AI Investor Insight

VLY 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Valley National Bancorp Fourth Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Ask a question during this session, you will need to press star 11 on your telephone. You'll then hear automated message if either your hand is raised. Withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Andrew Gianetti. Please go ahead. Andrew Gianetti: Good morning. And welcome to Valley's Fourth Quarter twenty twenty five Earnings Conference Call. I am joined today by CEO, Ira Robbins, and CFO, Travis Lan. Our quarterly earnings release and supporting documents are available at valley.com. Reconciliations of any non GAAP measures mentioned on the call can be found in today's earnings release. Please also note Slide two of our earnings presentation and remember that comments made today may include forward looking statements about Valley National Bancorp and the banking industry. For more information on these forward looking statements, and associated risks factors, please refer to our SEC filings including forms eight k, 10 Q, and 10 k. With that, I'll turn the call over to Ira Robbins. Ira Robbins: Thank you, Andrew. Valley delivered record earnings in the 2025. With net income of approximately $195,000,000 or $0.33 per diluted share. Excluding certain non core items, adjusted net income was $180,000,000 or $0.31 per diluted share. An increase from 28¢ on both the reported and adjusted basis in the 2025. Our adjusted return on average assets of 1.14% represents the highest level since the 2022. For the full year of 2025, we produced $598,000,000 of net income or $585,000,000 on an adjusted basis. This material improvement versus 2024 reflects disciplined balance sheet management, a stronger funding mix, and continued benefits from strategic investments in talent, technology, and our operating model. We enter 2025 with a fortified balance sheet and clear profitability targets, tied to sustained funding improvement and credit cost normalization. By year end, we had exceeded these expectations across all major metrics, while further strengthening our capital and liquidity positions. This performance underscores both the resilience of our franchise and the depth of our customer relationships. Our improved profitability has accelerated retained earnings growth and enabled us to return more capital to investors through share buybacks and regular cash dividends. Our substantial core deposit growth stands out as one of our major significant achievements of the past year and is the key underpinning of our profitability improvement in 2025. On a year over year basis, we grew core deposit by nearly $4,000,000,000 or 9%. Past strategic investments in talent and technology have deepened customer engagement, increased operating account wins, and driven momentum across our diverse delivery channels. We continue to recruit experienced commercial bankers who are focused on both loan and deposit opportunities in their geographies or areas of focus. While future growth is not likely to be linear, we have a high degree of confidence in our ability to further enhance funding profile over the next twelve months. The course loan growth was strong, diverse, and tightly aligned with our relationship focused strategy. For the first time since the 2024, total commercial real estate loans grew on a sequential basis. This growth was primarily in the owner occupied category and was partially funded by strategic runoff of nonrelationship commercial real estate. During the quarter, owner occupied CRE and C and I growth was driven primarily by activity in our specialty health care vertical and Southeast franchise. Loan growth is well positioned to accelerate further in 2026. Our immediate and late stage pipelines are exceptionally strong, up over $1,000,000,000 or nearly 70% from just a year ago. Driven by a $600,000,000 increase in C and I, and $700,000,000 increase in commercial real estate. Past investments in data analytics, artificial intelligence, and sales effectiveness are making our bankers more productive across the franchise. These investments also ensure that newly onboarded relationship bankers have the tools necessary to hit the ground running and contribute more quickly to our consolidated results. To this end, recent additions to our teams, New Jersey, California, and Florida have already generated loan and deposit activity and directly support the aforementioned expansion in our pipelines. Our recruiting efforts remain active, which we expect will continue to accelerate the growth in our relationship business model. Most importantly, increased activity from both legacy and new hires is the result of our strategic focus on attracting profitable holistic banking relationships, which align with our risk appetite. Our improved balance sheet position and profitability metrics reflect the cumulative benefits of a variety of multiyear initiatives. We have focused on geographic and business line diversification across the franchise and have invested in high caliber commercial talent to achieve our goals. Our twenty twenty three core systems conversion set the stage for our expanded treasury management offering. Which improved our ability to win operating accounts, and deepen commercial relationships. This has directly supported additional growth in both core deposits and fee income. And has been further augmented by specialty funding niches that have produced above average deposit growth. Our strategic priorities for 2026 remain generally consistent and focused on sustained value creation. To support our deposit ambitions, we are igniting our small business sales efforts, improving branch productivity, and exploring new growth oriented deposit niches. Additionally, there is an opportunity to further expand the customer adoption of our treasury platform. Recent investments in branding artificial intelligence solutions, and service model improvements have been designed to accelerate customer acquisition and elevate the client experience which we believe will contribute to future revenue growth and increased franchise value. At the same time, we are always working to identify and execute on expense offsets to help fund these initiatives. Our strong momentum in 2025 directly supports our 2026 outlook. Which Travis will detail shortly. From a high level, we expect continued benefits from repricing opportunities on both the funding side of the balance sheet and in the lower yielding fixed rate segment of our loan portfolio. While Travis will describe some of the traditional seasonal headwinds that we face in the first quarter of each year, we anticipate an additional 15 to 20 basis points of margin expansion from the 4Q 2025 to the 4Q 2026. All else equal. This combined with continued fee income growth, credit stability, and expense management, should result in further profitability improvement in 2026. I am extremely proud of what our team accomplished in 2025. We have built undeniable momentum with respect to customer growth, funding diversification, loan quality, talent acquisition, and ultimately, financial performance. Our strategy is paying off, our teams are executing, and we remain focused on delivering additional long term value for our associates, shareholders, and clients. With that, I will now turn the call over to Travis to discuss our financial results. After his remarks, Gina Martocci, Patrick Smith, Mark Sager, Travis, and I will be available for your comments. Travis Lan: Thank you, Ira. Continuing the discussion on 2026 expectations, we have provided our guidance for the year on slide nine. We expect mid single digit loan growth supported by roughly 10% C and I growth, low single digit CRE growth, and mid single digit consumer and residential growth. While results may not be linear, we anticipate deposit growth will outpace loans throughout the year, allowing us to further reduce our loan to deposit ratio. We expect CET1 will remain in the previously guided 10.5% to 11% range, as we continue to execute our capital deployment strategy. As a result of expected balance sheet growth and continued repricing tailwinds, we anticipate that net interest income will grow between 11-13% in 2026. Our forecast assumes two rate cuts in 2026 that we remain generally neutral to the front end of the yield curve. While fourth quarter fee income benefited from abnormally high commercial loan swap activity, and, to a lesser extent, valuation gains on fintech equity investments, which may not recur, we anticipate high single digit growth in 2026. Ira discussed the investments we have made and will continue to make in talent, branding, technology, and capability expansion. These are incorporated into our operating expense guidance, and any incremental investments would be expected to further enhance our growth potential. Finally, we expect further credit cost improvement in 2026. We anticipate general stability in our allowance coverage ratio, and further normalization in net charge offs. These factors would combine to imply a 2026 loan loss provision of around $100,000,000 give or take. While quarterly trends naturally vary, I would remind you that our first quarter tends to be somewhat softer as a result of lower day count, elevated payroll taxes within operating expenses, and seasonal headwinds on both sides of the balance sheet. These dynamics may be more evident in the 2026 as we saw a late year spike in both fee income and noninterest deposits which are likely to moderate early in the year. That said, our 2026 guidance reflects the strong momentum that we have and our expectation for further profitability improvement throughout the year. We added slide 10 to provide a clearer view of our capital deployment strategy, which continues to balance organic growth with meaningful capital returns. In the fourth quarter, we generated $188,000,000 of net income to common shareholders. Of which we returned $109,000,000 of that in the form of cash dividends and share repurchases. Our earnings generated about 38 basis points of CET1 during the quarter, and we used about half of that to support organic loan growth while returning the other half to shareholders and preserving capital ratios well within our target range. At the upper end of that range, we believe we have significant flexibility and anticipate preserving this balanced approach to capital deployment going forward. Slide 11 illustrates the continued momentum in our deposit gathering efforts. During the quarter, we increased core deposits by about $1,500,000,000 enabling us to pay off almost $500,000,000 of maturing higher cost brokered deposits. Our core deposit growth is primarily concentrated in non interest and transactional accounts. Noninterest deposits grew over 15% on an annualized basis, but benefited from late quarter activity, which is likely to moderate. Still, total deposit costs came down by 24 basis points sequentially, implying a 55% quarterly deposit beta. Turning to slide 14. Total loans grew about $800,000,000 or 7% on an annualized basis. This was the result of accelerating commercial real estate originations, continued C and I momentum, and complementary residential and consumer growth. We continue to fund relationship based CRE growth with transactional CRE runoff. For the year, we anticipate 40% of our net loan growth will come from C and I, 40% from CRE, and the remainder from consumer and residential. Our loan yield data continues to meaningfully lag our deposit data, as the replacement of low yielding fixed rate loans with higher yielding originations slows the rate base compression. Slide 17 tells our net interest income and margin expansion story as we benefit from loan growth and repricing dynamics on both sides of the balance sheet. Net interest income increased 4% quarter over quarter or 10% year over year. We also saw our margin expand to 3.17% well beyond our fourth quarter target of above 3.1%. We continue to see the repricing dynamic playing out, supporting our expectations for an additional 15 to 20 basis points of margin expansion from the 4Q 2025 to the 4Q 2026. We saw exceptional 18% growth in noninterest income during the quarter. Roughly two thirds of the sequential growth was from swap fees and unrealized gains on certain fintech investments. Some of this activity was episodic and is not likely to recur. That said, we continue to have strong momentum from a deposit service charge and wealth management perspective. Quarterly fee income in the mid to high $60,000,000 range is likely a reasonable starting point for 2026, with anticipated growth throughout the year. Similar to fee income, fourth quarter adjusted expenses were elevated by a few discrete and infrequent items. Roughly half of the quarterly expense growth was due to our new branding campaign, and performance based accruals tied to the execution of certain operational initiatives and milestones in 2025. Even with these items, expenses for the full year year increased just 2.6% well below our 9% revenue growth. We continue to project low single digit expense growth in 2026 as ongoing investments in talent, technology, branding, and capabilities are partially funded by efficiencies from other parts of the organization. As a result of these efforts, we anticipate that our efficiency ratio continue to decline towards 50% throughout the year. Slides twenty one and twenty two illustrate our asset quality and reserve trends. Criticized and classified loans declined by over $350,000,000 or 8% during the quarter. And total nonaccrual loans to total loans were effectively unchanged. Quarterly net charge offs were 18 basis points of average loans, bringing twenty twenty five net charge offs down to 24 basis points of average loans versus 40 basis points in twenty twenty four. Our allowance coverage ratio declined by two basis points during the quarter, as lower quantitative reserves more than offset higher specific and qualitative factors. We remain confident in the performance of our loan portfolio and expect further normalization of credit costs in 2026. Turning to slide 24. Tangible book value increased nearly 3% during the quarter, as a result of retained earnings and a favorable OCI impact associated with our available for sale portfolio. Regulatory capital ratios remain generally stable as we support our loan growth and utilize excess capital to repurchase stock. We utilized over $60,000,000 of organically generated capital to repurchase 6,000,000 shares in 2025. 4,000,000 of these shares were bought back in the 4Q 2025 alone, and we anticipate continued repurchase activity going forward. With that, I will turn the call back to the operator to begin Q and A. Thank you. Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from the line of David Chiaverini of Jefferies. Your line is now open. David Chiaverini: So wanted to start on net interest margin, you mentioned about 15 to 20 basis points 4Q twenty twenty five versus 4Q 'twenty six. Can you talk about some of the drivers behind that on both sides, the loan side? As well as the deposit side in terms of betas? Travis Lan: Yes. This is Travis, David, and thanks for the question. The benefits between now and the 4Q 2026 will be fairly balanced between the loan and deposit sides of the balance sheet. So from a deposit perspective, you know, we continue to work customer deposit rates lower and then we have the the additional benefit of replacing higher cost brokered with lower cost core. In 2026, we also have one... excuse me, $600,000,000 of FHLB advances at about 4.7% that will come due and will be replaced lower as well. That's another benefit that we anticipate to to play out on the margin. We have $1,800,000,000 of fixed rate loans that are going to mature in 2026 at a rate of around 4.7%. Those are coming back on, 150 to 200 basis points higher. And so while, you know, as rates fall yields may fall, you know, we slowed the the rate of compression of that fixed rate repricing dynamic. David Chiaverini: And in terms of kind of the cadence, you mentioned a couple times about results not being linear through the year. How should we think about the net interest margin as we kind of progress through the year? Travis Lan: Yes. So in the first quarter, I anticipate the margin comes down a little from the 3.17% that we put up this quarter. And then grows from that level back to that kind of mid-three 30s that we talked about by the fourth quarter. The drivers of that, again, I mentioned that we had some late December spikes in noninterest bearing balances. I would expect that that's closer to the average noninterest deposit balance for the fourth quarter, at 3.17. And then we also get the headwind from day count. So each day, we accrue about $5,000,000 of NII. So two fewer days in the first quarter is a slight headwind. We'll offset some of that with growth and the rate dynamics, but that's the way that we think about it. David Chiaverini: Thanks very much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Freddie Strickland of Hovde Group. Your line is now open. Freddie Strickland: Hey, thanks for taking my question. Good morning, guys. Just great to see the trend down in classifieds again this quarter. And as you look at workouts in progress and you mentioned declining credit costs, is the implication that we could see adversely classified assets continue to fall over the course of 'twenty six? Mark Sager: Hey, Freddie. This is Mark Sager. We absolutely, if the economy stays in the situation that it is today, which we expect, we expect this trend to continue in 2026 and into 2027. We've seen it for the past three quarters now, improvement, and this was a substantive decrease. Ira Robbins: I would just add, Freddie, that the reduction quarter over quarter is a combination of payoffs and net upgrades. So it's both factors that drove that improvement. We would anticipate that to continue. Freddie Strickland: Got it. And then just the loan growth outlook, it seems like you're going to have CRE concentration continue to decline in 2026 if you had higher growth rates of C and I, consumer and resi? Is that the case? Or is it maybe relatively flat as you look to deploy some capital? Travis Lan: I think it's a modest improvement or further decline in the CRE concentration. So if you untangle kind of the loan growth guidance, it's about $1,000,000,000 C and I, $1,000,000,000 of net CRE and a half billion of Resi and Consumer. Now that billion dollars of CRE will be split between owner occupied and regulatory CRE. And the way that we factor it with the capital growth that we anticipate, you'd still see CRE concentration improve throughout the year. Freddie Strickland: Alright. Great. Thanks. That's it for me. Operator: Thank you. One moment for our next question. Our next question comes from the line of Anthony Elian of JPMorgan. Your line is now open. Anthony Elian: Hi. Your adjusted ROE was over 13% in 4Q, which is above your guide of 11% for '25. Ira, I know last quarter, you pointed to achieving the 15% goal by late twenty seven or early 'twenty eight. But any update to that time line just given the tailwinds you have and you outlined on Slide nine for NIM, operating leverage, and provision? Ira Robbins: I don't think we're going to update what that guide looks like. We feel really, really strong about sort of where the lift off is for us in the 2026. And a lot of tailwind for us. We think we're well on our way to achieve that 15% target. Anthony Elian: Thank you. And then on expense, so I get the low single digit guide for the full year. But, Travis, how are you thinking about expense specifically for 1Q, just given some of the elevated items you mentioned around payroll taxes? Thank you. Travis Lan: Yeah. Appreciate it. I mean, I think, as I mentioned, the fourth quarter also included some elevated items. As those normalize and then you typically have about a $7,000,000 or $8,000,000 headwind in the first quarter from payroll taxes, things probably roughly balance out. And so you'd see, I'd say, general stability in operating expenses in the first quarter due to that, whereas normally, it would be kind of a straight uptick. Again, you have some offsets with some of these more onetime items that occurred in the fourth quarter. Anthony Elian: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Janet Lee of TD Cowen. Your line is now open. Janet Lee: Good morning. Thank you. So you guys said you're neutral to the front end of the curve. And I know there's a lot of fixed rate asset repricing benefits that are flowing through for Valley. Does your... how does your prediction around 15 to 20 basis point NIM expansion change if we assume no rate cuts? Travis Lan: Yeah, Janet. This is Travis. If you assume that, as I said, we are generally neutral. If you assume no rate cuts, you would actually, you know, you'd look at kind of a half percent to a percent of headwind from NII. The reality though is the implied forward curve assumes some modest increase in the the two, five, and ten year points, which are more impact to our margins. So, in a vacuum, no Fed cuts would be a slight, very slight headwind. But, you know, as the rest of the curve plays out, I think we offset that. The other component to think about is we're structurally neutral to the front end of the curve. But we've outperformed our beta assumptions in the wake of Fed cuts. So that's, you know, something that's improved the margin. Janet Lee: Got it. Thank you. And just to follow-up on buyback. Looks like $19,000,000 that's remaining in authorization that expires in April. And with their current capital generation, looks like you could maintain the 4Q pace of buyback while still pretty comfortably staying in that CET1 target range, perhaps even at the higher end. Could you comment around the pace of buyback? I know you're gonna be opportunistic, but just would love to hear your response. Thanks. Travis Lan: Yeah. Absolutely. So if you kind of play out our guidance, CET1 on a gross basis would increase 130 basis to 140 basis points next year. About 50 basis points of that would be used to support loan growth. 50 basis points will be paid out in the dividend. And it would leave you with 30 or 40 basis points of excess CET1 for the buyback. That would kind of back into $150,000,000 to $200,000,000 worth of stock. Which, if you think about the pace of the fourth quarter when we used about $48,000,000 of equity in the buyback, it's pretty consistent. So that's the way that we're thinking about it. To your point, our authorization expires in April, I mean, obviously, we would, you know, plan on re upping that, as we would traditionally. Janet Lee: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Manan Gosalia of Morgan Stanley. Your line is now open. Manan Gosalia: Hey, good morning. On the strategic growth slide, you have a bullet in there that talks about contemplating geographic expansion. Any specific markets you'd highlight? And, I guess, how should we think about the scale of that build out? Ira Robbins: I think just from a broad perspective, we've had real success as we think about growing into different geographies whether it be through acquisition or just from an organic perspective. On the back end of our Leumi deal, we were able to enter into Chicago and Los Angeles markets and have seen strong growth come out of those areas. We recently expanded our team in the Philadelphia area and have seen real positive momentum and traction out of that. So I think we feel very comfortable, whether it be contiguous to where we sit today or where there's other opportunities in strong markets. Gina, maybe you can comment about... Gina Martocci: Well, I think you phrased that well. We have had some success with our senior leaders that we've hired in bringing in additional producers. And we are really focused on adjacent markets, but also opportunistically on teams that we can... we can bring in and quickly start producing. Manan Gosalia: Got it. Okay. Great. And then as we think about the 3.30 plus NIM guide for FY 2026, how important are loan spreads there? You know, we've heard from some banks that they're seeing more competition on both spread and structure. I guess the question is what are you seeing in your markets, and what are you baking into that guide? Travis Lan: Thanks, Manan. This is Travis. The reality is we hear the same from our bankers on the street. When you look at the data, the spreads have been fairly consistent now. Based on the feedback, we are conservatively assuming modest spread compression in the NII forecast that we gave you. So I think we, you know, we hear it on the ground as well, and we're trying to factor that in appropriately. Manan Gosalia: Got it. So that's already baked in. Thanks. Travis Lan: Yes. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jared Shaw of Barclays. Your line is now open. Jared Shaw: Good morning. Maybe just on the DDA, the non interest bearing deposit discussion, great growth this quarter. Were you saying we should expect average DDA to stay flat but EOP potentially to go down? Or how should we think about the seasonality that you saw this quarter and the seasonality in the first quarter? Travis Lan: Yes. I mean, first, I think it's reflective of a lot of wonderful activity, in terms of our bankers' ability to generate operating accounts and utilize our treasury management platform to generate business. My commentary, though, was that we were at $11,900,000,000 of average NIB for the quarter. And the end of period was $12,200,000,000. I would anticipate that at the end of the first quarter, we're kind of at that $11,900,000,000 level on an end of period basis and generally flat from an average perspective. Jared Shaw: Okay. Alright. Thanks. And then, you know, maybe just credit overall, like you said, is is stable and looks good. Any more color you can give on the growth in the C and I NPLs? Mark Sager: Sure, Jared. This is Mark again. C and I growth was really driven by one credit in the portfolio, a larger credit that we've had within the portfolio for over ten years, an in-market syndicated credit, unique business segment, that's supported by structural payments over a ten year period. Because of the length of of that payback, combined with the recent modification of the loan, we did move that to nonaccrual and established what we feel is an adequate specific reserve on that loan. Jared Shaw: Okay. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Steve Moss of Raymond James. Your line is now open. Steve Moss: Good morning. Maybe just going back to the loan pipeline here you highlighted, Ira. Just kind of curious good to hear the strong pipeline. And I guess also with the kind of decline in the runoff on on CRE, just curious if you guys are thinking potential upside to your loan growth guidance here or maybe what are some of the offsets you see? Travis Lan: Maybe I'll start, Steve. This is Travis. So our 5%, right, if you took the midpoint of our loan growth guide, it would be 5%. The reality is that also includes $500,000,000 of runoff in our Tier three transactional CRE portfolio. So absent that, you'd be at certainly above the higher end of the range that we gave. So I think there is a lot of good dynamics in the pipeline that Gina can talk about, but wanted to throw that out as well. Gina Martocci: Yeah. We've got a really very strong pipeline. I mean, we finished 12/25 at a billion 2, actually higher than 12/24. And also, since 12/25, we've grown the pipeline by another $300,000,000. And that is despite closing about half a billion dollars worth of loans so far. So we feel very good. It's geographically distributed. It's both CRE and C and I with slight concentration in C and I. So our clients continue to be very confident and we're booking the loans. Steve Moss: Okay. Appreciate that color there. And then just on credit here with the decline in criticized and classifieds, just kind of curious as to how you're thinking about the reserve kind of settling out over time. If we see that come down towards, like, a more normal level, like 4, 5%, could we see a pretty meaningful reserve decline over time? Travis Lan: This is Travis. I think that directionally makes sense. The offset though is C and I will be an increasing portion of the portfolio. So I think that helps balance out the benefit hypothetically that you get from lower criticized and classified. So that's why we kind of guided to general stability in the allowance coverage ratio. Steve Moss: Okay. Great. Appreciate all the color. Thank you very much, guys. Ira Robbins: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Breese of Stephens. Your line is now open. Matthew Breese: Hey, good morning. Yeah. I was hoping to get a little bit more color on loan growth this quarter and then the pipeline from a geography perspective? So how much of the C and I and CRE activity is coming from Florida? You know, up here in in in the Mid-Atlantic Northeast, and then from the Leumi lines. And I'm curious if you're seeing any major notable differences in origination trends, activity or spreads across these kind of categories and geographies? Gina Martocci: It's Gina. I'll take that. As I just mentioned, it's really well balanced across the spectrum. There is a pretty good pipeline or a strong pipeline, I should say, in health care. And we saw that last year, and we're seeing it again this quarter. But New York, New Jersey, Florida all are contributing. And then even as Ira mentioned, our Philly market has already built a very strong pipeline. And as far as spread trends, it's pretty consistent across the markets as well. There is a minor bit of compression and competition, but all in all, it's fairly well balanced. Matthew Breese: Got it. Okay. And then Travis, you know, time deposit cost CDs are are still a bit elevated north of 4%. As stuff matures and rolls and maybe you can talk about some of the promotional activity, what is kind of the new blended rate of CDs? And is that a decent proxy for where CD cost could go over the next six, nine, twelve months? Travis Lan: Yeah. I think where our new rates or our rates that are available from a rollover perspective are in the kinda 3.50% range, which would imply some opportunity to reprice lower in the CD portfolio more broadly. And the elements that really keep that average cost elevated continue to be the brokered deposits. And so in the coming year, you know, we have a billion 2 of brokered coming off close to 4.50%. So you know, there's upside there. Matthew Breese: Got it. And do you have the cost of deposits at period end or or more recently so we get a sense of trend? Travis Lan: Yeah. For sure. So the total portfolio spot deposit rate was 2.32. So below the $2.45 average for the quarter. Our core rate is about 2.10 and then brokered is 4.20 or so, give or take. So gives you a little bit more insight into the dynamics there and the opportunity to replace brokered with core. I'd say in the fourth quarter, we originated $1,000,000,000 of new deposit relationships at a blended rate of 2.17. That was, from a balance perspective, pretty consistent with the third quarter, but the third quarter origination was 2.91. So we're seeing some very good tailwinds in terms of the new deposits that we're bringing to the bank at a much lower blended cost. Matthew Breese: Understood. And then just last one. Loans past due, thirty to fifty nine days picked up, think, by about $56,000,000. Is there anything administrative about that timing related? I know end of year can get a little bit hairy. Or is there a sense that that might migrate into NPLs? And that's all I had. Thank you. Mark Sager: Yeah, Matt. It was really driven... there's three loans in their unique situations. We don't view this as a trend at all, but related to three specific loans. One, we have a contract for sale, and we expect that to be completed and be done. We've recently signed a modification for another loan and anticipate interest being current. And the third, where we believe it's gonna linger in delinquency thirty to sixty day bucket, but gradually catch up and potentially be current, in the second quarter. So not seeing a trend really in the portfolio in any means, really just a couple specific transactions. Matthew Breese: That's all I had. Thanks for taking my questions. Ira Robbins: Thanks, Matt. Operator: Thank you. One moment for our next question. Our next question comes from the line of John Arfstrom of RBC. Your line is now open. John Arfstrom: Hey, thanks. Good morning. Ira Robbins: Morning, John. John Arfstrom: Yeah. Just a couple of follow ups. But maybe obvious, but you mentioned you know, CRE growth for the first time in a long time. What changed there? Is it just less runoff on your balance sheet, or are you actually seeing stronger growth and stronger pipelines there? Travis Lan: It's stronger originations, John. Entering 2025, we were turning the CRE origination engine back on, from a very disciplined perspective, both in terms of requiring deposits to come with those loans and obviously, the consistent conservatism on the credit side. But it took a couple of quarters, I think, for the origination engine to fully pick back up. We saw it in the fourth quarter. Origination trends were very strong. Again, as we look forward to 2026, you know, we're contemplating about a billion and a half of new tier one and tier two CRE. That'll be offset by about a half billion dollars of runoff in our transactional CRE portfolio. You net to about $1,000,000,000. And that's, I think, just consistent with the general strong activity we're seeing across our geographies. John Arfstrom: Yep. Okay. And then just some subtleties on expenses. I'm just curious, Ira, how aggressive you wanna be on the commercial banker recruiting efforts. And then also, if you can maybe comment on the branding investments and how much you wanna allocate there? Ira Robbins: Yeah. Look. I honestly believe there's a lot of opportunity within our geographies and as we think about different verticals, for us to enter into as well. So from a hiring perspective, you know, it's a really good market for us. I think, you know, Valley has a very unique value proposition based on the size of organization we are. Our focus on relationship banking. And then when you look across product set and the capabilities that we have, very few organizations our size have breadth of capital markets, FX, and everything else that we do across the entire organization. The treasury platform here, the data and analytics, I mean, it's phenomenal, really on a relative basis. So we have bankers that are really attracted to us, which is a phenomenal place for us to be in. That said, you know, the p and l is very important. And managing the new hires that we bring into the organization to not just blow up the expense basis. Some of that we're very focused on. Obviously, making sure that we provide internal opportunities to really think about where we can reshift expenses across the organization. So it's not just growth in expenses. We think about some of the opportunities. Now we talked in the prepared comments about some of the AI initiatives that we have in place, with regard to machine learning and other things to really focus on the expenses. And we continue to really look at cost to serve across the entire organization. When I took over CEO, we were 3,351 employees and about $20,000,000,000 in size. Today, we're 3,634 and $60,000,000,000 in size. So 280 plus or minus employees and triple the size of the organization. So we've done a really nice job, I think, leveraging technology and thinking about how we can support growth within the organization without bloating on the expense side. And I really do believe we have a great team in place, we'll be able to continue that. John Arfstrom: Mhmm. Okay. And just to comment on branding, how extensive is that? Ira Robbins: It's been a real, long term effort for us, I think, in thinking about who our target client was, especially after what happened with SVB and making sure that we were focused on building a whole relationship, internal branding within our bankers to make sure that we understood what a relationship banker should do across the organization. And we're now, very, very comfortable that we have the right ability to execute with the branding campaign that we put out there. We think it'll really enhance the ability to grow some of the consumer and small business within our geography right now. We hired Patrick Smith to come into the organization during this past year. A really strong, proven leader within that space, and we wanna make sure that we have a branding campaign to complement a lot of what Patrick is able to really bring to the organization. So for me, it's a holistic approach. You can't have branding without the people. And I think what we're doing on the branding side really, really complement what Patrick's able to bring to Valley. John Arfstrom: Okay. Alright. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Chris McGratty of KBW. Your line is now open. Chris McGratty: Great. Good morning. Travis, just going back to deposit growth beyond... I hear you on the first quarter on the average EOP to NIB. But on the full year, how do you break out the 5% to 7% growth by mix? Like, how much contribution from NIB versus yeah. Travis Lan: Yep. So if you take the midpoint, you're at 6% total deposit growth. We conservatively model NIB growth of 5%. So all of the margin guide that we've talked about and the deposit growth that we're talking about, it's not over indexed on some assumption that NIB significantly outgrows total deposits. It's pretty consistent. So 5% NIB growth, about 7% savings, now, and money market growth, then pretty modest CD growth. Chris McGratty: Okay. And then what's the beta you're assuming on these... I think you talked about 55% in the fourth quarter, what are you assuming for '26 on the betas? Travis Lan: Yeah. We've been consistently assuming 50% total deposit beta. For the full year of 2025, it was actually 60% in terms of the actual result, but we continue to model a 50% total deposit cost beta. Chris McGratty: Okay. Great. And then Ira, last quarter you were asked this kind of about strategic options and long term planning. Is there a scenario where you might entertain buying a bank this year? Ira Robbins: Look. I think M&A is an interesting dynamic as to how you think about sort of where the market looks today. For me, really, there's sort of three levers that you really need to think about. One, it just starts with shareholders. Like, what are you doing for your shareholders, are you really prioritizing your shareholders? I think the second, as you think about M&A, really sticks to what are the financial constraints. We spend a lot of time and a lot of focus across the organization as we've done M&A historically and not diluting the current shareholders. I think M&A, partially, is focused on the target shareholders, which I think is crazy. You have a strong shareholder base and to sit there and solely focus on the target doesn't make any kind of sense in my mind. I think that M&A really then has to be aligned with what the strategic objectives of the organization look like. Travis and his team did a wonderful job on slide eight laying out sort of what the focus is for us in 2026. So if we see an opportunity to accelerate some of those things, based on an M&A deal, that's something we may consider. But to your point, you know, there's an unbelievable organic story that's really unraveling here at Valley. We brought in tremendous leaders across the organization, starting with Gina, Patrick, and a real complement of individuals to help support them. And then we've really been able to continue to bring in people below them. So we feel really excited about the organic. And there would have to be something that would make a lot of sense for us to really divert any kind of attention away from that. Chris McGratty: Okay. Great. Thank you very much. Operator: Thank you. One moment for our next question. Our next question comes from the line of David Smith of Truist Securities. Your line is now open. David Smith: Hey, good morning. On the funding cost side, you know, you've obviously been able to pay down a lot of brokered this year. You mentioned being able to take some FHLB funding lower next year. Is there a minimum level of brokered and borrowings that you would still want to maintain? You know, through the long term or as core organic deposit growth keeps outperforming, do those go more or less to zero over time? Travis Lan: Yes. David, this is Travis. I think the reality is both brokered CDs and FHLB advances play a very important role in terms of interest rate risk management and the certainty that you can get with some of those instruments. And so I don't anticipate that it would go to zero. You know, but there is a level certainly lower than where we are today that that probably makes more sense. David Smith: Thank you. And then, you know, the regulatory backdrop is changing a lot for the banking industry right now, but you can also say that about pretty much any industry. I'm wondering, given that you have some pretty niche industries and commercial clients that you bank, are there any regulatory changes to your client base that you're watching with particular interest either from the risk or opportunity side? Gina Martocci: Hi, it's Gina. I think generally speaking the reduced regulation is driving confidence in our entrepreneurial borrowers. And I think it's increasing their level of confidence and their willingness to invest. But no specific industry, I would say, at least we're pretty well generalists here. David Smith: Alright. Thank you. Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

101天前Insight Analytics约5分钟阅读

BX 2025 Q4 财报电话会议

Operator: Thank you for standing by. You are on hold for the Blackstone Inc. fourth quarter and full year 2025 investor call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Inc. Fourth Quarter and Full Year 2025 Investor Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. If you would like to ask a question, please signal by pressing star one. If you are using a speakerphone, please make sure your mute function is off. At this time, I would like to turn the conference over to Weston Tucker, Head of Shareholder Relations. Please go ahead. Weston Tucker: Great. Thank you, and good morning, and welcome to Blackstone Inc.'s fourth quarter conference call. Joining today are Stephen Schwarzman, Chairman and CEO; Jonathan Gray, President and Chief Operating Officer; and Michael Chae, Vice Chairman and Chief Financial Officer. Stephen Schwarzman: Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-K report later next month. I would like to remind you that today's call may include forward-looking statements which are uncertain and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the factors that could affect results, please see the Risk Factors section of our 10-K. We will also refer to non-GAAP measures, and you will find reconciliations in the press release and the shareholders page of our website. Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any Blackstone Inc. fund. This audio cast is copyrighted material of Blackstone Inc. and may not be duplicated without consent. Just quickly on results. We reported GAAP net income for the quarter of $2 billion. Distributable earnings were $2.2 billion or $1.75 per common share, and we declared a dividend of $1.49 per share, which we paid to holders of record as of February 9. With that, I will now turn the call over to Steve. Jonathan Gray: Good morning, and thank you for joining our call. Blackstone Inc. just reported the best results in our forty-year history. With distributable earnings of $1.75 per share, as Weston mentioned. This capped a record year for the firm, in which DE increased 20% to $5.57 per share, or $7.1 billion. Powered by strong growth in fee-related earnings, and a significant acceleration in net realizations. Inflows reached a stunning $71 billion just in the fourth quarter, the highest level in three and a half years. Michael Chae: At approximately $240 billion for the full year, reflecting robust momentum across the institutional private wealth, and insurance channels. Of particular note, our fundraising in private wealth increased 53% year over year in 2025 to $43 billion. And we expect strong inflows again in 2026 given our performance and continuous innovation. According to recent analyst research, Blackstone Inc. has an estimated 50% share of all private wealth revenue across the major alternative firms. In total, the firm's fundraising success lifted assets under management 13% year over year to a new industry record of nearly $1.3 trillion. Most importantly, we generated outstanding investment performance overall for our limited partners again in 2025. Highlighted by notable strength in infrastructure, corporate private equity, our multi-asset investing business, BXMN. We achieved these results amid the turbulent year for markets, which was impacted by tariff uncertainty, geopolitical instability, and the longest government shutdown in US history. Federal Reserve officials liken this backdrop to driving in a fog. For Blackstone Inc., a key advantage of our leading scale with a portfolio spanning more than 270 companies, nearly 13,000 assets in real estate, and one of the largest credit platforms is the expansive array of proprietary data it produces. This data provides deep insight into what's happening in the global economy, helping us see through the fog and chart the path forward. What we saw in the data was a fundamentally strong economy underpinned by the ongoing technology AI-driven investment boom. We were also encouraged by what we were seeing on the ground in terms of moderating inflation. The context of limited input and labor cost growth at our companies, as well as our real-time understanding of shelter costs given our unique position in real estate. We shared these perspectives with you throughout the year, which did not always align with the consensus viewpoint. Today, there continues to be a range of geopolitical uncertainties that are impacting markets. But we remain anchored by the strong operating and capital market fundamentals we see through our portfolio. Our views on the economy and inflation have informed our investment approach. They also led to our conviction that the deal cycle would accelerate, including a resurgence in capital markets activity. First, in terms of our investments, our data gave us the confidence to lean into key thematic areas such as digital infrastructure, including data centers, power, and electrification. Private credit, life sciences, and from a regional perspective, India, and Japan. These areas have been among the largest drivers of appreciation in our funds. We also took advantage of volatility in markets to sign or close eight privatizations during the year. In private equity and real estate, including in the fourth quarter, medical technology company, WholeLogic, for $18 billion. And in credit, we saw record deployment in 2025, including the emergence of an important new source of direct origination, customized long-duration capital solutions for investment-grade corporates. We have executed multiple of these to date and we expect to do more over time. In total, we invested $138 billion across the firm in 2025, the highest level in four years, planting the seeds of future value. Stepping back, the historic pace of investment taking place in the US to facilitate the development of artificial intelligence, including the design and manufacture of semiconductors, data center construction, and the expansion of power generation is the key driver of economic growth today. And is creating an enormous need for capital solutions. The US has long occupied a unique position in the world in terms of its innovation and economic leadership. And the investment medical cycle underway in AIMpower and the expected future boost in AI-related productivity should propel US economic growth for years to come. Blackstone Inc. is extremely well positioned to benefit against this backdrop, given our scale and expertise in these areas, including our ownership of the world's largest data center platform, as well as our position as a major investor in the modernization and growth of the US electric grid. Jonathan Gray: Turning to the acceleration in the deal cycle and capital market activity, we regularly spoke about this dynamic last year. And we are now seeing it start to materialize. IPO and M&A activity are accelerating. Deal sizes are increasing. And sponsor activity is picking up. In the fourth quarter, global IPO issuance rose 40% year over year, including a two and a half fold increase in the United States notwithstanding the government shutdown. Blackstone Inc. was a major contributor with the $7.2 billion IPO of medical supply company Medline, the largest IPO since 2021, and the largest sponsor-backed IPO in history. The offering was extremely well received with shares trading up over 40% on the first day. Medline is a perfect illustration of the power of Blackstone Inc.'s private equity model at work and our ability to generate attractive returns on large-scale control deals across vintages. This 2021 transaction represented the largest healthcare buyout in history, which we completed in partnership with the company's founding family, key limited partners, and two other financial sponsors. During our ownership, we accelerated the company's growth, implemented multiple initiatives to drive value, and executed accretive acquisitions to expand the company's product suite and end markets. Today, Medline is a category-leading public company that is exceptionally well positioned for continued success. Medline was Blackstone Inc.'s fourth IPO globally since last summer, and our momentum continues to build. We have one of the largest IPO pipelines in our history, reflecting a diverse mix of sectors and geographies. Looking forward, the structural tailwinds driving the alternative sector and in particular Blackstone Inc. are accelerating. More investors are discovering the benefits of private market solutions, including in the vast private wealth and insurance channels. At the same time, we continue to deepen our relationship with institutional limited partners across multiple areas. These tailwinds alongside the cyclical recovery underway in transaction activity are a powerful combination for our firm and our shareholders. In closing, I could not have more confidence in the firm and our prospects for continued growth. Our business performed exceptionally well through the high cost of capital backdrop of the past several years. And we believe we are now moving into a more supportive environment with a portfolio concentrated in compelling sectors and nearly $200 billion of dry powder to take advantage of opportunities. We are extremely well positioned for the road ahead. And with that, I will turn it over to John. Michael Chae: Thank you, Steve, and good morning, everyone. This is an exciting time for Blackstone Inc. Three powerful dynamics are coming together. First, the deal environment has reached escape velocity on the back of moderating cost of capital. Secondly, the AI revolution is creating generational opportunities to invest private capital at scale, both debt and equity, while creating attractive gains across multiple sectors. And third, adoption of private markets continues to deepen across all three of our major customer channels: institutions, insurance, and individual investors. These dynamics are translating to outstanding results across the firm. Starting with our institutional business, which makes up over half of our AUM, and comprised over half of 2025 inflows. We are seeing strong demand today across numerous open-ended and drawdown fund strategies. In infrastructure, our dedicated platform grew a remarkable 40% year over year to $77 billion, including over $4 billion raised in the fourth quarter underpinned by exceptional investment performance. The commingled VIP strategy has generated 18% net returns annually since inception seven years ago. And 2025 was one of the best years yet, with broad-based gains across digital energy and transportation infrastructure. Our QTS data center business was again the largest single driver of returns for BIP as well as in real estate. Speaking with our open-ended strategies, DXMA reported excellent results again in Q4. The composite gross return for BXMA's largest strategy has been positive for twenty-three straight quarters and exceeded 13% for the year in both 2025 and 2024, the best since 2009. Investors are responding favorably with $6.3 billion of net inflows for BXMA in 2025, representing the highest net fundraising in nearly fifteen years and lifting AUM 14% year over year to a record $96 billion. Meanwhile, in our institutional drawdown area, our business is accelerating with a new fundraising cycle underway. We have held initial closings of $5 billion for our new PE secondaries flagship, targeting at least the size of the prior $22 billion vintage, with another major close expected in the coming weeks. Our secondaries platform saw a record year of deployment in 2025, and we see strong growth ahead fueled by the ongoing expansion of private markets. In corporate private equity, we have raised over $10 billion to date for our next Asia flagship, compared to approximately $6 billion for the previous vintage, and expect to reach over $12 billion. We also launched fundraising for our fifth private equity energy transition vehicle, which we expect to be meaningfully larger than the prior vintage of approximately $5.5 billion, with a first close anticipated this spring. Rising demand in the power and electrification ecosystem is creating enormous deal flow in this area. And our currently investing vintage is approximately 80% committed only a year and a half after launch. In Q4, we also held closings for the new vintages of our tactical opportunities, GP stakes, and life sciences vehicles. And in credit, we raised additional capital for our fifth opportunistic strategy, bringing it to over $7 billion with a target of $10 billion. There is no question that institutional investors remain the bedrock of our firm. Diving deeper into credit specifically, our platform overall continues to see extraordinary momentum. We now manage $520 billion of total assets across corporate and real estate credit, up 15% year over year. Inflows exceeded $140 billion in 2025, with strong fundraising across the institutional insurance and private wealth channels. Underpinning this demand, again, is investment performance. Our non-investment grade strategies in private credit and real estate credit delivered gross performance of 11% and 17% respectively for the year. Since inception twenty years ago, our non-investment grade private credit strategies have generated 10% net returns annually, double the return of the leveraged loan market with minimal losses. Despite the external noise today in private credit, facts do matter, and our portfolio overall is in excellent shape, including high single-digit EBITDA growth on average for our direct lending borrowers for the most recent annual period. The backdrop remains favorable with corporate profits growing, short-term rates declining, and transaction activity increasing. At the same time, we are benefiting from the massive secular shift underway towards investment-grade private credit, which we believe is in the earliest stages. We now manage $130 billion in this area, up 30% year over year. Our farm-to-table approach, which brings clients directly to borrowers and is designed to create a structural premium to liquid fixed income, is really resonating. Why is investment-grade private credit growing so quickly? Two main reasons. First, corporate investment-grade bond spreads are at their tightest level since 1998. We have been seeing insurers and now some pensions and sovereign wealth funds looking to earn materially higher spreads at the same or lower risk level. Second, the build-out of AI infrastructure requires a massive amount of private debt capital for the construction of fabs, energy supply, and data centers. Turning to the insurance channel specifically, our AUM grew 18% year over year to $271 billion. This remarkable growth is happening without taking on any insurance liability. Investors are responding particularly well to our open architecture model and the value we deliver. We placed or originated $50 billion credits for our private IG-focused clients in 2025, which generated approximately 180 basis points of incremental spread versus comparably rated liquid credits. These results are more important than ever in an environment of tightening yields. Moving to the individual investor channel where we are uniquely positioned given the breadth of our product lineup, our performance, and the power of our brand. Our AUM in private wealth grew 16% year over year, to more than $300 billion, and is up threefold in the past five years. In Q4, our total sales in the channel exceeded $11 billion, up 50% year over year. BCred led the way with gross sales of $3.3 billion while net inflows were $1.2 billion. For the full year, BCRED reported record gross sales of over $14 billion powered by investment performance, with 10% net returns annually since inception five years ago, almost entirely comprised of current income. Our private equity flagship in this channel, BXP, has also generated outstanding performance achieving an annualized net return of 17% since inception. BXP has grown to $18 billion in only two years, with its broad-based approach to our expansive private equity platform. Our infrastructure strategy in private wealth, BX infra, is approximately $4 billion only one year after launch with strong performance out of the gates. And BREIT delivered terrific results in 2025, underpinned by a net return of 8.1% for its largest share class, nearly three times the public REIT index. BREIT's portfolio position continues to drive returns, including its significant exposure to data centers. In private wealth, as with the rest of Blackstone Inc., our relentless focus on investment performance gives us the license to innovate. And our innovation is accelerating. We expect 2026 to be our busiest year yet in terms of product launches as we stated previously. Blackstone Inc. has led the evolution of the private wealth market to date, and we expect to lead it in the future. Turning to real estate where we have been navigating the early stages of the sector's recovery. We said the cycle was bottoming two years ago, but that the recovery would not be a straight line. Since then, US private real estate values have been slowly improving. However, since the interest rate cycle began approximately four years ago, real estate values are still down 16% compared to an increase of 75% for the S&P 500. We think real estate has plenty of room to run. We have taken advantage of choppy investor sentiment to lean into deployment, investing or committing over $50 billion in real estate since the cycle trough two years ago, including our commitment in Q4 to privatize Alexander and Baldwin, an owner of high-quality grocery-anchored shopping centers and warehouses in Hawaii. The gradual pace of the recovery today has meant our real estate funds in aggregate saw limited appreciation in 2025, notwithstanding BREIT's strong performance. That said, we do see a number of positive signs which point to a better year ahead. These include the sharp decline in construction starts, which have fallen to the lowest level in more than twelve years in the US, in both logistics and multifamily, our two largest sectors in real estate. Continued growth in debt availability and declines in the cost of debt, a pickup in transaction activity, and now an improvement in logistics demand with our US platform reporting record leasing activity in Q4. At the same time, our exposure to data centers continues to be a source of strength, as does real estate credit. We remain highly optimistic about the direction of travel for our real estate business. In closing, we enter 2026 with tremendous momentum. Our clients are growing their commitments to us across channels. We are actively investing that capital in compelling thematic areas and realizations have begun to accelerate. Blackstone Inc.'s performance-driven, capital-light, brand-heavy model continues to deliver for shareholders. And with that, I will turn things over to Michael. Michael Chae: Thanks, John, and good morning, everyone. The firm's fourth-quarter results represented an outstanding finish to a record year. I will first review financial results and then discuss investment performance and the forward outlook. Starting with results. The fourth quarter represented the best quarter of distributable earnings per share in the firm's history, as Steve highlighted, and one of the three best quarters of fee-related earnings. First, in terms of FRE, which reached $1.5 billion in Q4 or $1.25 per share. Management fees increased 11% year over year to a record $2.1 billion, underpinned by 10% growth in base management fees and a 27% increase in transaction and advisory fees. Base management fees for three of the firm's four segments—private equity, credit insurance, and multi-asset investing—on a combined basis grew 17% year over year in Q4, while in real estate, base management fees declined moderately. Fee-related performance revenues for the firm totaled $606 million in the fourth quarter, generated by a broad range of perpetual strategies led by BREIT, as well as BCRED and VXPE. The year-over-year comparison reflected the crystallization of over $1 billion of these revenues in our institutional infrastructure business in last year's fourth quarter related to three years of accrued gains. Excluding this from the prior period, fee-related performance revenues grew significantly year over year and FRE overall grew 24%. In terms of distributable earnings, we reported $2.2 billion of DE in 2025, or $1.75 per common share. Alongside robust FRE, net realizations increased 59% year over year to $957 million, the highest level in three and a half years. Gross performance revenues exceeded $1 billion in the quarter, driven by a number of net realizations across the firm, including the sale of a portion of our stock in energy solutions company Legions, the sale of a stake in the city center complex on the Las Vegas Strip, the monetization of certain royalty interests in our life sciences portfolio, and importantly, year-end crystallizations in BXMA and certain credit vehicles. With respect to full-year 2025 performance, VXMA specifically reported record performance revenues in Q4 of $465 million, up 38% year over year. We also closed the sale of the firm's 6% stake in Resolution Life in the fourth quarter in connection with the company's sale to Nippon Life. With the realized gain reflected in principal investment income. Turning to the full year. Despite numerous challenges in the external operating environment in 2025, Blackstone Inc. delivered record full-year results across digital earnings, fee-related earnings, management fees, and assets under management. All of which have approximately doubled or more than doubled in the past five years. Distributable earnings grew nearly 20% to $7.1 billion. Fee-related earnings increased 9% to $5.7 billion. Management fees rose 12% to $8 billion, while FRE margin expanded over 100 basis points to the highest level ever for a full-year period. And net realizations grew dramatically in 2025, up 50% to $2.1 billion. Meanwhile, the firm's extraordinary breadth lifted AUM up 13% year over year to $1.275 trillion. At the same time, all of our key operating metrics accelerated in 2025. Inflows, capital deployed, total fund appreciation, and realizations. Net accrued performance revenues on the balance sheet or STORE value increased 7% in 2025 to $6.7 billion. The foundation of future value for the firm continued to expand even as the pace of monetizations increased. And all of this during a period where the significant underlying earnings power of our real estate business has yet to reemerge. The fundamental driver of this positive momentum is, of course, investment performance. Our funds overall delivered strong returns in the fourth quarter and in 2025. Infrastructure led the way with 8.4% appreciation in the quarter and a remarkable 24% for the full year. The corporate private equity funds appreciated 5% in the fourth quarter, with particular strength in the public portfolio, and 14% for the year, supported by high single-digit revenue growth in our operating companies and resilient margins. BXMA reported a 4.3% gross return for the absolute return composite in the fourth quarter and 13% for 2025. BXMA has delivered positive composite returns for the last twenty-three quarters, as John noted, and in each of the past thirty-three months, which is driving strong inflows and the segment's fifth consecutive quarter of double-digit year-over-year AUM growth in the fourth quarter. In credit, our non-investment grade private credit strategies reported a gross return of 2.4% in the fourth quarter and 11% for the full year, reflecting stable underlying credit performance. In our $160 billion-plus global direct lending portfolio specifically, realized losses were only 11 basis points over the last twelve months. In real estate, overall values appreciated approximately 1% in the fourth quarter and 1.5% for 2025. In Q4, continued significant strength in data centers was partly offset by headwinds in certain areas, such as life sciences office, and UK student housing. In total, our real estate portfolio remains well-positioned, with 75% of our global equity holdings concentrated in data centers, logistics, and rental housing. RE sectors supported by very positive long-term fundamentals, as John discussed. At the same time, our real estate credit business continues to report outstanding performance, with our non-investment grade funds appreciating 17% for the full year, including 2.8% in the fourth quarter. Moving to the outlook. The firm is advancing with significant momentum across multiple drivers. We expect management fees to continue on a strong positive trajectory in 2026, underpinned by robust growth in the private equity, credit, and insurance, and multi-asset investing segments, with real estate management fees consistent with Q4 levels in the near term. Along with a strong contribution from our capital markets business in 2026. Meanwhile, the continued expansion of our platform and perpetual capital strategies overall is widening the aperture for generating fee-related performance revenues. In terms of net realizations, the backdrop has become much more constructive as you have heard this morning. While we will not have the one-time benefit of the sale of our Resolution Life stake, and our software platform Bistro, we expect a strong year ahead, particularly with respect to our drawdown fund business, with activity building as we move through the year. Overall, our embedded value and realization potential are significant, and we are very optimistic in the multi-year outlook. So in closing, in 2025, the firm delivered robust financial performance in the face of a complex external environment. And as we look forward, with powerful structural tailwinds and multiple engines of growth, we strongly believe the best is yet to come. Thank you for joining today's call. We would like to open it up now for questions. Operator: Thank you. We ask you limit yourself to one question to allow as many callers to join the queue as possible. We will take our first question from Craig Siegenthaler with Bank of America. Craig Siegenthaler: Good morning, Steve, John, Michael. Hope everyone's doing well. Our question is on the record IPO pipeline. So what sectors and industries will you be leaning into? Will some of that spill over into real estate, or is it too early? And as you hand limited partners cash back at a blended MOIC of two times, can you talk about the second-order effect it will have on fundraising as LP liquidity profiles rebound? Jonathan Gray: Thanks, Craig. I would say it will be mostly concentrated in the corporate space. Just because obviously, the fundamentals there are strong. The market is open. I think it will be broad-based. But, obviously, there is a lot of focus around energy and electricity and some of the picks and shovels around that. But in general, as we saw with Medline, high-quality companies are getting a good reception. I do think it will be more US-focused, but I think we will do a number of things in India. And that is a place where we will see probably more real estate activity as well just because of the underlying health of that economy and that IPO market. Europe is slower, but it feels broad-based to us. And getting better. And as I said, on TV a little earlier, it feels like 2013-2014 where you had that four, five-year hibernation period. The markets reopened, and we took a bunch of companies public. And that is the way it feels today. And the fact that Medline and Allegiance, a couple of companies we have taken out, have performed so well for shareholders, I think that is a very good sign. So we do have a lot of confidence. In terms of what it means for our customers, yes, as they get capital back, as they get gains back, it makes it easier for them to allocate more capital to us. It does get that flywheel going again. This is a very positive sign. I think we forget sometimes that the last four years have been in the abnormal period. That M&A and IPO activity have been well below historic levels, and we are moving back towards more historic levels of activity. And a very positive sign for our business and helps obviously with transaction fees. It delivers returns. Generally, we are these things out at higher levels and carrying value. It gives the investors more capital in their pockets to redeploy. So it is a very good virtuous cycle for us, and we are excited to see the IPO market coming back like it is. Operator: Thank you. We will take our next question from Michael Cyprys with Morgan Stanley. Michael Cyprys: Hey, good morning. Thanks for taking the question. I just wanted to ask about AI. You guys are big investors in data centers and AI infrastructure, but just curious how you are deploying AI across your portfolio companies, what learnings you have had along the way, what sort of impact you are seeing from this deployment, and how do you see this evolving over the next twelve to twenty-four months? Jonathan Gray: Well, it is still early days, but we are starting to see some real impact. I would say at the Blackstone Inc. level, it has been with our software engineers. That is where we have seen the biggest impact day one in terms of making our folks places of efficient when they are coding. We are beginning to use it for cyber monitoring. It is giving us a productivity boost. We invested in a company called Norm AI to help us on the legal side, particularly marketing compliance. And then I would say data summarization is super helpful. You know, we have 270 companies, 13,000 pieces of real estate, and the ability to get that real-time and to use that information to make us better investors to me, that is hugely important. At our portfolio companies, I would say customer engagement. We have a number of companies who are doing that. Content creation, certainly with the media focus, companies there. Rules-based businesses, again, legal, accounting, transaction processing. We are working with some of the LLM companies on how to accelerate this. And so it feels to us like real productivity gains will come. It is not happening immediately, but we are seeing early test cases that are quite positive. And this is one reason I am optimistic about what can happen to earnings overall in the stock market and certainly across our portfolio. So we want to be really leaders in this space. We hired Rodney Zemmel who ran AI at McKinsey to help with this, and it is a huge focus for our firm. Operator: Thank you. We will take our next question from William Katz with TD Cowen. William Katz: Great. Thank you. Good morning. Just so curious, just coming back to the retail opportunity, certainly appreciate the big picture and your market share. One of the biggest pushbacks is as rates continue to work their way lower, the relative appeal of oriented vehicles is going down. So I was wondering, a, what are you hearing on the evolution of, in the wealth market? And how would you be positioned if that trend were to continue and maybe could break that down in terms of maybe flushing out your activity level you mentioned in your prepared remarks for '26? And what it might mean for products, geography, or incremental opportunities. Thank you. Jonathan Gray: Thanks, Bill. I think the place to start, of course, is the breadth of our we have. So one of the great things about our firm is we obviously have income. We have products that are incoming growth, and we have growth-oriented products. So the fact that we have a very large-scale private equity vehicle. We have got this just starting out infrastructure vehicle. We have real estate. Obviously, we have credit as well. That is powerful if investors start to shift a little bit. But I think it is worth noting that I think the appeal of, let's say, private credit is not just about absolute returns. It is also very much around relative returns and the return premium we can generate. So in the fourth quarter, our institutional investors in credit we had record fundraising with them because of that premium, both in non-investment grade and investment grade. And if you think about when we started, for instance, Bcred, base rates were close to zero at that point, and yet we had significant flows. So the key to us and if you look at what we have done in direct lending, let's say, over twenty years, consistently outperform what the leveraged loan and high yield market offers. That is why I think these products can continue to do quite well. Yes. There may be a little less demand for these at the margin because of lower rates in the wealth channel. Although the institutional clients are actually leaning more into the space now. And at the same time, obviously, equity-oriented products benefit in a meaningful way lower rates. And I think one of the great things about our firm is we have the ability to capture that benefit across a wide range of equity products and things we own. Both on the individual investor side and the institutional side. Operator: We will take our next question from Alexander Blostein with Goldman Sachs. Alexander Blostein: John, I was hoping you could unpack a little bit what is going on in direct lending both on the wealth side and the institutional side. On the one hand, obviously, we saw redemptions pick up, not surprisingly, last quarter. Gross sales on gen one. Looks like they slowed down a little bit in BCRED still. So what is the sentiment from advisers? How long do you think this will continue? On the wealth side of things? And then importantly, it looks like on the institutional, it has been almost the opposite where your fundraising dynamics on direct lending on the direct lending side quite strong. So help us understand kind of both of those markets least then today. Jonathan Gray: Well, Alex, you characterized it well. On the institutional side, where they are looking at the fundamentals and it is not the headlines and some of the noise here is not as impactful. Their confidence in what we are doing and their need in many ways is going up. So if you think about it on the insurance side, the fact that investment-grade credit is at 71 basis points, corporate investment-grade credit, which is the tightest level since 1998. The fact that we can bring our insurance clients an extra 180 basis points, which is what we did in 2025, obviously motivates them in this area. And similarly, as rates come down, on the non-investment grade side, they still see the benefit of the incremental yield because of our farm-to-table model that we can bring them as investors directly up to borrowers without all the origination financing friction. And so that is helpful. On B credit and wealth specifically, the numbers are as you know, we raised $14 billion in BCRED last year. In the fourth quarter, it was $3.3 billion despite the noise. We did see this uptick in redemptions, which is not a surprise. Given all the headlines out there. Although, of course, it is very different than what we are seeing on the ground. In reality, yes, there will be losses in non-investment grade credit. The key, of course, is is your portfolio healthy? Last year, we saw actually high single-digit growth in the EBITDA of our borrowers. The loan to values are sub 45%, and rates are coming down. So the credit metrics are healthy. The key remains, can we deliver a durable premium to what you can get in liquid credit? And that we feel very confident in terms of, you know, sort of outlook. We will have to wait and see on the redemption front. Over time. But I think performance will be a key driver here on that. And on inflows, think it is notable that the last two months despite all of this, we have had $800 million of gross inflows each of the last two months in excess of that. So we have a lot of confidence in the portfolio and the outlook over time despite these headlines. Operator: Thank you. We will go next to Glenn Schorr with Evercore. Glenn Schorr: Hi there. So maybe a little more of a yeah. You know what? I am going to go with the management fee question instead. Sorry. So I think we in consensus have that flattish near-term management fee growth that you talked about, but we also have a ramp in '26 and ramps up even more in '27. So I guess I am looking for you to talk to when about you see the ramp and the why, meaning how much and when do you is it about the deployment of all the dry powder? How much do you see fee holiday running off and helping in over the next couple of quarters? Thanks very much. Michael Chae: Sure. Well, look, overall, I think as I outlined in my remarks, you have this picture of overall strength. And in the private equity credit and the SMA segments, 17% base management fee growth in the fourth quarter year over year, you have that really entering the year with significant momentum in those areas. To put a little more context around that, and sort of the shape of the year and the period ahead that you said, first, we have talked about our new drawdown fundraising cycle that is underway. We are actively fundraising for five PE drawdowns among others. We are targeting over $50 billion for those in aggregate. We expect it will be materially larger than their respective predecessors in aggregate. And following what we expect to be the commencement of their respective investment periods in the first half of the year and then fall at different lengths, we expect all five to be fee-earning by year-end. Second, I would say you have the continued seasoning and expansion of perpetual strategies overall. Perpetual capital is 48% of our fee-earning AUM. That is up 18% year over year. You have this, you know, quite impressive scaling in BXPE. You have BXMper just entering in the second year coming off holiday. You obviously have our VIP area, new products coming. And then overall, you know, from a business line standpoint, this strong momentum in credit insurance across channels and really broadening diversity fee-earning AUM in that area, 19%. And I talked about real estate in my remarks. So fundamentally, we are on this upward trajectory. We feel really good about our positioning. I just commented on sort of the shape of some of these major new drawdowns. And sort of the timing of fundraising closes, launches, and fee holidays. And so you will see that upward ramp in contribution in the course of the year. And then full-year contribution next year. And I would note in this year, you also will have full-year contribution of a couple of newer drawdown funds like the second growth funds the life sciences fund. And so you have those embedded components around the overall picture. Operator: Thank you. We will take our next question from Daniel Fannon with Jefferies. Daniel Fannon: Thanks. Good morning. Michael, maybe just to follow-up on that in the context of all that growth, how you are thinking about FRE margin the potential for expansion in 2026? Michael Chae: Sure. Look. As I think if this past year illustrated, we think our margins position is fundamentally strong. Expanded over 100 basis points, to a fiscal year record in the context of record FRE. And we do always sort of advise people to look at the full year. And as it relates to 2026, you know, in terms of drivers to note, as we said before, there is a level of sensitivities to BRRPRs and transaction fees. And we think the setup for both of those is quite strong entering the year. On operating expenses, we had previously outlined a path of a decelerating rate of growth for 2025, and that is what happened. And we feel good about the continuation of that trend over time. All of this in the context of quite healthy expected top-line revenue. So at this stage in the year, you have heard me say it before, we would view the starting point again as margin stability with the potential for upside. So that is what I would sort of leave you with here in January. Operator: We will take our next question from Brian Bedell with Deutsche Bank. Brian Bedell: Great. Thanks very much. Those last two questions were similar to mine. Maybe if I can extend it to '27 just because the ramp-up happens more in the back half of the year, especially with the turn-on of the various private equity funds and fee holidays? So, looking at base management fee growth of probably 11%-ish or similar in '26 to '25, again, just because the ramp is happening in the back half. But as we get into '27, does that portend an inflection point upward back to base management fee growth rates that are closer to what we saw in the twenty to twenty-twenty-two cycle you know, versus the this the low double digits side. And then, if I can layer in the FRE margin question for '27, is it fair to assume that you you know, if you have that accelerating revenue growth, obviously, it depends on FRPRs, but can you continue to scale that for FRE margin improvement in 2027? And is there any ceiling you are thinking about for FRE margin in that context? Michael Chae: Yes. Thanks, Brian. I would say overall, as you are hearing, we feel quite good about 2026. And, we feel really good about 2027. Just overall, across the business, from a fee-related earnings standpoint, from a, as part of that fee-related performance revenues with obviously, the infrastructure every three-year large incentive fee happening late that year. With transaction fees over the next couple of years. Around net realizations, certainly, if this, sort of market cycle we see continues and with margins as well. So without getting too granular, you know, certainly for a couple of years from now, that is the overall picture. And structurally, and in terms of the kind of timing of those, new fundraisers I mentioned and the fact that Bill contributes full-year fees in 2027 and the other factors, and, yes, around operating leverage. We feel quite good about it. Operator: Thank you. We will go next to Michael Brown with UBS. Michael Brown: Great. Hi. Good morning. So in light of the DOL's proposed rules facilitating the ALTs in 401 plans, last week. I just wanted to check-in and see if you had kind of updated view on how the market could start to open up and if you are expecting anything in 2026. And then on a related note, does the alliance with Vanguard and Wellington sit today? Is there any new developments to share on that front? Jonathan Gray: So on the 401 front, we obviously have to wait and see what the administration puts out. There is a rulemaking process. So I would expect, '26 is a year of sort of building and hopefully the rules coming out and you know, I think you will begin to see capital raising more in '27 on the 401k side. I do think that if we get a favorable outcome here that allows private assets to move into American worker savings program, I do think long term it has a very significant potential. And, obviously, for us, as the largest player with the biggest products, that it positions us quite well. And, obviously, the strength of our brand. So it is something we are very focused on. We have an excellent team and leadership group on it, but it is that is going to build, and I see this as sort of a foundational year. On the Vanguard Wellington front, there is not a lot I can say I do think that we will hopefully be launching products this year in the first half of the year. I am not sure I can go much beyond that. But to me, it speaks to just what is happening to alternatives and the fact that in the wealth channel, continue to spread out. And we are hopeful that we can reach a broader audience beyond sort of very top end of potential clients wealth advisers. And there are a lot of people, I think, interested in these products, particularly if we can make them easier to access. And so I would just say overall in wealth, and individual investors, that the firm's brand and performance we have delivered is pretty extraordinary. And that this is an area where I think there is lots and lots of overall lots and lots of opportunity. We have been at it for many years. We did our first drawdown product going back to 2002. We did our first semi-liquid perpetual. Now nine plus years ago with BREIT, and we built up a lot of goodwill in this channel. And I think you will continue to see new products come online, We filed something in the hedge fund area as well recently. I think you will see us continue to deliver for these customers. And continue to expand. And what is nice about this AUM, as you know, is it is in this perpetual format. It tends to stick for long periods of time in compounds. So we have a lot of optimism, and it is on multiple fronts. Within this wealth and retirement area. Operator: Thank you. We will take our next question from Brennan Hawken with BMO. Brennan Hawken: Good morning. Thanks for taking my question. In the perpetual wealth management strategies, what does the AUM base look like across geographies? Particularly interested in what the exposure is as far as Asia goes, Asian investors, and it would be great if you could to give that breakdown by asset class. Thanks. Jonathan Gray: Yeah. Do not know if we have that Andy. What I would say is the vast majority of the capital comes from the US. And within Asia, I think the next biggest market for us globally is Japan. Which is a market that obviously has long-term stickiness. And then we have had recent great success in Canada. Do have an investment base in Hong Kong and Singapore. We are spreading out around the globe. But it continues to be a US-dominated business. With Japan now a strong number two for us. Operator: We will take our next question from Brian McKenna with Citizens. Brian McKenna: Great. Thanks. So just a bigger picture question for me. As Blackstone Inc. has become bigger and bigger over the years, I mean, there have been some questions from time to time around your ability to keep generating strong outperformance. But if you look at your results over the past year, think you could argue that fundamentals are only accelerating here. And then performance across most of the businesses is only getting better. I think this is a great example of why scale is so important in the industry. But as the company continues to grow from here, how do you make sure you continue to deliver for your investors and then also make sure you are preserving your culture across the firm? Jonathan Gray: It is a great question. I would say we have a fair strive at this place that starts with Steve at the top. And a desire to deliver for our customers. The reason we have grown so much over forty years is because we have not lost sight of True North. Which is delivering returns for our customers. And so for us, what we are utilizing is the enormous scale advantages in terms of insights coming from our companies, our real estate and infrastructure, and translating that into the capital. And so you have seen this thematic push into AI infrastructure both digital and energy infrastructure. You see this in geographically. The big focus we have had in India, as the leading foreign investor there in private equity and real estate are pushing to Japan as well, which has paid off for us so well. In Asia overall. Our focus on secondaries and GP stakes and our knowledge of alternatives using that to translate into terrific returns. Obviously, our enormous scale in real estate, which is a competitive advantage. And in credit, doing this on an asset-light basis just based on our relationships with clients. And the ability to write these very large checks allows us in our minds and in the numbers to outperform. So I know everyone's always like, oh, larger is worse. I think in this environment, having more scale and more data is a meaningful moat. And we are trying to capitalize that for our investors each and every day. There is very much of an entrepreneurial spirit in this place. There is a fierce sense of urgency and desire and will to win. And none of that is going away. And so I think the key thing to look at is we raised $71 billion of inflows in a quarter, $239 billion in a year. In what has still been a pretty tough environment, real estate lagging, the M&A and IPO market's not quite open yet, and look at what we are doing. So we think the future has been world normalized. Cost of capital comes down. You have what is happening. In the AI world. Economy growing faster. Productivity picking up. And us investing in sectors we really like, we think that will really get this flywheel going, which is why you hear this optimism on the call. Operator: We will take our question from Benjamin Budish with Barclays. Benjamin Budish: Hi, good morning and thank you for taking the question. I wanted to follow-up on some of the discussion on the exit environment I hear the optimism around the IPO opportunity in particular, but I am just curious you could comment a little bit on what you are seeing regarding financial and strategic sponsor-backed M&A. What does that mean for the near-term pipeline? I think your commentary about the ramp is more on the IPO cycle just taking some time despite the growing pipeline. But how are you thinking about other types of M&A? What should we expect maybe in the next couple of quarters? How should we be thinking about Thank you. Jonathan Gray: Well, the strength in the stock market is certainly helping. We announced a defense contracting business that we sold in the fourth quarter you know, which was maybe it was early this year, maybe in the last couple of weeks, our card that we sold, and that was from a strategic. We do see strategics now given the strength of their stocks and the fact that the regulatory environment is much more conducive for M&A. There is more confidence as we have sort of normalized the approach in terms of evaluating antitrust issues. That has been very helpful. So I would expect a mix. IPOs are obviously helpful for a number of these companies, but I think we will see strategics. There was an announcement this week on the stake side where a large manager bought a smaller credit manager that we had a stake in. Again, that reflects an M&A environment that is improving. So I think it is fair to say it is on both sides. And then on real estate specifically, you know, we did see a 21% in overall M&A activity in real estate. We talked about the strength in logistics. We have seen some of the stocks on the screen start to pick up. I would not be surprised if you start to get momentum in that space, particularly as you move towards the latter half of the year, you will see a pickup there as well. So we did lean a lot into the IPO story. But I do think M&A and strategic sales will be there, and they will continue to be financial buyers for some assets as well. Operator: Thank you. We will take our next question from Steven Chubak with Wolfe Research. Steven Chubak: So wanted to ask on the outlook for e-credit flows cited the $700 million of equity raise in 4Q. Those flows appear to be accelerating. I was hoping you could speak to what the reception has been for the product. How you are approaching marketing the offering given just a more complex regulatory apparatus in Europe. And as you think about your North Star, whether BCred is a reasonable paradigm to anchor to as you think about how much this could scale over a longer horizon? Jonathan Gray: Well, we are excited about the eCred product. Direct lending in Europe is a compelling area. The spreads are wider. The loan to values are lower. We have had a product that has delivered 10% inception to date returns in a lower rate economy in Europe. It is a harder place to distribute product because of the regulatory matrix that exists in Europe, but we are beginning to get more and more traction. Some of the new structures that have come out in the UK and on Continental Europe, we believe will make it easier. And the fact that we have delivered this consistent performance. So I think this is a product that could scale. You know, it is not the size of the US market, so I would not have those kinds of expectations. But, certainly, it has gone from raising, you know, single-digit dollars or euros. Now, as you pointed out, $700 million in a quarter, and we have real positive momentum there. So it is an example, again, of the strength of our platform and the way it is globalizing and the growing recept to private assets, not only in the US but around the world. And so this is one where we are going to just keep focusing on it, keep delivering strong returns, and I think it can consistently grow. Operator: Thank you. We will take our next question from Kenneth Worthington with JPMorgan. Kenneth Worthington: Hi, good morning. Thanks for taking the question. Curious how you see the deployment opportunities developing in real estate this year particularly core versus opportunistic, and you have got plenty of capital still in the latest flagship prep funds. How does the deployment pipeline look for those funds this year? Jonathan Gray: Well, I would say it has been a little bit lumpy. We have done some big things. We said here we have deployed across the whole real estate platform last two years, $50 billion. But sellers generally are a bit reluctant because people obviously want to see higher prices, want to see the sector recover. I think you will continue to see us find some big things to do. I think we will continue to invest in AI infrastructure and data centers in this space. I think we will continue to look for privatizations because certain parts of the public real estate market are lagging. And then as values start to move up again and sellers become more motivated, I think we will see transaction activity pick up. It is still very low relative to historic levels. And again, this is an asset class that is not going away. You know, real estate has fallen pretty far out of favor. And yet hard assets, apartments, logistics, you know, beachfront hotels, they are definitely going to you know, have long-term demand. I would say I think the focus for us initially will be more on the opportunistic side. But over time here, I think you will see more and more transaction activity. Operator: We will take our next question from Arnaud Giblat with BNP. Arnaud Giblat: Yes. Good morning. I was wondering if you could carry on the on the real estate side. Could you talk a bit more about the outlook for performance in multifamily? I mean, I heard what you said with regards to the very low levels of new starts and potential from rate cap improvements. Bleeding into performance. But I was just wondering if you could develop a bit more what are the drivers you see that could help her performance in multifamily? Thank you. Jonathan Gray: What we have seen in multifamily in the US has been pretty slow growth, in some cases, modest negative, but pretty flat the last couple of years as the absorption of construction and slower job growth just basically led to a relatively flat market. I think the good news sign goes back to this supply dynamic, which is you know, the starts are now down two-thirds from their peak. That takes a while to work through the system. But when you stop building new supply, that should be supportive of rental values over time. And again, this is a sector, so long as the population continues to grow, there is some aging of existing stock. There should be incremental demand and better fundamentals. We have seen an improvement over what we saw versus you know, six months ago, twelve months ago. And, again, the cost to own remains pretty high, which is pushing people into the rental area. So I would say, overall, logistics is clearly in a better position today, which is our biggest asset class. Multifamily in the US, our second biggest area, is beginning to show some better signs. But that lack of new supply combined with a healthy economy should create a favorable dynamic as we work through this year. Operator: Our next question comes from Patrick Davitt with Autonomous Research. Patrick Davitt: Hi. Good morning, everyone. You talked about the increased demand for IG private credit. But mostly from institutional pools. It seems like retail demand for those strategies has been slow to develop, just looking at BMAX and similar products from other managers. Do you think the relative yields of returns are too low relative to other products on the market? Or is it something else? And then, I guess, looking forward, given your discussions and education process, with distributors, do you see a path to, you know, a meaningful uptick there as that process plays out? Thank you. Michael Chae: So what I would say on the individual investor side, there clearly is more attraction to higher-yielding products and credit relative to the institution who are just looking at a pure fixed income replacement. But I do think over time, these things will evolve. I mean, if you think about the evolution of alternatives, they really started at the highest level with, you know, private equity and real estate private equity. And over time, within institutions have also migrated into infrastructure and real estate and performing credit, you know, non-investment grade, now investment grade. I would guess as alternatives mature over time and they are more and more accepted, you will see a similar path. It may not happen overnight, but they will not just think about, I am going to do an alternative just because I am going to get a double-digit return. I think people will begin to recognize the benefit of premium return over what I can get in liquid markets. But as it relates to fixed income, investment-grade fixed income today, it is not there yet. Operator: Thank you. We will take our final question from Crispin Love with Piper Sandler. Crispin Love: Thank you. Good morning, everyone. You announced the BREIT bonus shares early in the quarter. It is not huge, but first, how is the uptake on that special so far? And then was that driven by your opportunity to deploy capital in real estate? And then where are you most focused in that area for deployment? And then also just separately, how are your institutional investors in real estate? Is the interest improving, noticing a shift in sentiment? Thank you. Jonathan Gray: Well, I would definitely say that the institutional owners are much more open to hearing about real estate than they were, let's say, two years ago. That sentiment is starting to shift and getting better. On the individual side, we have seen some uptick in BREIT over the last year, but it has been modest. The motivation for the bonus shares was really about attracting more capital to invest into what we think will be a very favorable environment. We did have in December the best net flows in the BREIT that we have seen in more than three years. So but but at this point, I think it is still too early to see what the reaction is going to be. I think the key thing with BREIT, as with all these products, will be performance. So the fact that we posted something at 8.1% last year, which was well better than the public markets, well better than other private REITs, is important. We have got to continue to consistently deliver strong performance. I believe if we do that, we will begin to see the flows pick up in BREIT over time. Operator: Thank you. With no additional questions in queue, I would like to turn the call back over to Weston Tucker for any additional or closing remarks. Weston Tucker: Great. Thanks, everyone, for joining us today, and look forward to following up after the call. Jonathan Gray: Goodbye.

101天前Insight Analytics约5分钟阅读

ECTXF 2025 Q4 财报电话会议

Jacob Broberg: Good morning, and welcome to Electrolux Professional Group Q4 and full year results presentation. My name is Jacob Broberg. I'm heading up Investor Relations and Corporate Communication. And with me, as always, I have Fabio Zarpellon, our CFO; and Alberto Zanata, our CEO. And I hand over to you, Alberto, please. Alberto Zanata: Thank you, Jacob, and morning to everybody. And before starting the usual presentation, let me add a comment because I'm sure that you already saw the announcement that was posted yesterday night, where it has been announced that Paolo Schira, the current President of the Laundry business is stepping up and has been appointed as my successor following the decision to retire. Everything has to come to an end. And after the year that I spent in this company, I think it is the right time to hand over the baton to a person that I've been working with for many, many years and that have been instrumental together with all the colleagues in the group management to build the company for what it is today. So I'm very happy that he's taking over this responsibility. I'm confident that together with the team, he will build an even stronger Electrolux professional organization. With this said, I would move on. And before commenting the quarter, let me spend a couple of words on the year because clearly, we closed also the year, not only the Q4. And the year has been another year characterized by uncertainty and geopolitical and macroeconomical headwinds. They have been very significant these headwinds, in particular, for what currency and tariffs are concerned, but also for the indirect effect of currency and tariffs with the business in the U.S. and in China. Despite all these headwinds, we have been able to deliver another year with a profitable growth. We improved organic sales. We improved the profitability. We improved margin, and we took down the ratio between net debt and EBITDA to 1%. So another year in the -- along the path to deliver the result that we all expect to deliver. But you know what, more than the result in itself, I believe this year is characterized by the fact that while performing, we continue to transform and invest for transforming this organization. We continue to invest in R&D starting to bring to market some of the products that we have been developing for years, starting with the cooking lines during Q1. And then even more important during the summer, we will start to bring to market again new cooking product, but also the first batch of the laundry machine that are part of the big program that will revolutionize the portfolio of laundry. We also continue to invest to grow the business in North America and with the chains acquiring Royal Range. It is a small company, but it is an important step, an important add-on to our organization because of the product portfolio, because of the margin and because of the kind of customers that they are currently serving. And last but not least, the third big pillar of the transformation that was significant in 2025 is the efficiency program that we launched in September, a program that is progressing very well, a program that is expected to generate significant savings already this year, but even more next year, a program that will redesign our footprint, concentrating the production of 2 factories into others that will generate efficiency, productivities and [ there's ] a consequent benefit both for the organization and the P&L, but also a program that is allowing us to upskill the organization to make sure that we get people into the organization that are more focus on the front end because that is the shift that we want to have in 2026 to move from back to front to start using all the things that we have been developing during the years to grow sales and win the preference of the customer in the market. With this said, we move to the quarter. And in summary, I would say that the quarter -- we closed the quarter with a strong growth of the margin despite all the headwinds that we had to face. Just to quantify, we are talking about 1.3 percentage point that is the negative impact of currency, in particular, currency in the quarter. So quite significant about that. In the numbers, we also include the SEK 10 million of the acquisition cost. So if you look at the underlying profitability, it's even stronger than what it is -- what you see on papers. The quarter has declining organic growth. But let me see that inside of this one, the decline comes mainly from the U.S. food and beverage market that has been weakening just after the summer, after being very strong in the first part of the year has been weakening during the summer, is coming from Japan that is still a weak market. And in some way, we had also declining sales in North America Laundry, and we will comment later. But in reality, the big business for food and beverage have been growing. We have been growing in Europe. We have been growing in -- excluding Japan in the other Asian market. And Laundry has been growing in general, excluding the United States and Asia in that case. That is again Japan. So, a good quarter, a quarter also solid in term of cash flow and that gave us the possibility to reduce the ratio between net debt and EBITDA. And again, a quarter marked by the signing of the acquisition of Royal Range that was completed in January this year. With all these things said, we are also proposing dividends that are increasing the dividend per share according to our objective to continue to remunerate the shareholders. Specifically about the market, I think I said it. So Europe strong, that is good because it is still more than half of our business, geographically speaking; a relatively weak North American market, but we will comment later about Laundry because the dynamics between the 2 segments are completely different. And you see a declining business in Asia Pac, but it is entirely related to Japan. If we look at the specific trend in Food and Beverage, Food and Beverage has been growing organically, and this is thanks to Europe. Europe is doing extremely well, extremely well, improving, growing sales, gaining market share and improving profitability. And if you think that now Europe is also launching new product, you can imagine how positive it can be about the European business. U.S. is weakening. It has been weakening during -- as I said, during the fall, where we were flattish, but we saw this happening also in Q4. And as I said, the Asia Pac is mainly Japan. Despite this, profitability improved. Profitability improved, is above 10%, including acquisition cost. So the underlying profitability is even stronger. To be noted, and I think it is completing just the comment that I had about Europe is that the order intake for Europe is higher. So not only strong sales in Europe, but also a strong collection of orders. If we move on to Laundry, here, you see that we reported declining organic sales. And it is mainly related to North America and Japan, so Asia Pac, Middle East, but mainly Japan. Two comments about that one. Japan, I believe we believe -- or at least this is the feeling we have, is that we touched the bottom of the decline. And the other thing is that -- and this is we know because Japan is one of the market where we have hard numbers. We know that we didn't lose market share. So having maintained the market share that we have, that is slightly below 50%, so very strong market share in this large market. And having known that the decline should come to an end. Also in this case, the feeling is that we could see the future in a positive way. North America is a different story. Yes, we had a decline, but we have to consider that last year was a super strong last quarter -- last year, I'm sorry, I'm referring to 2024. In the last quarter of 2024 was a very strong quarter where our distributor built up a stock. I still remember that call 1 year ago, exactly this call I was asking if that strong growth would have been replicated? And I said, no, it can't be because it was a buildup of stock. Okay. In this quarter, the same distributor normalized the inventory that he has in North America. So the difference between generated a negative for us, and that is what you see reflected in the overall sales. Nevertheless, the business in North America, that is an important business for our Laundry segment, is a healthy business. It's a healthy business, completely different compared to the situation of Food and Beverage, and that is reassuring. The other important thing that I want to underline for Laundry is that despite the headwinds that we have been talking about, the currency in particular, but also tariff, we improved margin. And this is, again, showing the strength of this business -- the strength of the business. Also in this case, I think that if I look at the magnitude of the headwinds, it would have been a 3 percentage point better in terms of margin and profitability. Looking ahead, also Laundry as well as Food and Beverage Europe, the order intake at the end of the year was higher than what we had the year before. With this said, I would pass to Fabio to comment the financials. Fabio Zarpellon: Thank you, Alberto, and good morning to everybody. Before I deep dive into quarter 4 financials, let me give you overall a perspective from a financial perspective of 2025. Overall, we grew sales organically by 0.5% and the EBITDA margin before the provision we did in September last year for restructuring increased from 11.6% of 2024 to 12.1% at year-end despite the large impact from tariff and currency that Alberto mentioned. Food and Beverage, the larger operating segment, grew 1.5 points overall, same currency and margin is close to 11%, 10.7% we closed the year. Laundry overall sales, the same currency, were flat, but not only the quarter, but full year margin increased, and we closed the year 17.4%, over 1 point better than 2024. Overall, if we look at how we generate the sales, I would say we have a pretty well balanced from a geographical perspective with America that is roughly around 24%; Asia Pac, 60%; and Europe around 60%. So, then moving from the yearly perspective to the quarter. As anticipated by Alberto, Q4 was another step towards our margin expansion, in line with our plan. EBITDA margin moved from 12% of last year to 12.6% of this year. The margin expansion overall was sustained by positive contribution from price, lower material cost and better productivity in our operations. To be noticed that good price management in U.S. compensated most of the tariff impact in the quarter. And let me say, provided there will be no additional change in the tariff award as anticipated during our Capital Market Day, we are confident to be able to fully compensate it in 2026. But before moving on, let me spend 2 words about currency. I mean, we are living in a period of unprecedented volatility for what concern currency. And I would like to develop through 2 dimensions, currency translation and currency transaction. When it comes to currency translation, SEK has been strengthening last year against, I would say, most of the currency. And currency -- all the rest equal, currency translation has reduced the top line by roughly 7 points and the EBITDA value in absolute term more or less by the same amount. So, with no change in what is the EBITDA margin. This also means that our EBITDA generated in quarter 4, if I look at it the same currency of the previous year, we are not deteriorated. So where you see a negative reduction in reality at the same currency, it is even a plus. On the other side, currency translation affected the underlying performance of the business, no doubt about it. And it touched sales, but also profit and profitability. On sales, I would say, mainly for Laundry where we invoice our U.S. distributor in U.S. dollar from our Swedish operation, SEK got stronger, meaning for the same $100 we get less SEK. And the impact is such that the group organic growth in the quarter net also of the currency transaction effect on sales instead of being negative would have been somehow positive, 0.6%, but positive. But I would say the main impact is on the profitability. The currency transaction, and it is mainly related to U.S. dollar, has hit our P&L by roughly SEK 45 million, 1.3 point in margin. So the underlying business performance is much better than what the reported numbers are showing. Currency transaction that was not important just for the quarter, but on a full year base, the impact is roughly SEK 100 million or roughly 0.8 point in margin. Alberto anticipated about the plan to reorganize and restructure our organization and improve our operation agility and profitability. The plan is proceeding according to plan and the anticipated saving, meaning over SEK 80 million for this year 2026 and over SEK 170 million for 2027, are confirmed. Going through the remaining part of the P&L, you see that the finance net was pretty low, SEK 80 million, lower than same quarter of the previous year, thanks to reduced borrowing, but I would say, even a more cost-efficient funding structure. To be noted in the quarter that the tax rate was pretty low, 11%. And this is due to a non-recurring, let me say, change of the funding structure that we put in place to finance our U.S. operation that led us to review the deferred tax asset and therefore, a non-recurring reduction on the tax cost. On a -- As a consequence of this, the overall tax rate for the year was in the range of 21%. But let me say this is not changing going forward the guidance that we gave in the past of roughly 26% of tax rate on income before taxes. Overall, this led to, I would say, a pretty strong earnings per share at SEK 0.98. That is roughly 30% up compared to the same quarter of last year. Cash flow generation was solid, slightly below -- somehow below last year. And this is due, I would say, from 3 components. We delivered somehow a slightly lower EBITA. We have had higher CapEx, and we started to have a cash out related to the execution of our restructuring activity. CapEx year-to-date we concluded the year with a CapEx over SEK 360 million. It's roughly 3% of sales. And as anticipated also during Capital Market Day, I expect it to remain around this level also for 2026, where as we anticipated, we are bringing to market very important product innovation, both in Food and in Laundry. Last word on capital efficiency. We have further improved the operating working capital on sales, meaning the utilization of it. We have seen a slight increase to the rolling 12 that we had in September. This is mainly related to a marginal increase in inventory. Our financial position at the end of the year is, I would say, pretty strong. You see that since the acquisition that we performed in the first part of 2024, we progressively reduced net debt, and we end up a year in a very, very strong financial position. And with that, back to you, Alberto. Alberto Zanata: Thank you, Fabio. And as I mentioned at the beginning, in a quarter with very strong headwind or even a full year, but a quarter with strong headwinds. But despite that solid performance and even stronger underlying performances, we continue to transform to bring to market new products that will surely generate additional sales. During the quarter, we launched the new cooking line in Europe. It will be sold also in Asia Pac, Middle East and Africa, but it's mainly the heart of the program of our European food organization. That is in line with what we always do. So more efficient product, product with higher productivity, product with the innovation that makes us different from competitors. But at the same time, we also -- despite the weak market conditions, we continue to innovate also in Japan. And this is a new product that is coming from the Tosei company, the one that we acquired. Also this one, pretty unique in the market. There are no similar stacking solution with a combo and a dryer in the market anywhere in the world. And this is, again, looking at a trend -- combining the trend of smaller spaces and lower investments to open a launderette. Part of this transformation is to create a new tool for the organic growth as the new products are, but also continue to make use of the cash that we are generating, investing in inorganic acquisition. I already mentioned the Royal Range, that has been completed. We are already working with the team -- [ of ] the Royal Range team to start generating value from this acquisition. So I'm very pleased about that one as well as the investment that we have been doing in this start-up. This is not significant for sale and EBIT today, but we [ count it ] to make use of the technology that the start-up is using to further increase the innovation path of our company. With this said, I would say that we are at the summary. And I have to say that we closed the quarter with profitability improvement. The profitability is mainly driven by the European business -- Food and Beverage, European business and by the Laundry business in general. And this improved profitability has been achieved, and we have been underlining more than once during the call, has been achieved despite of the strong headwinds that we had to face. We also closed the quarter with an improving order intake for Food and Beverage in Europe and for Laundry. And Food and Beverage and Laundry, they account for roughly 70% of our total business and -- you also know that for -- even more in terms of profitability, in terms of EBITA. We closed the quarter with the acquisition of the assets in the company in the United States, a company that we count to make use of this acquisition already in '26 or at least to start. And then for sure, it is something that will come next year. We closed a quarter starting to introduce to market the new cooking product and preparing for the Laundry platform. It is a quarter where we accelerated the execution of the efficiency program presented in September. I mentioned already that in the -- during the first quarter of 2026, we count to already move most of the production of the coffee from one factory to the other. And I think it is a [ counter ] that in a summary is another step in the building blocks path that we have been also presenting to reach our targets. It's a quarter where, thanks to the result of the quarter and the full year, bring us to propose the dividend and improved dividend per share according to our target and to our ambition to remunerate the shareholder. If I look at the first quarter of 2026, what we see, also thanks to the order intake that was reported at the end of Q4, we expect that the trend that we experienced in Q4 for what the Food and Beverage business in Europe and for what the Laundry business are concerned, should continue also in Q1. And this should compensate the U.S. Food and Beverage business that is -- that we saw relatively weak during the quarter. So that is what at least we can say today. With this said, Jacob, back to you. Jacob Broberg: Thank you, Alberto. Thank you, Fabio. With that, we open up for questions. Please go ahead, operator. Operator: [Operator Instructions] The first question comes from the line of Johan Eliason from SB1. Johan Eliason: This is Johan at SB1 [indiscernible]. I have just a question. You talked about the positive Europe. Do you think there are some temporary impacts from the Olympic Games coming up in Milan in Q4 -- Q3, Q4? Alberto Zanata: Let's say that we have obviously some good businesses as usual for the Olympic Games. But first, the Winter Olympic games are not as large or as impactful as the Summer Olympic games. And secondly, no, it is not because it is not only Italy. The European market, all the Mediterranean market are doing well. And the good things in Q4 is that also the Nordic market started to perform much better. So some sales, yes, but not as such that they could be considered a spike in the trend of Europe. Johan Eliason: Okay. Good. Excellent. And then I'm wondering a little bit, I mean, you are generating pretty good cash flows here and your net debt is quite rapidly coming down and then probably closer to 0 at the end of this year than to 1x net debt to EBITDA, obviously, depending on what you are doing on the M&A side. How is the M&A pipeline? Is it sort of more of these smaller potentially attractive acquisitions that we should expect? Or do you still have something more sizable that could or could not materialize in the coming year? Alberto Zanata: I believe you know that my answer will not be a straightforward answer on the matter. The only thing that I can tell you is that we are working on acquisitions. We are working on acquisitions. We just completed one, and I can tell you that we are working in parallel on many other opportunities. If I look around, clearly, there are more opportunity for mid-mall (sic) [ small ] sized company than for large one. The larger not so many all around. But for sure, we are looking for any possible additions -- inorganic addition that is instrumental to our strategy. Johan Eliason: Good. And then you mentioned market share gains. I can't remember if that was related to Europe or where you said that. But is it any product category or geographic area? Or can you say any details on that? Alberto Zanata: Okay. Yes, I was referring to Europe, in particular the food business in Europe. I'm referring to the cooking, and that is very good because remember that we are launching also the new line of cooking where we are the leading company in this market. So we are reinforcing our stronghold. So geography wise, let's say that as during the past quarters or here, so the South European market, in particular Italy, they've been overperforming. They've been above the average. But as I said, the pleasing thing is that also the Nordic started to move well. So -- but it is hot, so cooking in some way. And I would say that it's across Europe more or less now. So it's a very good and promising thing. Johan Eliason: Excellent. And then I just have a detailed question to Fabio. In the cash flow statement, we see that the change in other operating assets, liabilities and provision was quite negative in the quarter. Is that the release of the provisions you took on the restructuring? Or what is that? Fabio Zarpellon: I would say -- I believe you touched on the point. I would say the remarkable things that is somehow sort of discontinuity to the normal path is the cash out related to the execution of the restructuring. The rest is normal business development. Operator: [Operator Instructions] There are no questions at this time. Jacob Broberg: Okay. Thank you very much, operator. Glad that we have been clear in our presentation. So with that, I would say thank you very much for listening in, and see you next time. Thank you, and goodbye.

101天前Insight Analytics约5分钟阅读

ABDBY 2025 Q4 财报电话会议

Operator: Hello, everyone, and thank you for joining us today for the Alm. Brand Q4 2025 Results Call. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Rasmus Werner Nielsen, CEO, to begin. Please go ahead, Rasmus. Rasmus Nielsen: Thank you. Good morning, and thank you for joining us on our conference call. As usual, I have with me today our CFO, Andreas Ruben Madsen; and the Head of our IR team, Mads Thinggaard. This morning, we published our interim report for the fourth quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Let us move to Slide 2. Overall, 2025 ended better than expected with an insurance service result of DKK 1.91 billion, significantly up from DKK 1.44 billion last year. Large claims of 5.2% and weather-related claims to 3.2% in '25 were both below the new normal levels we expect, while the undiscounted underlying loss ratio improved by 3.1 percentage points compared to '24, driven by our repricing and synergies. We had a strong growth of 9.7% in our Personal Lines in '25, while also ending the year with a quarterly growth rate of almost 10%. Thanks to our strong partnership with local banks as well as countrywide banks, we are taking market shares in Personal Lines. We view growth in Commercial Lines is decent in '25 with just below 3%. On the cost side, we improved the cost percentage to 17% in '25 as planned. This is a satisfactory 1.3 percentage point reduction from 2024. Combined with a very satisfactory investment result for '25 of about DKK 0.3 billion, the profit before special costs and tax reached DKK 2.12 billion. Our proposed dividend of DKK 0.66 per share and total ordinary buybacks of DKK 500 million represent a record high normal distribution of a total of DKK 1.4 billion and a payout ratio of 98% for 2025. This is on top of the DKK 1 billion extraordinary buyback we expect to do in 2026 related to the approval of our PIM model as well as an extraordinary steady increase in our CSR coverage in Q4. Now I'll turn to Slide 3 with our highlights for Q4. Q4 was supported by an improvement in the underlying undiscounted claims ratio of 3 percentage points related to our repricing and harvesting of synergies. Synergies also supported a further drop in our cost ratio. As mentioned on the slide before, growth in Personal Lines was strong at almost 10 percentage year-on-year in Q4, while growth in Commercial Lines was a bit negative due to the build-in volatility in repricing our largest corporate customers. Furthermore, a technicality in Q4 last year gave a small headwind for the quarter as well. Please turn to Slide 4 with our financial highlights for Q4. Insurance service results for Q4 '25 was DKK 521 million, was an improvement from DKK 440 million last year, mainly driven by lower underlying claims, but also with support from the strong growth in Personal Lines. The investment result of DKK 73 million in Q4 was satisfactory and on par with last year, and we ended 2025 at a very satisfactory level for the investment result of DKK 337 million. Special cost of DKK 39 million is somewhat lower than last year due to lower cost for the integration of Codan and realization of synergy as well as special cost for announced redundancies booked in Q4 last year. On Slide 5, you can see the payout ratio and EPS for 2025. The payout ratio was 98% and earnings per share ended at DKK 1. The payout ratio is achieved as the net profit after tax with some adjustment related to the Codan integration, amortization of intangible assets and profit after discontinued activity from Energy & Marine business. In 2025, we are close to 100% payout as we have been in all recent years. This reflects our strong underlying capacity for distribution. Earnings per share came to DKK 1 for 2025 based on adjusted profit after tax and the average number of shares. This serves as the baseline for the 2026 to '28 EPS CAGR target of 10%. So adding together the upcoming share buyback program of DKK 1.5 billion and the dividend of DKK 0.66 to be paid in April, we expect to make a total of DKK 2.4 billion in distributions in 2026. Let's go into the details with the insurance service result segments on Slide 7. Personal Lines increased the insurance services result significantly to DKK 314 million in Q4. The improvement in Personal Lines was driven by double-digit premium growth, 2 percentage point improvement in the underlying undiscounted claims ratio and higher run-off claims than the year before. The drop in the cost ratio followed the plan and thus helped as well. Commercial Lines did a bit under last year with an insurance service result of DKK 207 million compared to DKK 238 million in Q4 last year. The main driver for the lower result was major claims doubling to 8% in Commercial Lines, although this is still below the normal level in Commercial Lines of around 10%. In addition, Commercial Lines were impacted negatively by a runoff loss of 2.8 percentage points, primarily related to liability insurance. We are, however, very satisfied with a massive improvement in the undiscounted underlying claims in Commercial Lines this quarter. And now please turn to Slide 8. Insurance revenue grew by 4.6% in the quarter, thanks to continued strong growth in Personal Lines of almost 10%. In Personal Lines, we are still taking market shares due to our strong bank partnerships while repricing related to high motor claims helped as well. The last effect is expected to dissipate in the coming quarters. Commercial Lines are switching to negative premium growth in the quarter but the growth is slightly positive when adjusting for technicality in Q4 last year that carries a headwind of 1% to Commercial Lines growth in this quarter. Our work with increasing profitability of our largest customers does lead to some volatility from quarter-to-quarter in Commercial Lines depending on the acceptance of individual price increases. Q4 this year premium growth was impacted negatively by this. And moving on to Slide 9 and the claims ratio. The Q4 claims ratio was down 1.2 percentage points year-on-year, mostly due to a drop in underlying claims of 2.4 percentage points, while it was negatively impacted by the runoff loss in Q4. The 2.4 percentage point improvement in the underlying claims ratio was driven by repricing and harvested synergy gains, while discounting was less of a help in Q4 this year due to a one-off, which led to a temporary 0.6 percentage point drop in the overall effect from discounting in this quarter. On an undiscounted basis, the underlying loss ratio improved by 3 percentage points. Personal Lines had an improvement of 2.1 percentage points, while the improvement in Commercial Lines reached 3.7 percentage points. And now please turn to Slide 10 and the Personal Lines. The claims ratio is down a massive 5 percentage points, driven by underlying improvements and higher runoff gains compared to last year. On top of this, the cost ratio still improves. This quarter it has reduced with 7.7 percentage points to 18.9%. Please turn to Slide 11 and the Commercial Lines. The total claims experience worsened in Commercial Lines, which was driven by an increase in major claims to 8% compared to a very low level of just 4% last year. However, I note that this year is still below the normal level of 10%. An atypical runoff loss of 2.8 percentage points in Commercial Lines was also a factor behind an increase in the claims ratio of about 3 percentage points. However, I'm still very pleased with the undiscounted underlying claims in Commercial Lines improving 3.7 percentage points year-on-year. Our expense ratio in Commercial Lines in Q4 improved by 1.3 percentage points year-on-year as well. And with these comments, I will now hand over the word to Andreas, who will walk us through the financials. Andreas Madsen: Thank you, Rasmus. Now please turn to Slide 13 for a final update on our synergies. Synergies in Q4 '25 of DKK 164 million is up by DKK 26 million compared to Q4 last year. And thus, we end '25 with DKK 618 million in realized synergies. This underlines our successful takeover of Codan as this is above the target of DKK 600 million per year. We actually finished the synergy program with a run rate of DKK 650 million by the end of '25, just to highlight how much we have won by acquiring Codan. The improvement in harvested synergies in Q4 '25 of DKK 26 million from DKK 138 million in Q4 '24 implies an improvement in our underlying claims ratio of 0.5 percentage points and our cost ratio by 0.4 percentage points year-on-year. This will be the ending of our synergy accounting. And now I move to Slide 14 and the investment result. The investment result was a profit of DKK 73 million, driven by a positive return from our free portfolio and a positive return from our match portfolio as well. Overall, I'm quite pleased with the investment result for 2025 of DKK 337 million, which ended well above the DKK 200 million guidance we started with at the beginning of the year. Even though we focus much more on insurance service result than the investment result, it is clear that a positive investment outcome like the one we had in '25 is a nice add-on to our distributions for the year. And now finally, please turn to Slide 16 for the outlook for '25 initially stated January 21. Our guidance includes a technical result, excluding run-offs, of DKK 1.65 billion to DKK 1.85 billion. The guidance reflects positive effects from our new strategy initiatives presented at the CMD in November last year. The cost ratio is expected to be unchanged at 17% in '26 and the combined ratio, excluding run-offs result, is expected to be 84.5% to 86.5%. We expect an investment result of DKK 200 million in '26 based on the current returns for the free portfolio and a 0 result for the match portfolio. Consequently, group profit, excluding other income and expenses, is expected to be DKK 1.85 billion to DKK 2.05 billion before tax, excluding run-off gains for '26. As you may have noticed, this is a bit different from how we used to guide. We're now limiting ourselves to just one line with other income and expenses, consisting of group costs spend for education and development and amortization of intangible assets. We guide DKK 0.5 billion net expenses for this single line below the line in 2026. And with this, I conclude our presentation and hand over the word to our moderator. Thank you. Operator: [Operator Instructions] Our first question comes from Mathias Nielsen from Nordea. Mathias Nielsen: Congratulations on the strong finish to the year. So if I may start by looking a bit into the year we have started now, if you maybe could share a few details on what we should expect in terms of top line development, and especially related to how much pricing you have done already in January? I know one of your peers is saying the same in Norway. So maybe you could share a bit of details on that as well. And then also in connection to this, like maybe a bit on claims inflation expectations for the year as well. Andreas Madsen: Yes. Mathias, Andreas here. I'll try to talk you through that. We started November '24 doing the repricing, which was mainly related to the uptick we have seen structurally in motor frequency up until that point. And that has been sort of the main driver for the significant premium increases we've had running during the last year or so. So -- but going into '26, we will expect that to dissipate. So we don't have the same sort of structural support from repricing anymore and logically so. Luckily also, we have seen motor claims, at least in terms of frequency, moderate somewhat. And so even though we still see some -- we see some tendencies for spare parts still increasing and thereby also average claims, we don't see, as we stand, a need for major structural increases in prices from motor anymore. So if we're looking at -- just to give you a rough sort of indication, we would be thinking something along the lines of 1% to 2% -- sorry, 2% to 3% indexation for '26 on average across the different lines we have. And on top of that, we still expect to be able to take some market shares and maintain some of the momentum we've had in Private Lines. So a guidance of, let's say -- and it's not a guidance, just to be clear, as you probably remember, we don't guide for top line, but let's say, a rough indication where a starting point is around 3% and maybe with some, let's say, in some likelihood, probably a bit above that, that's where we would imagine the group being. Yes, sorry. Mathias Nielsen: Sure. Is there any difference between like private -- like commercial and private lines on the pricing like going into '26? Sorry for further details, but you can say a bit of that. Andreas Madsen: No, that's fine. No major differences. But we do still have -- would say, it's more -- we're more sort of back to normal mode in both segments. We still maintain for Commercial Lines a focus on especially having the right price for the larger corporates. And we still, I would say, see some repricing needs within select lines. For instance, within larger workers' compensation, we have seen, but we've also been doing quite a bit of that already this year. So -- but no major sort of differences there. And as I maybe also adhered o before, most of the market share we would expect to get would be as we have seen in Private Lines. And then I think you also asked a bit about claims and claims inflation. I mean, I sort of softly touched upon it within motor. I think the overall read is that we do see claims inflation, let's say, moderate, but we do -- but as I mentioned before, from motor at least, we're still a bit sort of, let's say, observant about the development there. But for now, we feel we're at a sort of stable development. Mathias Nielsen: And then maybe like a last question before I jump back in the queue, like Q4 was obviously a quite benign quarter in terms of weather and how everything looked in Denmark during the quarter. How should we think about the start of '26? Like is this on par with what you have in your normal assumption? Or is it slightly worse due to all the snow and cold weather that we have had in January so far? How should we think about what is actually a normal assumption for you? Andreas Madsen: Yes. Overall, Mathias, we would say we're more or less on par with what we would expect for January so far. Operator: Our next question comes from Asbjorn Mork from Danske Bank. Asbjørn Mørk: If I may come back to the question -- the previous question on the premium growth. If I take your midrange of your guidance, so the 85.5% on the combined ratio. And then I use the -- your insurance result mid-range guidance to sort of calculate backwards to see your premium growth assumptions, it seems to be more like in the tune of 2% for the growth for '26. Just wondering if there is something here, especially, I guess, on the corporate side, something we should be aware of that will continue to be a drag pruning on the portfolio? Because I guess with the price initiatives that you are, the indexation you are carrying through in private and with the continued growth in private sector, I guess we should expect the Private Lines to do have above that in growth for '26. Andreas Madsen: Yes. Thank you, Asbjorn. I'll start out and maybe Mads can help me out also. But I mean, I think I heard you say 2% implicit top line. I'm closer to 3%, and I also -- between the combined and insurance service result factor. And I would say that you shouldn't read too much into that. I think that -- as I said before, our overall expectation is something like 2% to 3% for indexation and then a continued momentum, especially in Private Lines. So 3% as a starting point and in all likelihood, maybe a bit more than that. Mads Thinggaard: Yes, Asbjorn, I didn't -- it's Mads here. I didn't hear if you kind of put in normal run-offs into your calculation here. So then you get to a bit different level when you do that. Asbjørn Mørk: No, but I just especially took your 85.5% midrange and your [ DKK 1.750 billion ] insurance service result midrange. So I guess that implies a insurance margin of 14.5%. So DKK 1.750 billion divided by 14.5% give me DKK 12 billion and DKK 7 billion in premium. Mads Thinggaard: Yes. The thing is these calculations, they are very, very sensitive to what the combined ratio level you put in when you do the implicit calculation. So if you try to do the kind of the calculation on 83.5% which would be the case with a normal run-off of 2%, I think you would end at a bit different level. We get it to around 3%. But then again, remember, if we were to move the combined rate to just a little bit in the guidance given that we are guiding in brackets of 0.5%, then you can actually get to, I mean, a quite different implicit premium growth level. So it's very sensitive. So I think listening to Andreas, it is a bit about starting at 3% and then we could have -- perhaps have a little plus to that. That is how we're now guiding. Asbjørn Mørk: Okay. Fair enough. Then on your underlying claims ratio improvement, so the 300 basis points undiscounted for the group, then if I read your slide correctly, you say that it's primarily driven by the corporate business. I guess there's a few run-offs in Q4, at least kind of year-over-year comparison, a few run-offs on the corporate side. But if we do the sort of the development in your -- in the underlying that you do report for the corporate business, it seems to be more in tune of 2.5% underlying, but obviously, that's not discounted. So just wondering, if we do sort of adjust for the various components, how do you see the underlying improvement in corporate in Q4? And how should we expect that to develop in '26 given that you continue to prune the portfolio? Andreas Madsen: Yes. I can start and hopefully give some flavor to it. When we look at it on an undiscounted basis, and keep in mind that the run-off we have is related almost entirely for Corporate Lines, the one relating to the discounting effect, which is from a model change this quarter regarding workers' compensation and therefore, also almost entirely relevant for Corporate Lines. That means that on an undiscounted basis, we see a year-on-year improvement of 3.7 percentage points. And actually, because of the -- if I -- just to add an extra factor, which is not in that number, we also have the indexation from legislation we mentioned in regards to the premium in Commercial Lines, where we had DKK 15 million more premiums in Q4 last year than we actually, so to say, normally would have because we had 2 quarters coming in for 1 quarter in Q4 with a premium regulation there. If you account for that also, then in the Corporate Lines, we would get even higher for the underlying year-on-year growth at least -- or sorry, yes, a change in underlying loss ratio. So I think in all actuality, we are quite happy with the improvements we see. But just back to your question, when we look at the broad lines, and that was true both of commercial and of private lines, motor has been the major factor which we have needed on a broad sense to do repricing for. So we would also expect for underlying loss ratios in commercial that to start dissipating that momentum we've had from repricing. Going forward, and maybe that's a relevant starting point for that. I guess other people would be interested in this on the call. If we look at what do we expect for underlying loss ratios in '25, well, we -- may be doing it in sort of simple terms, we have a net insurance service result improvement on a normalized basis of DKK 150 million with the guidance we put forth. We have a cost ratio which is guided more or less at the same rate as before. So if you split that, we'd say at least 2/3 of it would be coming roughly from underlying loss ratios. And then we have a slight -- also a positive impact from some growth on top of that. And looking -- so looking at something stylized along the line for the full year of an improvement of around 100 basis points in underlying loss ratios. And the factors there would be we realize we do have some tailwind. We have a bit of synergy hangover, maybe a slight bit of pricing, especially maybe in the beginning of the year. And then so we could -- that would add some support. And then actually, we also have some improvements from our reinsurance coming in. So we're somewhere maybe, let's say, 50 to 75 basis points coming from that. And then we also have the initiatives will start to get effect from our improvements we're doing in the strategy, especially towards the end of the year. So in sort of rough indication would be something along the lines of 100 basis points for the year. Asbjørn Mørk: For the combined group? Andreas Madsen: And that was for the combined group, yes, good question, yes, for the combined group. Operator: Our next question comes from Alessia Magni from Barclays. Alessia Magni: So I have three from my side. The first one is if you could provide the split of premium growth by price and volume for the group and if possible private and commercial. The second question is regarding the share buyback that you announced last week. So the DKK 500 million recurring share buyback, should we look at it as the base for next years? Or should we consider it as recurring at DKK 500 million? And then the last question, which is a more long-term strategic, is on the autonomous vehicles. What do you see or what do you expect to see in Denmark in the medium to long term? Andreas Madsen: Yes. Thank you. I can start at least with -- starting with premiums, we sort of touched upon that earlier. If I heard you correctly, it would be regarding the '26 expectations for premiums? Or is it regarded to the Q4 we see, just to be clear? Alessia Magni: For the Q4 and then obviously, I mean, you already talk about... Andreas Madsen: Thanks for clarifying that. Well, we still -- what we see in Q4 is that we have the continued momentum being very strong in Private Lines. We have just around -- just below 10 percentage points year-on-year premium growth for Private Lines. So looking at that, we would say that we have something like 3 percentage points coming from indexation -- sorry, yes, 3% from indexation. Then we have around roughly 4 percentage points coming from repricing, which is now, as I mentioned before, towards the end of that, but we still have some strong support coming from that. And then the net gain for these business, much of that coming from our banking partnerships would be around 3 percentage points support for the premium growth. So that's sort of stylized rough levels for that. Then if you look at Commercial Lines, we have -- actually, the headline is sort of negative for premiums. And I can try to do the same bridge for Commercial Lines. We would start with something around 3 percentage points coming from indexation positive and then a positive support from -- also from repricing of around 2 percentage points. And then there's a one-off effect I mentioned earlier from workers' compensation premiums regulation last year, which would be a headwind of 1 percentage points. And then implicitly, you could say that something along the lines of 5 percentage points negative is from premiums going out due to the repricing strategy we continue to have coming from our strong focus on profitability in -- especially in the larger corporate segments, where just one or two of the larger, let's say, customer engagements can add some volatility into our quarterly earnings. So there's nothing sort of out of the ordinary, but obviously, it is a leap in the quarter here, but actually following the strategy we've had for some time now. So -- and then I think just going into -- shortly, briefly recapping on what we expect for the next year, we would see most of the repricing we've been doing is now fully in the books. We don't have that much coming, and we don't see the need for structural repricing anymore. And that means that with the -- so an indication -- and again, not a guidance because we do not guide for top line growth, we need to have flexibility to cater for the focus on profitability first. Then we would be talking something along a starting point of around 3 percentage points where 2 to 3 coming from indexation and also with support from our market shares being captured in private lines. So that would be what we expect for '26. Then you asked about the share buyback. Well, I think -- maybe I think the best way to explain the DKK 500 million we have coming in, which we term sort of regarding the ordinary net earnings we've had this year. We have a payout of 98% for the year. And so coming from, so let's say, the ordinary -- our dividends and the buyback of DKK 500 million. And the thinking we have is that we try to cater for a stable increase in dividends per share, something along the lines of 10% every year. That's also very closely linked to our earnings per share target for the coming years. So we like to see that come up stably, something along the lines of 10%. And when we did that this year, that meant that we ended with a total payout of DKK 933 million. And then the rest is placed in an ordinary buyback. And this time, we had -- we were able to pay out all of it, so to say, is coming very close to a payout of 100. So the DKK 500 million is -- that's how the DKK 500 million come around. And I think more or less you could say that, that makes it, all else equal, probably something along the lines of a rough starting point for where we would be next year, we would have more earnings in a sort of -- in an expected -- on an expected basis at least, and then we would need to cater for dividends per share also coming up a bit. So that's sort of how you should think about it. And then if I heard the last question... Rasmus Nielsen: Yes, I can take it. It was the report from U.S. on self-driven cars, as I understood it. You, of course, noticed the report. We know about the issue for long. It's been discussed. It's also a matter of when will this happen in Europe, when will the legislation be in place and all that. For the moment being, we are quite confident that it will not have a huge effect or any effect in this strategy period. But of course, we are very, very well aware of the issue and follow it quite closely. Operator: Our next question comes from Martin Birk from SEB. Martin Birk: Just a couple of small questions from my side. I guess in relation to the jumbo share buyback you had just announced, you also comment on reinsurance coverage. What has changed in that perspective? That would be my first question. Andreas Madsen: Yes, Andreas here. We've had some, I would say, some tailwinds in general on reinsurance in this placing. So actually, as I mentioned before, we also -- we do see some improvements in terms of like-for-like premiums. And on top of that, we've actually also been able to -- especially, I would say, or actually within our cat program, we've been able to in this placing, get better terms, meaning that the prepaid reinstatements, or we have been able to achieve prepaid reinstatements for some of the higher lines in the programs where we have the severe losses. And that means that in actuality, our risk in a very severe catastrophe events has come down quite a bit, and that's what's the major factor within the insurance risk driving down the SCR this quarter. So I hope that makes... Martin Birk: So if you take, let's call this extra DKK 0.5 billion top up, right? So if you take that top-up, how is that split between reduced market risk, better reinsurance coverage and a higher profit margin? Andreas Madsen: Well, if you look at -- maybe looking it in a bit of a different way, the -- if we look at the SCR part of the capital change coming from the quarter from Q3, I'm just looking just a minute, Martin, just to find it here. We have an SCR now of DKK 1.9 billion roughly. DKK 1,914 million, and we're coming down from DKK 2,085 million. So that's a total decrease in SCR of DKK 172 million. If you look at that number, roughly around DKK 200 million is coming from the reinsurance, including latest exposure updates. So that is sort of the main driver behind our total decrease. We have a few other moving parts in the other parts of the SCR, but that is the major driver of the SCR coming down. And then on top of that, you also have, keep in mind that if you look at the -- so on top of that, you also have that the own funds sees quite a favorable movement, especially from the development in our profit margin from Q3 to Q4. That is more or less as would be expected in a normal cycle over the year. but that's sort of what -- those are the major explanations for our change in solvency coverage from Q3 to Q4. Martin Birk: Okay. I guess over the past many years, Alm. Brand has been sort of a story of excess capital distributions and you have managed to over and over again to find sort of new top-ups to your ordinary distributions. But with your sort of CFO eyes and ears, do you think that Alm. Brand is now a fully optimized company in terms of the solvency ratio? Or do you still see that there's more belly fat to dig into? Andreas Madsen: I think we are quite optimized now. We have a full internal model. That was a major change in this strategy period. We got that on the -- sorry, in '25, in the last strategy period, we just got that through. I think further optimization could at some point be relevant within reinsurance, as I just mentioned. But again, that would be very dependent on us seeing a continued general improvement of the market conditions. So I'm not saying it's ruled out, but we have already gotten quite, I would say, good benefits there. But then I would mention that the strong driver between -- or behind the favorable overall solvency regime or capital requirements for non-life P&C companies is that more or less when you have internal models, the first shield in your defense is the earnings you structurally make. And as we expect to structurally make more money in the insurance service results in coming years, that would also factor into lower solvency. Martin Birk: Okay. All right. Very clear. And then perhaps just the last question from my side. Could you please share a few words on the arbitration case? Andreas Madsen: Yes, do you want to talk to that? Rasmus Nielsen: Yes, I can take that. It was a case that got built here in beginning of 2026. And of course, just to be clear, we dispute the case, and it's regards to the principal applied for valuation of the divestment and how that was in line with our historical principles of assessing assets and liabilities. These principles are fully in line with how we have made the financial accounts, and it's been reviewed by our external accountants. So I actually or we actually sincerely doubt that this case will have any significant financial impact for our group in the future. Martin Birk: What do you think the time line is? Rasmus Nielsen: Normally, the time line for these arbitration cases are, I would say, 1 to 2 years. Operator: Our next question is a follow-up question from Mathias Nielsen from Nordea. Mathias Nielsen: Just a quick follow-up. So it's not because it's a major one, but it's also the first time that we meet after your CMD and your new strategy. So I thought it would also be interesting to hear like what is the pushback you get from the organization on your strategy? Are people in general happy? Are some of them concerned about how they need to make more money and they need to be a bit more aggressive on pricing and so on? Like what is the pushback you're getting from internal? I think that could be interesting to hear given that it's the first time after you launched it. Rasmus Nielsen: Yes, it's actually a very good question, Mathias. We put quite an effort in starting with having the management team -- full management team on board when we did the strategy, of course, together with our Board. That means a lot of people were involved in creating this strategy. And of course, that gives us followers. So that was one thing. And then the time after 2 months have passed, and we had -- just an example, we had a big management conference 2 weeks ago, where we put additional effort into discussing and finding out how to proceed with the strategy. I would say the followup for the organization is very good, and it's good to the reason that now we will work with -- even more with our processes, with our thinking about how to improve the work with policies, with setting prices and all that. But the very best thing is that we all agree that now it's time -- even more time to be there for our customers. It should be easy to be customers. It should be easy to write the insurance contracts, but also to fill in claims and all that. So on that note, it's very -- it's taking very positively for our people. Operator: We currently have no further questions. So I'd like to hand back to Rasmus for some closing remarks. Rasmus Nielsen: Yes. And as usual, thank you very much for participating, and thank you for your questions. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.

101天前Insight Analytics约5分钟阅读

OSK 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Oshkosh Corporation Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Davidson, Senior Vice President of Investor Relations. Thank you, sir. You may begin. Patrick Davidson: Good morning, and thanks for joining us. Earlier today, we published our fourth quarter 2025 results. A copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately twelve months. Please refer now to slide two of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8-Ks filed with the SEC this morning, and other filings we make with the SEC as well as matters noted in our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today are John Pfeifer, President and Chief Executive Officer, and Matthew Field, Executive Vice President and Chief Financial Officer. Please turn to Slide three, and I'll turn it over to you, John. John Pfeifer: Thank you, Patrick, and good morning, everyone. I want to thank our over 18,000 Oshkosh team members that work together to deliver strong results in a dynamic external environment. Before we review our fourth quarter and full year highlights, I'd like to talk about the CES show in Las Vegas earlier this month. This was the second year of showcasing our products and technologies that serve everyday heroes by making jobs safe, intuitive, and productive. Our vision for the airport of the future, the job site of the future, and the neighborhood of the future incorporates robotics, autonomy, AI connectivity, and electrification which we highlighted at our booth. In particular, visitors to our booth saw our concept for a welding robot that utilized a JLG boom lift coupled with autonomous scissor lifts, AI software, and sensing technologies. This concept highlighted our strategy to shift from providing equipment that enables jobs at height to offering equipment that executes jobs autonomously. We believe this technology is also applicable for a wide range of AWP use cases. In addition, we demonstrated how a modular airport robot platform can support the airport of the future. We have trialed a perimeter detection robot at airports and are optimistic about our ability to commercialize this technology in the coming years and expand it to other applications. Lastly, through an immersive theater experience, we demonstrated how our equipment and technology, including the autonomous jet dock, modular runway robots, and IOPS software, work together in any weather to deliver the perfect turn for airlines, airports, and travelers. Our industry-leading technology also received third-party recognition at the show, winning two best of innovation awards. One for JLG's robotics on the job site, and another for our hybrid electric Volterra ARF. We were also named as innovation honorees for our JLG boom lifts, and our McNeilus Volterra electric refuse and recycling collection vehicle. As the show was happening, we were delighted that our racetrack-inspired collision avoidance mitigation system or CAMS was awarded a CES picks award. The picks award recognize and celebrate brands at the forefront of innovation. Honoring standout products and creative solutions. CAMS is the first purpose-built technology to anticipate collisions for firefighters and others on active roadways. Following a strong response to our showing this technology at CES last year, we have been field testing the AI-powered solution with fire departments in large cities over the past year, and the feedback has been powerful. We are working on scaling this safety platform to support everyday heroes, such as EMS crews at accident scenes, police officers managing traffic or responding to calls, and even tow truck operators assisting motorists. The awards we received at CES as well as the resoundingly positive response we received from show attendees, demonstrate how our investments and innovation are creating safer, more efficient workplaces for America's everyday heroes. We are excited about our next-generation products and are confident they will lay the foundation for long-term profitable growth as we transform industries and help our customers achieve their goals. Please turn to slide four for some highlights for 2025. For the year, we posted revenue of $10.4 billion leading to adjusted operating income of just over $1 billion and adjusted earnings per share of $10.79. As we have discussed on prior calls, the team pulled together across the company to respond to the evolving tariff landscape. Effectively managing our costs, and supply chain throughout the year. We also continued to make strategic investments and strengthened our leadership team to execute on our 2028 goals, as laid out at our Investor Day in June. Please turn to Slide five for a discussion of Q4 highlights. For the quarter, we delivered adjusted operating margin of 8.4% on revenue of $2.7 billion. This led to adjusted EPS of $2.26. In line with the guidance we provided last quarter. Strong performance in both our Access and Vocational segments led to our solid finish to the year. Turning our outlook to 2026, we see a general continuation of recent economic conditions which includes expected lower capital investments at certain of our industrial customers, notably in our access equipment and refuse businesses. Without an improvement expected in nonresidential construction in 2026, our outlook for the year is for adjusted EPS in the range of $11.50. Our EPS growth compared to 2025 reflects strong performance in the vocational segment, reflecting our higher production throughput for fire trucks and the continued ramp-up of our NGDV in the transport segment. Partially offset by our expectation for weaker market conditions in the Access segment. Matt will provide additional details on segment performance and our 2026 outlook later in the call. Please turn to Slide seven for segment highlights. Our access team managed through challenges to finish the year on a high note with fourth quarter revenue of $1.2 billion roughly equal to last year and a higher than the third quarter as we benefited from strong demand in advance of 2026 price increases. As you will hear from Matt shortly, we believe that our strong Q4 sales will have an impact on Q1 sales. Orders were strong at more than $1.7 billion leading to a book-to-bill ratio of 1.5 as customers continue to move toward more traditional seasonal ordering patterns. We are pleased with this performance and we continue to work with customers on their plans for 2026. Our backlog is $1.3 billion which we believe is reasonable in this environment. JLG products serve many end markets in our communities. But the primary driver for demand is nonresidential construction. While we continue to see underlying strength supported by data centers and infrastructure, many other construction sectors remain soft, and we therefore expect revenue in the 2026 to be down compared to 2025. We believe that elevated fleet ages and improving economic conditions in the second half of the year will provide momentum for 2027. As I mentioned earlier, generated tremendous excitement with our technology and vision for the Connect job site of the future at CES. Customers, analysts, and attendees recognize the value of our innovations positioning JLG to build on its market leadership. We look forward to the CONEXPO show in March, we'll be announcing new products and demonstrating our boom lift with robotic end effector concept that was such a hit at CES earlier this month. Matthew Field: Turning to Slide eight. Vocational delivered another quarter of growth. Leading to full year revenue of more than $3.7 billion up nearly 13% and a robust adjusted operating income margin of 15.8%. Our fire apparatus business continues to lead the way with sales up about 17% for the year. We made good progress on throughput with fire truck deliveries up nearly 10% in the second half compared to a year ago. We continue to execute our plan to reduce lead times with expected capital investments of about $150 million to support improved throughput across our three key locations with about $70 million spent to date. The airport products business continues to grow with sales up about 13% in 2025, and we remain confident in our outlook as we see strength in both air passenger and cargo traffic over the long term. Airports and airlines are investing in critical infrastructure and embracing technologies like those we showcased at CES. This provides outstanding opportunities for us to grow this business. Before I turn to our transport segment, I want to briefly touch on our refuse and recycling vehicle business. We're excited about the refuse contamination detection and service technology that we displayed at CES. Which we plan to launch in the first quarter. This technology uses AI and onboard edge computing to identify 14 different types of contaminants so customers can identify contamination in their waste streams, in order to reduce the amount of recyclables going to landfills. While we have seen a moderation of near-term demand, we believe in the long-term growth of this business and our opportunities to bring technology to solve customer problems. Our backlog for the vocational segment of more than $6.6 billion provides excellent visibility as we expect the segment to deliver meaningful revenue over the coming years, as we improve production throughput as outlined at our Investor Day. We expect our investments in production will reduce this backlog over time as we build units to meet continued robust demand for our products. Please turn to Slide nine. We made significant progress on transforming our transport business in 2025. You will recall that we changed the name of the segment to reflect the growing importance of the delivery business and the expanded opportunities we see for this segment. About six months ago, Steve Nordland joined Oshkosh as the segment president. Steve's outstanding experience and fresh perspective are shaping both the direction of delivery as well as our defense strategy going forward. We continue to increase NGDB shipments during the year and are delivering in line with or ahead of USPS expectations. We surpassed the production milestone of our five thousandth unit and are pleased to share that the fleet has exceeded 10 million miles driven. NGDVs now operate in nearly all 50 states including Alaska. Postal workers continue to praise these vehicles, which include modern safety equipment and productivity enhancements that improve their working conditions and are a significant upgrade to the decades-old vehicles being replaced. On the defense side, several key contracts that we announced in 2025 will be important for 2026. As we build and ship units for programs to support the US Armed Forces. In particular, both the FMTV and the rogue fires programs are essential for our nation's security, and they will become more meaningful in our defense results as the year progresses. And just a little over two weeks ago, we announced a follow-on order for JLTV units for the Dutch Marine Corps. We expect to begin delivering on that order towards the 2026. With that, I'll hand it over to Matt to walk through our detailed financial results. Matthew Field: Thanks, John. Please turn to slide 10. Consolidated sales in the fourth quarter were nearly $2.7 billion, an increase of $91 million or 3.5% from the same quarter last year. Primarily due to improved pricing in the vocational segment and higher sales volume in the access segment. Adjusted operating income was $226 million, down about $20 million from the prior year primarily due to unfavorable product mix and higher manufacturing overhead costs. Partly offset by lower incentive compensation costs and higher sales volume. As a result, adjusted operating income margin of 8.4% was down 100 basis points from last year. Adjusted earnings per share was $2.26 in the fourth quarter resulting in full year 2025 adjusted EPS of $10.79 slightly above the midpoint of our most recent guidance. On full year 2025 sales of $10.4 billion, which was also in line with our most recent guidance. During the quarter, as we said on the last call, we stepped up share repurchases to 912,000 shares of our stock for $119 million, supporting our Investor Day target of cash conversion in excess of 90%. Turning to our segment results on slide 11. The Access segment delivered fourth quarter sales of $1.2 billion, up 1% over last year. Adjusted operating income margin of 8.8% reflected unfavorable price cost dynamics including about $20 million of tariffs. And adverse product mix partly offset by higher sales volume. As we expected, the impact of tariffs was largest on the Access segment during the quarter. Across all segments, the impact of tariffs was approximately $25 million in line with our prior call. We believe that the announced 2026 tariff-related price increases for access products contributed to stronger sales performance in the fourth quarter compared to our most recent guidance. Our vocational segment achieved an adjusted operating income margin of 16.2% on $922 million in sales in the quarter. Sales increased by $42 million with improved pricing partially offset by lower sales volume. Lower volume in RCVs was partially offset by improved volumes in municipal fire apparatus and airport products. Vocational adjusted operating income increased to $150 million as a result of improved price cost dynamics partially offset by unfavorable product mix within municipal fire apparatus in the quarter. Transport segment sales increased $33 million to $567 million in the quarter. Delivery vehicle revenue grew by $130 million to $165 million and represented approximately 30% of Transport segment revenue during the quarter. Delivery revenue grew 13% sequentially compared to the 2025. As expected, defense vehicle revenue was lower compared with last year due to the wind down of the domestic JLTV program. Transport segment operating income margin was 4%, up from 2.8% last year reflecting the net impact of changes in CCAs and improved pricing on new contracts. Partially offset by NGDV ramp-up costs. Fourth quarter operating income margin was down sequentially from the third quarter due to the non-recurrence of the one-time sale of the JLT related IP license to the US government. Turning to our expectations for 2026, on Slide 12, we remain on our plan to deliver strong improvements to revenue and operating margin by 2028. For next year, we expect sales to be approximately $11 billion on a consolidated basis which represents growth in the mid-single digits. We are estimating adjusted operating income to be a little over $1 billion and we estimate that adjusted earnings per share will improve to approximately $11.50. Our sales outlook assumes roughly flat nonresidential construction activity in line with many external projections. We expect lower sales and access, we expect to grow both sales and adjusted operating income for the vocational and transport segments. Also, it's worth noting that we are assuming that the present tariff rates remain in place throughout the year. The rough magnitude of these tariffs is estimated at $200 million or about $160 million higher than 2025. While we expect full year results to reflect improved performance, we anticipate that the first quarter will be the lowest quarter of the year as we would traditionally see from seasonal factors. We expect the strong fourth quarter 2025 customer response to pricing actions at Access will also adversely impact Q1 volumes. As a result, we believe our adjusted EPS for the first quarter could be about half of last year. Building on John's earlier comments, we believe our second half performance will be more favorable across the segments than in the first half. For the full year, at a segment level, we are estimating access sales to be approximately $4.2 billion with an adjusted operating margin of 10%. Reflective of softer market conditions in North America. We expect to fully offset the impact of tariffs by year-end. We project vocational sales will be approximately $4.2 billion about equal to our 17%. Supported by a continuation of favorable price cost dynamics and volume growth from improved production throughput. For transport, we expect sales to be approximately $2.5 billion with expectations for operating margin of approximately 4% as we continue to transition out of past fixed price contracts and ramp up NGDB production. Performance in this segment is anticipated to improve throughout the year as we grow revenue on NGDV deliveries, receive follow-on NGDV orders, and billed units under the new FMTV contract. Our estimate for corporate and other costs is $180 million, and tax rate is approximately 24.5%. Expect to invest approximately $200 million in CapEx, and our estimate for free cash flow is approximately $550 to $650 million or about 80% of net income. We are announcing our quarterly dividend of $0.57 per share, which reflects our expectation of strong long-term cash flow generation and our Board's confidence in our ability to sustain profitable growth while continuing to fund our investments in innovation, and to expand US manufacturing. We also plan to continue repurchases of shares throughout the year. With that, I'll turn it back over to John for some closing comments. John Pfeifer: Thanks, Matt. We just delivered a solid fourth quarter to complete a great year and we remain confident in our long-term growth opportunities. Driven by our people, innovative products, and strong businesses. We believe our guidance for 2026 continues to support our plans to achieve our adjusted EPS range of 18 to $22 per share by 2028. We appreciate your continued confidence in Oshkosh and look forward to answering your questions. I'll turn it back to you, Patrick, for the Q and A. Patrick Davidson: Thanks, John. I'd like to remind everyone to please limit your questions to one plus a follow-up, and please stay disciplined on your follow-up question. After that follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q and A session. Operator: Thank you. We will now be conducting a question and answer session. Again, we ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may requeue, and those will be addressed time permitting. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Moment please while we poll for questions. Operator: Thank you. Our first question comes from the line of Jamie Cook with Truist. Please proceed with your question. Jamie Cook: Hi, good morning. I guess just two questions. One, John, on the access guidance or the aerial guidance for the year. I think it's applied down 6% or 7%. You know, relative to United Rentals who came out, and I think their CapEx guide was up modestly. Katz retail sales in North American construction were up double digits. So there just seems to be a disconnect between what I mean, like, what's implied in your guide versus what we're seeing from competitors or peers or customers. So just color there. Is it is is there a you know, I guess, so color there. And then, my second question, just on the Transport margins. It sounds like you're ramping as you expected. I think implied sales are up 20%, the margins of only 4%. I know there's some some pricing that needs to happen on the defense side. But just color there on how we think about margins as we exit the year under you said things should get better as the year progresses? Thank you. John Pfeifer: Yeah. Great, Jamie. Thanks for your questions. I'll take the first one. I'll probably pass the the margin question on transport over to Matt. Starting with our access business and your and your question on our outlook, First of all, I I wanna make sure I I state that we think we're taking a balanced approach to 2026. The the market is is unfolding right now. Kinda what we all hear about on a regular daily basis in terms of what's going on, meaning, really strong big mega projects and data centers power gen, some large infrastructure projects. So that that does drive demand, and then that's very positive. On the other hand, you've got private nonres construction, which is a huge segment of non nonresidential construction, which is still under some pressure. And we just we read the stats, and we look at the outlooks for these markets. And long term, we feel really good. You know? Eventually, we'll see some of these delayed starts start to come back online. And and and when that does, that'll be really good news. But right now, we we've taken a balanced approach on that. When you talk about United Rentals and what they reported today, last night, I guess it was, versus a lot of other businesses that are out there. They're they're not all the same. You know, if you're highly if a if one of our customers is highly exposed to these big mega projects, then then then that's a that's one story. The other story, you've got a lot of independent rental companies that are more exposed to the private nonres, is still under pressure. And that kind of is what leads into our balanced approach on the market and and what we're seeing in in 2026. You know, for example, manufacturing construction is is still under pressure, and that's a big sector of nonresident construction. We kinda need to see that turn a bit. And and if we do, in a future call, we'll let you know. Matt, I'll turn it to you on the transport question. Matthew Field: Yeah. Morning, Jamie. So first, let me just say we remain confident in our 2028 outlook for the transport segment. Our guide in 2026 reflects a number of factors. There's pricing for new contracts, as you mentioned, with FMTV, new pricing coming on in the second half? We'll see steady production increases for the NGDV, We do anticipate further NGDV orders to come throughout the year, And then there's a couple things that are are maybe nuances you worth noting. One is we do have lower defense volume in 2026 largely on export orders. And then some investment in new product development, cost and so forth, normal engineering that steps up over the year. That's what results in the OI of 4% with the back half a bit stronger than the first half. But, again, remain very confident in our 2028 outlook. Operator: Thank you. Our next question comes from the line of Jerry Revich with Wells Fargo. Please proceed with your question. Jerry Revich: Yes. Hi. Good morning, everyone. John Pfeifer: Morning, Jerry. Jerry Revich: John, hi. John, I I know you you have excellent telematics data from your fleet gauge. Just tell us what you're seeing in The U. S. And European market for your products? You United Rentals spoke about good utilization for your equipment categories. Curious what you're seeing. John Pfeifer: Yeah. We, you know, we've got a lot of machines out there that are connected Jerry. I mean, in in the hundreds of thousands. Like like, a lot of equipment that's connected. We've got really good insight into the health of the equipment that's in the fleet, and it is we see it as healthy. And and same in Europe. The European fleet's relatively healthy too. So that's good news. Right? And the used market is also pretty healthy. Right now as as we see it. You know, the prices in the used market, the amount of supply that's in the used market, it's not in a it's in a healthy state. So I I can't you know, we we that's all good news. And I think we're all kind of looking forward and saying, okay. We got a lot of nonres under some pressure, but we've got big mega projects that are growing at a healthy rate. And we're we're kinda all looking for the data to tell us if there's an inflection point. And right now, we don't we don't know exactly when that's gonna happen. We just know that at some point, it will happen. And that gives us the reason for our balanced outlook on 2026 for access equipment. Quarter versus the fourth quarter because the guidance implies a really meaningful earnings acceleration. So in Access, it sounds like you're expecting under absorption because of the pull forward and of price increases, but maybe we could just unpack that and talk about margin expectations and access it in in in the first quarter and the transport headwinds, you mentioned sounds like those might be heavier in 1Q than 4Q. Can we just maybe quantify those points just to build the comfort with the earnings acceleration? Matthew Field: Yes. So our first quarter, as as we mentioned on the call, we expect that about half of last year. Most of that decline is is in the access segment year on year in terms of the growth And so if you think about that, we had a strong first quarter last year ending flowing through from 2024. This year, we did see very strong sales in the fourth quarter as we just reported. We think that'll have a moderate impact in the first quarter. We also have some adverse price costs. While we did announce pricing, we do have a full load of tariffs in the back half of the year, we'll start getting some of the cost reductions that we kicked off couple years ago, which progressively increased throughout the year. So so that's the large driver of kind of the year over year EPS at at roughly half of last year. Operator: Thank you. Thanks, Jerry. Our next question comes from the line of Mircea Dobre with Baird. Please proceed with your question. Mircea Dobre: Sorry. I'm gonna have to stick with access equipment too because I am little bit confused here in terms of how we're thinking about the the first quarter. Can we can we be specific in terms of what you guys are are are thinking in terms of year over year revenue decline and margin? And my follow-up, you know, as you as you think about the full year guide, right, I mean, if if if we're recognizing that the order intake that you had in the fourth quarter maybe as you said, pull forward some of the demand because of the announced price increases. Where you're guiding the full year revenue at $4.2 billion frankly, is still higher than what your order intake was for 2025. So to me, in that in that guidance, it you do imply that things are, frankly, getting a little bit better. As the year progresses. What's your visibility related to that? I mean, you know, are you hearing that from your customers in terms of how they're deploying CapEx? Or are there some other assumptions that you're baking in? Matthew Field: So I'll take first quarter and kinda how to think about that and then hand off to John to talk about some of the backlog and how we see the year developing. So, again, for the full year, we're 4.2. As you mentioned, that's about a 6% to 7% decline year on year. We think on a year over year basis, that'll be higher in the first quarter. Again, first quarter last year was very strong coming off Q4 2024. This year, we are seeing a relative weakness in part because of the pricing we announced for 2026, which resulted in strong sales in Q4 so we would expect to see the revenue decline year on year, first quarter higher. What we have for our full year guide. John Pfeifer: Yeah. And and with regard to how the year is gonna progress, Mircea, so we did in the fourth quarter, our orders were $1.7 billion. Our book to bill was 1.5, and we have a backlog of $1.3 billion. So I always pay attention to we we always pay attention to our backlog and how it's how it's continuing to progress. We and and I always indicated our backlog is was typically, we say should represent three to six months of demand, and it that $1.3 billion is right in the middle of it when you look at our guide. We do look at the first half being under a continued pressure because of some of the nonresidential activity that we see we we also saw you know, a heavy, shipments in the fourth quarter, which may impact the first quarter a little bit. As Matt just indicated and you indicated with your question. When you look at where our backlog is, and that backlog also shows when customers need equipment because their shipment dates on every order we take. That that's what leads to our to our guide of of the $4.2 billion which is down a little bit year over year. But kinda consistent with our balanced outlook on where we are with the market. Mircea Dobre: K. Lastly, if I if I recall, we were looking at $300 million of revenue delivery with these units, the customer is delighted with them. Quarterly at full run rate for 10 million miles, and the customer with When you look at our our our performance, we are at or ahead of US Postal Service delivery requirements right now. The Postal Service is very happy with the deliveries we're making. And we have a formal schedule that we have to meet. And we're at or ahead of that formal schedule. So when you look at our revenue for the full year, you know, we've always said that we will do between 16,020 units a year on this program. And in '26, we're right at the low end of that range. We're in that range on the low end side of it. So we we continue to do well with production. Sure. We'll produce more units in the second half than the first half, but we're, you know, we're running fairly well with this program. And and our customer is very happy with it. If you look at our guide for the transport business, kinda thinking about the revenue side of it, about half of that guide is NGDV or delivery units. To give you kind of some numbers. And it's a little bit more on the back half than the first half. Mircea Dobre: Alright. Appreciate that. Thank you. Operator: Thanks, Mircea. Our next question comes from the line of Steve Barger with KeyBanc. Please proceed with your question. Christian Zyla: Morning. This is Christian Zyla on Steve Barger. Thanks for taking the questions. Just on access, were there any other industry or customer specific ordering dynamics in access that you don't think would recur as we head later into the construction season. Or was it really primarily just the pricing pull forward on top of a regular ordering cadence from your customers? Matthew Field: Hi, Christian. It's Matt. So certainly, we I'm gonna say there's anything unique. I would just say we had, you know, a strong sale into independents in the fourth quarter. We think that'll reverse out and the the year will normalize. For 2025, know, in general, we saw relative strength in independence And I think we all expect that that'll that'll normalize more through 2026. Christian Zyla: Got it. And then maybe a slightly different question. Just at CES, you guys showcased delivery vehicles for non USPS. As your team put together the concept, just kind of what drove you to pursue that that plan? Was it the market size or unit economics that you like? Was it the financials? Or or kind of the cross synergies? Just any thoughts on that concept. Thank you so much. John Pfeifer: Yeah. Thanks for the question on CES. We I mean, all of the above, on what your question was. I mean, we we you know, when you look at our NGDV, we developed in United States, there's a lot of technology on that vehicle. It's the most advanced last mile delivery vehicle ever put into the market. It provides so much benefit for the operator to be productive, but underscore also safety. Safety for people around the vehicle and safety for the operator. And so in at CES, we wanted to showcase that we have the capability to to continue to deliver this type of a vehicle for other segments of delivery market know, these are purpose-built vehicles. They're not they're not modified Or a body on chassis, which you see a lot Cox vehicles, which you tend to see a lot in the delivery market. These are purpose-built vehicles with technology on them to drive productivity, safety, and economic performance for the fleet operator. And we wanted to showcase that because we've you know, we we've we've always talked about future opportunity beyond NGDB. So that that was the intent of it. Operator: Our next question comes from the line of Angel Castillo with Morgan Stanley. Please proceed with your question. Angel Castillo: Hey, thanks for taking my question. Just wanted to maybe get a little bit more color Sorry to keep harboring on the access side. But have you said exactly, I guess, how much pricing you anticipate to get in 2026 within your sales guide? And can you just kind of talk about that in a little bit more color just to how much is kind of embedded right now at this point in your backlog? And not just for your arrows, for each segment? John Pfeifer: Yes. Thanks, Angel. I'll take the question as Great question, of course. So when we look at our our pricing plans, you know, course, we've been through a dynamic period. When you look at our the cost side of the equation, it's been headlined by tariffs, tariffs, and more and tariffs in that dynamic environment. So we go to work, and we went to work in 2025 doing a lot of tariff engineering work. To try to do everything we can to take the cost of tariffs and mitigate it. And a lot of that has to do with engineering, reengineering, you know, our sourcing teams work hard on, where we're sourcing what product, and and we we try to localize or move product when we need to. So we've done a lot of that work, and we'll continue to do that work. We try to minimize the impact to our customers, but you can't you can't eliminate all of it. So eventually, you have to pass some through in price. So we did we've done that. And we believe that the price increase is reflective of something that our customers can manage as well as something that allows us to stay whole throughout 2026 on the price cost equation. So that's the gist of it. Angel Castillo: That's very helpful. And maybe just following up on that point of, you know, localizing cost And one of the big kind of questions we've been getting is just what what happens to kind of the bill of materials or or just materials cost in general, whether it's from commodity price inflation or memory chips and other things that we're seeing out in the market. So could you just comment a little bit on what's kind of embedded in your guidance in terms of just broader cost buckets? In particular, for Xtandi, maybe on the access side, if you could just kind of unpack how much is maybe of of the cost or or the margin potential dynamics here is tariffs versus materials versus mix of independence. Know, or any other kind of buckets here? Matthew Field: Yeah. Angel, thanks for the question. So on the cost side, I'll give kudos to the access team, which really kicked off a cost reduction initiative going all the way back to 2024, and that progressively has results And so they're continuing to identify cost savings throughout this year. So cost savings are kind of grow cumulatively quarter over quarter. So we'll get more in the back half of this year than the front half of this year. You know, with those actions, with with other actions, I'd say overall, we're seeing largely flattish cost set aside tariffs. And so the team's really doing a great job to manage the cost equation of this and offsetting as much of the tariffs as they can through those initiatives. In terms of mix, you know, we've we've historically seen a higher mix of IR IRCs. I I can't be explicit about how that impacts the financials. But, you know, traditionally, that's been 55% NRC, 45% IRC. We think that'll shift kinda more normalized to those levels in 2026. Angel Castillo: Very helpful. Thank you. Operator: Thanks, Angel. Our next question comes from the line of Timothy Thein with Raymond James. Please proceed with your question. Timothy Thein: I just have one. As on the vocational segment. Can you maybe give some comments in terms of the the the backlog there and and and how that's kinda influencing the the revenue, what you expect in terms of the revenue composition and in 26. I I take it that that the RCVs will are are likely to step down just given comments in some of the the the public waste haulers. But maybe if if there's some further handholding you can give there in terms of of, you know, split across f and e and and AeroTech, etcetera. Thank you. John Pfeifer: Sure. Yeah. Thanks, Tim, for the question. So a vocational, you know, continues to be a great story, a great business for us, will be for for many years into the future. The backlog in across the business is really healthy. When you look at the backlog at a as one step down from that, which is your question, the the the fire backlog is still really healthy. You know, we've had a big backlog. We're continuing to increase capacity, increase output. Yet we continue to see healthy order rates. I mean, customers want our product. So the backlog is really, really healthy in the fire market. It's the same in the airport market with our airport and AeroTech business. A healthy business conditions, healthy order rates, the stats on both you know, customers are continuing to invest. You see the passenger and commercial demand for airport. It's really good. There is some pressure in the environmental business with refuse and recycling. The business in total is very healthy. And our customers are are very healthy in this segment. There's just a little bit of a of a reluctance right now to place a lot of CapEx That's just temporary. We see the long term being fantastic as we had indicated in our investor day through 2028. Just could be a little bit of a lull in CapEx, so some downward pressure on that business. In in 2026. But long term, it's fine. And that and the vocational business will perform exceptionally well even with a little of that blip in in 2026. So we feel great about this segment. The segment where we really showcase our technology makes such a big impact for our customers. And that's one of the reasons it's so healthy. Timothy Thein: Great. Thank you, John. Operator: Our next question comes from the line of Kyle Menges with Citi. Please proceed with your question. Kyle Menges: Thanks for taking the questions, guys. I was hoping we could just go back to the the margin and just how to think about the transport margin ramp throughout 2026. And then, Matt, you still sounded confident in in hitting the Investor Day target for Transport margins in 2028. So would be helpful to hear some color on how to think about the bridge from transport margin of around 4% in 2026 to to meeting the investor day target by 2028. Matthew Field: Yeah. Thanks, Kyle. So you know, as I think about going from the 4% that we got this year to the 10%, all the building blocks are there. It's just a matter of timing. And so we've talked about is new price on on new contracts we're building on our FMTVs sorry, FHTVs now. Which you see in the performance in the 2025. We'll build under the medium contracts, the FMTV, '26. NGDV ramp, so we'll continue to increase our production progressively throughout the year. John mentioned that about half of our revenue for next year, so the $2.5 billion is NGDV, which is right what we said we would be in in the long term guide of 3.1. So you're starting to see those elements come in with with us seeing more of that the second half, obviously, than the first half. You will have some some launch costs that we pick up in the first half. The other thing just to note is that with that half of the revenue being delivery, then you can see some of the defense decrease year on year from the export orders, and we would expect defense volume to pick up into our future guide a bit as well relative to 2026. So that's kinda how to think about 2026. Again, all the building blocks there, it's just a matter of timing for them. And then the second half being stronger for the reasons I mentioned earlier. John Pfeifer: Yeah. We're and we remain really confident on the confident on this going forward. And on on the recovery of its margins. We're very confident that that continue to progress as we head towards 2028. Kyle Menges: Helpful. And then a question on AeroTech. Just how how do you think you've been able to to to extract some some margin synergies? And what what's really the the potential to to squeeze out some more margin from that And I think you guys have hinted at doing some eighty twenty within AeroTech. So it'd helpful be helpful to hear just what what some of those eighty twenty initiatives look like. Thank you. John Pfeifer: Yeah. Thank you for that question. The AeroTech business is a great business for us. The market that we're in and the synergies that we get between our our core synergies and the capabilities of AeroTech, and that's what you see. So the the market's healthy. We're continuing to drive technological innovations within that market segment. You already see our autonomous jet docking and autonomous cargo loading. Being deployed right now in so production, so to speak, meaning at gates. There's a lot more technology to come. Technology really helps customers be more productive. And when that the case, it it it also helps our margins, of course. But we are we are we do, on the other hand, have operating synergies, and and we do eighty twenty similar to the way we do it in some of our other businesses, which is dramatically helped us transform margins over the years. And there's opportunity there for us to continue to get margin through improvement in operating performance. It's not to say that there's anything wrong with the operations of AeroTech. There isn't. But you can always make operations better. You could always do that. And if you ever don't have that mindset, you're probably in trouble. Mhmm. But this is a great business. We expect margins to continue to expand because of technological synergies. And continuing to be better and better with operations through our 8020 philosophy. So thanks for that question. Kyle Menges: Great. Thank you, guys. Operator: Thanks, Kyle. Our next question comes from the line of Steven Fisher with UBS. Please proceed with your question. Steven Fisher: Thanks. Good morning. Just on within the vocational side of things on fire side, just curious how much of a surprise was this municipal mix in the quarter relative to kind of what your expectations were start of the quarter? And what's your baseline expectation of mix in '26 versus '25? Matthew Field: So what we see in the fire business is some quarters, you kinda have a mix of products that has a bit of a lower margin as you kinda work through the one offs and so forth. What we seen in prior quarters is more batches you've seen us talk about those even on the call. We have, you know, 13, 15 trucks being delivered to a department. In the fourth quarter, we had a few more snowflakes, I guess, I'd say. Than we would have in other quarters, and that resulted in a little bit of adverse mix You know, I don't see that being anything sustained. It's more of a periodic thing. And over the year and kinda over the long arc, it really gets lost in the shuffle, but it was something we saw in the fourth quarter specifically. Steven Fisher: Okay. That's helpful. And then just coming back to the cost elements, just curious how much visibility you have to the costs for this year at this point. How locked in are you for what you expect to produce? And then I think, John, you you mentioned your expect to be whole on the price versus cost, but just on the second half of the year in particular, is versus cost expected to be positive for that second half? Thank you. Matthew Field: Yes, Steve. So we have good visibility into the cost at this stage for the year. We think we're in a stable of an environment as we've seen for a while in terms of tariffs at least. And we've got good visibility into our raw material prices as well as our cost reduction initiatives. So we feel we've got a good handle on the cost for the year. We do anticipate price cost to turn positive in the back half of this year. That's one of the drivers of some of the better performance in the second half. And is a bit of a drag in the first quarter as as we work through some of those costs reduction initiatives throughout the year. Steven Fisher: Terrific. Thank you. Operator: Thanks, Steve. Our final question comes from the line of Chad Dillard with Bernstein. Chad Dillard: Hey, good morning, guys. I was hoping you could quantify the incremental tariffs in '26 suppose not by segment, And then also, talked about taking price increases to cover them. In the event that AiEPA gets overturned, I guess, do you think about that? Are you able to maintain the margin? Or do you revisit the the pricing discussions with your customers for '26? Matthew Field: Thanks, Chad. So as I mentioned on the call, full year impact's about $200 million. That's roughly a $160 million higher than last year. I just of that as mostly in access, so about three quarters is in access segment. To put some ballpark numbers on that. If there is anything overturned, our assumption in certainly our planning assumption is that something equivalent will go in place. So our guidance assumes that the present tariff rates sustain throughout the year. I think that's a probably fair assumption based off everything I've read, but you know, as the situation evolves, we'll adapt as we did in 2025. Chad Dillard: Gotcha. That that's helpful. And then I was hoping you could bridge your your incremental margins in the vocational business. They're pretty sizable. So I was wondering if could split it out, how much comes from price realization versus volume? And then secondly, you know, with 17%, you're kind of at that midpoint of your long term guidance. So I guess what's stopping you guys from from taking that that target a bit higher now? Sound like a CFO. Matthew Field: So so we're at 17%. We're really pleased with that margin. It's it's a good step forward. And what you see in that growth and I won't be explicit about the breakout between volume and price cost, but volume plays a larger driver in 2026 than it did in 2025. As we bring on more capacity, John referenced the amount of capital we're investing into our assembly plants for fire capacity. So we started to see that come to the floor in 2026 relative to 2025. Price cost, we do see still favorable in 2026. Then we do have some investments that help us support our business growth that's really what drives the 17%. But that's a great margin. It is right within the sweet spot of the 16 to 18% we got it in 2028 with revenue growth in the 2028 guide relative to where we are in 2026. So really pleased with the progress we're making in that segment and pleased with the performance we're seeing. John Pfeifer: Yeah. I'll just say that, you know, we're at we are we're expecting to be at 70% margins. Which which we'd all look at and say that's that's good compared to our '28 guidance. So we we got a lot of good things still happening in business. A lot of good things on deck to come. So we feel good about it. Chad Dillard: Okay. Thanks, John. Operator: Mr. Davidson, I'd like to turn the floor back over to you for closing comments. Patrick Davidson: All right. Appreciate it, Christine. Thanks for joining us, everybody, on the call today. We will be meeting with investors at several conferences during February and March. We're also looking forward to another CONEXPO show, as John mentioned earlier during his comments on the access business. If you're interested in learning more about our company and our construction equipment leaders, consider a trip to Vegas in March for the show. Last held back in 2023, right, three years ago. So it's a great opportunity to gain exposure to our industries and hear about the new products and technology. Have a good rest of the day. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

101天前Insight Analytics约5分钟阅读

WHR 2025 Q4 财报电话会议

Operator: Good morning and welcome to Whirlpool Corporation's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, Roxanne Warner, our Chief Financial Officer, Juan Carlos Fuente, our Executive President of North America and Global Strategic Sourcing, and Ludovic Bouffiz, our Executive President of KitchenAid Small Appliances in Latin America. Our remarks today track with a presentation available on the investor section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from the statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports. We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better base for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the investor relations section of our website for the reconciliations of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in listen-only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc Bitzer. Marc Bitzer: Thanks, Scott, and good morning, everyone. Today, we're going to discuss our 2025 results and share our expectations for 2026. Before we dive in, I would like to acknowledge three leadership promotions we have recently made. By their new faces or rather new voices on this call, they together represent over seventy years of experience within Whirlpool. Each one of them brings deep operational, strategic, and financial experience to a new role. Let me start by handing it over to Roxanne to introduce herself. Roxanne Warner: Thanks, Marc, and good morning, everyone. I am honored to step into the role of Chief Financial Officer of Whirlpool Corporation. Having spent the last eighteen years at Whirlpool, I have a deep appreciation for our operations and a firm commitment to driving long-term shareholder value. Prior to my current role, I served as Executive Vice President Finance and Corporate Controller. In 2021, I was the Chief Financial Officer of our Europe segment where I led both finance and integrated supply chain operations and supported the organization through our European divestiture. Joining Whirlpool in 2008, I have had the privilege of holding numerous roles across cost management, commercial, and corporate finance, including leading the finance functions of our US laundry and US sales organization in North America. In 2019, I had the honor of leading investor relations where I connected with both our investors and analysts. I look forward to reestablishing those connections and creating new ones. I'm excited to work alongside the leadership team and our employees to deliver our next chapter of growth. I will turn it over to Juan Carlos. Juan Carlos Fuente: Thanks, Roxanne, and good morning, everybody. It's a privilege to be speaking with you today as I start my new role leading MDA North America in global strategic sourcing. I joined Whirlpool as an intern in 1996, and I have spent the last thirty years in almost all functions and regions of the corporation. While my recent years were spent abroad, I have been in North America before. Where I previously led our laundry business unit, the core of our product portfolio, as well as served as general manager for our business with Home Depot. Having held these roles before, I know that winning in North America requires continuing to strengthen our brand and product portfolio, enhance our customer relationships, as well as our world-class supply chain to fulfill our purpose of improving life at home. I'm very excited to return to the MDA North America business. I'm looking forward to building on our powerful foundation and creating value for our stakeholders. Now I'll hand the call to Ludo. Ludovic Bouffiz: Thanks, Juan Carlos, good morning, everyone. Expanding my role beyond KitchenAid small appliances to our MDA Latin America business is an exciting opportunity. It's an opportunity to drive growth for both an iconic global premium brand and now iconic local brands such as Brastemp. One of our most dynamic high-growth segments. I have spent the better part of my twenty-year career with Whirlpool developing our products and brands. From inception to industrialization and to commercialization. I went from leading critical categories in EMEA and in the US to driving our product marketing organization in North America. These roles, combined with my more recent position in the global product organization, and my current responsibilities with KitchenAid, have given me a unique vantage point on how to drive innovation and cost competitiveness to win in every channel and every market. I look forward to this tremendous opportunity to accelerate growth for our company. Now I'll turn the call back over to Marc to provide an overview of our 2025. Marc Bitzer: Thanks, Ludo. I'm very excited about these leadership appointments and have every confidence that we have the right team in place to continue to execute on our strategic priorities. As you're well aware, 2025 marked a difficult year with unforeseen challenges in particular for our North American business. There are two particular challenges that our business faced. One, tariffs. As domestic producers, we will ultimately benefit from the tariffs that were put in place, there is no question in my mind. However, in 2025, we absorbed roughly $300 million of tariffs largely for components and some finished products, but the industry did not yet move on pricing. This might be surprising given that our competitors are two to four times more exposed to tariffs than we are, but the significant amount of inventory preloading ahead of the tariffs and the uncertainty of a tariff framework might explain the delay of industry price moves. The good news is that we observed a meaningful change in industry pricing and promotions after mid-December into the MLK holiday and the upcoming Presidents' Day. Two, housing. As we discussed in prior calls, existing home sales are the most important driver for appliance demand and in particular for discretionary demand. Which inherently is more margin attractive. However, mortgage lock-in effect coupled with lower consumer confidence, led to a thirty-year low of existing home sales. But there's no doubt about an eventual multiyear housing recovery, 2025 did not yet unlock the housing sector. With these macro challenges in mind, delivered results largely in line with the prior year. Our global organic revenues were essentially flat, and we're pleased with the MDA North America market share gains during 2025. Our operating margins were slightly below 5% largely driven by the intense promotional environment in North America during Q3, and in particular Q4. We delivered cost takeout actions of $200 million but with the absence of industry pricing, they were not enough to mitigate the cost of tariffs. Lastly, our Latin America business had yet another strong year, while our KitchenAid SDA business delivered outstanding double-digit growth rates with mid operating margins. With 2025 in the rearview mirror, and despite the extreme macro volatility we experienced, we're confident about 2026. First of all, we believe we will be able to sustain the strong trajectory of our KitchenAid SDA and our Latin America business. For North America, there are a number of catalysts to drive margin improvements. First, we already identified more than $150 million of cost actions primarily focused in North America. This will allow us to largely offset the remainder of the tariff headwinds. Second, launched a record number of new products last year. These new product launches have been hugely successful, with expanded floor space and incremental share gains. Third, the industry's promotion intensity has clearly normalized over the past six weeks. We have already announced and implemented promotion pricing changes as well. Lastly, while the new housing starts will likely still be slow, we do see a potential faster improvement of existing home sales on the back of lower mortgage rates. However, as you will hear later during our guidance discussion, we have not yet factored in any discretionary demand upside. With this, let me hand it over to Roxanne who will discuss the 2025 results in more detail. Roxanne Warner: Thanks, Marc. Turning to slide six. I'll provide an overview of our full-year results. As Marc mentioned, our global organic revenue was flat to the prior year and we delivered significant cost takeout to help mitigate the incremental cost of tariffs. We did not see the industry pricing adjustments to offset these incremental tariff costs in 2025. And the prolonged intense promotional environment unfavorably impacted our margins. Ultimately, we delivered a full-year ongoing EBIT margin of 4.7% and a full-year ongoing earnings per share of $6.23. Given the challenging operational environment in 2025, these results are proof of our resilience and commitment to focus on what we control. We generated $78 million of free cash flow which was unfavorably impacted by the timing of tariff payments and higher inventory necessary to support our new products. In November, we executed the previously announced India share sale transaction which resulted in a reduction of our majority stake from 51% to a minority stake of 40%. Proceeds were utilized to pay down debt in line with our capital allocation priorities. We are pleased with the results of this transaction and our retained position. We will continue to evaluate all options to further reduce our debt throughout 2026 in line with our guidance and capital allocation priorities. We continue to fund a healthy dividend returning approximately $300 million to shareholders in 2025. Turning to Slide seven, I will provide an overview of our fourth quarter and full-year results for our business segments, starting with MDA North America. On a full-year basis, net sales excluding currency was largely flat year over year. We saw continued strong share gains throughout the fourth quarter driven by the momentum of our new product launches. Promotional activity remained intense. As industry pricing did not reflect the cost of tariffs. Which impacted margins. As a result, the segment delivered an EBIT margin of 2.8% in the fourth quarter, and a full-year EBIT margin of approximately 5%. Looking ahead, given the industry's pricing changes over the last six weeks, we expect a less promotional environment. In December, we saw a shortening of the post-Black Friday promotional period, and in January, we saw a decrease in the depth of the promotional pricing for the MLK holiday. Based on these data points, we expect a less promotional environment during Presidents' Day. We have already announced and implemented promotional pricing changes that went into effect in early January. We expect these actions to put MDA North America back on track for margin expansion in 2026 which we will discuss in detail shortly. Moving to our MDA Latin America business, On a full-year basis, net sales excluding currency declined approximately 2% year over year due to volume decline. In the fourth quarter, we continue to see economic instability in Argentina and an aggressive promotional environment in Brazil. Which negatively impacted revenue and margins. These unfavorable results were offset by a favorable operational tax benefit related to the default legal ruling. As a result, the segment delivered a full-year EBIT margin of 6.2%. Next, I will review the result for our MDA Asia business. On a full-year basis, excluding the impacts of the India and currency, net sales increased approximately 1% year over year. The segment delivered a full-year EBIT margin of approximately 5% with 120 basis points of expansion year over year. The India transaction resulted in margin accretion of approximately 40 basis points, while the remaining benefit was driven by a favorable cost take-up. As a result of the deconsolidation of India, we will not report Asia as a stand-alone segment moving forward. Turning to our SDA global business. SDA Global continues to perform very well. Achieving impressive net sales growth of approximately 10% year over year in the fourth quarter. And approximately 9% on a full-year basis driven by new product launches and strong direct-to-consumer business. Fourth-quarter EBIT margins expanded 130 basis points year over year as a result of favorable price mix. For the full year, the segment delivered a strong EBIT margin of 16%, with 170 basis points of margin expansion year over year. Now I will turn the call over to Juan Carlos and Ludo to review how our investment thesis is as strong as ever. Juan Carlos Fuente: Thanks, Roxanne. Turning to slide nine, I will cover how our MDA North America is well-positioned to further organic growth and margin expansion. Our structural drivers for value creation in North America are stronger than ever. The first driver is our strong lineup of new products. As Marc mentioned earlier, in 2025, we transitioned over 30% of our product portfolio to new products, and we're seeing a very strong response from both our trade customers and consumers. These new products gain significantly more floor space than their predecessors within the key retailers. Resulting in share gains as we exit the year and we have more innovation coming in 2026. The second driver is our unique position as a domestic manufacturer in the tariff environment. Our US manufacturing legacy started over a hundred and ten years ago and we never left. We produce more of our appliances in the US than any of our industry peers who, in contrast, only produce approximately 25% of what they sell in the US in the US. Our US factories use approximately 96% American steel and work with thousands of US suppliers. We operate some of the largest appliance plants in the world, and we continue to make investments to strengthen our domestic position. The tariffs imposed by the current administration aim to support US manufacturers like Whirlpool and we're starting to see positive signs suggesting that the tariffs will become a tailwind. As Roxanne mentioned, we have also observed a less promotional MDA industry throughout January in comparison to the same period in previous years. This suggests that the tariff costs for importers are beginning to impact their business and therefore the elevated promotions we saw last year are proving to be unsustainable in the long term. The last driver is the state of the US housing market which I will cover in the following slide. Turning to slide 10, the historical data both for existing and new home sales clearly signals a multiyear recovery is on the horizon. Looking at existing homes over the last forty years, whenever we observe a multiyear sales trough, like the one we saw since 2022, recovery has followed. The lack of recovery has created pent-up demand in the market. Existing home sales are highly correlated with the discretionary demand for home appliances. Which as a result has also been suppressed. On new home construction, fundamentals are also favorable and include decades of long undersupply of new homes since the great financial crisis, coupled with the highest aging stock of existing homes in the US, which now has a median age over 40 years old. Finally, affordability concerns remain, the US government has made housing affordability a clear priority to address, which only strengthens our prospects of a recovery. In this context and given our strong competitive advantage in the builder segment, there is simply no company better positioned to benefit from the multiyear housing recovery. Turning to slide 11, let me highlight one of the many new products we are launching this quarter that will continue to support our product leadership. Our new Whirlpool laundry tower allows the consumer to save space while having easy access controls, featuring the new FreshFlow bend system and an industry-first UB Clean technology, this product reduces bacteria in the wash without requiring high temperatures that compromise your fabrics. Now let me turn it over to Ludo to review the MDA Latin America and SDA global business. Ludovic Bouffiz: Thanks, Juan Carlos. Turning to Slide 12, let me explain why we believe the MDA Latin America business is uniquely positioned to grow. MDA Latin America has enormous growth potential given the low market penetration of appliances in the industry's compound annual growth rate projections of approximately 4% to 5%. Our MDA business in Latin America has a sustained track record of value creation rooted in the strength of our products and brands. And is ideally positioned to take advantage of this industry growth. We hold the number one share position in the region, supported by our strong historical presence in Brazil, the Brastemp and Consul brands. These are leading brands in consumer preference that have held this position for decades as a result are present in more than half of Brazilian homes. Whirlpool brand also holds the number one position in terms of preference in the second largest market in Latin America, Mexico. In many other smaller markets around the region. We have built an exceptionally strong infrastructure across the region. We have a well-established supply base, some of the largest plants in the world, great distribution and service network, and a direct-to-consumer channel representing approximately 20% of our sales. We are therefore incredibly well-positioned to continue to grow profitably in this very large region. Turning to Slide 13, let me introduce one of the tools to drive that growth in 2026. A new lineup of refrigerators coming to the Brazilian market. This quarter. Brastemp, our premium home appliance brand in Brazil, is launching a new portfolio of products in two of the most critical categories in the market, top mount and bottom mount refrigerators. These new refrigerators offer increased capacity, improved energy efficiency, and bring a refreshed aesthetic to consumers' kitchens. They are poised to do very, very well in the market starting this quarter. Turning to slide 14, I will review how well-positioned the SDA global is for continued profitable growth. As you already know, KitchenAid is an iconic brand known for its high-quality craftsmanship and performance as well as superior design. It is the number one mixer brand in the world, and with over 75% of the products we sell in the US being produced in the US, holds a strong competitive advantage in an industry that is almost entirely reliant on imports. Across the globe, we have successfully developed strong trade relationships and more recently, have significantly expanded our online presence, which now represents over 20% of our sales and continues to grow at an accelerated pace. Outside of the stand mixer, we're starting to drive tremendous growth in adjacent categories as espresso, blenders, cordless appliances, and other food preparation segments. We are leveraging KitchenAid's strong brand preference, our industry expertise, and our established infrastructure to drive profitable growth in these categories. And we're successfully reinvesting the proceeds of that growth into further growth acceleration while maintaining highly accretive margins. Turning to Slide 15, let me preview the exciting innovation coming to the SDA Global business this quarter. First, our KitchenAid compact grain and rice cooker. This tankless version of our popular grain and rice cooker now features precise pour technology which automatically measures liquid as it is added based on your preferred texture and simmers rice and all kinds of grains to perfection. Next, our KitchenAid Artisan Plus stand mixer. This new stand mixer will bring the biggest advancements to the KitchenAid tilt-head mixer since 1955. This product is sure to be a hit to enthusiasts around the world, so stay tuned for the big reveal coming this March. Now I will turn the call back over to Marc to review our expectations for 2026. Marc Bitzer: Thanks, Ludo. Turning to Slide 17, I will review our guidance for 2026. Given the recently executed transaction to reduce our majority stake in India, we have provided a reset baseline for our long-term targets in 2025 results. These targets reflect our business performance expectations during a mid-cycle which will be after housing recovery has started but before it reaches the peak. On a like-for-like basis, we expect revenue growth of approximately 5% in 2026. Our new product launches are expected to deliver growth in MDA North America and we expect continued strength in our SDA Global and international businesses. On a like-for-like basis, we expect 80 to 110 basis points of ongoing EBIT margin expansion 2026 EBIT margin of approximately 5.5 to 5.8%. Free cash flow is expected to deliver $400 million to $500 million or approximately 3% of net sales driven by improved earnings, and significant inventory optimization. We expect full-year ongoing earnings per share of approximately $7. This includes an adjusted effective tax rate of approximately 25% which is an increase compared to 2025, and impacts 2026 ongoing earnings per share by approximately $2. Turning to Slide 18, we show the assumptions supporting our 2026 ongoing EBIT margin guidance. We expect a positive price mix impact of 175 basis points from our recent and future new product launches, and benefit from our previously announced pricing actions in a reduced promotional environment. While we have seen interest rates beginning to ease, we do not expect a material catalyst for new home sales in early 2026. As mentioned before, we do see the potential for faster recovery of existing home sales and thus discretionary demand, but at this point, we're not factoring this into our guidance. We will drive further actions to optimize our cost structure and expect 100 basis points of net cost benefit from more than $150 million of cost takeout actions. Based on having long-term steel agreements in place, we expect minimal to no impact on EBIT margin from raw materials this year. We expect approximately 125 basis points of negative impact from the tariffs announced in 2025, will be concentrated in 2026. It is important to note that these impacts represent currently announced tariffs and do not factor in any future potential changes in trade policy. With approximately 100 new products launching this year, we plan to increase investments in marketing technology which will impact margin by approximately 50 basis points. Currency and transaction impacts are both expected to have minimal impact on EBIT margin this year. Turning to Slide 19, I will review our segment guidance. Starting with industry demand, we expect the global industry to be approximately flat in 2025. In the US, we expect similar demand trends to what we saw throughout 2025, with an emphasis on replacement demand. Strong replacement demand creates a solid foundation for industry volumes, while consumer discretionary demand is still significantly below long-term averages. Again, this might change as a result of faster growth of existing home sales, thus providing upside to our demand forecast. We expect the MDA Latin America industry to be slightly between 0-3%. Finally, we expect the SDA global industry to be approximately flat with our growth driven by new products and continued investments in our direct-to-consumer business. For MDA North America, we expect to deliver a full-year EBIT margin of approximately 6%. Previously announced pricing actions are expected to positively impact the full-year margin, and additional cost actions are expected to be delivered throughout the year. For MDA Latin America, we expect a solid EBIT margin of approximately 7%, driven by new product launches and continued cost takeout. And for SDA Global, we expect a strong EBIT margin of approximately 15.5% driven by sustained momentum from new products. Turning to Slide 20, let me review the actions we're taking to deliver price mix expansion. Firstly, as mentioned, we've seen a less promotional environment in MLK and Presidents' Day. This is an encouraging indicator that our competitors are now experiencing the full cost of tariffs. We first saw positive signs with the end of a Black Friday promotional period. While in prior years, retailers and competitors extended Black Friday prices well into January, we observed meaningful pricing moves immediately after Black Friday. Probably an indication of preloaded inventories finally being sold through. Given these broader industry dynamics, we're confident in the 2020 pricing actions we previously announced. Secondly, incremental flooring gained by the new product launch in 2025 is largely installed. The flooring costs are behind us, and we should start to experience the full benefit of these new products. As a reminder, the new products that we launched in North America gained over 30% incremental flooring on a like-for-like basis. Lastly, we're focused on continuing to expand our mass premium and premium product offering where we see consumer preference for our brands, the opportunity to drive differentiation. Our KitchenAid MDA launch in late 2025 is a perfect example of how we see an opportunity to elevate and position our brands for growth. Turning to Slide 21, you will see the actions we're taking to support our cost position and deliver over $150 million of cost reduction in 2026. We are accelerating vertical integration and automation in our factories. Leveraging some of our core competencies to improve quality, and efficiency in manufacturing. In particular, with vertical integration, will not only bring us cost savings, but will further strengthen the resilience of our supply chain. We're taking steps to optimize our manufacturing and logistics footprint. And lastly, we're launching a strategic sourcing initiative to deliver the best landing cost for our components. We have had significant success in the past with activating the sourcing initiative and are excited to renew its effort in 2026. Turning to Slide 22. I will provide the drivers of our free cash flow guidance. I'm confident that we will improve free cash flow in 2026, and this is a key priority for us. We expect cash earnings of approximately $800 million driven by an improvement in our earnings. We expect approximately $400 million of capital expenditures as we continue to invest in our products and fund organic growth. We plan to optimize our inventory and improve our working capital by approximately $100 million to support cash generation in 2026. And we expect approximately $50 million of restructuring cash outlays related to our manufacturing and logistics footprint optimization efforts. Overall, we expect to deliver free cash flow of $400 to $500 million or approximately 3% of net sales. Now I will turn the call back over to Roxanne to review our capital allocation priorities for 2026. Roxanne Warner: Thanks, Marc. Turning to Slide 23. I will review our capital allocation priorities, which are consistent with what we shared in 2025. Funding our organic growth is critical to delivering innovative products that meet our consumers' needs. We will continue to invest in product innovation, digital transformation, and cost efficiency projects with approximately $400 million of capital expenditure expected this year. Secondly, we are committed to reducing our debt levels. We expect to pay down at least $400 million of debt in 2026 continuing our commitment to deleverage. Thirdly, we are committed to returning cash to shareholders through funding a healthy dividend. We will continue to evaluate our dividend funding and ensure it aligns with our progress toward our long-term goals. As a reminder, the dividend is approved quarterly by the Board of Directors. Turning to Slide 24. Let me summarize what you heard today. Despite navigating a year of significant external shocks, led by the substantial cost increase of tariffs. Our 2025 results were largely in line with the prior year. We maintained our track record of course takeouts and delivered cost reduction of $200 million to help offset the impact of tariff costs. Introduced a record number of new products proving their early success through flooring expansion and share gains in 2025. As we look forward into 2026, we have another strong pipeline of new products coming. With industry pricing expected to normalize, and structural cost takeout actions yielding results. We expect margins and free cash flow to strengthen. We expect the SDA global business to continue to be a bright spot. With sustained momentum from new products resulting in significant year-over-year growth. Lastly, we continue to be extremely well-positioned to fully capture the benefits of the housing market recovery. As it begins to turn in a favorable direction. I'm confident in our strategy and our path forward will create shareholder value. Now we will end our formal remarks and open it up for questions. Operator: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of David MacGregor from Longbow Research. Your line is open. David MacGregor: Yes. Good morning, everyone. And Roxanne, it's David speaking with you again. Good morning. I guess, Marc, I wanted to start by just unpacking the 26 flat industry units number. And you referenced no expectations for an increase in discretionary or builder, which would I guess, imply a flat replacement demand outlook. But you also, at the same time, talked about seeing strength in replacement demand. So I guess I just wanted to better understand that. And maybe within the context of that answer, could just talk about the extent to which you're pent up demand, as you had referenced. And then I have a follow-up. Marc Bitzer: Yeah. So so so, David, again, you as you well know, there's two main components of replacement demand, discretionary demand. The replacement demand what we base that is continues to stay on a very, very healthy structural level. And that is still on the tail end of post-COVID. We saw a significant higher use of appliance and that just drives a lot of healthy ongoing replacement demand. As a reminder, as everybody knows, while we like that part of our business, it's not necessarily the most margin accretive part of the business. The discretionary side and to be also very clear, again, we have not factored in upside in the discretionary side. The discretionary side would have to largely come from increased remodeling activities and, in particular, faster or uptick of existing home sales. So that is not factored in even though I think there's a certain chance that, you know, depending on what the mortgage rate environment will do, that we will start a slow unfreezing of existing home sales. But again, as a reminder, it's not factored in our numbers, in our guidance. And as such, could potentially provide an upside. But, again, let's just see how that evolves. So far, as you look in the rearview mirror on 2025, the existing home sales were just on a very low level and got stuck there pretty much. David MacGregor: And you had mentioned pent-up demand. I guess just what your assessment is at this point. Of where that stands, and then I have a follow-up. Marc Bitzer: I mean, I think, David, there's a very significant pent-up demand tied towards the housing. And then I'm not gonna repeat I think everybody knows. I mean, this the entire housing market is in terms of new home sales, is undersupplied in the tune of 3 million homes. Now that will not happen overnight, but it just means just the new homes will spill a multiyear uptick on demand. The other side is and this is and, again, that could potentially materialize earlier. The discretionary side, which comes with remodeling or existing home sales, I think, could accelerate faster than the new homes. And very significant potential out there, as you know, but the consumer has equity. Equity in particular in the form of housing stock. So the perceived equity the consumer has is there, it will take an uptick also in consumer sentiment to unleash that. That, in my view, could happen faster than the new home sites. But again, it's right now, we're you all know, we're in a very uncertain global environment, I would say if consumer sentiment changes, I think you could see an uptick already this year on the discretionary side. But, certainly, it's just it's only a question of when it's not if there's a multiyear pent-up demand still waiting out there. David MacGregor: Okay. Great. And then second is follow-up. I guess, you had a very substantial product refresh 2025, and along with that, of course, comes elevated flooring costs. What's the benefit in '26 from the relief on the flooring costs? Marc Bitzer: To North American market? David, you're highlighting a very important point. Just as a recap, and I think many of you listening understand that know that when you have a lot of new product introductions, and we as we highlighted in particular North America, we had the highest amount of product introductions in more than a decade, and it's been massive. You have, of course, it starts acting with factories. You have phase-in and phase-out costs. Of course, you don't run the factory in the most efficient way if you at one point, take down production and you ramp it up, you have inefficiencies in there. You have inefficiencies in warehousing inventory because for some period, and you saw that all in Q4, you hold inventory pretty much on phase-out and phase-in. And then lastly, you have very significant flooring costs. Which just come with flooring with products now. Ultimately, it's like a return investment. You get your return on these flooring costs, but it all hit our P&L large in '25. So in particular, in the back half, and I'm not trying to take it as infused. It's just there. And it was it's an investment against the future. So as we turn the page into '26, first of all, you have the absence of these introduction costs, which is an uplift. And second of all, now I have a full benefit of a higher flooring. We know because, of course, we get weekly sellout numbers. We know when new products are not just floored, best selling. So we're very pleased with the sellout. And so not only do you have the absence of a cost, but you also have tailwinds in form of a demand of new products. So I don't wanna give a precise number how much that means, but, of course, that is a very beyond a normalization promotion environment, that's a key driver of where we see the improvement in North America. Operator: Your next question comes from the line of Michael Rehaut from JPMorgan. Your line is open. Michael Rehaut: Great. Thanks very much. Good morning, everyone. My first question is for good morning. First question is for Roxanne and Juan Carlos. Congratulations, obviously, stepping into your new roles, your expanded roles, and Roxanne a pleasure working with you again. Wanted each of your perspectives on you know, if there's any kind of how are you gonna approach the jobs over the next couple of years? Obviously, you know, the business has had a number of challenges particularly in the in the North America margin. Challenges. Through various you know, macro, tariffs, you know, promotional, etcetera. What's the road back from a margin perspective over the next few years? I mean, obviously, you continue to look at your kind of tried and true playbook of cost savings, better mix, etcetera. I know a lot of this is also macro led with the challenges in the existing home repair model market. But I'm wondering if you're looking at anything maybe a little bit bigger picture structural or kind of changing strategy, then that might kinda jump start you know, the pathway back, or is it going to be more of, you know, you know, the initiatives that you've done already. And expanding on that. Roxanne Warner: Thanks, Michael. I will answer from a global perspective, and then I will move it over to Juan Carlos. First of all, thanks. It's great working with you again as well. The number one priority for us continues to be, one, debt pay down, and I will continue to have that focus. Driving that is our continued focus on cash and working capital. You see in 2026, we have a guidance of $400 million to $500 million of free cash flow, and that is imperative that we drive our inventory down. And so that is going to be a number one focus for us. And then overall, we will continue to deliver on cost takeout as we've done over the years. And absolutely in 2026. Price mix is going to be absolutely a huge focus. One, on seeing the pricing from an overall industry, but then secondly, delivering on the benefits that Marc just touched on as it relates to our new product launches. With that, I'll turn it over to Juan Carlos. Juan Carlos Fuente: Yep. So thank you very much for the congratulations. I am super happy and excited to be in this new role. Like I mentioned at the beginning, I've been in North America before, and I was part of the I would say, in the global financial crisis two thousand and eight. Moved in 2008, and then, obviously, that happened. So I was together with Marc, in that turnaround in 2009, 2010, and not that those tools will be working moving forward, but I think by like, look Roxanne mentioned and we mentioned before, with the new products that we're putting in place, with aggressive cost take actions that we have, and, obviously, with our manufacturing footprint that is extremely strong in North America, we believe that focusing lasering focusing on that we we could turn the business around. Michael Rehaut: Great. No. Appreciate that. I guess, secondly, you know, the sales growth like for like of 5%, and it looks like that's against a volume outlook of flat. If I'm understanding the segment regional segment guidance you know, by and large, I guess that that results in a balance of price and mix driving the growth. I wanted to make sure I'm understanding that right and how much exactly you're anticipating to come from price versus mix? And lastly, if that 5% also I would assume applies broadly to the North American segment as well? Marc Bitzer: Michael, it's Marc. First of all, the 5% in North America or globally, but directionally also reflective of what we have in mind in North America. Also, on a global level, we showed 1.75 percentage points coming from price mix, there is a healthy mix portion because we have a lot of new products and premium products. But there is also pricing comes with a more normalized environment. So what we showed on a global level is also true on a direction on North America level. So, yes, there is also in our organic, in North America, call it a two to three points of unit growth in there because we we know these new products have been picking up market share, and we expect them to carry over into next year. So short answer is there's a portion of price mix. The price mix also has a good content element of mix in there. But there is also some unit growth into our North America assumptions. Operator: Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open. Mike Dahl: Good morning. Thanks for taking my questions. Marc, I was hoping you could touch on or your team could touch on just more specifically the comments around the promotional cadence then also your own actions around your promotional pricing plans. Can you be more specific or quantitative about what you've seen in recent weeks and how that gives you the better confidence ahead of Presidents' Day, think quantification would help if you can. Marc Bitzer: Yeah. So, Michael, so let me maybe give you a lot more color on what we've seen in North America up until Presidents' Day. Obviously, I can't comment on the go forward. So first of all, in Q4, in some ways, we've seen two parts of a market in Q4. One was the nonpromotional period where we had the new product in there, where we actually like what we saw and we picked up market share. The promotional period itself was intense. By any definition, and think once the competitors announce their numbers, you would see it was intense. We made a conscious decision to hold our ground during this promotion. Period. We did not pick up share during the promotion period. But, frankly, it was a very costly investment. I mean, there's no denial, and you see that in our number. What difference we saw after a particular backfiring is an event well, the meaningful difference is post-Black Friday, the prices, the promotion prices immediately recovered, pretty much exactly what we got after. And that is, for those of you following the steel different from prior years. Very often, saw that either retails or competitors did not sell all the products they want. Like, Friday, prices were extended well in some cases to January. We did not see that last year. So as intense as the promotional period was, it also ended pretty abruptly. And these higher prices held now for pretty much six weeks, now we all know it's six weeks. It's not fifty-two weeks, but it's six weeks. And that is very different from prior year. We saw a meaningful price change already on MLK. We have, of course, already announced our prices with trade towards Presidents' Day, and what we see is these call it, this normalized promotional environment certainly held for Presidents' Day. So we saw a big difference the last six weeks. Again, is that a full extrapolation for the full year? No. We all don't know. This is a competitive environment. But at least we saw over the last six weeks that the industry's finally starting to reflect the full cost of tariff in the prices. Mike Dahl: Okay. Got it. Thanks for that, Marc. And just to dovetail on that, can you give us a sense then of within your margin guidance? And I'm thinking specifically the 6% for North America how you envision the cadence between first half and second half? Marc Bitzer: I mean, there's several elements coming in that cadence. First of all, you will not see the 6% throughout the full year. And there's Q1, in particular, will be still impacted by a number of factors. First of all, we just see now the pricing, a more positive pricing coming through. So it's starting to build, and that is still a good guy. A negative side, we will curtail production. We said we will control inventories, and we're correct, but we had too much of inventories. That will be a burden on our Q1 numbers in North America because we will adjust inventory. As Roxanne highlighted before, cash is a key priority, and we take that very seriously. So you will have the inventory reduction going against us in Q1. But prior starts moving our favor. And on top of that, you have now in Q1, contrary to last year, you had the full cost of tariffs in there. So there's a number of factors. So Q1 will still be clearly below that 6%. And as of Q2, we expect this low and gradual buildup. Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open. Rafe Jadrosich: Hi. Good morning. Thanks for taking my questions. I wanted to ask on the capital allocation for the year. This free cash flow guidance of $400 million to $500 million the $200 million dividend and then, I think, $400 million of debt pay down. Is a bit of a funding gap there. So can you just help us understand how we get to the full, like, debt paydown and dividend relative to the free cash flow guidance? Roxanne Warner: Rafe, good morning. One of the things that we touched on in the script earlier as well is that we are pleased with the India transaction that we have executed, which turned our majority stake from 51% to 40%. As of this time, we will retain that position, but we will continue to evaluate all options to further reduce our debt in line with the debt pay down guidance of $400 million. Rafe Jadrosich: Got it. So are there additional India sales, like, you can better than the in the guidance, or is that just an option that's sort of on the table? There are other things outside of India that could be done to generate cash. Marc Bitzer: Yeah. So so, Rafe, you know, it's Marc. And so Roxanne said, right now, we feel very comfortable with where we are in India. We're not gonna make a statement about what if. As you know, first of all, we have a number of minority stakes throughout the world. And India is now one of these, but we've continued to evaluate all the time where we are. We also still have some smaller asset sale opportunity. They're smaller and which could be part of closing that element. And so we're the ideas which we have in mind, we're pretty confident that we can close that gap. Or, I mean, specify it very soon. But we feel right now with that pay down, as we then point out before, we will get going. Rafe Jadrosich: Okay. That's really helpful. And then on the promotional cadence, that you're seeing from competitors, it's encouraging to see sort of the improvement at the end of 4Q and into 1Q. Are you seeing like actual price announcements from competitors. Either on resale or wholesale retail or wholesale. Or do you think they've sort of just worked through that inventory? What's driving this improvement in the promotional cadence that's out there? Marc Bitzer: Yeah. So so, Rafe so first of all, our perspective, it's pure outside incumbent on competitors. We don't know what's going through ahead or whatever. So what we observe, just more from a dataset, is we have a fairly sophisticated price scraping tool where every week, we see we get thousands of in-car pricing for every competitor, every product, every SKU. We have a fairly sophisticated in-house tool, so we pretty much weekly observe everything which was going on the marketplace. So our comments in terms of promotion depth from what we see is based on this pricing scripting tool which would say is very accurate. And also my comments on recovery afterward are based on this price scripting tool. The actual mechanism which competitors use it's their decision. I would say, it's partially like we also do. Sometimes it's a like-for-like price change. Sometimes it's just a reduction of promotional depth. But we don't know ultimately what matter of price what consumer prices are basic in the card, and that's what we look at. But I would assume every competitor chooses slightly different tools. Operator: Your next question comes from the line of W. Andrew Carter from Stifel. Your line is open. W. Andrew Carter: I wanted to ask about the negative price mix variance in 4Q. And how it changed so much from kind of the 3Q guidance I wanted to ask is that, you know, number one, did all I think you said at one point that you didn't participate in promotion. But it's obviously a more promotional environment. Was there anything to this about clearing activity? I you had a lot of innovation. You also had a weaker, market. Therefore, the old analogs didn't move as quick. So anything you can help us on, you know, that big delta and kind of the speed at which it improves to 26. Marc Bitzer: So, Andrew, I think what has changed versus what we had in mind Q3 coming into Q4, we knew there's still some preloaded inventory of the markets. Obviously, because we don't have exact competitor data, I think what we may have underestimated how much first deal is out there. So we promotion MedBev will be an aggressive promotion environment. We anticipated it but it was deeper than we expected in all transparency. And now at the same time, and I made that comment in the script already, is the fact that the price is corrected pretty immediately after Black Friday I would read as an indication that this preloaded inventory is out of the system. Because if it would still be there, we would have seen Black Friday pricing continuing longer. So I think the big change is probably there was more inventory out there than we assumed. And right now, we assume that is normalized. And we're kind of that is behind us. And, again, what I said before, but last six weeks would indicate we're now in a more, what I would consider, normal competitive environment. W. Andrew Carter: Thank you for that. And I think at one point, you mentioned you get sellout data on a weekly basis. We could obviously see the AHAM data guess it gets cut monthly but released quarterly. We could see how both how far below the discretionary units are relative to 19. Are you seeing a quicker reversion in sellout? And I guess where I'm going with this is, like, could there be a massive catch-up in discretionary unit shipments relative to nondiscretionary. They're higher mix. You know, if the turn has happened quicker, about what I'm asking. And I know just to be clear, your guidance is pretty much for 2026 more of the same on the discretionary nondiscretionary mix. Thanks. Marc Bitzer: Yeah. So so so, Andrew, I mean, first of all, to your question, we get sellout data, iCasel registered data for about 70% of our trade partners. So we have a pretty good sense about how we are doing from a sellout. And coupled with that, we typically also get comparable house sales. I e, we know how we're doing in the store in terms of picking up balance of sale or not. So we have a very good sense, and that is, of course, critical in particular when we're trying to assess the success of our new product launches. Lot of confidence you heard before comes exactly from looking at we sellout data on a weekly base. To your question about the discretionary demand, again, reemphasizing it's not baked in the guidance. Is there a certain chance? Yes. But you also we've been waiting for this uptick in discretionary demand for a long time, and that's why we're a little bit cautious at this point. What really and, again, it's the big driver will be ultimately consumer sentiment. The broader perception. Consumer sentiment, and we've seen that before, changes a lot faster than other indicators. And right now, it's low. And if you just take January, consumer sentiment is low by any definition. So reading that, you wouldn't have a lot of confidence. But, again, we have seen this coming around faster. And to your point, yes, that could unlock quite a bit of pent-up discretionary demand. But it's not factored in. Operator: Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open. Eric Bosshard: Good morning. Thank you. Marc Bitzer: Morning, Eric. Eric Bosshard: Question for Just two housekeeping questions for Roxanne. First of all, a lot of talk about the last six weeks on price mix. Has price mix been positive in this one and a half, 2% range over these six weeks? Is that what you've seen in your business? Roxanne Warner: Hi. Good morning, Eric. A couple of things to keep into consideration. One of the time periods where we saw the improvement is Black Friday. And so as you'd expect, during the Black Friday period, we are all paying out for the depth of the Black Friday holiday. So the majority of the benefit as it relates to price mix for the six weeks would really come in 2026. As Marc mentioned, from a Q1 perspective, though, keep in mind that there are other items that we will be doing, such as reducing production, which would therefore impact the Q1 results. And so we expect price mix to build up as we go throughout the year. Marc Bitzer: Eric, maybe and again, keep in mind, we largely pay our sales a trade partner on a sellout base. So there's a delay effect when you pay out pretty much a lot of these costs. What we look at as an early indicator, now we're getting two operations probably is also the gross ASVs, i.e., what is really the gross sales value which we have. And that is favorable the last six weeks. So that is an early indicator that we see the pricing coming through. Eric Bosshard: Okay. And then the second is, the assumption in '26 on outgrowing the flat market by two or three points. Similar question, Roxanne, is that what you're seeing now that your business is outgrowing the industry? By two or three points is that what's happening now, or is that a ramp in '26? Marc Bitzer: So so, Eric, I can comment on this one. That is almost entirely built on the success of a new product, and that is not just the last six weeks. As I mentioned before, ever since again, they didn't all launch at the same time. There was a big KitchenAid launch '3, but we have other products. And by the way, we continue to have new products also in '26. So we see from these new products on the flooring. Gains, and we also see the sellout gains. So that's pickup in volume is, I would say, almost entirely driven by what we see from the new products. Operator: Your next question comes from the line of Sam Darkatsh from Raymond James. Your line is open. Sam Darkatsh: Good morning, everyone. And Roxanne, JC, Ludo, again again, congratulations, and Roxanne in particular. I know you well. Very, very well deserved. And I think it made us all smile when we saw your the announcement. Roxanne Warner: Thank you. Sam Darkatsh: Couple of quick questions. I know we've been dancing around the pricing question. Quite a bit this morning. The 1.75 guide for the year, what's the inherent assumption for industry like-for-like net pricing in order for you to achieve the one seven five? Marc Bitzer: So, Sam, again, we're not publishing what we assume as an industry pricing, and a lot depends on what competitors will do. Having said that, you saw earlier, and that's why we had this slide with the three components of pricing pitch, a better promotion environment, added new products, and mix overall. So, yes, there's a in the one seventy-five, there is a component about what we just think from a less promotional environment. Again, we to be honest, but assume it's roughly a third probably of that overall assumption or maybe half of a less promotional environment. But in all transparency, yes, we like what we saw over the last six weeks, but, of course, we're just cautious in terms of extrapolating the last six weeks for the full year. And I think right now, this assumption is kind of a little bit of middle ground. Sam Darkatsh: So to paraphrase, if there is announced increase industry pricing from competitors that would be additive to your price guide theoretically? I've got a follow-up, but I just wanted to clarify that. Marc Bitzer: And then there's obviously a lot of ifs and whens and forward-looking statements, but let's if the price the promotion environment, which was seen in the last six weeks holds on a full year, we will like the outcome. Sam Darkatsh: Okay. My follow-up question noticed that the RMI guide remains flat for '26. We recognize that steel is set but there have been moves of late in things like resins and base metals. Since the October call. I'm guessing the resins are getting offset by lower oil prices, so I think that's pretty understandable. But on the base metal side, can you help us as to how the hedges work from a timing standpoint as to when that might flow through or if you are exposed to higher copper, aluminum, nickel, zinc, that kind of stuff in '26 potentially? Marc Bitzer: Sam, you know our business very well, and you pretty much already gave the answer. So steel, because we have multiyear contract, is flat. In our assumption. There's still a couple moving pieces. On resins, it's directionally a good guy versus our assumption, but as you point out, aluminum, copper, in particular, a little bit of net a bad guy. A little bit buffered because, as you know, we go out with edges. With certain hedging corridors. And that's why we're saying right now the sum of it all is we basically assume a flat or not a major surprise. And, again, it's a wash of ins and outs. But we feel pretty comfortable about that RMI assumption. Operator: Your next question comes from the line of Susan Maklari from Goldman Sachs. Your line is open. Charles Perron: Hi. Good morning, everyone. This is Charles Perron in for Susan. Thanks for taking my question. First, I just wanna Marc Bitzer: Good morning. Charles Perron: First, I just wanna go back on the cost action, the 150 plus tailwind for 2026. Can you talk about some of the what is the new actions, that are gonna be implemented this year versus the carryover impact from 2025 action. Can you elaborate on some of these measures put in place in terms of automation, strategic sourcing, and footprint of rationalization? And what factors are you considering before determining whether additional action would be necessary? Marc Bitzer: Yeah. So, Charles, it's Marc. First of all, there is some carryover, but, frankly, it's not that much. It's obvious overall. It's $150 million plus. It's probably less than a third is carryover. And that largely comes from the actions which we initiated about the cost they got last year, but just carried through, and there's the additional actions. The vertical integration is actually a new angle which we're pursuing. We've made good experience with vertically integrating some components actually in our Mexico factories. And we will aggressively go after that also in North America, where we expect quite a sizable saving on the respective components and frankly, also just more stability in our supply chain. That's one element. Automation is an ongoing effort and will accelerate. That will also drive benefits. What we refer to as a strategic sourcing initiative. It's a fairly elaborate and sophisticated process which we don't do every year because it's way too complex. The last time we've done that six years ago, and we got a lot of savings out of this one. It basically goes down to you take a book, take apart every single component. You weigh it. You do a global complete clean sheet assessment, what should cost be, we're putting it out for bidding across the world. It's just a very elaborate thorough process. And, again, just for complexity, you can't do whatever you're but given that it's six years ago, I think it's right. And we know we know the tool. We've done it before, and we expect, probably in the overall context, almost a third of cost savings coming out of this one. Charles Perron: Got it. That's super helpful color, Marc. And then second, I just wanna ask on the continued progress here seeing in small domestic appliances. It's good to see the 10% sales growth this quarter. When considering the business, how do you balance the growth momentum that you're seeing here versus holding to your 16% EBIT margin as you to maximize your returns over time? Ludovic Bouffiz: Yeah. Charles, this is Ludo. So I'll take this one. So as you said, we're very happy with the performance of the SDA business. We grew at 10% in Q3 and again in Q4, and we have similar projections for 2026 going forward. A margin standpoint, what we believe is most of the highest value we can create, frankly, is through growth given the level of accretiveness we have on the margins already. So we're very focused on delivering that growth, and we're effectively reinvesting the margin that we create in excess of this 15 to 16% margin range into further acceleration. Operator: And your final questions come from the line of Jeffrey Stevenson from Loop Capital Markets. Your line is open. Jeffrey Stevenson: Hi. Thanks for taking my questions today. You reported healthy share gains in the third quarter from your new product introductions, which offset your first half share losses. But I was wondering if you could comment on your fourth quarter share gains and whether heavier competitor discounting and a soft underlying R and R demand environment prevented similar levels of share gains during the quarter? Marc Bitzer: So, Jeffrey, based on what we report in Q3, we picked up quite a bit of share with the new product, and that off what we lost in the entire first half. In Q4, the positive momentum when new products continued, so we continue to gain share with the new product. But, of course, by definition, the overall promotional period in Q4 is just a bigger portion of a quarter than in our prior quarter. During the promotional period, and that's what I indicated before, we did not pick up share. We just decided to hold our ground, and that's what we've done. So you have continued gains of share with a new product, in the promotion period, we didn't pick up a lot more. So overall, it ended with a full year, but we have a small market share gain for the entire year in North America. And almost entirely driven by the back half. Almost entirely driven by new products. Jeffrey Stevenson: Understood. Thank you. Then I wanted to go back to, you know, comments earlier on a replacement demand. And this was tracking to roughly two-thirds of North America MDA sales last year, which is well above normalized levels. And just so I'm clear and your guidance are you not expecting, you know, any moderation in the percentage of replacement demand in 2026 unless we see some improvement in existing housing turnover or And then over the midterm, do you believe the percentage of replacements sales could move closer to, you know, 50% once the industry returns to a more normalized repair and remodel demand environment. Marc Bitzer: So, Jeffrey, there's two components. The absolute number of replacement volume we get, we expect to stay stable. And we've seen that pretty stable now for an extended time period. And then, again, it just comes with simple math. It's installed base, and we know that. And the overall usage in terms of here has come down a little bit because people are more using it more intensively. MET has now been stable for, I would say, two, almost three years on a pure replacement side. So the volume will stay the same. But, of course, then by definition, if it finally the discretionary demand picks up, the percentage of a total market replacement, will come down. Right now, it's well above 60%. And in I would even wouldn't even call it peak cycle. I would call it early or mid-cycle, discretionary cycle easily cover 50%. Not easy, but we had years where it would the discretionary side was up to 60%. So it's so the percentage is all driven by how much we would see on the discretionary demand going forward. So with that, I think that was the last question I'm which sorry. We went a little bit overtime today, but there's new faces, new voices, and then I think a lot of good questions. Again, as you heard before from us, you know, 2025 is behind us. It's in real video. We right now look just forward '26. There are some encouraging signs already happening now in '26, and I think we laid out the catalyst why we believe we are confident and it's in our execution control to deliver on them. And gives us the confidence behind '26. So thanks for joining me today, and looking forward to talking to you again next quarter. Operator: Ladies and gentlemen, that concludes today's conference call. You may now disconnect.

101天前Insight Analytics约5分钟阅读

ALMB.CO 2025 Q4 财报电话会议

Operator: Hello, everyone, and thank you for joining us today for the Alm. Brand Q4 2025 Results Call. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Rasmus Werner Nielsen, CEO, to begin. Please go ahead, Rasmus. Rasmus Nielsen: Thank you. Good morning, and thank you for joining us on our conference call. As usual, I have with me today our CFO, Andreas Ruben Madsen; and the Head of our IR team, Mads Thinggaard. This morning, we published our interim report for the fourth quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Let us move to Slide 2. Overall, 2025 ended better than expected with an insurance service result of DKK 1.91 billion, significantly up from DKK 1.44 billion last year. Large claims of 5.2% and weather-related claims to 3.2% in '25 were both below the new normal levels we expect, while the undiscounted underlying loss ratio improved by 3.1 percentage points compared to '24, driven by our repricing and synergies. We had a strong growth of 9.7% in our Personal Lines in '25, while also ending the year with a quarterly growth rate of almost 10%. Thanks to our strong partnership with local banks as well as countrywide banks, we are taking market shares in Personal Lines. We view growth in Commercial Lines is decent in '25 with just below 3%. On the cost side, we improved the cost percentage to 17% in '25 as planned. This is a satisfactory 1.3 percentage point reduction from 2024. Combined with a very satisfactory investment result for '25 of about DKK 0.3 billion, the profit before special costs and tax reached DKK 2.12 billion. Our proposed dividend of DKK 0.66 per share and total ordinary buybacks of DKK 500 million represent a record high normal distribution of a total of DKK 1.4 billion and a payout ratio of 98% for 2025. This is on top of the DKK 1 billion extraordinary buyback we expect to do in 2026 related to the approval of our PIM model as well as an extraordinary steady increase in our CSR coverage in Q4. Now I'll turn to Slide 3 with our highlights for Q4. Q4 was supported by an improvement in the underlying undiscounted claims ratio of 3 percentage points related to our repricing and harvesting of synergies. Synergies also supported a further drop in our cost ratio. As mentioned on the slide before, growth in Personal Lines was strong at almost 10 percentage year-on-year in Q4, while growth in Commercial Lines was a bit negative due to the build-in volatility in repricing our largest corporate customers. Furthermore, a technicality in Q4 last year gave a small headwind for the quarter as well. Please turn to Slide 4 with our financial highlights for Q4. Insurance service results for Q4 '25 was DKK 521 million, was an improvement from DKK 440 million last year, mainly driven by lower underlying claims, but also with support from the strong growth in Personal Lines. The investment result of DKK 73 million in Q4 was satisfactory and on par with last year, and we ended 2025 at a very satisfactory level for the investment result of DKK 337 million. Special cost of DKK 39 million is somewhat lower than last year due to lower cost for the integration of Codan and realization of synergy as well as special cost for announced redundancies booked in Q4 last year. On Slide 5, you can see the payout ratio and EPS for 2025. The payout ratio was 98% and earnings per share ended at DKK 1. The payout ratio is achieved as the net profit after tax with some adjustment related to the Codan integration, amortization of intangible assets and profit after discontinued activity from Energy & Marine business. In 2025, we are close to 100% payout as we have been in all recent years. This reflects our strong underlying capacity for distribution. Earnings per share came to DKK 1 for 2025 based on adjusted profit after tax and the average number of shares. This serves as the baseline for the 2026 to '28 EPS CAGR target of 10%. So adding together the upcoming share buyback program of DKK 1.5 billion and the dividend of DKK 0.66 to be paid in April, we expect to make a total of DKK 2.4 billion in distributions in 2026. Let's go into the details with the insurance service result segments on Slide 7. Personal Lines increased the insurance services result significantly to DKK 314 million in Q4. The improvement in Personal Lines was driven by double-digit premium growth, 2 percentage point improvement in the underlying undiscounted claims ratio and higher run-off claims than the year before. The drop in the cost ratio followed the plan and thus helped as well. Commercial Lines did a bit under last year with an insurance service result of DKK 207 million compared to DKK 238 million in Q4 last year. The main driver for the lower result was major claims doubling to 8% in Commercial Lines, although this is still below the normal level in Commercial Lines of around 10%. In addition, Commercial Lines were impacted negatively by a runoff loss of 2.8 percentage points, primarily related to liability insurance. We are, however, very satisfied with a massive improvement in the undiscounted underlying claims in Commercial Lines this quarter. And now please turn to Slide 8. Insurance revenue grew by 4.6% in the quarter, thanks to continued strong growth in Personal Lines of almost 10%. In Personal Lines, we are still taking market shares due to our strong bank partnerships while repricing related to high motor claims helped as well. The last effect is expected to dissipate in the coming quarters. Commercial Lines are switching to negative premium growth in the quarter but the growth is slightly positive when adjusting for technicality in Q4 last year that carries a headwind of 1% to Commercial Lines growth in this quarter. Our work with increasing profitability of our largest customers does lead to some volatility from quarter-to-quarter in Commercial Lines depending on the acceptance of individual price increases. Q4 this year premium growth was impacted negatively by this. And moving on to Slide 9 and the claims ratio. The Q4 claims ratio was down 1.2 percentage points year-on-year, mostly due to a drop in underlying claims of 2.4 percentage points, while it was negatively impacted by the runoff loss in Q4. The 2.4 percentage point improvement in the underlying claims ratio was driven by repricing and harvested synergy gains, while discounting was less of a help in Q4 this year due to a one-off, which led to a temporary 0.6 percentage point drop in the overall effect from discounting in this quarter. On an undiscounted basis, the underlying loss ratio improved by 3 percentage points. Personal Lines had an improvement of 2.1 percentage points, while the improvement in Commercial Lines reached 3.7 percentage points. And now please turn to Slide 10 and the Personal Lines. The claims ratio is down a massive 5 percentage points, driven by underlying improvements and higher runoff gains compared to last year. On top of this, the cost ratio still improves. This quarter it has reduced with 7.7 percentage points to 18.9%. Please turn to Slide 11 and the Commercial Lines. The total claims experience worsened in Commercial Lines, which was driven by an increase in major claims to 8% compared to a very low level of just 4% last year. However, I note that this year is still below the normal level of 10%. An atypical runoff loss of 2.8 percentage points in Commercial Lines was also a factor behind an increase in the claims ratio of about 3 percentage points. However, I'm still very pleased with the undiscounted underlying claims in Commercial Lines improving 3.7 percentage points year-on-year. Our expense ratio in Commercial Lines in Q4 improved by 1.3 percentage points year-on-year as well. And with these comments, I will now hand over the word to Andreas, who will walk us through the financials. Andreas Madsen: Thank you, Rasmus. Now please turn to Slide 13 for a final update on our synergies. Synergies in Q4 '25 of DKK 164 million is up by DKK 26 million compared to Q4 last year. And thus, we end '25 with DKK 618 million in realized synergies. This underlines our successful takeover of Codan as this is above the target of DKK 600 million per year. We actually finished the synergy program with a run rate of DKK 650 million by the end of '25, just to highlight how much we have won by acquiring Codan. The improvement in harvested synergies in Q4 '25 of DKK 26 million from DKK 138 million in Q4 '24 implies an improvement in our underlying claims ratio of 0.5 percentage points and our cost ratio by 0.4 percentage points year-on-year. This will be the ending of our synergy accounting. And now I move to Slide 14 and the investment result. The investment result was a profit of DKK 73 million, driven by a positive return from our free portfolio and a positive return from our match portfolio as well. Overall, I'm quite pleased with the investment result for 2025 of DKK 337 million, which ended well above the DKK 200 million guidance we started with at the beginning of the year. Even though we focus much more on insurance service result than the investment result, it is clear that a positive investment outcome like the one we had in '25 is a nice add-on to our distributions for the year. And now finally, please turn to Slide 16 for the outlook for '25 initially stated January 21. Our guidance includes a technical result, excluding run-offs, of DKK 1.65 billion to DKK 1.85 billion. The guidance reflects positive effects from our new strategy initiatives presented at the CMD in November last year. The cost ratio is expected to be unchanged at 17% in '26 and the combined ratio, excluding run-offs result, is expected to be 84.5% to 86.5%. We expect an investment result of DKK 200 million in '26 based on the current returns for the free portfolio and a 0 result for the match portfolio. Consequently, group profit, excluding other income and expenses, is expected to be DKK 1.85 billion to DKK 2.05 billion before tax, excluding run-off gains for '26. As you may have noticed, this is a bit different from how we used to guide. We're now limiting ourselves to just one line with other income and expenses, consisting of group costs spend for education and development and amortization of intangible assets. We guide DKK 0.5 billion net expenses for this single line below the line in 2026. And with this, I conclude our presentation and hand over the word to our moderator. Thank you. Operator: [Operator Instructions] Our first question comes from Mathias Nielsen from Nordea. Mathias Nielsen: Congratulations on the strong finish to the year. So if I may start by looking a bit into the year we have started now, if you maybe could share a few details on what we should expect in terms of top line development, and especially related to how much pricing you have done already in January? I know one of your peers is saying the same in Norway. So maybe you could share a bit of details on that as well. And then also in connection to this, like maybe a bit on claims inflation expectations for the year as well. Andreas Madsen: Yes. Mathias, Andreas here. I'll try to talk you through that. We started November '24 doing the repricing, which was mainly related to the uptick we have seen structurally in motor frequency up until that point. And that has been sort of the main driver for the significant premium increases we've had running during the last year or so. So -- but going into '26, we will expect that to dissipate. So we don't have the same sort of structural support from repricing anymore and logically so. Luckily also, we have seen motor claims, at least in terms of frequency, moderate somewhat. And so even though we still see some -- we see some tendencies for spare parts still increasing and thereby also average claims, we don't see, as we stand, a need for major structural increases in prices from motor anymore. So if we're looking at -- just to give you a rough sort of indication, we would be thinking something along the lines of 1% to 2% -- sorry, 2% to 3% indexation for '26 on average across the different lines we have. And on top of that, we still expect to be able to take some market shares and maintain some of the momentum we've had in Private Lines. So a guidance of, let's say -- and it's not a guidance, just to be clear, as you probably remember, we don't guide for top line, but let's say, a rough indication where a starting point is around 3% and maybe with some, let's say, in some likelihood, probably a bit above that, that's where we would imagine the group being. Yes, sorry. Mathias Nielsen: Sure. Is there any difference between like private -- like commercial and private lines on the pricing like going into '26? Sorry for further details, but you can say a bit of that. Andreas Madsen: No, that's fine. No major differences. But we do still have -- would say, it's more -- we're more sort of back to normal mode in both segments. We still maintain for Commercial Lines a focus on especially having the right price for the larger corporates. And we still, I would say, see some repricing needs within select lines. For instance, within larger workers' compensation, we have seen, but we've also been doing quite a bit of that already this year. So -- but no major sort of differences there. And as I maybe also adhered o before, most of the market share we would expect to get would be as we have seen in Private Lines. And then I think you also asked a bit about claims and claims inflation. I mean, I sort of softly touched upon it within motor. I think the overall read is that we do see claims inflation, let's say, moderate, but we do -- but as I mentioned before, from motor at least, we're still a bit sort of, let's say, observant about the development there. But for now, we feel we're at a sort of stable development. Mathias Nielsen: And then maybe like a last question before I jump back in the queue, like Q4 was obviously a quite benign quarter in terms of weather and how everything looked in Denmark during the quarter. How should we think about the start of '26? Like is this on par with what you have in your normal assumption? Or is it slightly worse due to all the snow and cold weather that we have had in January so far? How should we think about what is actually a normal assumption for you? Andreas Madsen: Yes. Overall, Mathias, we would say we're more or less on par with what we would expect for January so far. Operator: Our next question comes from Asbjorn Mork from Danske Bank. Asbjørn Mørk: If I may come back to the question -- the previous question on the premium growth. If I take your midrange of your guidance, so the 85.5% on the combined ratio. And then I use the -- your insurance result mid-range guidance to sort of calculate backwards to see your premium growth assumptions, it seems to be more like in the tune of 2% for the growth for '26. Just wondering if there is something here, especially, I guess, on the corporate side, something we should be aware of that will continue to be a drag pruning on the portfolio? Because I guess with the price initiatives that you are, the indexation you are carrying through in private and with the continued growth in private sector, I guess we should expect the Private Lines to do have above that in growth for '26. Andreas Madsen: Yes. Thank you, Asbjorn. I'll start out and maybe Mads can help me out also. But I mean, I think I heard you say 2% implicit top line. I'm closer to 3%, and I also -- between the combined and insurance service result factor. And I would say that you shouldn't read too much into that. I think that -- as I said before, our overall expectation is something like 2% to 3% for indexation and then a continued momentum, especially in Private Lines. So 3% as a starting point and in all likelihood, maybe a bit more than that. Mads Thinggaard: Yes, Asbjorn, I didn't -- it's Mads here. I didn't hear if you kind of put in normal run-offs into your calculation here. So then you get to a bit different level when you do that. Asbjørn Mørk: No, but I just especially took your 85.5% midrange and your [ DKK 1.750 billion ] insurance service result midrange. So I guess that implies a insurance margin of 14.5%. So DKK 1.750 billion divided by 14.5% give me DKK 12 billion and DKK 7 billion in premium. Mads Thinggaard: Yes. The thing is these calculations, they are very, very sensitive to what the combined ratio level you put in when you do the implicit calculation. So if you try to do the kind of the calculation on 83.5% which would be the case with a normal run-off of 2%, I think you would end at a bit different level. We get it to around 3%. But then again, remember, if we were to move the combined rate to just a little bit in the guidance given that we are guiding in brackets of 0.5%, then you can actually get to, I mean, a quite different implicit premium growth level. So it's very sensitive. So I think listening to Andreas, it is a bit about starting at 3% and then we could have -- perhaps have a little plus to that. That is how we're now guiding. Asbjørn Mørk: Okay. Fair enough. Then on your underlying claims ratio improvement, so the 300 basis points undiscounted for the group, then if I read your slide correctly, you say that it's primarily driven by the corporate business. I guess there's a few run-offs in Q4, at least kind of year-over-year comparison, a few run-offs on the corporate side. But if we do the sort of the development in your -- in the underlying that you do report for the corporate business, it seems to be more in tune of 2.5% underlying, but obviously, that's not discounted. So just wondering, if we do sort of adjust for the various components, how do you see the underlying improvement in corporate in Q4? And how should we expect that to develop in '26 given that you continue to prune the portfolio? Andreas Madsen: Yes. I can start and hopefully give some flavor to it. When we look at it on an undiscounted basis, and keep in mind that the run-off we have is related almost entirely for Corporate Lines, the one relating to the discounting effect, which is from a model change this quarter regarding workers' compensation and therefore, also almost entirely relevant for Corporate Lines. That means that on an undiscounted basis, we see a year-on-year improvement of 3.7 percentage points. And actually, because of the -- if I -- just to add an extra factor, which is not in that number, we also have the indexation from legislation we mentioned in regards to the premium in Commercial Lines, where we had DKK 15 million more premiums in Q4 last year than we actually, so to say, normally would have because we had 2 quarters coming in for 1 quarter in Q4 with a premium regulation there. If you account for that also, then in the Corporate Lines, we would get even higher for the underlying year-on-year growth at least -- or sorry, yes, a change in underlying loss ratio. So I think in all actuality, we are quite happy with the improvements we see. But just back to your question, when we look at the broad lines, and that was true both of commercial and of private lines, motor has been the major factor which we have needed on a broad sense to do repricing for. So we would also expect for underlying loss ratios in commercial that to start dissipating that momentum we've had from repricing. Going forward, and maybe that's a relevant starting point for that. I guess other people would be interested in this on the call. If we look at what do we expect for underlying loss ratios in '25, well, we -- may be doing it in sort of simple terms, we have a net insurance service result improvement on a normalized basis of DKK 150 million with the guidance we put forth. We have a cost ratio which is guided more or less at the same rate as before. So if you split that, we'd say at least 2/3 of it would be coming roughly from underlying loss ratios. And then we have a slight -- also a positive impact from some growth on top of that. And looking -- so looking at something stylized along the line for the full year of an improvement of around 100 basis points in underlying loss ratios. And the factors there would be we realize we do have some tailwind. We have a bit of synergy hangover, maybe a slight bit of pricing, especially maybe in the beginning of the year. And then so we could -- that would add some support. And then actually, we also have some improvements from our reinsurance coming in. So we're somewhere maybe, let's say, 50 to 75 basis points coming from that. And then we also have the initiatives will start to get effect from our improvements we're doing in the strategy, especially towards the end of the year. So in sort of rough indication would be something along the lines of 100 basis points for the year. Asbjørn Mørk: For the combined group? Andreas Madsen: And that was for the combined group, yes, good question, yes, for the combined group. Operator: Our next question comes from Alessia Magni from Barclays. Alessia Magni: So I have three from my side. The first one is if you could provide the split of premium growth by price and volume for the group and if possible private and commercial. The second question is regarding the share buyback that you announced last week. So the DKK 500 million recurring share buyback, should we look at it as the base for next years? Or should we consider it as recurring at DKK 500 million? And then the last question, which is a more long-term strategic, is on the autonomous vehicles. What do you see or what do you expect to see in Denmark in the medium to long term? Andreas Madsen: Yes. Thank you. I can start at least with -- starting with premiums, we sort of touched upon that earlier. If I heard you correctly, it would be regarding the '26 expectations for premiums? Or is it regarded to the Q4 we see, just to be clear? Alessia Magni: For the Q4 and then obviously, I mean, you already talk about... Andreas Madsen: Thanks for clarifying that. Well, we still -- what we see in Q4 is that we have the continued momentum being very strong in Private Lines. We have just around -- just below 10 percentage points year-on-year premium growth for Private Lines. So looking at that, we would say that we have something like 3 percentage points coming from indexation -- sorry, yes, 3% from indexation. Then we have around roughly 4 percentage points coming from repricing, which is now, as I mentioned before, towards the end of that, but we still have some strong support coming from that. And then the net gain for these business, much of that coming from our banking partnerships would be around 3 percentage points support for the premium growth. So that's sort of stylized rough levels for that. Then if you look at Commercial Lines, we have -- actually, the headline is sort of negative for premiums. And I can try to do the same bridge for Commercial Lines. We would start with something around 3 percentage points coming from indexation positive and then a positive support from -- also from repricing of around 2 percentage points. And then there's a one-off effect I mentioned earlier from workers' compensation premiums regulation last year, which would be a headwind of 1 percentage points. And then implicitly, you could say that something along the lines of 5 percentage points negative is from premiums going out due to the repricing strategy we continue to have coming from our strong focus on profitability in -- especially in the larger corporate segments, where just one or two of the larger, let's say, customer engagements can add some volatility into our quarterly earnings. So there's nothing sort of out of the ordinary, but obviously, it is a leap in the quarter here, but actually following the strategy we've had for some time now. So -- and then I think just going into -- shortly, briefly recapping on what we expect for the next year, we would see most of the repricing we've been doing is now fully in the books. We don't have that much coming, and we don't see the need for structural repricing anymore. And that means that with the -- so an indication -- and again, not a guidance because we do not guide for top line growth, we need to have flexibility to cater for the focus on profitability first. Then we would be talking something along a starting point of around 3 percentage points where 2 to 3 coming from indexation and also with support from our market shares being captured in private lines. So that would be what we expect for '26. Then you asked about the share buyback. Well, I think -- maybe I think the best way to explain the DKK 500 million we have coming in, which we term sort of regarding the ordinary net earnings we've had this year. We have a payout of 98% for the year. And so coming from, so let's say, the ordinary -- our dividends and the buyback of DKK 500 million. And the thinking we have is that we try to cater for a stable increase in dividends per share, something along the lines of 10% every year. That's also very closely linked to our earnings per share target for the coming years. So we like to see that come up stably, something along the lines of 10%. And when we did that this year, that meant that we ended with a total payout of DKK 933 million. And then the rest is placed in an ordinary buyback. And this time, we had -- we were able to pay out all of it, so to say, is coming very close to a payout of 100. So the DKK 500 million is -- that's how the DKK 500 million come around. And I think more or less you could say that, that makes it, all else equal, probably something along the lines of a rough starting point for where we would be next year, we would have more earnings in a sort of -- in an expected -- on an expected basis at least, and then we would need to cater for dividends per share also coming up a bit. So that's sort of how you should think about it. And then if I heard the last question... Rasmus Nielsen: Yes, I can take it. It was the report from U.S. on self-driven cars, as I understood it. You, of course, noticed the report. We know about the issue for long. It's been discussed. It's also a matter of when will this happen in Europe, when will the legislation be in place and all that. For the moment being, we are quite confident that it will not have a huge effect or any effect in this strategy period. But of course, we are very, very well aware of the issue and follow it quite closely. Operator: Our next question comes from Martin Birk from SEB. Martin Birk: Just a couple of small questions from my side. I guess in relation to the jumbo share buyback you had just announced, you also comment on reinsurance coverage. What has changed in that perspective? That would be my first question. Andreas Madsen: Yes, Andreas here. We've had some, I would say, some tailwinds in general on reinsurance in this placing. So actually, as I mentioned before, we also -- we do see some improvements in terms of like-for-like premiums. And on top of that, we've actually also been able to -- especially, I would say, or actually within our cat program, we've been able to in this placing, get better terms, meaning that the prepaid reinstatements, or we have been able to achieve prepaid reinstatements for some of the higher lines in the programs where we have the severe losses. And that means that in actuality, our risk in a very severe catastrophe events has come down quite a bit, and that's what's the major factor within the insurance risk driving down the SCR this quarter. So I hope that makes... Martin Birk: So if you take, let's call this extra DKK 0.5 billion top up, right? So if you take that top-up, how is that split between reduced market risk, better reinsurance coverage and a higher profit margin? Andreas Madsen: Well, if you look at -- maybe looking it in a bit of a different way, the -- if we look at the SCR part of the capital change coming from the quarter from Q3, I'm just looking just a minute, Martin, just to find it here. We have an SCR now of DKK 1.9 billion roughly. DKK 1,914 million, and we're coming down from DKK 2,085 million. So that's a total decrease in SCR of DKK 172 million. If you look at that number, roughly around DKK 200 million is coming from the reinsurance, including latest exposure updates. So that is sort of the main driver behind our total decrease. We have a few other moving parts in the other parts of the SCR, but that is the major driver of the SCR coming down. And then on top of that, you also have, keep in mind that if you look at the -- so on top of that, you also have that the own funds sees quite a favorable movement, especially from the development in our profit margin from Q3 to Q4. That is more or less as would be expected in a normal cycle over the year. but that's sort of what -- those are the major explanations for our change in solvency coverage from Q3 to Q4. Martin Birk: Okay. I guess over the past many years, Alm. Brand has been sort of a story of excess capital distributions and you have managed to over and over again to find sort of new top-ups to your ordinary distributions. But with your sort of CFO eyes and ears, do you think that Alm. Brand is now a fully optimized company in terms of the solvency ratio? Or do you still see that there's more belly fat to dig into? Andreas Madsen: I think we are quite optimized now. We have a full internal model. That was a major change in this strategy period. We got that on the -- sorry, in '25, in the last strategy period, we just got that through. I think further optimization could at some point be relevant within reinsurance, as I just mentioned. But again, that would be very dependent on us seeing a continued general improvement of the market conditions. So I'm not saying it's ruled out, but we have already gotten quite, I would say, good benefits there. But then I would mention that the strong driver between -- or behind the favorable overall solvency regime or capital requirements for non-life P&C companies is that more or less when you have internal models, the first shield in your defense is the earnings you structurally make. And as we expect to structurally make more money in the insurance service results in coming years, that would also factor into lower solvency. Martin Birk: Okay. All right. Very clear. And then perhaps just the last question from my side. Could you please share a few words on the arbitration case? Andreas Madsen: Yes, do you want to talk to that? Rasmus Nielsen: Yes, I can take that. It was a case that got built here in beginning of 2026. And of course, just to be clear, we dispute the case, and it's regards to the principal applied for valuation of the divestment and how that was in line with our historical principles of assessing assets and liabilities. These principles are fully in line with how we have made the financial accounts, and it's been reviewed by our external accountants. So I actually or we actually sincerely doubt that this case will have any significant financial impact for our group in the future. Martin Birk: What do you think the time line is? Rasmus Nielsen: Normally, the time line for these arbitration cases are, I would say, 1 to 2 years. Operator: Our next question is a follow-up question from Mathias Nielsen from Nordea. Mathias Nielsen: Just a quick follow-up. So it's not because it's a major one, but it's also the first time that we meet after your CMD and your new strategy. So I thought it would also be interesting to hear like what is the pushback you get from the organization on your strategy? Are people in general happy? Are some of them concerned about how they need to make more money and they need to be a bit more aggressive on pricing and so on? Like what is the pushback you're getting from internal? I think that could be interesting to hear given that it's the first time after you launched it. Rasmus Nielsen: Yes, it's actually a very good question, Mathias. We put quite an effort in starting with having the management team -- full management team on board when we did the strategy, of course, together with our Board. That means a lot of people were involved in creating this strategy. And of course, that gives us followers. So that was one thing. And then the time after 2 months have passed, and we had -- just an example, we had a big management conference 2 weeks ago, where we put additional effort into discussing and finding out how to proceed with the strategy. I would say the followup for the organization is very good, and it's good to the reason that now we will work with -- even more with our processes, with our thinking about how to improve the work with policies, with setting prices and all that. But the very best thing is that we all agree that now it's time -- even more time to be there for our customers. It should be easy to be customers. It should be easy to write the insurance contracts, but also to fill in claims and all that. So on that note, it's very -- it's taking very positively for our people. Operator: We currently have no further questions. So I'd like to hand back to Rasmus for some closing remarks. Rasmus Nielsen: Yes. And as usual, thank you very much for participating, and thank you for your questions. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.

101天前Insight Analytics约5分钟阅读

EPRO-B.ST 2025 Q4 财报电话会议

Jacob Broberg: Good morning, and welcome to Electrolux Professional Group Q4 and full year results presentation. My name is Jacob Broberg. I'm heading up Investor Relations and Corporate Communication. And with me, as always, I have Fabio Zarpellon, our CFO; and Alberto Zanata, our CEO. And I hand over to you, Alberto, please. Alberto Zanata: Thank you, Jacob, and morning to everybody. And before starting the usual presentation, let me add a comment because I'm sure that you already saw the announcement that was posted yesterday night, where it has been announced that Paolo Schira, the current President of the Laundry business is stepping up and has been appointed as my successor following the decision to retire. Everything has to come to an end. And after the year that I spent in this company, I think it is the right time to hand over the baton to a person that I've been working with for many, many years and that have been instrumental together with all the colleagues in the group management to build the company for what it is today. So I'm very happy that he's taking over this responsibility. I'm confident that together with the team, he will build an even stronger Electrolux professional organization. With this said, I would move on. And before commenting the quarter, let me spend a couple of words on the year because clearly, we closed also the year, not only the Q4. And the year has been another year characterized by uncertainty and geopolitical and macroeconomical headwinds. They have been very significant these headwinds, in particular, for what currency and tariffs are concerned, but also for the indirect effect of currency and tariffs with the business in the U.S. and in China. Despite all these headwinds, we have been able to deliver another year with a profitable growth. We improved organic sales. We improved the profitability. We improved margin, and we took down the ratio between net debt and EBITDA to 1%. So another year in the -- along the path to deliver the result that we all expect to deliver. But you know what, more than the result in itself, I believe this year is characterized by the fact that while performing, we continue to transform and invest for transforming this organization. We continue to invest in R&D starting to bring to market some of the products that we have been developing for years, starting with the cooking lines during Q1. And then even more important during the summer, we will start to bring to market again new cooking product, but also the first batch of the laundry machine that are part of the big program that will revolutionize the portfolio of laundry. We also continue to invest to grow the business in North America and with the chains acquiring Royal Range. It is a small company, but it is an important step, an important add-on to our organization because of the product portfolio, because of the margin and because of the kind of customers that they are currently serving. And last but not least, the third big pillar of the transformation that was significant in 2025 is the efficiency program that we launched in September, a program that is progressing very well, a program that is expected to generate significant savings already this year, but even more next year, a program that will redesign our footprint, concentrating the production of 2 factories into others that will generate efficiency, productivities and [ there's ] a consequent benefit both for the organization and the P&L, but also a program that is allowing us to upskill the organization to make sure that we get people into the organization that are more focus on the front end because that is the shift that we want to have in 2026 to move from back to front to start using all the things that we have been developing during the years to grow sales and win the preference of the customer in the market. With this said, we move to the quarter. And in summary, I would say that the quarter -- we closed the quarter with a strong growth of the margin despite all the headwinds that we had to face. Just to quantify, we are talking about 1.3 percentage point that is the negative impact of currency, in particular, currency in the quarter. So quite significant about that. In the numbers, we also include the SEK 10 million of the acquisition cost. So if you look at the underlying profitability, it's even stronger than what it is -- what you see on papers. The quarter has declining organic growth. But let me see that inside of this one, the decline comes mainly from the U.S. food and beverage market that has been weakening just after the summer, after being very strong in the first part of the year has been weakening during the summer, is coming from Japan that is still a weak market. And in some way, we had also declining sales in North America Laundry, and we will comment later. But in reality, the big business for food and beverage have been growing. We have been growing in Europe. We have been growing in -- excluding Japan in the other Asian market. And Laundry has been growing in general, excluding the United States and Asia in that case. That is again Japan. So, a good quarter, a quarter also solid in term of cash flow and that gave us the possibility to reduce the ratio between net debt and EBITDA. And again, a quarter marked by the signing of the acquisition of Royal Range that was completed in January this year. With all these things said, we are also proposing dividends that are increasing the dividend per share according to our objective to continue to remunerate the shareholders. Specifically about the market, I think I said it. So Europe strong, that is good because it is still more than half of our business, geographically speaking; a relatively weak North American market, but we will comment later about Laundry because the dynamics between the 2 segments are completely different. And you see a declining business in Asia Pac, but it is entirely related to Japan. If we look at the specific trend in Food and Beverage, Food and Beverage has been growing organically, and this is thanks to Europe. Europe is doing extremely well, extremely well, improving, growing sales, gaining market share and improving profitability. And if you think that now Europe is also launching new product, you can imagine how positive it can be about the European business. U.S. is weakening. It has been weakening during -- as I said, during the fall, where we were flattish, but we saw this happening also in Q4. And as I said, the Asia Pac is mainly Japan. Despite this, profitability improved. Profitability improved, is above 10%, including acquisition cost. So the underlying profitability is even stronger. To be noted, and I think it is completing just the comment that I had about Europe is that the order intake for Europe is higher. So not only strong sales in Europe, but also a strong collection of orders. If we move on to Laundry, here, you see that we reported declining organic sales. And it is mainly related to North America and Japan, so Asia Pac, Middle East, but mainly Japan. Two comments about that one. Japan, I believe we believe -- or at least this is the feeling we have, is that we touched the bottom of the decline. And the other thing is that -- and this is we know because Japan is one of the market where we have hard numbers. We know that we didn't lose market share. So having maintained the market share that we have, that is slightly below 50%, so very strong market share in this large market. And having known that the decline should come to an end. Also in this case, the feeling is that we could see the future in a positive way. North America is a different story. Yes, we had a decline, but we have to consider that last year was a super strong last quarter -- last year, I'm sorry, I'm referring to 2024. In the last quarter of 2024 was a very strong quarter where our distributor built up a stock. I still remember that call 1 year ago, exactly this call I was asking if that strong growth would have been replicated? And I said, no, it can't be because it was a buildup of stock. Okay. In this quarter, the same distributor normalized the inventory that he has in North America. So the difference between generated a negative for us, and that is what you see reflected in the overall sales. Nevertheless, the business in North America, that is an important business for our Laundry segment, is a healthy business. It's a healthy business, completely different compared to the situation of Food and Beverage, and that is reassuring. The other important thing that I want to underline for Laundry is that despite the headwinds that we have been talking about, the currency in particular, but also tariff, we improved margin. And this is, again, showing the strength of this business -- the strength of the business. Also in this case, I think that if I look at the magnitude of the headwinds, it would have been a 3 percentage point better in terms of margin and profitability. Looking ahead, also Laundry as well as Food and Beverage Europe, the order intake at the end of the year was higher than what we had the year before. With this said, I would pass to Fabio to comment the financials. Fabio Zarpellon: Thank you, Alberto, and good morning to everybody. Before I deep dive into quarter 4 financials, let me give you overall a perspective from a financial perspective of 2025. Overall, we grew sales organically by 0.5% and the EBITDA margin before the provision we did in September last year for restructuring increased from 11.6% of 2024 to 12.1% at year-end despite the large impact from tariff and currency that Alberto mentioned. Food and Beverage, the larger operating segment, grew 1.5 points overall, same currency and margin is close to 11%, 10.7% we closed the year. Laundry overall sales, the same currency, were flat, but not only the quarter, but full year margin increased, and we closed the year 17.4%, over 1 point better than 2024. Overall, if we look at how we generate the sales, I would say we have a pretty well balanced from a geographical perspective with America that is roughly around 24%; Asia Pac, 60%; and Europe around 60%. So, then moving from the yearly perspective to the quarter. As anticipated by Alberto, Q4 was another step towards our margin expansion, in line with our plan. EBITDA margin moved from 12% of last year to 12.6% of this year. The margin expansion overall was sustained by positive contribution from price, lower material cost and better productivity in our operations. To be noticed that good price management in U.S. compensated most of the tariff impact in the quarter. And let me say, provided there will be no additional change in the tariff award as anticipated during our Capital Market Day, we are confident to be able to fully compensate it in 2026. But before moving on, let me spend 2 words about currency. I mean, we are living in a period of unprecedented volatility for what concern currency. And I would like to develop through 2 dimensions, currency translation and currency transaction. When it comes to currency translation, SEK has been strengthening last year against, I would say, most of the currency. And currency -- all the rest equal, currency translation has reduced the top line by roughly 7 points and the EBITDA value in absolute term more or less by the same amount. So, with no change in what is the EBITDA margin. This also means that our EBITDA generated in quarter 4, if I look at it the same currency of the previous year, we are not deteriorated. So where you see a negative reduction in reality at the same currency, it is even a plus. On the other side, currency translation affected the underlying performance of the business, no doubt about it. And it touched sales, but also profit and profitability. On sales, I would say, mainly for Laundry where we invoice our U.S. distributor in U.S. dollar from our Swedish operation, SEK got stronger, meaning for the same $100 we get less SEK. And the impact is such that the group organic growth in the quarter net also of the currency transaction effect on sales instead of being negative would have been somehow positive, 0.6%, but positive. But I would say the main impact is on the profitability. The currency transaction, and it is mainly related to U.S. dollar, has hit our P&L by roughly SEK 45 million, 1.3 point in margin. So the underlying business performance is much better than what the reported numbers are showing. Currency transaction that was not important just for the quarter, but on a full year base, the impact is roughly SEK 100 million or roughly 0.8 point in margin. Alberto anticipated about the plan to reorganize and restructure our organization and improve our operation agility and profitability. The plan is proceeding according to plan and the anticipated saving, meaning over SEK 80 million for this year 2026 and over SEK 170 million for 2027, are confirmed. Going through the remaining part of the P&L, you see that the finance net was pretty low, SEK 80 million, lower than same quarter of the previous year, thanks to reduced borrowing, but I would say, even a more cost-efficient funding structure. To be noted in the quarter that the tax rate was pretty low, 11%. And this is due to a non-recurring, let me say, change of the funding structure that we put in place to finance our U.S. operation that led us to review the deferred tax asset and therefore, a non-recurring reduction on the tax cost. On a -- As a consequence of this, the overall tax rate for the year was in the range of 21%. But let me say this is not changing going forward the guidance that we gave in the past of roughly 26% of tax rate on income before taxes. Overall, this led to, I would say, a pretty strong earnings per share at SEK 0.98. That is roughly 30% up compared to the same quarter of last year. Cash flow generation was solid, slightly below -- somehow below last year. And this is due, I would say, from 3 components. We delivered somehow a slightly lower EBITA. We have had higher CapEx, and we started to have a cash out related to the execution of our restructuring activity. CapEx year-to-date we concluded the year with a CapEx over SEK 360 million. It's roughly 3% of sales. And as anticipated also during Capital Market Day, I expect it to remain around this level also for 2026, where as we anticipated, we are bringing to market very important product innovation, both in Food and in Laundry. Last word on capital efficiency. We have further improved the operating working capital on sales, meaning the utilization of it. We have seen a slight increase to the rolling 12 that we had in September. This is mainly related to a marginal increase in inventory. Our financial position at the end of the year is, I would say, pretty strong. You see that since the acquisition that we performed in the first part of 2024, we progressively reduced net debt, and we end up a year in a very, very strong financial position. And with that, back to you, Alberto. Alberto Zanata: Thank you, Fabio. And as I mentioned at the beginning, in a quarter with very strong headwind or even a full year, but a quarter with strong headwinds. But despite that solid performance and even stronger underlying performances, we continue to transform to bring to market new products that will surely generate additional sales. During the quarter, we launched the new cooking line in Europe. It will be sold also in Asia Pac, Middle East and Africa, but it's mainly the heart of the program of our European food organization. That is in line with what we always do. So more efficient product, product with higher productivity, product with the innovation that makes us different from competitors. But at the same time, we also -- despite the weak market conditions, we continue to innovate also in Japan. And this is a new product that is coming from the Tosei company, the one that we acquired. Also this one, pretty unique in the market. There are no similar stacking solution with a combo and a dryer in the market anywhere in the world. And this is, again, looking at a trend -- combining the trend of smaller spaces and lower investments to open a launderette. Part of this transformation is to create a new tool for the organic growth as the new products are, but also continue to make use of the cash that we are generating, investing in inorganic acquisition. I already mentioned the Royal Range, that has been completed. We are already working with the team -- [ of ] the Royal Range team to start generating value from this acquisition. So I'm very pleased about that one as well as the investment that we have been doing in this start-up. This is not significant for sale and EBIT today, but we [ count it ] to make use of the technology that the start-up is using to further increase the innovation path of our company. With this said, I would say that we are at the summary. And I have to say that we closed the quarter with profitability improvement. The profitability is mainly driven by the European business -- Food and Beverage, European business and by the Laundry business in general. And this improved profitability has been achieved, and we have been underlining more than once during the call, has been achieved despite of the strong headwinds that we had to face. We also closed the quarter with an improving order intake for Food and Beverage in Europe and for Laundry. And Food and Beverage and Laundry, they account for roughly 70% of our total business and -- you also know that for -- even more in terms of profitability, in terms of EBITA. We closed the quarter with the acquisition of the assets in the company in the United States, a company that we count to make use of this acquisition already in '26 or at least to start. And then for sure, it is something that will come next year. We closed a quarter starting to introduce to market the new cooking product and preparing for the Laundry platform. It is a quarter where we accelerated the execution of the efficiency program presented in September. I mentioned already that in the -- during the first quarter of 2026, we count to already move most of the production of the coffee from one factory to the other. And I think it is a [ counter ] that in a summary is another step in the building blocks path that we have been also presenting to reach our targets. It's a quarter where, thanks to the result of the quarter and the full year, bring us to propose the dividend and improved dividend per share according to our target and to our ambition to remunerate the shareholder. If I look at the first quarter of 2026, what we see, also thanks to the order intake that was reported at the end of Q4, we expect that the trend that we experienced in Q4 for what the Food and Beverage business in Europe and for what the Laundry business are concerned, should continue also in Q1. And this should compensate the U.S. Food and Beverage business that is -- that we saw relatively weak during the quarter. So that is what at least we can say today. With this said, Jacob, back to you. Jacob Broberg: Thank you, Alberto. Thank you, Fabio. With that, we open up for questions. Please go ahead, operator. Operator: [Operator Instructions] The first question comes from the line of Johan Eliason from SB1. Johan Eliason: This is Johan at SB1 [indiscernible]. I have just a question. You talked about the positive Europe. Do you think there are some temporary impacts from the Olympic Games coming up in Milan in Q4 -- Q3, Q4? Alberto Zanata: Let's say that we have obviously some good businesses as usual for the Olympic Games. But first, the Winter Olympic games are not as large or as impactful as the Summer Olympic games. And secondly, no, it is not because it is not only Italy. The European market, all the Mediterranean market are doing well. And the good things in Q4 is that also the Nordic market started to perform much better. So some sales, yes, but not as such that they could be considered a spike in the trend of Europe. Johan Eliason: Okay. Good. Excellent. And then I'm wondering a little bit, I mean, you are generating pretty good cash flows here and your net debt is quite rapidly coming down and then probably closer to 0 at the end of this year than to 1x net debt to EBITDA, obviously, depending on what you are doing on the M&A side. How is the M&A pipeline? Is it sort of more of these smaller potentially attractive acquisitions that we should expect? Or do you still have something more sizable that could or could not materialize in the coming year? Alberto Zanata: I believe you know that my answer will not be a straightforward answer on the matter. The only thing that I can tell you is that we are working on acquisitions. We are working on acquisitions. We just completed one, and I can tell you that we are working in parallel on many other opportunities. If I look around, clearly, there are more opportunity for mid-mall (sic) [ small ] sized company than for large one. The larger not so many all around. But for sure, we are looking for any possible additions -- inorganic addition that is instrumental to our strategy. Johan Eliason: Good. And then you mentioned market share gains. I can't remember if that was related to Europe or where you said that. But is it any product category or geographic area? Or can you say any details on that? Alberto Zanata: Okay. Yes, I was referring to Europe, in particular the food business in Europe. I'm referring to the cooking, and that is very good because remember that we are launching also the new line of cooking where we are the leading company in this market. So we are reinforcing our stronghold. So geography wise, let's say that as during the past quarters or here, so the South European market, in particular Italy, they've been overperforming. They've been above the average. But as I said, the pleasing thing is that also the Nordic started to move well. So -- but it is hot, so cooking in some way. And I would say that it's across Europe more or less now. So it's a very good and promising thing. Johan Eliason: Excellent. And then I just have a detailed question to Fabio. In the cash flow statement, we see that the change in other operating assets, liabilities and provision was quite negative in the quarter. Is that the release of the provisions you took on the restructuring? Or what is that? Fabio Zarpellon: I would say -- I believe you touched on the point. I would say the remarkable things that is somehow sort of discontinuity to the normal path is the cash out related to the execution of the restructuring. The rest is normal business development. Operator: [Operator Instructions] There are no questions at this time. Jacob Broberg: Okay. Thank you very much, operator. Glad that we have been clear in our presentation. So with that, I would say thank you very much for listening in, and see you next time. Thank you, and goodbye.

101天前Insight Analytics约5分钟阅读

MA 2025 Q4 财报电话会议

Operator: Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q4 and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Followed by the number one on your telephone keypad. Star one multiple times may affect your position in the queue. Mr. Devin Corr, Head of Investor Relations, you may begin your conference. Devin Corr: Morning, everyone, and thank you for joining us for our fourth quarter 2025 earnings call. With me today are Michael Miebach, our Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions. You can access our earnings release, supplemental performance data, and a slide deck that accompany this call in the Investor Relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP currency-neutral basis unless otherwise noted. The release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts. Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding Mastercard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of our earnings release and in our recent SEC filings. A replay of this call will be posted on our website for thirty days. With that, I will now turn the call over to our Chief Executive Officer, Michael Miebach. Michael Miebach: Thank you, Devin. Good morning, everyone. There was a lot of activity to close out 2025, and it's been a fast-paced start to the new year. In that spirit, let's jump right in. My headline for you today, we continue to deliver in 2025 was another very strong year. For the fourth quarter, net revenues were up 15% overall, with value-added services and solutions net revenue up 22% versus a year ago on a non-GAAP currency-neutral basis. Our consistently solid performance is driven by several factors. First, we are focused. Our strategy is clear, and we're executing against it. We're making strong progress against each of our strategic pillars and benefiting from the virtuous cycle across our payment network and services offerings. Second, we're innovative and agile. We spearhead the payments evolution. At the same time, environments shift. Customer needs, technology, regulation, so we adapt. And we prioritize ensuring we have the right capabilities and skill sets. Recently, we completed a strategic review of our business. This will result in reductions in some areas and roles, but lead to further investment and increased focus in others. And finally, we're diversified and differentiated. Our business extends across geographies, spend categories, and payment adjacencies. The diversification of our business means we benefit from a wide range of growth drivers, which make us more resilient. As we enter 2026, geopolitical and macroeconomic uncertainty persists. We will continue to monitor and work to navigate just as we have successfully done in the past. But for now, we remain optimistic and confident in our execution and the fundamentals of our business. Looking back at 2025, we won hundreds of new issuing deals and expansions globally. This doesn't just happen; it is the result of our dedicated sales force, technology, and differentiated value we deliver to our customers. I will share a few highlights from this past quarter. In the U.S. and Canada, we extended our long-standing partnership with Capital One, where we renewed our partnership in credit. We will be the network for a large portion of newly acquired credit accounts. And across their business, Capital One will continue to use several of Mastercard's services. In Turkey, Yapi Credi will migrate nearly 10 million cards across their consumer credit, debit, and affluent portfolios to Mastercard. Our consulting and marketing services will be used to support the end-to-end portfolio conversion. In Latin America, Scotiabank chose Mastercard as their network partner in Chile and Uruguay. Why? They see Mastercard's security, loyalty, and analytics offerings as key to fueling their growth. This builds upon our strong relationship with the bank in Peru and the Caribbean markets. In South Africa, our modernized real-time payment switch is a key factor in assigning exclusive deals with several players in the market, Nedbank and Standard Bank. These wins position us to increase our share in the market by multiple points, and we continue to win in affluence, so important. We have secured more than 60 new affluent programs in 2025 across the world. Our drumbeat of wins continued this quarter with new deals secured with PickPay, Zikub, Sis Prime in Brazil, and Nedbank in South Africa, which I just mentioned. We're seeing the same momentum in co-brands, with leading merchants and digital players. Earlier this month, it was announced that Mastercard will continue to be the exclusive network for the Apple Card, which will transition to JPMorgan Chase as the issuer in approximately twenty-four months. We supported the launch of this industry-leading co-brand nearly seven years ago, and we are excited to support its continued success. We won the Walmart and Sam's Club co-brands in Mexico in partnership with Invect Spankel. We renewed our partnership with Barclays, supporting its U.S. co-branded card programs and its Tesco Bank card programs in the UK. And we partnered with Amazon and Emirates Islamic to launch the Amazon credit card in the UAE. As I said, we remain focused on driving long-term growth across each of our strategic pillars. In Consumer Payments, this quarter was about continued innovation and focus on driving incremental growth. Our drumbeat of wins I just mentioned shows that Mastercard's preferred over alternative networks. Banks chose Mastercard because of our global acceptance, our consumer protections, strong security, and digital capabilities. It's also about our dedicated teams and our commitment to driving mutual growth. We work with our existing customers to optimize their portfolios by using our advanced analytics and AI capabilities. We help clients activate their cardholders, drive top-of-wallet behavior, and increase approval rates. And it works. We're driving more transactions of our network and in key categories. Think digital or cross-border. In looking at digital commerce alone, we've seen approval rates increase by 270 basis points in the last five years. Now think about what that means when applied to Mastercard's global payment network. Last year alone, we switched more than 175 billion transactions. That's a lot of potential to further optimize. We now switch more than 70% of all Mastercard transactions globally, an increase of 10% since 2020. More switched transactions result in more data and more opportunity to sell services and so on. All of which allows us to help our partners drive top and bottom-line growth, enabling seamless and secure experiences for our cardholders. This is the virtuous cycle in motion. The payments industry continues to evolve. Stablecoins and the Gentecommerce bring new choices to pay and get paid. And we are leaning in just as we have with neobanks, digital wallets, and installments and so on. For us, stablecoins and agenetic commerce are emerging opportunities, ones where Mastercard has a natural role to play. We have been active in the digital asset space for over a decade. Most use cases for crypto and stablecoin today offer trading and the like. For us, it is another currency we can support within our network. We've made good traction enabling the purchase of these assets, facilitating transactions, and supporting stablecoin for settlement over our network. Trust, interoperability, and global acceptance are key in all payments. That's where we come in. This quarter we have supported co-brand partners such as MetaMask, as they scale across geographies. We partner with co-brand partners to extend their offerings to new customer types. Gemini brings their success in the digital asset space to launch the first business-focused stablecoin co-brand. And we continue to expand our settlement capabilities, now working with Ripple. Moving on to Agenci Commerce. Where AI-powered agents assist or act on behalf of consumers throughout their commerce journeys. For us, Agenty Commerce represents another avenue to enable payment choice with the same trust that we always deliver. It's early days, but we are ready. You remember, last year, launched Mastercard AgentPay, a framework designed to foster trust in agentic transactions. Have now enabled our US issuers to participate in agent pay. And we are working to enable our global issuer base by the end of the first quarter. As more agents come on board, there will be more opportunities for consumers to experience a truly seamless commerce experience. We're actively working with ecosystems participants to adopt Agenci commerce across all regions. I'll share a few highlights from this quarter. In Asia, we're partnering with Anthem on card-based tokenized payment solutions for agentic payments. In The UK, where consulting clients such as Lloyd's Banking Group, Elavon, and Santander on AgenTek commerce innovations. And in The UAE, we're piloting AgenTik payments with the leading retailer in the entertainment group, Majid Alsattain. And with banks, merchants, and digital players, we continue to position them for success in this new era of commerce. Whether it be through consulting, security, data-driven insights, or new loyalty programs, we are there. Moving to commercial and new payment flows, one of our three strategic priorities. In 2025, our commercial credit and debit volumes represented 13% of our total GDV, and grew at 11% year over year on a local currency basis. That's a clear reinforcement that our differentiated value propositions and broad-based partnerships are driving meaningful results. In commercial point of sale and invoice-based payment flows, our offerings are designed to meet corporate demands for more efficient, data-rich, and secure transactions. We continue to expand usage of our virtual cards by enabling transactions to be initiated within B2B and T and E platforms. Mastercard's commercial express program simplifies the integration and commercial onboarding. This quarter, Ambers, a leading T and E platform, and BMO and Huntingbank were the latest issuers to participate. Differentiated solutions benefit our customers. And that has translated into significant wins. This quarter, we renewed our global partnership with WEX and extended our partnership with Barclays the UK and across Europe. Also, we partner with Cooper, a leading business spend management platform, to launch the Coupa Mastercard. Together, we are enabling virtual card payments across the entire customer base, which spans millions of buyers and suppliers globally. There's much more than winning share. We're actively working to capture the sizable secular opportunity. Small businesses represent more than half of the cash and check opportunity in commercial point of sale that we outlined at our Investor Day. Given the broad-based diversity of the small business segment, we are working across banks, and non-bank partners to serve this segment. It benefits our partners, Mastercard in the overall economy. This quarter, we extended our partnerships with Intesa Sanpaolo to drive greater small business issuance in Italy. Partnering with L'Oreal to issue small business cards across Latin America our first market launch is a co-brand card with Clara for salon owners in Mexico. This is a prime example of how we are using a vertical approach to partner with large-scale players to capture untapped payment flows. Grow through differentiated value and broad-based partnership continues for Mastercard move. Our disbursements and remittances capability. Now with more than 17 billion endpoints available, Move is positioned to be the money movement platform with the greatest reach in the industry. Mastercard Move recipients had the option to receive funds across a variety of endpoints, including, but not limited to, bank accounts, debit cards, digital wallets, and cash if you want to. We continue to expand our network reach just recently by enabling bank account deposits in Bangladesh. By expanding digital wallets and endpoints in The Philippines, a partnership with GCash, and in China through our partnership with Tenpay Global for Weixin Pay. With Stablecoin Wallets through our partnership with Zunes. Our expanded reach and endpoint options are resonating with customers. This quarter, we partnered with Banco Ripley a subsidiary of the Ripley Corporation, one of the largest retail companies in South America, to offer Mastercard cross-border services to their customers in Chile and Peru. Also partnered with Capital Bank, a leading neobank in Mexico which is leveraging Mastercard and Corpay's cross-border payment solutions. Our Mastercard move capability is demonstrated consistently strong transaction growth, In quarter four 2025 and full year 2025, saw transaction growth exceeding 35% versus a year ago. Our extensive reach and market adoption position us well going forward. Turning to value-added services and solutions. We delivered strong performance in 2025 with full-year net revenue growth of 21% or 18% excluding acquisitions year over year on a currency-neutral basis. This growth was broad-based, with consistently strong growth across regions, and product groups. Our performance is a clear demonstration of our growth algorithm in action. That steps through that. We have curated a suite of value-added services and capabilities in large and fast-growing addressable markets such as digital, security, and data-driven insights. Mastercard's proprietary data and AI capabilities combined with our payment network reach provide us a real competitive advantage. Simply put, we provide unique intelligence at scale. There's a natural tailwind to services from payments. At our Investor Day at the 2024, we noted that 60% of our value-added services and solutions net revenues were network linked. This simply means value-added services and solutions revenues benefit from transaction growth. And also higher growth drivers such as tokenization. For example, fraud scores and token authentication fall into this category. And we are actively working to further penetrate our customers and markets just like the Mastercard threat intelligence offering we launched last quarter, which has already started scaling across our payment network. In addition to network-linked offerings, we also provide our customers with consulting, marketing, and platform-based offerings. These non-network services enable us to sell to new buying centers at retail banks, They also extend our reach across a more diversified customer base, including governments, merchants, digital players, and more. This quarter, we supported Costco in Canada and their omnichannel growth strategy using Mastercard's marketing and consulting services, that's meaningful strategic value. Innovation remains core to our long-term growth. We have a long-standing history of success in launching and scaling innovation. Way back in 2013, we architected the industry standard for tokenization to enable trusted digital transactions. The critical need of customers and partners at that time and still true today. In fact, as of quarter four, we have tokenized nearly 40% of all transactions. And we continue to see adoption in both card present and card not present use cases. And with this growth, we're seeing higher transactional approval rates enabling further services growth. Our innovations continue to deliver real value to our customers and continue to drive financial benefit today. We're adding to that innovation. Now with the launch of Mastercard Credit Intelligence, By using Mastercard's proprietary network data, identity, and open finance capabilities, we can deliver faster credit assessments. For individuals and entrepreneurs, this could mean greater access to credit, from banks, greater insights to inform their lending strategies. And that fuels a healthy, inclusive digital economy live in market and seeing adoption across a variety of customer types. In addition, we've launched Mastercard Agent Suite, evolving our consulting practice from AI strategy to now include asset-led engagements. You will design and deploy AI agents within customer environments to drive operational excellence, and enhance end customer experience. In addition to directly engaging with customers, we're scaling our services through distribution partners, one to many, including FIS, WPP, and Comcast advertising will be added this quarter. So with that, I will wrap it up. In summary, we delivered a very strong fourth quarter and full year 2025. Our performance is a direct reflection of growth strategy deliberate diversification and focused execution. We're at the forefront of innovation, and we're remaining differentiated versus the competition. This helps us be an agile, trusted, valued partner, especially as markets evolve. With strong momentum moving into 2026 and remain confident in our continued growth, Sachin, over to you. Sachin Mehra: Thanks, Michael. So turning to page three, which shows our financial performance for the fourth quarter on a currency-neutral basis. Excluding where applicable special items and the impact of gains and losses on our equity investments. Net revenue was up 15% reflecting continued growth in our payment network and our value-added services and solutions. Acquisitions contributed one ppt to this growth. Before discussing expenses, I am pleased to share that in late December, the company secured various new multiyear government grants related to investments in select geographies. These grants benefit both operating expenses and other income and expense. We expect to realize the operating expense benefit primarily in 2025 and 2026, while the other income and expense benefit will extend multiple years beyond 2026. The Q4 2025 impact reflects the full-year value of the 2025 grants. With operating expenses growth improving by around 5.5 ppt and other income and expense benefiting by approximately $135 million in the quarter. These positively impacted each of the following metrics, that I will discuss on this page. Operating expenses increased 12% including a five ppt increase from acquisitions. And operating income was up 17%, which includes a one ppt headwind from acquisitions. Net income and EPS increased 17-20%, respectively. Driven primarily by the strong operating income growth and a positive discrete tax item, which primarily benefited the effective tax rate. EPS was $4.76, which includes a 10¢ contribution from share repurchases. During the quarter, we repurchased $3.6 billion worth of stock and an additional $715 million through 01/26/2026. Now turning to page four. Let's first look at some of our key volume drivers for the fourth quarter on a local currency basis. Worldwide gross dollar volume or GDV increased by 7% year over year. In The US, GDV increased by 4% with credit growth of 6% and debit growth of 2%. The growth of our debit portfolio was impacted by the Capital One debit migration, which continued through Q4. Outside of The US, volume increased 9% with credit growth of 9% and debit growth of 9%. Overall, cross-border volume increased 14% globally for the quarter, reflecting continued growth in both travel and non-travel-related cross-border spending. Turning to page five. Switch transactions grew 10% year over year in Q4. We continue to drive contactless penetration, which in Q4 stood at 77% of all in-person switched purchase transactions. This is up five ppt since the same period last year. In addition, card growth was 6%. Globally, there are 3.7 billion Mastercard and Maestro branded cards issued. Turning now to slide six. A look into our net revenue growth rates for the fourth quarter discussed on a currency-neutral basis. Payment Network net revenue increased 9% primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 22%. Acquisitions contributed approximately three ppt to this growth. The remaining 19% increase was primarily driven by growth in our underlying drivers, strong demand across digital and authentication, security solutions, consumer acquisition and engagement, and business and market insights, as well as pricing. As we reflect on value-added services and solutions growth for full year 2025, we continue to see strong broad-based growth, as Michael mentioned earlier. Looking at our organic growth rates, both AP EMEA and The Americas delivered high teens growth. And we also saw at least high teens growth across all the services product areas apart from other solutions. Now let's turn to page seven to discuss key metrics related to the payment network. Again, all growth rates are described on a currency-neutral basis. Unless otherwise noted. Looking quickly at each key metric. Domestic assessments were up 8%, while worldwide GDV grew 7%. The difference is primarily driven by pricing, offset by mix. Cross-border assessments increased 17% while cross-border volumes increased 14%. The three ppt difference is driven primarily by pricing in international markets, partially offset by mix. Transaction processing assessments were up 14% switched transactions grew 10%. The four ppt difference is primarily due to favorable mix and pricing, partially offset by a decline in revenue from FX volatility. Towards the end of Q4 and month-to-date January, we saw FX volatility well below historical norms. Other network assessments were $272 million this quarter. Moving on to page eight, you can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 12% which includes a five ppt impact from acquisitions. Excluding acquisitions, the growth of total adjusted operating expenses was primarily driven by increased spending to support various strategic initiatives, including investing in our infrastructure, geographic expansion, and enhancing and delivering our products and services. This was partially offset by the benefit of the government grants I described earlier. Turning to page nine. Let me comment on the operating metric trends. Starting with Q4 and looking at the metrics on a sequential basis. U.S. Switched volume growth declined primarily due to the migration of the Capital One debit portfolio. Worldwide less US switched volume saw a slight deceleration driven primarily by tougher comps including the lapping of portfolio wins in Europe. Switch transactions were in line with Q3. Cross-border volume remained strong. Of note, we saw a sequential decline in cross-border card not present ex travel, primarily driven by tougher comps from the lapping of share wins in Europe and higher growth from crypto purchases a year ago. As we look to the first three weeks of January, our metrics continue to remain strong, generally in line with the fourth quarter. Of note, U.S. Switched volume was flat sequentially, as the Capital One debit roll-off was mostly offset by easier comps due to weather impacts in the prior year. Saw a decline in cross-border travel volumes primarily due to weather-related impacts in Europe this year. Cross-border card not present ex travel continued to be impacted by higher growth from crypto purchases a year ago. Overall, we continue to see healthy consumer and business spending. Turning to page 10, I wanted to share our thoughts on fiscal year 2026. As Michael said, we delivered very strong results in 2025, across all facets of our business despite an uncertain backdrop. The fundamentals of our business remain strong. The macroeconomic environment remains supportive, with balanced job markets across the globe underpinning healthy consumer and business spending. That said, there continues to be ongoing geopolitical, and economic uncertainty. We maintain a disciplined capital planning approach have levers to pull if needed. But most importantly, we're focused on the execution of our strategy. Positioning ourselves for long-term growth and remaining innovative, and differentiated. Coupled with our diversified business model, this creates resiliency, helps us navigate diverse environments, just as we have done in the past. We remain positive about the growth outlook and our base case for 2026 continues to reflect healthy consumer spending. As it relates to our expectations for the full year 2026, we expect net revenues to grow at the high end of a low double digits range on a currency-neutral basis, excluding inorganic activity. We estimate a tailwind of approximately one to 1.5 ppt from foreign exchange. From a net revenue perspective, we expect currency-neutral growth in the first half of the year to be lower than in the second half. This is driven by tougher comps in the first half, primarily due to elevated revenue growth from FX volatility in 2025. From an operating expense standpoint, we expect growth to be at the low end a low double digits range versus a year ago on a currency-neutral basis excluding inorganic activity and special items. We expect a headwind of 0.5 to one ppt from foreign exchange on a full-year basis. Now turning to the 2026. Year over year net revenue growth is expected to be at the low end of a low double digits range. On a currency-neutral basis, excluding inorganic activity. Estimate a tailwind of approximately 3.5 to four ppt foreign exchange for the quarter. From an operating expense standpoint, we expect Q1 growth to be in the high end of high single-digit range versus a year ago, again, on a currency-neutral basis, excluding inorganic activity and special items. Foreign exchange is forecasted to be a headwind of approximately 2.5 ppt for the quarter. Separately, as Michael mentioned, based on the recent strategic review of our business, we expect to record a one-time restructuring charge in Q1 of approximately $200 million will be recorded as a special item and is excluded from our non-GAAP metrics. These actions will impact approximately 4% of our full-time employees globally. We expect these actions will free up capacity to further invest in our strategic priorities and best position us to continue to execute on our growth algorithm. Other items to keep in mind, on other income and expenses in Q1, we expect an expense of approximately $50 million including the benefit from the government grants previously discussed. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metric. Finally, we expect a non-GAAP tax rate in the range of 20% to 21% for the full year and approximately 19% to 20% for Q1. A lower forecasted tax rate for Q1 as compared to the balance of the year is consistent with prior years, due to expected discrete tax benefits related to share-based payments in the first quarter. And with that, will turn the call back over to Devin. Devin Corr: Thank you, Sachin. Thank you, Michael. Julianne, you may now open the line for questions. Operator: Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on times may affect your position in the queue. Our first question comes from William Nance from Goldman Sachs. Please go ahead. Your line is open. William Nance: Hi. Thank you for taking the question. I wanted to start on the Capital One renegotiation. Congratulations on announcing that. Maybe if you could just provide a little bit more details. I think Cap One has talked about wanting to move volumes over to the Discover network over time, but at the same time, has talked about a lot of investments on the acceptance side. So can you talk about just the renegotiation as it relates to your existing Capital One cards outstanding? Are you expecting your share of Capital One credit volumes to remain stable? As a function of the renegotiation? And if you could just maybe talk about how long the extension was for. I appreciate any details you can share. Thank you. Michael Miebach: Yeah. Thanks for the question. So no surprise. We're excited about these recent news that we announced earlier. So extending our credit portfolio agreement with them is important, but also we should not overlook the aspect of Capital One as the great partner they are to use more of our services across their whole business. It's a strong signal, in my view at least, that the Mastercard network is valued. This is important to consider. We continue to invest in this network because we continue to invest in our acceptance. We know this is hard to build, and that is really what matters when it comes to affluent portfolios, when it comes to business portfolios, and so forth. So the partnership will continue, but we will continue to invest to ensure that we have a truly differentiated proposition as a partner for Capital One. William Nance: Appreciate you taking the question. Operator: Our next question comes from Sanjay Sakhrani from KBW. Please go ahead. Your line is open. Sanjay Sakhrani: Thank you. Good morning. I just have a question on the CCCA. It's obviously back in the news flow. I'm just curious how you guys are thinking about the implications to yourselves and the industry and sort of you know, the probability that it may or may not get through. And then just a quick clarification on the Capital One question. I'm just curious, it talks about sort of new account. Is there any volume migrating to Mastercard from Capital One? Or I'm I just wanted some more clarity there. Thank you. Michael Miebach: Let's start with the first topic, CCCA. You know, Sanjay, as you said, it's back in the news, and, yeah, it's been back in the news. But, yeah, it's been ongoing for a long time. So this was first introduced in 2023. And, you know, if you take it down to the facts, little progress has been made. A lot of discussions there around that, but also, what clearly has emerged is that there's a very united opposition to this proposed bill, as the benefits of the bill are yet to be proven while the risks are pretty clear. That aspect is about taking consumer choice away from consumers. They can't really take pay the way they want to pay. You know, that choice moves to merchants. This has been discussed in the context of affordability, but there is no particular, you know, consideration in this bill to actually pass on any savings. There's a big topic, that is often overlooked, and that is the potential risk to cybersecurity. This is a race to the bottom for the cheapest network option, but not the safest. Those are all things that haven't really changed since 2023. But the opposition, based on, you know, focused on these points has intensified. So the industry is very aligned. We're engaging with regulators at every point to educate and ensure that this is fully understood. So it's also important to understand that payments ecosystem is highly competitive. Now this the Credit Card Competition Act isn't really about It's about lowering cost without considering all the points I just said. So you know, there is competition. It's working. It's a highly effective ecosystem. So that is our perspective on it. That hasn't changed. On a probability of this going through, I mean, we shouldn't be speculating here. A few moves weighed over the last couple of weeks, which haven't succeeded, and I think we attribute that to a continued discussion on the, you know, risk associated with this particular regulation. And then, Sanjay, a new question around Capital One. It's like Michael said in his prepared remarks. Right? We're really excited about the new agreement which we struck with them as it relates to new credit issuance. And, you know, that's the extent of what we'll share with you publicly. As it relates to the interactions. But suffice it to say, you know, the reality is customer sees real value with what Mastercard brings. That's the reason, you know, we are actually doing what we are doing in the nature of the credit agreement. And, you know, they're seeing that across the payment network as well as value-added services solutions. Sanjay Sakhrani: Thank you. Operator: Our next question comes from Adam Frisch from Evercore ISI. Adam Frisch: Thanks, guys, and thanks for restoring some order. In the marketplace as it relates to your stock this morning. Wanna address the d go back to DC for a second. We wrote earlier this week that CCCA is is all but dead for now at least, but would love your views on the topic around a 10% rate cap on credit. Which seems like it's a back burner for now, but it's only a tweet away from being reignited. So would love your perspective on how you describe the conversations going on between the industry industry and the administration to address the affordability the affordability issue. As it relates to our space? And then if you could also provide some insight around your conversation conversations with issuers and other players in the ecosystem about ways to address the president's concerns without creating a broader crisis in the industry. Michael Miebach: Thanks. Good. Yes. Appreciate your first comment, actually, on the order. So the rate the rate cap. You know, that's a it's a really important conversation around affordability, and we shared that that it should be addressed Yeah. But when you think about the rate cap in particular, here is a a proposal that comes with a whole range of consequences that you think through, how that would something like this would be impacted. And the, you know, consequence that comes to mind first is what does this mean to credit access for a lot of the most vulnerable people that may not have access to credit any longer should a rate the cap like this be passed. So this is an important topic to be understood. To your question about our conversations with the the banks, with the issuers, the card issuers, We don't set rates, but, obviously, we have a shared interest in making sure that the overall credit ecosystem does work and provides credit access. So we're sharing data. We're on you know, we're you know, helping to compute what the impact would be. Then it is really understanding from our bank partners where they are gonna go. Is it, you know, it gonna be different products? It's you know, what is there today? Part of this is education. What kind of 0% introductory rates are out there today? Low interest rate products, and so forth. So it's a broad conversation that's going on, and I you know, across the industry leaning in on the topic of affordability and options around that. So I think overall, a constructive dialogue that was sparked you know, we have yet to see. As I it doesn't affect us directly as we don't set rates, but we're actively engaged as an industry custodian. Adam Frisch: Do you see the administration and the industry having more constructive talks about feasible alternatives here? As opposed to a blanket temper There's a lot there's a live doc. Yeah. There is a live dialogue here. You know, I think everybody realizes it's an important topic. Devin Corr: I think we need to move to the next question. Okay. Great. Michael Miebach: Thanks, guys. Operator: Next question comes from Ramsey El-Assal from Cantor Fitzgerald. Please go ahead. Your line is open. Ramsey El-Assal: Michael, could you give us a view on the health of the consumer? It's a very noisy kind of media political environment. A lot of mixed signals. On the other hand, it seems like the underlying spend volumes are really hanging in quite solidly across the board. What are you guys seeing out there? Any changing patterns? Anything interesting to call out? Thanks. Michael Miebach: Right. You know, it's a it's a great question. You know, when you look back over 2025, over the whole year, and we just take, soft data, like headlines or consumer confidence, data that comes out. You know? On one hand, consumers fill in surveys that the same time, their spend behavior hasn't actually changed. So that's a pattern that just continues We see know, just taking 2025, it it hasn't changed quarter on quarter. We see a truly savvy and intentional consumer. So what the digital economy brings to consumers almost back to the affordability topic is an ability to figure out what's the best deal, what do you wanna spend on, Where can you use your rewards to avail something that otherwise you might not do at this time. So is it a savvy and intentional consumer They're using their loyalty programs, their data to kind of spend on what they wanna spend on anyway. So that has been a continuous trend. There is question on how the consumer was affected or not, you know, by some of the tariff changes that we've seen not year. And, you know, that doesn't show up in our data either. So it's not coming through somewhere across the ecosystem between, you know, importers and big brands it's all been adjusted in a way that it hasn't really affected consumer spending. At least we cannot tell that. There's conversation on how does the you know, the whole spend pattern change when you look across higher income bands and lower income bands. And what we see across the board you know, in the light of a job market that is supporting paychecks and people are spending those paychecks, And the wealth effect on the other hand, so there are different types of supporting kind of factors around that support overall affluent spend as well. Lower income spend. So that hasn't really changed. And, you know, Sachin talked about it earlier. The first three weeks into January, we see this continue. Now if you zoom out and you look across the world, these patterns are different by region here and there, but the aggregate top line is the consumer spending remains healthy is the same. Ramsey El-Assal: Got it. Thank you. Operator: Our next question comes from Craig Maurer from ST Partners. Please go ahead. Your line is open. Craig Maurer: Yes. Hi. Thanks for taking the questions. First, there's been quite a bit of FX volatility in the past week, which makes a nominal guide a bit of a moving target. Can you talk about the sensitivity of the overall business to FX rate moves these days? And when you set the FX rates for the guidance? And secondly, vast grew regardless of how I look at it, VAS growth accelerated significantly in '25 versus the growth in the rest of the business. And so I'm curious if this is a trend that we should expect to continue in terms of the relationship between vast revenue growth and however we look at it, whether purchase volume or process transaction growth, or whatever metric you prefer? Thanks. Sachin Mehra: Sure, Craig. So let me just take both questions. Here, which is from an FX follow-up release standpoint. I'll be humble enough to tell you I have no idea where FX volatility is gonna be tomorrow. As it's gonna be in the remaining part of this year. So what we do is we take our best estimates of what we think it's going to be. We look at long-term averages. We kinda look at, you know, what the general environment is. And, you know, on the basis of that, we build in our best estimates. In quarters in which we see outsized benefit come from FX volatility, we call it out as we did in the first and second quarter of last year. Right? And, in other quarters where we see record low levels of FX volatility, we'll call it out as well as I did today. So look. I mean, the reality is super hard to predict. Right? And the impact to our business, as you can see, is fact that I'm calling it out means it does have an impact on our business. In particular, in the transaction processing assessments line. Right? So that's kinda important for people to know where it kinda sits. From an overall perspective. The more important thing here, though, is Mastercard is actually delivering some incremental value to our customers, which is why we actually generate the revenue associated with whether it's good volatility or bad The reality is we're delivering currency conversion services. Which means that our customers are seeing value in terms of what we're doing and allows us to actually you know, participate in that volatility to the extent it's high or then, you know, the detrimental impact of that volatility to extent it's low. So that's kind of point number one. On VAS growth, super pleased with the results. You know, the company continues to be very focused. It's an important part of our various strategic pillars. You can see that the growth rates are healthy. I'll go back to what Michael said in his prepared remarks. Right? Our business in terms of how we actually operate our vast portfolio is very tightly intertwined with what's going on in the payment network. Let's stop there. Right? The payment network brings volume onto the system, It brings data. Data enables the creation of the solutions. And that allows the social cycle to keep going. As it relates to the growth, know, we continue to remain very encouraged about the growth prospects from a vast standpoint. We've we shared with you previously what the building blocks of that growth are. Start with the fact that if there's underlying growth in drivers driven by know, what we're doing in the payment network, You know, there's an attach rate, which is related to that, which actually helps growth take place. Our Investor Day, we talked about how 60% of our 60% of our VAS revenues are network linked. So if you see the network the payment network growing, and the underlying drivers growing, you're gonna see that the growth of that come through. Second, we are in the business of actually really increasing the attach rate to the there are new solutions we're putting out in the market. Doesn't mean that every new solution that we put under the market is necessarily network link. But those which are allow us, you know, the opportunity to continue that growth algorithm. Third, we're increasing the penetration of these solutions with our customers globally. So the color I gave you in my prepared remarks today about the fact that our VAS growth is broad-based gives me confidence that this is not episodic in one particular region. Kinda talked about how across AP, EMEA, and Americas, we're seeing good growth from a vast standpoint. As also across the various elements of our services portfolio, we're seeing good growth. So that's kind of pretty comforting to me to see that we are actually executing across that VAS growth algorithm in a meaningful manner. And the last point I'll make is enabling this growth has been the constant look we do from an innovation standpoint organically, and we've done a bunch of new innovation, which we've announced, But also what we're doing to expand our addressable market. And examples of that would be things like recorded future, which takes us into new and different and fast-growing spaces like threat intelligence. So if I had to bring all of this together for you, I'd say, know, good solid growth in DAS in 2025 and we continue to remain encouraged about the prospects from a growth standpoint from a BaaS standpoint. Going forward. Michael Miebach: Yeah. If I can add a point here, this is you know, what's really important here is is the differentiation. Because there's when you look at the competitive landscape and in services, there's specialist companies out there that focus on cyber security. There's loyalty companies out there. 's really not a company out there like us. So it puts us in a very differentiated problem. Prop position here. We have the payment data as Sachin laid out, and we can build a set of services that are truly unique. It's a very curated set of services. We keep getting the questions from you now and then. What is actually in services? But if think about it from the perspective of cybersecurity solutions, data insight solutions, those are all, you know, you know, types of services that ground it in fundamental growth drivers and needs of the growing digital economy. So differentiated underlying growth drivers everything that Sachin just said. And all this is powered by a significantly changing distribution network that we're using. By selling these services through many others other than our payment partners. Thank you. Operator: Our next question comes from Tien-Tsin Huang from JPMorgan. Please go ahead. Your line is open. Tien-Tsin Huang: Hey. Appreciate it. Great growth here. I wanted to ask about Capital One little differently. You mentioned think it's Michael, you mentioned hundreds of issuing wins in twenty five. I'm curious for this year in '26, Any updated callouts on timing and impact on let's say, the KPIs from all these conversions and renewals. In in '26? How how does the renewal pipeline in general look? And any callouts on on pricing or competitive intensity, that kind of thing? Thanks. Sachin Mehra: Tien-Tsin, it's Sachin. Why don't I take the Look. I mean, you know, again, from a overall, customer engagement standpoint and a deal pipeline standpoint, I'd coming into 2026 is I I'd put it in in the realm of pretty normal what we see at this time of the year compared to prior year. So active pipeline, you know, lots of great engagement taking place with numerous customers. Nothing unusual to call out there in terms of the pipeline of deals. As it relates to the competitive environment, we're in a competitive space. There's no question about it. And what we're also very clear about is that in a competitive space, you've got to differentiate. And differentiation is gonna be driven by what we can do at the payment network level, through our digital capabilities, but also what we can bring in the nature of value-added services solutions. So this virtuous cycle piece kinda comes into play again. And and we're seeing ourselves be able to participate and actually grow in such an environment, which is very encouraging. So I I think it's a competitive environment. We have you know, very, what I would call, formidable competitors out there, but you know, I feel very good about our ability to compete given our suite of services and solutions as well as our payment network capabilities that are out there. So net net, the here's what I'd share with you, which is feel encouraged about the the robustness of the pipeline, and, you know, we'll keep doing what supposed to do in terms of actually driving with our customers to deliver value. To them. The last point I'll make is I don't expect, and I certainly hope that we don't win all deals. Wanna win the right kind of deals. We've said this in the past. And we will be very focused on doing that, which is making sure that we want to win those deals which are fast-growing, which are cross-border heavy, which are ones where we can bring our services to bear, to actually drive incremental growth for the issuer. That's really important because if you can't drive incremental growth for the issuer, you know, the the the whole idea of being able to take it take the deal over from the other network is kinda redundant from a issuer standpoint. So we really gotta push on that. Which is the way we kinda go about doing what we do. Michael Miebach: Yeah. I think it's a it's a really important question, Tien-Tsin. So you know, when you look across I'm just looking back at my prepared remarks. Sixteen minutes and you see all the wins in there. So the pipeline is healthy. But it it sounds like maybe it's broad stroke. We are very focused. Based on what Sachin just said, the focus on affluent, for example, on cross-border, on really high octane kind of, you know, partnerships that help our customers, but also us, really important. And then as I called it out, it's not just about share. It's about secular So wins in the secular opportunity context are just as important when I think about small business and I think about B2B and so forth. So full on, Really full on. That's the plan for '26, but not for everything, as Sachin just said. Tien-Tsin Huang: Yep. No. It's very good good good detail there. Just forgive me for asking one other clarification question. Just if if if it looks similar to '25, can we infer that the rebate in incentive outlook is also similar? Sachin Mehra: Yeah. Here's what I'd share with you. I am not gonna give you a full-year rebate guidance. But what I will share with you is that in Q1, we expect our contra as a percentage of payment network assessments to be flat to slightly down. Sequentially compared to Q4, very much in line with what you've seen in the past. Tien-Tsin Huang: Terrific. Thank you both. Michael Miebach: That's what he really wanted to know. Operator: Our next question comes from Darrin Peller from Wolfe Research. Please go ahead. Your line is open. Darrin Peller: Just following up on guidance for a minute. When you look at the trajectory of it, obviously, starting off And then calling for maybe a slight acceleration of the year progresses to the high end of low double digits from low end of low double digits. Maybe just give us a just remind us the puts and takes of your progresses. And then more importantly, just the inputs. What are you assuming the consumer does spend volumes do both cross-border domestically? What are your thoughts on the potential for more stimulus? Is that embedded in your guide? So any more color on that would be great. Thanks, guys. Sachin Mehra: Sure, Darrin. So our base case, which is the the basis of the guidance that we've shared with you, is that consumer and business spending remains healthy That's kinda our going in position because that's what we've seen. Right? And like Michael said earlier, you know, the different numbers as it relates to the soft data from sentiment standpoint, and then there's the hot data. And that's what kinda see. We've kind of triangulated around the best we can, and it's you know, our base case assumes a strong consumer. So that's kind of the starting point of you know, where we are from a driver standpoint. That contemplates, you know, the the dialogue around, you know, a fairly healthy tax refund season, etcetera, All of that's taken into consideration. Again, recognize that The US and then we're a global business as well. We've got 70% of our business, roughly coming from overseas markets. So I I think Right. It's important to kinda think about in that whole context. Now I think you're asking the question as it relates to cadence between the first half and the second half, which is something I shared. You know, the the the the I've given you full-year guidance, and I've kinda said that we expect the growth in the first half to be lower than in the second half, and that's primarily driven by the fact that you've got tougher comps. From an FX volatility standpoint. We called this out last year where we talked about first quarter, second quarter of last year, higher FX volatility. I called out how we're seeing lower FX volatility you know, you know, coming out of Q4 and into the January. Something to keep in mind. And, you know, the reality is it that's really what primarily explains the difference in cadence, which is there between the first half and the second Okay. Darrin Peller: Thanks, guys. Operator: Our next question comes from Trevor Williams from Jefferies. Trevor Williams: Sachin, think you called out pricing as a driver across every revenue line. Quarter. So just how should we think about the durability of what we're seeing come through across each of the line items, especially on cross-border, which has been a it's seen a nice pricing tailwind over the course of the year. And then in terms of magnitude, just what you're building into the guide for '26 for pricing relative to '25? Thanks. Sachin Mehra: Yeah. I think it's important to actually understand how we go about thinking about what we do and what we call pricing as well. Right? It's kind of very much a function of, you know, what is the nature of products and solutions and services that we have delivered whether they're brand new in nature and or they are you know, modifications or improvements in terms of delivering incremental value to our customers. Which comes into play. So there is the impact of know, what we've done last year. And not everything starts on January 1, so there's the lapping effect of that which comes through in the following year. And then what do we see in the nature of of pipeline of new capabilities that will deliver incremental value to our customer? That we will price for, that we build into our forecast. Trevor, I'm not gonna get more specific than that as it relates to, you know, how much of that there is just because at the end of the day, a lot of this is a function of our ability to be able to deliver everything we've got in the nature of the pipeline in terms of new capabilities and new value, which will actually ultimately result in how much we generate in the nature of pricing. Trevor Williams: Okay. Fair enough. Thanks. Operator: Our next question comes from Harshita Rawat from Bernstein. Please go ahead. Your line is open. Harshita Rawat: Hi. Good morning. I wanna on your recent announcements in AgenTek, including the suite you just announced. It's early in this era. Lots of experimentation happening. But maybe help us frame the different pieces of the capabilities here. You have the identity trust layer, not the platform for custom AI agents. But there's so much fragmentation competing protocols. I you're partnering with Google and OpenAI. Among others. So how does that frame this and talk about why you believe you'll see Mastercard not only growing, but in a genetic era, but also thriving with respect to the trust, governance, personalization, and other services you can provide. Thank you. Michael Miebach: Thank you, Harshita. This is a this is a great question. What what an exciting space. It might be one of those use cases, AI-driven use cases that meet our reality much faster than other AI use cases out So I think AgenTeCommerce is gonna come, is gonna come fast. So this whole idea of you know, a consumer using an agent to drive you know, have a better commerce journey, think that just resonates. With people. You get better quality insights. You get better recommendations. So from that perspective, that's just kind of the the starting headline and, hence, when you didn't build out from that, you know, we've been at this for over eight months now with agent pay launching that as our framework around recognizing agents, ensuring identity, and then bringing all the protections of payments into the world of AgenciCommerce. So those are all know, consumer protections and user experience journeys that are understood by consumers, also by our partners. Take a Google, for example. So this isn't new. And which gives me great confidence because it's understood and it comes it can be delivered at scale. We are a really important partner in this whole journey. So there's new entrants, LLM companies that haven't been really in the commerce space, you know, contrary to somebody like Google maybe. So yet again, you know, that puts it on us to engage with these partners. From the outset, we ensured as we do in other emerging payment spaces, that the standards are set. We put out protocols. Others put out protocols. There's a question, how do these protocols all interact with each other? Well, it's it's the focus on consumer protection, safety, security, and cyber. And, you know, registering agents and making sure they're real and all of that. That is really driving this. And they these protocols generally reinforce each other. So from that perspective, we feel they're very centered here. The cards ecosystem brings a lot of value, and that is understood, and it will bring it into this space. So then you kind of ask yourself and say, well, from here on, what's different then? Well, new relationships are being built, and, of course, we're stepping forward with a differentiated set of you know, solutions that we can offer. You know, we just talked about services earlier that that's an opportunity. You could start to see that there's a transaction opportunity in all of this, because, you know, a basket might be spread over many merchants. So that's another opportunity. You could also see that certain application of services, for example, tokenization, get you know, to see a a very different path than it might see without the Gentec Commerce. So these are all aspects that make me very excited about this. We're leaning across the ecosystem. Everybody, you know, wants to talk about this. If we take a step back right now, it's also true it's early days. But everything that I just said is true, and we're leaning for that. It's hard to predict in when and how to is gonna scale to what degree, but the train is leaving the station, and we're right in front of it. Thank you. Operator: Our next question comes from Bryan Keane from Citi. Please go ahead. Your line is open. Bryan Keane: Congrats on the solid results. I was just going to ask, when there's geopolitical risks investors are always trying to figure out what the impact would be to Mastercard. And you talked about you know, levers and mitigation efforts that you guys use. Could you just talk a little bit about some of the things that you could do or pull or know, things you've done in the past when political things have popped up. To kinda mitigate downside to top line and bottom line? Thanks. Michael Miebach: Yeah. So it's a it's a very important topic. You know, we are probably one of the most global businesses 220 countries and territories. So as I said in my prepared remarks, we're monitoring geopolitics all the time. We we have through the past years, and we're doing so today. It's really important for us to that this is not just about geopolitics. If you look at our business model, we're aligned in terms of our interest. You know, with banks around the world. We're aligned with merchants and companies around the world. We are focused on driving an inclusive digital economy aligns us with broader populations and NGOs and so forth. So it's not just about the politics when you look at the geopolitical landscape. We're engaging with all partners. An important aspect of this is we don't do the same thing everywhere. This is not a you know, off the shelf kind of solution that Mastercard brings. We always strive to understand the local needs the local considerations. Of course, it's very different in Africa, which is why we partnered with MTN. It's very different in The U in The UAE versus Europe. We just announced in October that we're bringing three additional data centers into Europe, $250 million of investments on the ground to drive better resilience and competitiveness for Europe, So these are all aspects that we can do today because we've invested in our technology. We continue to invest in our technology. So some of the, you know, comments that Sachin earlier made about reprioritization and where we take charges because that is what we need to fuel, that we have that flexibility. To engage with a country on their path and be a true partner for that. At the same time, we bring global best practice and global cybersecurity solutions and that sets apart to navigate that world very actively. This will only work, with a strong public policy and engagement process and spending time with governments and their understand where they want to go, and that is what we do because we're, you know, in with 125 offices around the world to really stay very close. To the local needs. Sachin Mehra: Yeah. And and I guess, Bryan, you asked what kind of levers do we have in in, you know, uncertain environments to the extent we need to pull levers. I I think the headline I would first say is that we will not do anything which will impair our ability to grow over the long term. I I think that's super important. But all of that being said, there are several several levers we've got. We got levers which we in terms of taking a look at where are we spending our our dollars Are they in favor with our customers? Are there things which, you know, are going to deliver returns in the near term, medium term, or long term? And we will pull those levers. This could be across all our expense line items, everything from personnel, to our, you know, our a and m spend to our T and E, pro fees, you name it, right, at the end of the day. And also remember, we do have a component of our revenues, which come with know, cost of goods sold. And so if to the extent you're asking what kind of levers are there because revenue is not to actually decline, you know, revenues coming down has a natural effect of bringing cost of goods sold down as well. So sufficient levers. You know, we'll never be complacent around this. I do want to leave you with one thought, which is we do care about investing for the long term, and that's something we will continue to do. Through up and down cycles because the the set of opportunities in front of us is so big that we shouldn't lose sight of that. Bryan Keane: You very much. Michael, any closing comments? Michael Miebach: Yes. Yes. So we just spent the past hour talking about our diverse global business and how we're winning in the market. None of this is possible, of course, with our colleagues around the world, the dedicated teams. I mentioned it twice earlier in my remarks, and we're we're proud about the work that's being done for our customers. We're also grateful for your support. Thank you for the dialogue and the great questions. We're gonna speak to you in a quarter from now. Thank you very much. Thanks, everyone. Operator: This concludes today's conference call. You may now disconnect.

101天前Insight Analytics约5分钟阅读

GPI 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen. Welcome to Group 1 Automotive, Inc.'s Fourth Quarter and Full Year 2025 Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President, Manufacturer Relations and Financial Services. Please go ahead, Mr. DeLongchamps. Pete DeLongchamps: Thank you, Nick, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted at Group 1 Automotive, Inc.'s website. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 Automotive, Inc. are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply, conditions of markets, successful integration of acquisitions, and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliation of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call are Daryl Kenningham, our President and Chief Executive Officer, and Daniel McHenry, Senior Vice President and Chief Financial Officer. I'd now like to hand the call over to Daryl. Daryl Kenningham: Thank you, Pete, and good morning, everyone. In 2025, Group 1 Automotive, Inc. achieved record revenues across all major business lines and record growth gross profits in parts and service and F&I, underscoring the strength and resilience of our diversified business model and our relentless focus on operational excellence. During the quarter, we delivered impressive parts and service results and strong F&I performance in both the U.S. and the UK. Parts and service continue to be a differentiator for Group 1 Automotive, Inc., providing both growth and stability while we leverage our scale and execution flexibility to further build out our used vehicle business. Our F&I teams have done an outstanding job maintaining gross profit discipline while driving higher product penetrations across nearly all categories. For the full year, we generated an all-time high gross profit of more than $3.6 billion, including record parts and service gross profit of nearly $1.6 billion. We sold 459,000 new and used vehicles in 2025, another record. In the U.S., new vehicle PRUs moderated by just $62 sequentially, reflecting a slower pace of normalization. Throughout the year, we remained focused on deploying capital toward the highest and best use for our shareholders. 2025 was a great example of that strategy. In the U.S., we acquired outstanding brands in growth markets: Lexus and Acura of Fort Myers, Florida, and Mercedes-Benz dealerships in Austin, Texas, and Atlanta, Georgia. In the UK, we acquired three Toyota and one Lexus dealership. We expect these acquisitions to generate approximately $40 million in annual revenue. At the same time, we disposed of 13 dealerships comprising 32 franchises, which had generated approximately $775 million in annualized revenue. In addition, we repurchased more than 10% of our outstanding shares in 2025. In the UK, the macroeconomic environment remains challenging, with weak economic growth, persistent inflation, increased competition from new entrants, and margin pressure from the BEV mandate. In response, we've reduced headcount by an additional 537 positions in 2025. And during the quarter, we continued to execute on our previously announced restructuring initiatives, including working with a number of interested parties on the exit of the JLR brand. We also completed our UK systems integration, which we expect will improve visibility, operational consistency, and data-driven decision-making across the business. In addition, we consolidated 10 customer contact centers into two and fully onshored our transactional accounting operations. We continue to focus on opportunities to further shape our UK portfolio and improve operations, consistent with the playbook we have successfully executed in the U.S. We are seeing the positive impact of our U.S. operating practices in the UK, particularly in aftersales. On a same-store basis, we increased our technician headcount by 9.5% in the UK, reducing customer wait times and driving a nearly six percentage point increase in customer pay mix and higher fixed absorption. We've made changes to our service pricing to move more closely to the aftermarket. At the same time, we've eliminated diagnosis fees in many brands. Daniel McHenry will speak to the positive results that these initiatives are having on our RO count. In F&I, PRU increased 13% in the UK, or $123, largely through better adoption of all of our products. Our focus in the UK remains on driving this type of operational improvement across the entire business. We realize there is still more work to do. In the U.S., the macroeconomic environment remains dynamic, with volumes and GPUs continuing to normalize from post-pandemic highs, particularly in the luxury segment. While the policy and trade uncertainty we saw last year has largely subsided, as macroeconomic conditions evolve, we remain vigilant and focused on staying nimble. In response, our teams remain disciplined and agile, sharpening execution at the dealership level, managing our costs, and prioritizing the areas of the business that generate the most durable returns. We believe this focus on controlling what we can control, from inventory and pricing discipline to aftersales performance, capital allocation, and costs, positions Group 1 Automotive, Inc. to navigate near-term challenges while continuing to build a stronger, more resilient platform for the long term. I'll now turn the call over to our CFO, Daniel McHenry, for an operating and financial overview. Daniel McHenry: Thank you, Daryl, and good morning, everyone. In 2025, Group 1 Automotive, Inc. reported revenues of $5.6 billion, gross profit of $874 million, adjusted net income of $105 million, and adjusted diluted EPS of $8.49 from continuing operations. Starting with our U.S. operations, fourth-quarter performance was strong across all lines of business, with a slight decline in new vehicle sales. New vehicle unit sales declined both on a reported and same-store basis. Average selling prices continue to increase, and consumers are increasingly concerned about affordability. While new vehicle GPUs continue to moderate from the highs of the past few years, we have maintained strong operational discipline through effective cost management and process consistency. Our used vehicle operations performed well, holding volumes basically flat versus the comparable year quarter while increasing revenues approximately 41% on an as-reported and same-store basis. GPUs declined approximately 8% on a same-store basis, reflecting higher costs to acquire used inventory. We continue to leverage our scale and operational flexibility to strengthen used vehicle acquisition while executing disciplined sourcing and pricing in an increasingly competitive market. Our fourth-quarter F&I GPUs grew nearly 3%, or $67 and $65 on a reported and same-store basis versus the prior year comparable period, respectively. The disciplined performance by our F&I professionals and improvements to our virtual finance operations have helped grow GPUs while driving higher product penetration across nearly all product categories. Aftersales again stood out as a major contributor. Gross profit continues to benefit from our efforts to optimize our collision footprint, shifting collision space opportunistically to additional traditional service capacity, and closing collision centers where the returns do not meet our requirements. Revenues from customer pay and warranty increased approximately 511%, respectively, and gross profits from customer pay and warranty increased over 813%, respectively. Our technician recruiting and retention efforts continue to pay off, with same-store technicians up 2.3% year over year. Overall, our U.S. business continues to perform exceptionally well, demonstrating both the resiliency of customer demand and the effectiveness of our disciplined, process-driven operating model. Wrapping up the U.S., let's shift to SG&A. While U.S. adjusted SG&A percent of gross profit increased 200 basis points sequentially to 67.8%, higher employee expense was the primary driver. We continue to focus heavily on resource management and technology investments to try to maintain SG&A as a percent of gross profit below pre-COVID levels as vehicle GPUs continue to normalize. Turning to the UK, results reflected the ongoing challenge of the UK operating environment. However, same-store revenues grew almost across every business line. New vehicle same-store volumes declined 8.2%, and local currency GPUs moderated 3.2% versus the prior year quarter, leading to an 11% decline in local currency same-store new revenues. Used vehicle same-store revenues were up over 9% on a local currency basis, with volumes up nearly 8%. Same-store GPUs declined almost 19% on a local currency basis, leading to a decline in used vehicle GP, reflecting the ongoing challenging used market in the UK. Aftersales and F&I delivered year-over-year growth in both revenue and gross profit on an as-reported and same-store basis. The aftersales business remains an important stabilizer within UK operations, and along with F&I, it's a key area of focus as we work to enhance profitability. We saw an outsized uplift in RO count of nearly 36% year over year as we bring best practices from the U.S. Same-store technicians are up 9.5%, reflecting significant capacity to our shops. Customer pay revenue was up 9% year over year. Same-store F&I PRU reached $1,060, with an as-reported and same-store PRU increasing over percent year over year. On expenses, SG&A declined from the prior year, reflecting cost improvements despite significant headwinds from inflation and cost increases, some of which is government-imposed through payroll tax and related charges. While we've executed targeted restructuring initiatives to improve efficiency and return the business to more sustainable cost levels, the environment remains difficult. During the quarter, we incurred modest nonrecurring restructuring costs tied to our restructuring efforts. We are executing additional restructuring plans in future periods as we exit select OEM sites. We are continuously taking decisive actions in the UK to control costs, strengthen operational efficiency, and position the business for improved returns as market conditions stabilize. Turning to our balance sheet and liquidity, our strong balance sheet, cash flow generation, and leverage position continue to support a flexible capital allocation approach. As of December 31, our liquidity of $883 million was comprised of accessible cash of $537 million and $346 million available to borrow on our acquisition line. Our rent-adjusted leverage, as defined by our U.S. credit facility, was 3.1 times at the December. Cash flow generation year-to-date 2025 yielded $699 million of adjusted operating cash flow and $494 million of free cash flow after backing out $205 million of CapEx. This capital was deployed in the same period through a combination of acquisitions, share repurchases, and dividends, including the acquisition of $640 million of revenues through December 31, $555 million repurchasing approximately 1.3 million shares at an average price of $413.05, and $26 million in dividends to our shareholders. Subsequent to the fourth quarter, we repurchased an additional 71,750 shares under a Rule 10b5-1 trading plan at an average price per common share of $394.20, for a total cost of $28.3 million, resulting in an approximate 0.6% reduction in our share count since January 1. We currently have $350 million remaining on our Board-authorized common share repurchase plan. For additional detail regarding our financial condition, please refer to the schedules of additional information attached to our news release as well as our investor presentation posted on our website. I will now turn the call over to the operator to begin the question and answer session. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and 2. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Rajat Gupta: Great. Thanks for taking the question. Just one clarification. Could you give us a sense of, you know, what the impairments were tied to this quarter? I know we had a large one last quarter. But were there any significant assets or brands that the impairment was tied to this quarter? And I have a follow-up. Thanks. Daniel McHenry: Hi, Rajat. It's Daniel. We do an annual impairment for all of our assets within quarter four on an annual basis. The impairments related virtually totally to the U.S. business as the impairments in quarter three were related to the UK business. You know, the principal brand, I guess, that we had impairments within was within the Audi brand. And, you know, we've had various discussions on that on previous calls. You know, other impairments, the Maryland stroke DC market has been a difficult market, I think, for both us and the other consolidators this year, and there was an impairment taken within that market. Rajat Gupta: Understood. That's very clear. Maybe, you know, a bit of a broader question, you know, as we go into 2026, around SG&A. I know you've talked about a lot of initiatives in the UK, just both of the productivity side and, you know, some of the cost action. But curious, you know, are there any specific productivity type actions that you might be undertaking in the U.S. today that could meaningfully move the meter especially with, you know, more and more AI tools like you get deployed. I'm curious, like, where do you see the opportunity? Are you already working on some? And how should we, you know, think about, you know, the impact to the SG&A to gross? Daryl Kenningham: Rajat, we are using AI in every part of our business, both customer interface as well as in our back office. And we're also deploying productivity tools in a number of areas. Like, as an example, when you look at our aftersales growth this quarter, it's 6% up, 5% up on a same-store on customer pay, and nine on warranty. We only added two and a half percent to our technician base. Our technicians are more productive now. One of the reasons is because our turnover is down 10 points when our technician population, which we've been working on. We've talked to you about the investments and things like air and things like that in our shops. And so we're seeing tangible results, which is resulting in less turnover and more productivity and takes the pressure off of all the hiring to do on technicians. So that's a productivity gain for us. Initiatives like virtual F&I, which we've got in a ton of stores now. We're rolling that out nationwide. We're seeing lower cost per transaction on virtual F&I across our footprint. Wide adoption there. And we are using AI in our sales operations with lead management and CRM control. We're using it in parts and service and in marketing and reaching out to customers and using more predictive analytics in that area. And so as we've made investments especially in marketing where we're now owning our own data, managing our own customer data, it's going to allow us to be much more efficient with how we reach customers and what our costs are and we hope in a more productive way than in the past. So the answer is yes. We're using it. We're using it in a number of areas. Offline. Be happy to talk to you more specifically about it. Operator: The next question will come from Bret Jordan with Jefferies. Please go ahead. Patrick Buckley: Hey, good morning, guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. As we look at the UK restructuring plan, spoke a bit about recent progress there. Could you talk a bit more about what inning that's in and how long of a process do you expect that to be? And I guess, is there a lot of front-loaded progress there? Or is there more of a steady schedule of work to be done? Daryl Kenningham: There's more work to do. We don't see it's a dynamic environment, especially Europe. And so we adjust, you know, every quarter with our expectations. And we will get us to a place where it has to be to make that business at an acceptable profit level for us. So I would say we're in the earlier innings, not the later innings. And Daniel has some thoughts too. Daniel McHenry: Brett, you know, the one thing that I would add was, you know, the cost came out in 2024 over the year. It wasn't all really front-loaded into, you know, quarter one, let's say, of 2025. So as we roll into 2026, we should see the benefit of those costs that have been taken out throughout the year, you know, fully baked in for the year in 2026. Patrick Buckley: Got it. That's helpful. And I guess staying on the UK here, could you talk a bit more about the dynamics between the broader economy headwinds versus increased penetration from Chinese OEMs? Any way to quantify the headwinds between the two? Daryl Kenningham: Well, the Chinese OEMs are their Q4 share leveled off at around a little under 12%. You know, they had a big spike from Q4 2024 to Q4 2025 that leveled off a bit. They're not slowing down. I don't mean to make that sound that way, but we're not expecting they will. But it appears that it's leveled off. When we look at the brands we're in, we feel like we're well-positioned because we're heavy luxury, which typically the Chinese aren't in at this point. And so it's something we're continuing to watch, and I expect we'll continue to make moves to try to offset that specific impact. I mean, their market share, I think, speaks the most. And, you know, they're using a dealer model, which is, you know, I think good news for dealers. So as long as there's a viable model there, we're looking at that business. Patrick Buckley: Great. That's all for us. Thanks, guys. Operator: The next question will come from John Sager with Evercore ISI. Please go ahead. John Sager: Hey, guys. Thanks for taking my question. Obviously, a lot of focus on the portfolio management in the UK. Can you give us a sense of the magnitude of restructuring as you see it today? Or are we talking, you know, anywhere near the $28 million that we saw this quarter? Daniel McHenry: It's Daniel. I don't see it as being anything like that this quarter or this year, 2026. You know, we've done significant work. You know, Daryl talked about it in the call earlier today. Around what we've done around our DMS, what we've done around our property portfolio. You know, the JLR, you know, the decision that we took to dispose of those stores over the next period. You know, a lot of that heavy lifting and cost has gone effectively. In terms of restructuring, that was restructuring costs that were taken in 2025. John Sager: Okay. Makes sense. And then, you know, post-restructuring, what's a good trend or range going forward for used GPUs and also SG&A as a percent of GP? Could you give us a sense of a range there and then the timing that it will take to get there? Daryl Kenningham: Is that the UK specific or U.S.? John Sager: Both. But I guess, primarily, I was focused on the UK there. Daryl Kenningham: Well, you know, our used GPUs in the U.S. are higher today for pre-COVID. They're lower than they were a year ago. We'd like to see some improvement in this, and we definitely know we have some upside in UK GPUs in pre-owned. We're trying to instill a different level of discipline in our pre-owned business in the UK. And we expect the output of that to be better GPU performance. On SG&A, what we've talked about historically in the UK is 80% on a long-range basis. It will be higher than that in the non-plate change quarters and will be hopefully lower than that in the plate change quarters. So those are kind of round numbers what we've targeted. Daniel McHenry: In terms of the U.S., you know, you would think, you know, mid to high 60% for the U.S. on an annualized basis. So, you know, some are below seventy. John Sager: Okay. Thanks, guys. Operator: The next question will come from David Whiston with Morningstar. Please go ahead. David Whiston: Just looking at your store disposal activity last year, I mean, by definition, there's always going to be, say, a bottom 10% or bottom quartile. But by divesting these stores, you are raising that the low end of the bar, so to speak, higher and higher. So do you see the need to do a lot of divestitures every year or do you think '25 is more of an outlier year? Daryl Kenningham: I think '25 was more of an outlier to your I'll say it. You know, much of our disposition work was in the UK. Around underperforming stores, around consolidation efforts in concert with our OEM partners. There will be some more of that in '26, but on a long-term basis, it won't be nearly that active. In the U.S., we're still, you know, we still dispose of some stores that are in markets that aren't favorable for us or are underperforming. We had relatively few in 2025 in the U.S. But we will always want to have that discipline to review our portfolio and stores that don't help us on SG&A leverage or don't help us on EPS contribution are subject to us disposing. David Whiston: Alright. Thanks. And on capital allocation for this year, any strong preference between acquisitions, buybacks, or perhaps reducing leverage below three? Daniel McHenry: Let's go from the leverage first. You know, our preference is to keep our leverage below three times, and we're going to continue to work to that. You know, in terms of capital allocation, we really want to grow the company and continue to grow the company through acquisition. We are not going to, however, buy stores that aren't instantly accretive to us as a company in terms of EPS, and we're not going to overpay for acquisitions whenever you look at the valuation of our company. In terms of where it's currently sitting. We were very active in terms of buybacks last year, buying back over 10% of the company. You can see in the first quarter so far, we bought back, you know, 0.6% of the company in, you know, circa twenty days. And we will continue to be aggressive in both terms of acquisitions and buybacks as and when the time is right. David Whiston: Okay. Thank you. Operator: The next question will come from Jeffrey Lick with Stephens Inc. Please go ahead. Jeffrey Lick: Good morning. Thanks for taking the question. Daryl and team, was wondering if you just take 2025 as your baseline year, obviously, was an awful lot that went on this year with tariffs, the EV tech credit expiration, the UK and whether it was the road tax, Chinese OEMs. You look at 2025 as your base year and you think about working through 2026, maybe just talk about how you see the year progressing in terms of GPU, you know, lapping the EV tax credit, you know, where do you see kind of the easier part of the year versus the harder part of the year? Daryl Kenningham: Well, I think on the EV question, last quarter, our EV mix was 1.3%. That's down a little, I mean, we were 3% ish before that. So for us, the EV impact, just given our footprint in the United States anyway, is not that big. The margins on EVs are not bad now, you know, compared to where they were a year ago when they were a disaster. So, hopefully, that is a tailwind a little bit. It's on a very small part of our volume, though. On the rest of it, you know, yeah, plenty of uncertainty out there. Obviously, and you know, what we try to focus our teams on is stay focused on what we can control. Because there's plenty of distractions and plenty of things that can lead you to focus on things outside of what we can affect. You know, what we're hoping for is to build on 2025 to try to get to your question, Jeff. We want to build on 2025. We want to grow. If that's organically growing, we feel like there's opportunity at Group 1 Automotive, Inc. to organically grow, especially in the UK. But we still have opportunities in our business in the U.S. too. As well as we perform in aftersales and F&I. You know, there's still opportunities in our used car business and so we and in our cost structure. So we're continuing to feel like there's opportunity in 2026 almost in the U.S. Jeffrey Lick: And then just a quick follow-up. This year, we're going to see a lot of lease returns actually. You know, percentages could be, you know, pretty big as we get into the back half. Curious, Daryl, in your career if you've seen anything similar to this. I mean, we're going to be talking about lease returns in excess of 30, 40%, you know, what that's going to mean for your business, you know, both in terms of ups and also in terms of your potential used car supply? How big of a deal do you view this? You know, am I thinking about it maybe, you know, in two grandiose terms? And if, you know, any kind of historical context would be very helpful. Daryl Kenningham: Well, I think two things will happen this year, which will help the use of our business. One is the uptick in lease returns, which a good solid controlled source of premium used cars is really great. If you look at the kind of used cars we sell today compared to what we sold pre-COVID, we're selling a much richer mix of pre-owned cars. And the profits are good on those cars. So I hope and expect that that will help us later in the year. Another thing is there's a lot of discussion around the tax returns and tax refunds in the first and second quarter. And what kind of impact will that have on the used car business. And we're hopeful it buoys it, you know, and how much I don't know. But there's plenty of optimism around that. So we'll see how that affects us. We continue to focus heavily on sourcing, especially organic sourcing out of our service drives. And out of our trade processes with appraisals and capture, and we continue to put a ton of focus on that using technology to try to increase that as well. Jeffrey Lick: Well, thanks so much for taking my questions, best of luck this year. Daryl Kenningham: Thank you, Jeff. Operator: The next question will come from John Babcock with Barclays. Please go ahead. John Babcock: Hey, good morning, and thanks for taking my questions. Just firstly on the used vehicle market in the U.S., at least the indicators that we've seen seem to show that volumes have been pretty good to start the year. But I'm just kind of curious, what are you guys seeing? And what are your expectations for the year? And particularly as we, you know, as you remember, like last year, there were the tariffs that impacted timing in March and April, kind of curious how you're thinking about the cadence of that demand and whether you think it's sustainable from current levels? Pete DeLongchamps: Sure. John, this is Pete DeLongchamps. I'll take that question. So we, certainly bullish on the used car opportunity this coming year. And you're correct. January, as traditionally does start off well because you get the nice trades from November and December that you can work with. And then, you know, you're ready for the spring selling season, which kicks off about President's Day through March. So I think the volumes are sustainable, and I think that what we're really focusing on is disciplined acquisition, whether that's service to sales coming out of the lane. We've got to be smarter this year. We're using AI to know exactly what cars to buy from the auction, not just based on personal preference. So there's things that we've put in place that we think that will continue to help our used business grow. But, you know, all in all, you always have to remember this is a, you know, 38 to 40 million car market, and we talk about SAR 16 and retail at 13 for new. But the used car market is continually a great source for our company's revenue and gross profits. John Babcock: Okay. Thanks for that. And then, just my last question. Just on GPUs, they were down in 4Q and I think at least most of the people I talked to expected a recovery in the quarter. Obviously, luxury demand was a little bit soft and, you know, I had heard that there was some increased competition at least among dealers just given the broadly softer volumes. I'm just kind of curious, were there any other factors that were missing that maybe we should be paying attention to? And what should we be mindful of in terms of thinking about GPUs in 1Q and 2026 more broadly? Daryl Kenningham: Is your question on new car GPUs or used car? Sorry. John Babcock: Yeah. New car specifically. Daryl Kenningham: You know, we saw some softening on the luxuries in the fourth quarter. GPUs, and that was, you know, affected us more than normal. You know, I would think that we'll see some moderation of that. I don't know that they'll stay where they were. And the Mercedes of the world, their inventory is in much better shape today than it was a year ago. And BMW's inventory is in really good shape with some new products coming out this year. So I believe that we'll see, you know, firming of the luxury. And the mass market GPUs are holding up pretty well. I mean, our big brand is Toyota held up pretty well. John Babcock: Okay. Thanks. Operator: This will conclude our question and answer session. I would like to hand the call back over to Mr. Daryl Kenningham for any closing remarks. Daryl Kenningham: Thank you. In summary, we remain committed to our strategic initiatives. We focus on our local customers' operating excellence, differentiated aftersales, and disciplined capital management. We'll continue to build on the strong operating results in the U.S. The UK remains a priority as we execute on restructuring initiatives, improving operating discipline, and shaping the portfolio to drive better returns. We believe consistent execution against these priorities positions Group 1 Automotive, Inc. to navigate near-term challenges while continuing to build long-term value for our shareholders. Thank you all for joining the call. Operator: This will conclude our pardon me. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

101天前Insight Analytics约5分钟阅读

MAN 2025 Q4 财报电话会议

Operator: Welcome to ManpowerGroup's Fourth Quarter Earnings Results Conference Call. You will be put into listen-only mode until the question and answer session time begins. This call is being recorded. If you care to drop off now, please do so. I would now like to turn the call over to ManpowerGroup's Chair and CEO, Mr. Jonas Prising. Sir, you may begin. Jonas Prising: Good morning, and thank you for joining us for our fourth quarter 2025 conference call. Our Chief Financial Officer, Jack McGinnis, and our President and Chief Strategy Officer, Becky Frankiewicz, are both with me today. For your convenience, our prepared remarks are available in the Investor Relations section of our website at manpowergroup.com. I'll begin with a brief overview of the quarter and the full year, including how we're seeing conditions evolve across markets and what that means for our execution. Becky will ground us in the broader environment, what we're hearing directly from the market, and how we're evaluating those insights as we position the business. Jack will then walk through the detailed financial results and our guidance for 2026. I'll close with a few comments before we open the line for Q&A. Jack will now cover the safe harbor language. Jack McGinnis: Good morning, everyone. This conference call includes forward-looking statements, including statements concerning economic and geopolitical conditions, which are subject to known and unknown risks and uncertainties. These statements are based on management's current expectations or beliefs. Actual results might differ materially from those projected in the forward-looking statements. We assume no obligation to update or revise any forward-looking statements. Slide two of our earnings release presentation further identifies forward-looking statements made in this call and factors that may cause our actual results to differ materially and information regarding reconciliation of non-GAAP measures. Jonas Prising: Thanks, Jack. Let me begin by saying we're pleased with our fourth quarter results, which marked a clear shift to stabilization, led by enterprise demand and supported by disciplined and continued commitment to cost optimization. In the fourth quarter, we delivered reported revenues of $4.7 billion, which represented organic constant currency growth of 2%. System-wide revenue, which includes our expanding franchise revenue base, was $5.1 billion. Adjusted EBITDA margin of 2.1% reflects improving demand trends across core markets, as well as P&L leverage. Though we faced strong headwinds during 2025, reflected in our full-year results, we are encouraged by our fourth quarter performance, which demonstrated sequential improvement through year-end. As we move through the fourth quarter, revenue trends strengthened in several key markets. Clients remain deliberate in their hiring given the macro backdrop, yet engagement levels are steady, and activity is becoming more consistent. Importantly, while we're not yet calling a broad-based recovery, we are seeing clear sequential improvement in key demand indicators, including Manpower associates on assignments in key markets, such as the US and France, which are performing better than expected, with France in particular showing resilience despite ongoing political and budget uncertainty. Markets such as Italy and Spain stabilized earlier and began to inflect, with Italy standing out as a clear outperformer on both growth and margin. These trends reinforce our view that the shape of the recovery can be different by market, with some inflecting earlier and others requiring longer periods of stabilization first. Against this backdrop, our priorities remain clear: execute with rigor, maintain cost discipline, and leverage our digitization advantage to position the business to generate operating leverage as demand improves. We are working to ensure that we're structurally stronger, more efficient, agile, and better positioned to capture share. To that end, our diversified multi-brand portfolio continues to perform well in a selective demand environment and plays a critical role in earnings durability. Manpower addresses in-demand AI-resilient skills at scale, supporting clients from entry-level to specialized roles in growth sectors and has grown for three consecutive quarters, with six quarters in the US. Experis, our brand providing specialized technology talent and services that match returns on digital, cloud, AI, and data investments, has seen the rate of decline narrowing and sequential improvement through the second half of the year. Talent Solutions delivers scaled enterprise offerings, including TAPFIN MSP, Right Management, placement, and consulting, which saw growth in the quarter. Firm recruitment across brands, including our Talent Solutions RPO offering, continues to face a challenging environment. As demand stabilizes, this breadth of our portfolio and geographic footprint positions us to improve win rates, capture share, and generate stronger incremental margins. We are pleased with our progress but a long way from being satisfied, and we will continue to focus on improving the current trajectory. On that point, let me provide an update on our cost discipline and operating leverage. Cost discipline remains a core leadership priority across our operations. Over the last three years, we have taken decisive actions to structurally reduce costs and align capacity with demand. These actions include permanent changes to our operating model in our back office and technology infrastructure, as well as targeted adjustments to current market conditions. Our efforts were further on display during the fourth quarter, as we delivered a 4% constant currency reduction in SG&A while driving organic growth. This reflects both structural cost reductions and tighter discretionary spend. Further, we accelerated cost actions across corporate functions in select geographies, sharpened capacity alignment, and reduced overheads. These actions are translating into improved profitability across the portfolio. For instance, for the first time in five quarters, we delivered positive operating profit in our Northern European business this quarter, a region where we've been highly focused on rightsizing the cost base. Importantly, we have more opportunity to enhance our cost structure across our global business. Jack will provide additional details on these efforts, including ongoing optimization actions, particularly in North America, as part of our broader transformation program. Before that, let me turn it over to Becky to expand on the work we're doing to cap critical market insights that are evolving our business model in line with changing customer needs and candidate behaviors. Becky Frankiewicz: Thanks, Jonas. Glad to be with you all this morning. My remit for ManpowerGroup is focused on three areas: driving commercial excellence, evolving our core capabilities to better serve the business, and infusing AI in the organization for today and tomorrow. In recent months, we've embarked on a comprehensive process to evaluate our strategy and priorities as AI accelerates and client and candidate needs change. As part of this work, we've engaged a wide set of experts, inside and outside our industry, including our clients and candidates, to conduct independent research and rigorous analysis across both technology and human behavior. While we are still early in this process, this work is surfacing two clear macro themes around how clients and candidates want to engage with us. First, flexibility. Candidates are increasingly looking to curate flexible engagement models for when, where, and how they contribute to work. Our clients are also seeking flexibility to attract talent and to remain agile in the changing landscape. The second theme is how AI will shape workforce composition. Our clients are asking tough questions: How could I get work done in the future? What are the new paths between humans and technology? They are increasingly seeking our advisory capabilities on new ways to get work done beyond the traditional models. Advancing the path of temp and perm alongside newer models of flexibility like gig and freelance, and they are seeking guidance on the newest path to work, leveraging AI in combination with humans for productivity and for growth. From this research and our continuous connections with clients across every industry, the intersection of AI and workforce readiness is an urgent priority. And unlocking productivity gains and growth will depend on combining technology adoption with workforce transformation. This was reinforced once again by our engagement with clients and prospects at the World Economic Forum in Davos last week, where we showcased insight and research around what we are calling the human edge, where empathy, imagination, and resilience are elevated by technology, and where human potential meets digital intelligence. Ultimately, these insights give us enhanced visibility on where client demand and growth will be, enabling us to make critical decisions now on where to play and how to win. Though we're in the early stages of this process, we are encouraged that the opportunity ahead to further differentiate our offerings. I look forward to continuing to update you on this critically important initiative. Jonas Prising: Thank you, Becky. As you heard, the environment for AI and automation continues to unfold. Since 2019, we have been executing against the clear technology roadmaps centered on PowerSuite, our end-to-end operating system and best-in-class technology stack. Today, PowerSuite operates across nearly 90% of our business, creating integrated global technology rails and proprietary data assets spanning more than 70 countries. This foundation enables faster innovation and allows us to convert technology adoption into productivity gains more quickly than in the past. Last quarter, we shared how we are increasingly moving from AI use cases to scaled commercial impact. Our integrated AI recruiter toolkit is now scaled to more than 12 markets, streamlining content creation, talent search, communication, and workflow automation. This is improving recruiter precision and productivity while enhancing the candidate experience to faster, smarter matching and real-time insights resulting in a 7% increase in placement rates. This is not just about productivity. It is about commercial excellence, positioning us to increase revenue, win clients, and deliver a superior experience to our clients and candidates. For instance, we are scaling the use of AgenTiK AI coding assistance across Experis in the US to deliver faster, higher quality, and more cost-efficient solutions for clients. This helps our clients accelerate delivery, improve product quality, and reduce operating costs while enabling us to strengthen our value proposition and win higher-margin work. More broadly, we're moving from experimentation to disciplined, governed deployment of AI, turning proprietary data, embedded technology, and human expertise into faster delivery, higher win rates, and durable differentiation. And as part of this commitment, we're upskilling our 25,000 employees and embedding AI more deeply across the organization to drive productivity, support higher-margin growth, and ensure that these gains translate into a leaner, more efficient cost structure. Pleased that we're able to deliver sequential improvement in revenue growth and profitability improvement through 2025, finishing Q4 with momentum that reflects stronger execution in our core markets and profitability improvements from our cost actions. Assuming current trends continue, and as we anniversary the tariff-related headwinds, we believe 2026 has the potential to represent an important inflection point for the business, with a path towards sustainable organic growth and margin expansion. At the same time, we remain agile and continue to monitor geopolitical developments. While uncertainty exists, our focus remains on supporting clients and executing in this evolving environment. And with that, I'll now turn it over to Jack to walk through the fourth quarter and full-year financial results in more detail. Jack McGinnis: Thanks, Jonas. In the fourth quarter, we delivered reported revenues of $4.7 billion. System-wide revenue was $5.1 billion. Our fourth quarter revenue results represented organic constant currency growth of 2%. US dollar reported revenues in the fourth quarter were impacted by foreign currency translation, and after adjusting for currency impacts, came in above the midpoint of our constant currency guidance range. Our revenue trends demonstrate the continuation of largely stable activity levels across North America and Europe overall, with improving trends in France and ongoing strength in Italy. Gross profit margin came in just below our guidance range, driven by lower permanent recruitment in Europe, while staffing margin came in as expected and consistent with the previous quarter year-over-year trend. As adjusted, EBITDA was $100 million, representing a 2% decrease in constant currency compared to the prior year period. As adjusted, EBITDA margin was 2.1%, equal to the prior year and came in at the midpoint of our guidance range. Foreign currency translation drove a favorable impact to the 7% US dollar reported revenue increase from the constant currency increase of 1%. Organic days adjusted constant currency revenue increased 2% in the quarter, which was favorable to our midpoint guidance of flat. Turning to the full-year results for a few moments. Reported earnings per share for the year was a negative $0.29. As adjusted, earnings per share was $2.97 and represented a constant currency decrease of 38%. Reported revenues for the year decreased 2% in constant currency to $18 billion, and system-wide revenues were $19.5 billion. Reported EBITDA was $270 million. As adjusted, EBITDA was $337 million, which represented a 20% constant currency decrease year over year. Transitioning to the EPS bridge, reported earnings per share for the quarter was $0.64. Adjusted EPS was $0.92 and came in $0.09 above our guidance midpoint. Walking from our guidance midpoint of $0.83, our results included improved operational performance, representing a positive impact of $0.06 and improved interest and other expenses, which was $0.03 favorable. Restructuring costs and other represented $0.28. Next, let's review our revenue by business line. Year over year, on an organic constant currency basis, the Manpower brand had growth of 5% in the quarter, a sequential improvement from the 3% growth in the third quarter. The Experis brand declined by 6%, an improvement from the 7% decline in the third quarter. And the Talent Solutions brand declined by 4%, an improvement from the third quarter decline of 8%. Within Talent Solutions, our RPO business experienced lower demand, notably in select ongoing client programs in the US year over year. Our MSP business saw continued revenue growth, and Right Management saw slight growth year over year. Looking at our gross profit margin in detail, our gross margin came in at 16.3% for the quarter. Staffing margin contributed a 40 basis point reduction due to mix shifts towards enterprise accounts, which was stable from the third quarter trend. Permanent recruitment activity was softer than expected in Europe, and the lower contribution resulted in a 30 basis point decline. Other services resulted in a 20 basis point margin decrease. Moving on to our gross profit by business line. During the quarter, the Manpower brand comprised 62% of gross profit. Our Experis Professional business comprised 22%, and Talent Solutions comprised 16%. During the quarter, our consolidated gross profit decreased by 3% on an organic constant currency basis year over year, representing an improvement from the 4% decline in the third quarter. Our Manpower brand increased 1% in organic constant currency gross profit year over year, an improvement from the flat third quarter year over year trend. Gross profit in our Experis brand decreased 5% in organic constant currency year over year, an improvement from the 10% decrease in the third quarter. Gross profit in Talent Solutions declined 12% in organic constant currency year over year, which was an improvement from the 13% decrease in the third quarter. Right Management gross profit improved from the third quarter on increased outplacement activity. MSP experienced similar activity levels from the third quarter, and RPO experienced slightly lower activity from the third quarter. Reported SG&A expense in the quarter was $686 million. SG&A as adjusted was down 4% on a constant currency basis and 3% on an organic constant currency basis. The year-over-year organic constant currency SG&A decreases largely consisted of reductions in operational costs of $22 million. Corporate costs have increased sequentially from the third quarter and include incremental investments in our transformation initiatives. These initiatives include our back-office transformation programs and are progressing well, and now also include our front-office transformation program, which is being planned for our North America business. These programs are enabling industry-leading end-to-end processes and further efficiencies associated with our leading PowerSuite front and back-office technology platform. Going forward, I will carve out any incremental expenses associated with the new front-office transformation program, which we will fund to the greatest degree possible through ongoing strong cost management as we remain focused on expanding EBITDA margin year over year in 2026. Dispositions represented a decrease of $3 million, while currency changes contributed to a $29 million increase. Adjusted SG&A expenses as a percentage of revenue represented 14.4% in constant currency in the fourth quarter. Adjustments represented restructuring of $13 million. Balancing gross profit trends with strong cost actions while funding ongoing transformation to enhance EBITDA margin in both the short and long term remains one of our highest priorities. The Americas segment comprised 24% of consolidated revenue. Revenue in the quarter was $1.1 billion, representing an increase of 5% year over year on a constant currency basis. As adjusted, OUP was $39 million, and OUP margin was 3.4%. Restructuring charges of $1 million largely represented actions in Peru. The US is the largest country in the Americas segment, comprising 60% of segment revenues. Revenue in the US was $682 million during the quarter, representing a 1% days adjusted decrease compared to the prior year, which was stronger than anticipated, driven by Experis and Talent Solutions MSP business. This represents a flat revenue trend sequentially from the third quarter. OUP as adjusted for our US business was $15 million in the quarter. OUP margin as adjusted was 2.2%. Within the US, the Manpower brand comprised 27% of gross profit during the quarter. Revenue for the Manpower brand in the US increased 7% on a days adjusted basis during the quarter, which represented strong market performance with six consecutive quarters of growth and a relatively stable trend from the 8% increase in the third quarter. The Experis brand in the US comprised 39% of gross profit in the quarter. Within Experis in the US, IT skills comprised approximately 90% of revenues. Experis US revenue decreased 10% on a days adjusted basis during the quarter, broadly stable from the 9% decline in the third quarter. Talent Solutions in the US contributed 34% of gross profit and saw a 2% increase in revenue year over year in the quarter, an increase from the flat result in the third quarter driven by a well-executed MSP business, which again posted strong double-digit revenue increases year over year and slight growth in Right Management outplacement activity. This was partially offset by lower RPO activity and the anniversary of select client programs in 2024. In 2026, we anniversary very strong healthcare IT project volumes in Experis and expect the overall US business to have an increased rate of revenue decline compared to the fourth quarter. If we exclude healthcare IT project volumes from both periods, the US year-over-year revenue trend in Q1 will be largely in line with the Q4 trend. Our Experis Healthcare IT project volume timing can be uneven, and although we do not anticipate comparable volumes in 2026, we have a very strong pipeline that is expected to benefit 2026. Southern Europe revenue comprised 48% of consolidated revenue in the quarter. Revenue in Southern Europe was $2.2 billion, and following thirteen consecutive quarters of revenue declines, flipped to 1% growth in constant currency during the fourth quarter. As adjusted, OUP for our Southern Europe business was $77 million in the quarter, and OUP margin was 3.4%. Restructuring charges of $6 million represented actions in Spain and France. France revenue equaled $1.2 billion and comprised 52% of the Southern Europe segment in the quarter, and decreased 3% on a days adjusted constant currency basis. As adjusted, OUP for our France business was $28 million in the quarter. Adjusted OUP margin was 2.4%. France revenue trends improved during the fourth quarter. This represents four consecutive months of revenue trend improvement, and we expect a similar sequential rate of revenue trend improvement into the first quarter. Revenue in Italy equaled $486 million in the quarter, reflecting an increase of 7% on a days adjusted constant currency basis. OUP as adjusted equaled $33 million, and OUP margin was 6.7%. Our Italy business is performing very well, and we estimate a similar constant currency revenue growth trend in the first quarter as compared to the fourth quarter. Our Northern Europe segment comprised 17% of consolidated revenue in the quarter. Revenue of $819 million represented a 1% decline in constant currency. As adjusted, OUP was $5 million in the quarter. This represents sequential OUP improvement during the last three quarters, reflecting cost actions taken to date. The restructuring charges of $6 million primarily represented actions in The Netherlands and Germany. Our largest market in the Northern Europe segment is the UK, which represented 32% of segment revenues in the quarter. During the quarter, UK revenues decreased 3% on a days adjusted currency basis, representing significant sequential improvement. We expect the rate of revenue decline in the UK to improve into the first quarter compared to the fourth quarter. The Nordics revenues flipped to growth during the fourth quarter, representing an increase of 2% in days adjusted constant currency. In Germany, revenues decreased 22% on a days adjusted constant currency basis in the quarter. Germany remains a very difficult market, but we are expecting an improvement in the rate of year-over-year revenue decline in the first quarter compared to the fourth quarter trend. The Asia Pacific Middle East segment comprises 11% of total company revenue. In the quarter, revenues equaled $520 million, representing an increase of 6% in organic constant currency. OUP was $28 million, and OUP margin was 5.3%. Our largest market in the APME segment is Japan, representing 58% of segment revenues in the quarter. Revenue in Japan grew 7% on a days adjusted constant currency basis. We remain very pleased with the consistent performance of our Japan business, and we expect continued strong revenue growth in the first quarter. I'll now turn to cash flow and balance sheet. In full-year 2025, free cash flow equaled an outflow of $161 million compared to an inflow of $258 million in the prior year. As we discussed in prior quarters, 2025 cash flows were impacted by timing of items that benefited 2024, which have not been repeated in 2025. In the fourth quarter, we drove a strong finish to the year with a free cash flow result of $168 million, which was not significantly impacted by timing items. At year-end, day sales outstanding increased to fifty-five days, up from fifty-two days in the prior year, as enterprise client mix has increased. During the fourth quarter, capital expenditures represented $11 million, and we did not repurchase any shares. Our balance sheet reflects continued actions to strengthen our liquidity and overall balance sheet composition. Our year-end reporting amounts reflect the successful refinance of our €500 million note in December 2025, resulting in the payoff of the previous €500 million note shortly after year-end in January 2026. Adjusting to exclude the temporary increase from the new euro and offsetting cash, we ended the quarter with cash of $284 million and total debt of $1.1 billion. Net debt equaled $806 million at December 31. Our adjusted debt ratios at year-end reflect total gross debt to trailing twelve months adjusted EBITDA of 2.7 and a total debt to total capitalization at 35%. Detail of our debt and credit facility arrangement are included in the appendix of the presentation. Next, I'll review our outlook for 2026. Our forecast anticipates a continuation of existing trends. When considering our guidance for the first quarter, it is also important to note there's always a meaningful sequential seasonal decrease in earnings from the fourth quarter to the first quarter. With that said, we are forecasting earnings per share for the first quarter to be in the range of $0.45 to $0.55. The guidance range also includes a favorable foreign currency impact of $0.06 per share, and our foreign currency translation rate estimates are disclosed at the bottom of the guidance slide. Our constant currency revenue guidance range is between a 1% decrease and a 3% increase. At the midpoint is a 1% increase. Considering business day variances are very slight, and the impact of dispositions is very small, our organic days adjusted constant currency revenue increase also represents 1% growth at the midpoint. EBITDA margin for the first quarter is projected to be up 10 basis points at the midpoint compared to the prior year. Although the government of France has not yet enacted the 2026 budget, their current proposal includes the corporate tax surcharge being extended into 2026. As a result, our 2026 tax guidance incorporates a similar level of surcharge, and we estimate a full-year global tax rate of 45%. In addition, the US workers' opportunity tax credit (WOTC) in the US has not been renewed for 2026 at this time, and this benefit has not been included in our 2026 estimate. If WOTC is enacted in the US and retroactively applied to the beginning of the year, we estimate it would reduce our full-year rate to within a range of 43.5% to 44%. We estimate that the effective tax rate for the first quarter will be 43%. As I mentioned earlier, I will carve out any restructuring and related front-office incremental transformation expenses incurred in Q1, as they are not included in the underlying guidance. In addition, we estimate our weighted average shares to be 47.3 million. I will now turn it back to Jonas. Jonas Prising: Thank you, Jack. In closing, we're confident that we have the right strategy, capabilities, and team in place to execute in this environment. With improving consistency across our major markets and early signs of inflection becoming increasingly evident, our cost discipline, diversified portfolio, scaled digital and AI platform, this is a clear leverage as demand stabilizes. With improving productivity and margin potential over time. Thank you to our talented team for your relentless commitment and to our candidates and clients for your continued trust in ManpowerGroup. And that concludes our prepared remarks. And as we go into our Q&A session, I'd like to ask if you could limit your question to one so we can make sure everyone has the opportunity to ask a question this morning. And with that, I'll ask our operator, Michel, to start our Q&A session. Operator: Thank you. If your question hasn't been answered and you'd like to remove yourself from the queue, press 11 again. And our first question comes from Mark Marcon with Baird. Your line is open. Mark Marcon: Hey, good morning, Jonas and Jack. It's great to see that there's some early signs of an inflection here. Jonas, I'd like to go back to some of your earlier comments just on a broad base with regards to the productivity and not just productivity, but also excellence. Initiatives that you have with some of your technology. As PowerSuite is fully implemented and as you implement AI, I'm wondering if you could discuss a little bit from a longer-term perspective what your aspirations are in terms of where the margins could ultimately end up going if we end up having, you know, kind of a nontraditional, more moderate recovery in the markets as opposed to, you know, the types of cyclical rebounds that we've seen, you know, more traditionally back in the nineties, early aughts, post-GFC, just because it seems like employment on the whole is gonna, you know, be a little bit more limited in terms of growth. So I'm wondering if we have a moderate recovery, what should investors expect over the next two to four years with regards to where we could potentially go from a margin perspective? Jonas Prising: Good morning, Mark. And, you know, as you've heard from our prepared remarks, we're pleased to see that, you know, we're seeing the early signs of an inflection coming through. But to your specific question about our PowerSuite and, you know, investments over the last couple of years, they've really put us in a really, really good position for us to think about ways to evolve our business and optimize, you know, our processes and improve our customer, our client, our candidate experience. Regardless of what the market does and how quickly it comes back. So as you heard from Becky's prepared remarks, we're really thinking about this around productivity and growth. And we're encouraged by the early signs that we're seeing. You heard me talk about a number of in terms of AI enablement around Experis, how we are improving the candidate experience and process as well. And, you know, we are really encouraged by what we're seeing. But as we said, it's early days yet. But our entire focus is around controlling what we can control, and whether that is a faster recovery or slower recovery, we're going to be driving growth and we're going to be driving productivity. We will always be a people business today, but we are going to be an AI-enabled global people business, and that's the path that we're on. And we are very encouraged by the results that we're seeing so far. But maybe Jack, you can talk a bit about what investors should expect from a longer-term perspective on margin. Jack McGinnis: Yeah. Happy to add some additional color there. I think, Mark, to Jonas's point, I think on the technology implementations that, you know, as you mentioned in the prepared remarks on the front office side, we're now 87% complete on PowerSuite front office revenues, global revenues running through. And on the back office, we're at 75%. We just had Italy go live as we ended the year. So we're in a really good place. A lot of the heavy lifting has been done on the technology implementation. And now we're very focused on centralization and standardization, and that is going to drive structural cost efficiency going forward. And as I mentioned on the back office, we expect that in the second half of this year. So even in a modest recovery scenario, you should expect EBITDA margin improvement year over year over the next four years in that scenario when we see continued improvement year over year. And as I we're really excited about extending the work we're doing on the back office now to starting additional work on the front office, and that's gonna drive it even further in terms of margin expansion opportunities going forward. Mark Marcon: Any sort of goal or target that you would have just under a moderate recovery? I know it's early days, but just trying to get a realistic sense in terms of, you know, one point we were targeting four and a half percent. You know, is it realistic to assume that, hey, we could, you know, we should be able to get to 3%? Just wondering how you're thinking about it. Jack McGinnis: Yeah. Yeah. No. I would say first off, we're absolutely still committed to the four and a half to 5% mark. And you're right. We've delevered pretty the recent period here. So we're starting from a lower point. But from that lower point, we're very optimistic we have an opportunity to expand margin meaningfully from this point over the next few years here. To get back to the 4.5% to 5% over time. And it is going to be a measure of how much operational leverage comes in through the environment. That will help. But even without that, we're gonna have a really good opportunity to continue to climb progressively forward towards that four and a half percent over the next couple of years. Mark Marcon: That's excellent. Thank you so much. Operator: Thank you. Our next question comes from Andrew Steinerman with JPMorgan. Your line is open. Andrew Steinerman: Hi. This one is probably a little tougher. So when you talk about a path towards sustainable organic revenue growth, could you give us a sense of what level of sustainable organic revenue growth is likely once the staffing market starts to improve? And then kind of an add-on to that question, we've been hearing a notable chatter from the staffing industry operators talking about an increased interest in flexible workers once such a recovery takes hold because labor uncertainty will remain. Do you have a view on that thesis? Jonas Prising: So thanks, Andrew. Yeah. No. To predict when and how the market is going to be improving overall, I think, is difficult. But as you can tell, we've been improving our performance in the US, for instance, in a tough market with six quarters of continuous growth for the Manpower brand. You've seen a number of our countries, despite, you know, reasonably stable but not growing labor markets, perform very well, such as Italy and Spain, not to mention Japan that has forty-five quarters of consistent growth. So I'd say that just as Jack just mentioned in his conversation with Mark, that we're going to control what we can control. Make sure that we drive the efficiencies we need to do in markets where we are facing headwinds. We will be very focused on rightsizing the business and adjusting capacity to the existing demand. In markets where we see the opportunity, we're investing in demand-generating activities. And we'll keep on working very, very hard on driving growth to capture share, as well as driving the productivity initiatives that you have seen us execute on in a number of markets and over a number of quarters. And we're encouraged by the inflection points that we have seen and the improvement in trends in France and in the US particularly, and the earlier ones, it's too early for us to call a broad-based recovery is in motion. Certainly, over the last couple of quarters, we've had some positive signs. And as you can tell from our guide, we expect those trends to continue into the first quarter. On the second part of your question around flexibility, maybe Becky, you could give some insights into what you've heard from clients and some of the work that we've been doing. Over to you. Becky Frankiewicz: Thanks, Andrew. You know, it's a timely question because we're just off of two weeks in Europe spending time with our markets as well as spending time with our clients and partners. The World Economic Forum. And just as you said, the chatter around flexibility is increasing. And, you know, for us, that's good for our business because it's one of the prime core propositions that we offer is flexibility. And so we're seeing that in the short term as well as over the long term. You know, all the research I've done around the strategy indicates that candidates want more flexibility and clients want more flexibility. And so we anticipate this is good for today, it's also gonna be good for us in the future. So the chatter is starting. We're not seeing all that flow through in volume yet, but it starts with conversation. Andrew Steinerman: Thanks, Becky. Operator: Thank you. Our next question comes from Kartik Mehta with Northcoast Research. Your line is open. Kartik Mehta: Hi, good morning. Jack, I think you said enterprise demand is helping at least stabilize the revenue. And I'm wondering, as enterprise revenue grows, what that means for margins, maybe even cash conversion, and kind of what you think by revenue durability for the business. Jack McGinnis: Sure, Kartik. Hey, happy to talk about that. So you're right. And that has been the trend we've seen in the second half of the year. The enterprise client has been the lion's share of the demand, and we've seen the mix impact on the GP margin. Now with that being said, most of that has worked its way through. If you look at the third quarter, that's really when we signaled the shift weighted in a bit more. And from the third quarter to the fourth quarter, it's really been quite stable. So you see in the GP margin bridge on the staffing side, it's down that same 40 basis points year over year from Q3 again in Q4. So that is signaling that a lot of that enterprise shift has worked its way through. And I'd say with that, you know, pricing remains very rational. That indicates that, you know, we are, it's always competitive, but pricing is not changing. And that is not having the impact. It's really just that averaging impact on the enterprise client. With that being said, you mentioned a couple of other things. What impact is that going to have on the balance sheet and cash? So, and I would say, you know, that is part of the equation. We did see DSO tick up a bit. We do know enterprise clients traditionally have a bit longer payment terms on average. And, you know, that's again, I'd say that's worked its way through in the numbers. With that being said, we're very focused on that. We have actions in place to continue to mitigate that. And we expect ongoing progress in that in 2026. And then lastly, I'd say, you know, the other part of the enterprise component is, you know, that does create some timing in terms of the cash flows. And we saw that with, you know, perhaps some lighter cash flow in the third quarter year over year, but a really good fourth quarter cash flow result as a lot of those enterprise client payment terms came in during the fourth quarter, really driving a pretty strong fourth quarter free cash flow result for us on an overall basis. So it's all part of the balancing equation between enterprise and non-enterprise on an overall basis. We have actions in place to mitigate that, you know, the DSO that I mentioned, and we do expect ongoing improvement as we go forward here in 2026. Kartik Mehta: Thank you. Appreciate it. Operator: Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open. Trevor Romeo: Good morning. Thank you for taking the questions. I wanted to, I guess, focus on some of the commentary on near-term demand. I think you noted some improvements throughout the quarter in some of your key markets. So I was just wondering if you could maybe provide some more color or Jack, if you could maybe quantify how the revenue trends progressed on a monthly basis in, you know, maybe France, Italy, US, maybe UK, and any color on what you're seeing so far in January if you have it. Thanks. Jack McGinnis: Thanks, Trevor. I'd be happy to add a little color there. I'd say generally, we're seeing positive momentum in a lot of our large markets. And maybe to your point, starting with France, improvement over the last four months sequentially month over month. So we ended September on a days adjusted basis at minus four, improved slightly into October, moved to minus three in November, and ended December minus two. So very good progress sequentially. And as we sit here in January, we're seeing ongoing progress here, and that aligns with the guide that I gave for the first quarter. So that is, you know, ongoing quarter over quarter improvement in France. And that's great to see for us. And so that's our biggest country, and that's a big driver. I would say if we look at the US, you know, we've been very, you know, we've discussed the trends in Manpower very frequently this year. Very strong. We're performing really, really well. So they've been running plus seven, plus 8% in the second half of the year. We take that momentum into the first quarter. I think on US overall, on an underlying basis, very stable from Q4 to Q1. I say underlying because we know the healthcare go-lives in the Experis business, as I mentioned in prepared remarks, can be a bit lumpy. But if you normalize for that, the US is trending on a stable position into Q1. And then Italy, as we mentioned, as Jonas mentioned, performing very, very strong. And I'd say on those trends, Italy, very strong sequential quarter trends as we end the year here. And I'd say we saw that generally December is always a little bit of a tricky month just based on the holidays and so forth. But I'd say on an overall basis, Italy is continuing to see very strong momentum, particularly here in January. So moving, you know, we're at that plus 7% base adjusted in Q4. And we feel really good, as I mentioned, for a similar trend into Q1. So I'd say those are the biggest countries and some of the momentum. But as I mentioned, I'd say generally, moving in line with positive trends as we start 2026. Trevor Romeo: Got it. Thank you, Jack. Operator: Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open. Jeff Silber: Thank you so much. Jonas, I think in one of the answers to the previous questions, you talked about being able to control what you can control. I'm just curious, are you expanding your workforce in any regions? Or because of the technology you put in, you're still able to have, you know, some excess capacity. Jonas Prising: Good morning, Jeff. Yeah. We are expanding more so thinking about this from a regional perspective. We're thinking about it from a country perspective. And there are definitely countries where we're expanding our teams, and it's mostly in demand-driving roles. So when you think about the growth that we're seeing in Japan, if we're thinking about the growth we're seeing in Italy, we're leaning into and we're expanding our team members there, especially in demand-driving roles. And we continue to bring great tools through the PowerSuite to our recruiters. And we are seeing, as I mentioned in my prepared remarks, some notable productivity improvement, for instance, on our candidate screening capabilities. And one of the huge advantages that we believe we are uniquely positioned to take advantage of is our global scale of PowerSuite. So we have a global technology infrastructure, modern and a global data asset that we are leveraging for faster expansion of recruiter tools that drive better productivity and enhance the client and candidate experience. So the answer to that is yes. We adjust capacity to demand, and in some cases, in some countries, that means we're leaning into demand-generating roles. In others, we are pulling back so that we ensure we protect our ability to deliver the bottom line margins that we're targeting. Jeff Silber: Alright. Great. Thanks for the color. Jonas Prising: Thanks, Jeff. Operator: Thank you. Our next question comes from Ronan Kennedy on behalf of Manav Patnaik with Barclays. Your line is open. Ronan Kennedy: Hi, good morning. This is Ronan Kennedy on for Manav. Thank you for taking our questions. Could you please reconfirm? I know you talked about what you're seeing associates on assignments in key markets, the positive trends in the US and France, etcetera. Could you please reconfirm other leading indicators to be mindful of that give insight to potential depths and breadth of the demand dynamics, and then what we could or should potentially look for to see to enable to call a broad-based recovery, whether that's, you know, new assignment starts and priority verticals or even fundamental client conversations. What we could look for for that broad-based recovery confirmation. Jonas Prising: Thanks, Ronan. Well, there are a number of indicators that we look at from, you know, demand perspective. And, you know, you can take anything from the conversations that Becky referenced. You know, we are hearing more clients express a desire to start to think about through our various brands about projects that they have held back and are now getting closer to activating. As Becky said, we're not seeing the activation yet, but the number of conversations with clients and employers seems to indicate that they are looking forward with greater confidence and that their plans are getting closer to being executed. So we then look at, of course, the flow of demand in terms of RFPs and RFIs that would come our way. And clearly, what we've been very successful at is targeting the verticals, the industry verticals that we feel good about for growth at this point versus others that we notice that we see have, you know, headwinds. So we feel, for instance, that the aerospace and defense sector could give us some tremendous opportunity across Europe. We have strong positions in a number of our very strong countries such as France, the UK, Sweden, and Italy. So we're very well positioned there. We feel good about that opportunity. So that's how we're sort of thinking about both looking at the moves within industry sectors as well as the client conversations within those sectors or verticals and then in other areas as well. And frankly, you know, when we'll know the broad-based recovery when you see these inflection points coming through in lots of our countries. But as we mentioned in our prepared remarks, we've been very encouraged by the overall trend in a number of our important markets. We continue to do very well in Asia Pacific as well as in Latin America. In fact, Asia Pacific broke an all-time profitability record in 2025. Latin America continues to perform very well. We have market-leading positions in 13 countries in that important region. So we're encouraged by what we're seeing. But we're not fully there yet from a broad-based recovery. But we are controlling what we can control, driving growth where we see demand, and adjusting our cost and capacity to demand in markets that remain more difficult. Ronan Kennedy: Thank you. Appreciate it. And as a follow-up to having spent two weeks in Europe around the World Economic Forum, are there any implications of potential political sentiment shift from Europe towards the US or any shifts in trade alliances as a result of US ambitions in the continent and the general approach that was taken at Davos? Could these developments have implications for some of the momentum you are seeing in Europe? Or the shape of recovery inflection or general time required for stabilization where it hasn't come yet? Jonas Prising: You know, we clearly are living in a turbulent environment, but I have to say from what we're seeing from our clients and from our business, at this point, this is not impacting our business. And to Becky's earlier point on flexibility, if anything, employers are becoming more confident about the future. Against the backdrop of greater turbulence, flexibility is key for them to find the right talent and be able to adjust, you know, with various kinds of skill sets. So we actually think, you know, this so far has not really impacted our business based on the trends that we're seeing. And we're now used as employers and organizations to a more fluctuating geopolitical environment, and companies at some point have to decide to manage through it and get on with the business of doing business. And that's what we're seeing, I think, in a lot of countries. Ronan Kennedy: Thank you. Appreciate it. And may I just sneak in one more? Could I ask for your broad, high-level characterization of the labor and hiring markets? I think previously, it was frozen. Is it thawing now, or how would you characterize it? Jonas Prising: I would say that the labor market is stabilizing, and, you know, we think the broader labor market, if you're referring to the US, is heading to stabilization. Thank you very much. Operator: Thank you. Our next question comes from Josh Chan with UBS. Your line is open. Josh Chan: Hi, good morning. Thanks for taking my question. I just have a two-part question on margins. So for SG&A leverage, it seems like your momentum is picking up quite nicely there. So could you talk to what's driving that in the last two quarters and where SG&A leverage could potentially go? And then I guess number two is on the gross margin line. You know, a lot of this call has been about stabilization, but that's sort of the one line that has not yet stabilized. So do you have any thoughts on whether gross margin will stabilize as the demand environment does the same? Thanks for any color there. Jack McGinnis: Okay. Thanks, Josh. I think on the SG&A, it's pretty straightforward, and thank you for your comments there. So we are very proud of the actions we've taken and the results we're seeing in the SG&A coming down 4% in constant currency in the fourth quarter. And it's to your point, that's an improvement from the 2% constant currency decline in the third quarter. So, you know, we've done a lot of work. We've taken a lot of actions earlier in the year, and we're seeing the benefits of that hard work coming through in the run rate now. And that is going into our continued trajectory into Q1 as well as we continue to see the benefit of those actions. And, you know, we've talked previously about, you know, the restructuring we've taken. A lot of that in Northern Europe. And, as we mentioned on the call and you saw in our results, Northern Europe flipped to a profit in the quarter. So, you know, based on the work we've done earlier in the year, we are actually helping to improve the seeing the benefits of those actions, helping to improve the profitability of Northern Europe as we end the year. So those are the main items that are driving that. Continue to be more stable. And, you know, in parts of the business that are still recovering, we're holding the line on cost, and that's coming through in the run rate. Your question on GP margin, I would say it really to your point, it has come down over the course of the year. But that's that enterprise element that we've talked about. And as enterprise demand continues to be the biggest part of demand in the current environment, that's averaged in. And to my earlier points, a lot of that has worked its way through, Josh. So you see that on the staffing margin progression from Q3 to Q4 being pretty stable year over year. But the bigger part of the story on an overall basis is perm. Perm is lower, and perm will come back in the future, but it's at historically low levels of a percentage total GP for us right now. And that's depressing the GP margin on an overall basis. So when perm starts to rebound, we'll see an opportunity for GP margin to increase. And we also will see opportunities for that as the higher margin businesses inflect in the future and start to average in at a higher percentage of the mix as well. So and convenience will come back going forward as well. So we have some really good opportunities as you know, right now, is the strongest part of demand, and that's been holding very steady. But as the other components start to come back and they usually follow enterprise, enterprise usually leads. That will be opportunities for us to increase GP margin in the future. Josh Chan: Great. Thank you for that color, Jack. I appreciate that. Operator: Thank you. Our next question comes from Andrew Grobler with BNP Paribas. Your line is open. Andrew Grobler: Hi, good morning. Just the one from me around technology. With the IT sector still down quite sharply in the US, what are you seeing in those end markets? I noted one of your competitors was talking about improvement in late 2025 and into this year. Is that something that you are also seeing? And if so, what can we expect through the remainder of this year? Thank you very much. Becky Frankiewicz: Yeah. Good morning, Andy. Yeah. We're, as we mentioned in our prepared remarks, we've seen sequential improvements in Experis, although still experiencing headwinds. We're encouraged by that. I would say that in conversations with our clients, you know, they've been very focused on a number of areas, and specifically within the technology sector, the very strong hiring that occurred during the pandemic caused a hiring bubble, and they've been working their way through that. And they've been focused on projects primarily related to AI. But with our clients, we are hearing that their pent-up project demand is getting closer to being executed. We haven't seen this come through yet, but we're encouraged by those conversations, and we would expect to see that, you know, the sequential improvements that we've seen in Experis continue. We would characterize it as stable into Q1. But overall, our clients are telling us that we want to proceed with the other technology investments and the projects that we need to do. And overall, I would say, you know, we've seen a very nice evolution around data and infrastructure projects where, you know, we were having to shift a bit into those areas. And then with our AI tools that are starting to give us, you know, confidence both consulting with our clients on how they can access AI and use AI in their own work and how we are providing solutions to our clients that resonate. We are faster, efficient, better quality, more cost-effective, which is also differentiating us. So long term, we feel very good about the trajectory that we have in Experis, acknowledging the headwinds, acknowledging that we still have a lot of work to do, but we think that we'll continue to see the progress going forward. Andrew Grobler: Thank you very much. Operator: Thank you. Our next question comes from Tobey Sommer with Truist. Tobey Sommer: Wanted to ask you a follow-up question on your comments about the 4.5% EBITDA margin goal longer term and that commitment. Could you talk to us in broad strokes, whether it's about top line, gross margins, or, you know, mix that may be required from the higher margin sources of revenue, how much do those have to rebound? Do they have to go back to prior peaks, or is it sort of more normalized levels to think about that long-term EBITDA margin goal? Thanks. Jack McGinnis: Yeah, Toby, I'd be happy to talk to that. So I think the way to think about it, and that is definitely part of the equation, right? So if you look at where we're ending 2025, so at 2.1% margin, you know, our previous peak was 4.1. And if we look at the mix of the businesses, what we've seen with the 5% Manpower growth in the quarter, Manpower certainly has been averaging in as a bigger part of the GP mix. And as the environment continues to recover, that will start to change. We'll start to see Experis and Talent Solutions start to average back in at a higher contribution. That in itself is going to be a positive. And we were just talking a little bit about this on the GP margin. That in itself will be a very positive impact on the overall consolidated GP margin. And we do expect that to happen. As Jonas said, we don't know the exact timing of that. Those parts, you know, permanent and professional have been more sluggish. But we are starting to see some signs that, you know, on the stabilization, there's opportunities for improvement here as we walk into 2026. So we will need that to happen. That will be important as we look at the overall GP margin component as getting back to where we were from a mix perspective. And that will be quite significant. And then, you know, just forget, you know, aside from just the brands, as we mentioned, just even within all the brands, as we see convenience come back, that will be a positive for the GP margin. So that's definitely part of the equation. As I mentioned previously, I think all the work we're doing structurally on cost is a big part of the equation. So as we see EBITDA, as we see that GP margin improvement fall down to the EBITDA line, combined with the cost improvement, those two items together will be big drivers for that EBITDA margin progression to the 4.5%. And as I said, hey, if the recovery is stronger and we start to see professional and RPO and perm come back stronger, it'll be faster. We'll see more help on the GP line. We'll get more operational leverage. But even in a modest recovery, as those, you know, as those sectors come back, that will be positive for both GP and EBITDA margin. So it's really just a question of, you know, the pace of when those other sectors start to come back. But it is encouraging that we're seeing Manpower now growing at 5% as we end 2025. And so that's a very good initial sign. Tobey Sommer: Thank you, Jack. Operator: Thank you. Our next question comes from Harold Anter with Jefferies. Your line is open. Harold Anter: Hello. This is Harold Anter on for Stephanie Moore. I guess, just on AI just real quick. I guess, you know, could you provide your long-term views on the impact of blue-collar versus white-collar staffing? And then, I guess, are you hearing clients talk about the need to hire people who can use AI? But they focus on just training their current staff to use the technology. And I guess the last thing is do you expect to see long-term pricing to be pressured in the future as clients request to share in the productivity benefits gained from AI. Thank you. Jonas Prising: Alright, Harold. We'll try and cover that's four questions in one. So here it comes. You know, first of all, let's be clear that we think that AI has tremendous opportunity for growth and productivity improvement generally, but specifically to our business. And that's what we are preparing for, and that's what we have been preparing for as we are creating more growth opportunities in terms of addressing how we're setting ourselves up for growth. In the research that Becky has done, we've looked at some of the, you know, the AI resiliency, and I mentioned this in my prepared remarks that there are a lot of skill sets that we have in Manpower that appear to be more resilient and that we're seeing in the other skill sets, white-collar, the emergence of some greater use of AI, and frankly, mostly enhancing human capabilities as opposed to replacing them. But I think, from a usage perspective, Becky, as we look at what we talk to our clients about and how they see it, in terms of where they're using AI, I think that could be great color. And then also, maybe talk a little bit about the work that we have done on SoFi.ai and how that is resonating with our clients as well. Becky Frankiewicz: Yeah. Thanks, Jonas. First, I would say I've spent a lot of time focused on AI over the last few months trying to understand what it can do today, but maybe more importantly, what it will grow up into tomorrow. And it is true that AI will impact most jobs, most skills inside most jobs. The difference, it'll be the varying degrees, and I think that was part of your question. What we found is that for blue-collar industrial manufacturing roles, they appear to be more resilient over the horizon where the disruption is happening more in the white-collar software developers and coders as we've already seen in demand. You know, keep in mind, though, that in the US, software developers are still the number three job in demand in our country. So even though it's impacted, it's still a huge in-demand role. We've also seen impact in call center professionals. And the good news for our business is we have limited exposure there, so we have an opportunity to actually find opportunity in this changing landscape. And a highlight of that is what Jonas mentioned with Experis, and us getting into these coding assistance to provide value in that incremental growth pocket for us as a company. Small, early days, but we think that's an opportunity. In terms of SoFi, Jonas mentioned SoFi.ai, just to remind everyone, it's our proprietary AI ecosystem. Ecosystem. So it's built on our PowerSuite foundation. It's why that foundation is so important. And it's designed to integrate human expertise, our proprietary data, as well as leading-edge AI models. And probably one specific example that I'm encouraged by is a pilot we're doing around workforce insights. So that we're providing real-time AI agents available twenty-four seven to give accurate labor market insights. It's 10x faster than anything we could do with humans alone, it is augmenting humans. It's 99% accurate, and it has self-correcting capabilities. So if something is off, it will alert us. And so those are the kind of actions we're taking to find profitable growth opportunities in the changing landscape. Jonas Prising: And then to your last part of the question, Harold, you asked about, you know, we're seeing an impact on this from a pricing perspective in taking a share? And, you know, whilst it is early days, most of our enhanced AI capabilities are coming through with higher value offerings and differentiated innovation. So we're actually seeing opportunities for us to deliver higher value work and actually maintaining, if not increasing, our margin opportunities on those offerings. So so far, we have not seen this. And the indications are positive to the reverse, but this may change as time goes on. Operator: Thank you. This concludes the question and answer session. I'd like to turn the call back over to Jonas Prising for closing remarks. Jonas Prising: Thanks, Michelle, and thanks, everyone, for joining us this morning for our Q4 earnings call. We look forward to speaking with all of you again on our Q1 earnings call sometime later in April. Until then, stay warm. Greetings from the frozen tundra in Milwaukee. We look forward to speaking with you on our next call. Thanks, everyone. Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.

101天前Insight Analytics约5分钟阅读

VIRT 2025 Q4 财报电话会议

Operator: Hello, everybody, and welcome to the Virtu Financial Fourth Quarter 2025 Earnings Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to Matt Sandberg at Virtu Financial. Please go ahead. Matthew Sandberg: Thank you, and good morning, everyone. Thank you for joining us. Our fourth quarter 2025 results were released this morning and are available on our website. With us today on this morning's call, we have Aaron Simons, our Chief Executive Officer; Cindy Lee; our Chief Financial Officer; and Joe Molluso, our Co-President and Co-Chief Operating Officer. We will begin with brief prepared remarks and then take your questions. First, if you remind us, today's call may include forward-looking statements, which represent Virtu's current belief regarding future events and are, therefore, subject to risks, assumptions and uncertainties, which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10-K and other public filings. During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA and adjusted EBITDA margin. These non-GAAP measures should not -- should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the Investor portion of our website where you'll find additional supplemental information referred to on this call as well as a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful as well as how management uses these measures. With that, I will turn the call over to Aaron. Aaron Simons: Thanks, Matt. Good morning, everyone. As a reminder, the prepared remarks for earnings calls moving forward, will focus predominantly on our financial results, allowing us to get to Q&A more quickly. Last call, we spoke about our plans to grow our trading by investing in our infrastructure, acquiring talent and expanding our capital base. We also emphasize that this growth would be a broad effort across the firm not limited to a handful of initiatives. The fourth quarter was a preview of the impact of this renewed focus on growth. Our results for the fourth quarter were impacted positively by a favorable operating environment, and while our capital accumulation efforts are just underway, the incremental capital we added and our ability to dynamically deploy it had a meaningful impact on our results. I'll hand it over to our Chief Financial Officer, Cindy Lee, who will review the financial results. As always, you can find additional perspective on the quarter in our detailed supplement. After her statement, we will move on to Q&A. Cindy Lee: Thank you, Aaron, and good morning, everyone. For the fourth quarter of 2025, we generated adjusted net trading income or ANTI of $9.7 million per day or a total of $613 million. This was the highest quarterly total since Q1 2021. For the full year 2025, we generated $8.6 million per day or $2.1 billion in total. Turning to our segment performance. Market Making reported ANTI of $7.8 million per day for Q4 and $6.7 million per day for the full year 2025. Virtu Execution Services reached $2 million per day for the quarter and $1.9 million per day for the full year. This is the seventh consecutive quarter of increased ANTI for VES and high watermark since early 2022. An indication of substantial progress we have been noting within the VES business. This performance reflects the investment we have made in technology, our focus on client acquisition and the expansion of our product offering. Both of our operating segments benefited from generally favorable market conditions, elevated volumes and strong execution by our team. Our profitability this quarter was robust. We generated $442 million in adjusted EBITDA, representing a 72% margin. Adjusted EPS was $1.85. For the full year 2025, we recorded $1.4 billion in adjusted EBITDA, 65% margin and $5.73 in adjusted EPS. These numbers all represent high since 2021 and underscores the operating leverage inherent in our business. On Slide 6 of our supplemental materials, we provided a summary of our operating expenses. Our full year 2025 cash compensation ratio was at 19%, which was within the historical range. The increase in compensation expense reflects our continued focus on retaining and acquiring top talent across the organization, particularly in trading and technology. Turning to capital. We increased our invested capital by $625 million in 2025, $448 million of which came in the second half of the year while generating an average return of 100% over the year. We will continue to expand our capital base, strengthen our infrastructure and deploy capital where we see the greatest opportunities, all while maintaining our quarterly dividend of $0.24 per share. This completes our prepared remarks. We will now take your questions. Operator: [Operator Instructions] First question comes from Eli Abboud from Bank of America. Eli Abboud: The dollar value of your 605 quoted spreads looked like it declined sequentially. So is it fair for us to conclude that this quarter's strong performance came from areas outside of equities, and if so, can you provide some granularity on which asset classes were the largest contributors to your sequential growth? Joseph Molluso: Eli, It's Joe. I think when you look at our performance this quarter, you've got to begin with the favorable operating environment, realized the volatility was up. The VIX was up. Equity share volumes were up, and there's a number of underlying drivers in the environment that should hopefully allow that to continue around asset rotation, around dollars, fixed income, currencies, commodities. We're a scaled globally connected firm, and we are more than just the retail flow business that shows up in the 605 reports. So I think that's the takeaway that we would want to leave with you. I think the growth in the trading capital base had an impact. We had a 100% return on incremental capital in the quarter. I don't expect that to always be the case, but obviously, when you make that kind of return and you have incrementally more capital, then it has an impact. And as Cindy mentioned, VES had a record quarter. All of its businesses are performing well. There's accelerating client engagement. There's new clients doing business. They're onboarding a lot of clients, there's existing clients doing more business. And that performance has been across all products, brokerage, algos, venues, workflow analytics and all geographies. So yes, that's the long answer. The short answer to your question is yes. the customer market making business, even though the quoted spreads have been down in the beginning of the quarter, as you can see from the public information, it's still elevated, I think, over a long period of time. But the noncustomer businesses, it did well, very well. Eli Abboud: Got it. And for a follow-up, ETF fund launches are expected to hit a record in 2026 with the recent ETF share class proposal out to the SEC. So I was wondering if you could refresh us on where Virtu has exposure to the ETF market and help us understand the potential -- the materiality to Virtu, if that does, in fact, come to pass? And in particular, I was hoping maybe you could help us size up the contribution of your create-redeem business for the overall Virtu P&L? Joseph Molluso: Again, Eli, I think it's difficult right now to give you something that would quantify the impact. But in general, we are a very large player across all of our businesses. In ETFs, we're an AP, and I don't know how many, but a large number of ETFs. There are -- it's a growing share class. It's continued to be a growing share clastic which you may be referring to some of the electronification around and tokenization, which, again, more, more product, more structure is generally a good thing for us. So I can't quantify for you a specific ETF statistic. It's just -- it touches just about every part of our business. Operator: We now turn to Patrick Moley with Piper Sandler. Unknown Analyst: This is Will Katz on for Patrick. Production markets, obviously, it seems like hey take an even larger role in the headlines every day. Can you give us your updated thoughts on participating in the asset class and whether sports or non-sports contracts would represent a more attractive entry point in the space? Aaron Simons: Sure. So we're generally optimistic anytime there's a new market or a new asset class to trade. So we're definitely in the process of connecting, understanding how the venues work, establishing relationships. That being said, in these markets, there's not like perfect regulatory or legal certainty. So we're definitely being very careful and evaluating how those things are going to shake out. With regards to the actual markets, I mean, obviously, there are certain markets that are much more similar to our current trading than, for example, like outright sports bets. But even within that context, there are market making like activities, cross-exchange, arbitrage and things of the like that will certainly investigate. Operator: We now turn to Dan Fannon with Jefferies. Unknown Analyst: This is actually Rick Roy on for Dan. And just my formal welcome to the new management. And regard from that, aside from that, are you able to quantify or perhaps describe how impactful the non-equity side of the business was in terms of the market-making metrics that you posted this quarter and perhaps even layering that on to VES and things like cross-asset workflows. And specifically with regards to some of the volatility that we saw with digital assets, precious metals and commodities and I know you don't give sort of that breakout anymore, but any sort of incremental color around that would be helpful. Joseph Molluso: Sure. Again, this is Joe. I think I would repeat a little bit the answer to the first question. And oftentimes, when we get an equities versus non-equities question, there's an underlying assumption there that equities represents the 605 business and everything else is non-equities, and that's not true. So the 605 retail flow business is what it is. It was as I said, it was a very good quarter. It was elevated relative to the past, and it was just the public metrics anyway, indicated as someone pointed out that it was down quarter-over-quarter. But in the non-customer Market Making business, we have a very large equities presence. We have a fixed income currencies and commodities presence. We have an options presence. We have a crypto presence. And as I said, we're global. So in the quarter where you have these kind of asset flows and these kind of movements in asset prices between fixed income and commodities and currencies and equities in Europe and in Asia and in the U.S., a firm like ours can thrive. So we don't break that out. We have no intention of breaking it out. But it's important, I think, to understand that outside of the retail flow business, we have a broad market making business that includes global equities, which did very well. Unknown Analyst: Understood. And then maybe just a follow-up then on sort of the non-retail more so client side of the business. Just wondering where are you sort of seeing the greatest level of incremental demand? Is it -- would it be incremental customer adds or greater utilization of some of those services, whether on the Market Making side or on the execution side? Joseph Molluso: That's more of a VES question, I think. And as I said, VES is firing on all cylinders. There's been a great deal of product improvement over the past year, 2 years, 3 years in terms of the algos in terms of venue -- the venues and in terms of workflow and analytics. There is retooling going on to accommodate non-equity asset classes in the workflow and analytics products and that's continuing. So VES had a very good quarter. And we had stated a goal of [ $2 million ] a day through the cycle for VES. Obviously, this is a favorable environment, and they were just short of it. So I think we're well on our way to getting to that goal on a through-the-cycle basis. Unknown Analyst: Understood, that's helpful. But I guess, any commentary on maybe the forward pipeline of adding customers or product innovation on that side? Joseph Molluso: Yes. All of the above. Operator: We now turn to Alex Blostein with Goldman Sachs. Unknown Analyst: This is actually [ Aditya ] filling in for Alex. Just zooming out and looking at the bigger picture, can you discuss your top 3 strategic priorities for 2026 in terms of either new initiatives or existing markets? Aaron Simons: Yes. So I mean as we sort of said in the last 2 statements, we're not focusing on a very small number of growth initiatives. We're really just focusing on growing everywhere in the firm and responding dynamically to the market opportunities that are available. But it's a very broad effort to increase the total firm's trading capital, which we move around relative to opportunity, investing in our infrastructure and acquiring excellent people. Operator: [Operator Instructions] We now turn to Ken Worthington with JPMorgan. Kenneth Worthington: You mentioned you deployed incremental capital during the quarter. Can you give us a sense of the magnitude of the incremental capital that you did deploy. And as we look to the coming quarters, if market conditions are accommodative, what is the magnitude of incremental capital that you could deploy if you so choose -- you so chose? Joseph Molluso: Yes, Ken. I think if you look at the 2024 year-end trading capital that we published and then if you look at the 2025 year-end trading capital that we publish, the total increase was over $600 million -- $628 million, $450 million of that was in the second half. And as you know, as your firm helped us increase our total debt by $300 million. So the debt increase was a portion of that. It is -- the answer in terms of how much we deployed is sort of easy in that we've deployed pretty much all of it. And that doesn't mean that we don't maintain substantial buffers and substantial excess capital in our U.S. broker-dealer and our other regulated entities. It just means that we've reduced the cost of capital because we relied less on contingent liquidity like revolvers to fund our operations. But I think overall and long term, when you have a quarter like this, you're going to have opportunities to deploy the capital. There will possibly be quarters when you're not deploying all of it or your buffers are greater just because the opportunity isn't there. Again, I think the underlying drivers of the environment are in place that hopefully we're not in that position. I think on the prior call, last quarter, we stated a long-term goal of being through the cycle, [ $10 million ] a day. And if you look at historical returns on capital, I don't expect them to be 100%. But if they're in the 50%, 60%, 70% range, you can do the math and figure out that we would expect to be able to deploy more capital than we have today, and we will achieve that through organic growth, and we'll achieve it through incremental borrowings to the extent they make sense and they're prudent, right. So it's a nuanced answer because it's really going to depend quarter-to-quarter. But in order to achieve our long-term goals, we're going to use the amount of capital we have today and even more. Kenneth Worthington: Okay. Great. I'll take a shot on this question. ICE bought its way into poly market in part because of innovations around clearing, settlement and collateral. Do you see the potential for these types of efficiencies to be big enough to make a difference to the Virtu P&L. And if so, does -- do these sort of changes widen the advantage that the Virtu citadels and jumps have over the rest of the market? Or do they level the playing field? Aaron Simons: I can take that. I think it's like a little early to say what the exact economic impact is going to be. Like I don't really view it as something that's going to be a step change in sort of all-in profitability on these sorts of trades. But I do think, in general, when there is added complexity in the market space of just different ways of trading the same thing, more connectivity, more different protocols, that's a relative competitive advantage for us because we're in everything, everywhere and connecting to another venue and understanding another clearing settlement cycle is just something that we've done over and over and over again. So any time they're sort of like multiple products with the same underlayer, that's a relative tailwind for us. So we're happy for the increased product space. Operator: This concludes our question-and-answer session. I'll hand back to the management team for any final remarks. Aaron Simons: I think that's it. Thanks, everyone, for joining. Operator: Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

101天前Insight Analytics约5分钟阅读

RNK.L 2026 Q2 财报电话会议

John O'Reilly: Good morning, everyone. A little video there of the Vic, Victoria Casino, Vic as we know it, now complete with 80 gaming machines and performing very strongly too. It's a fabulous casino. Thank you for joining Richard Harris and me this morning for the Rank Group interim results for the half year from July to the end of December 2025. Thanks to those of you who are here with us. Great to see you. And thanks also to those of you who are joining us online. Now very sadly, this is my last set of results after what has been a hugely enjoyable best part of 8 years as CEO of the Rank Group. Some of you already know I'm retiring today. I'm super sad to be leaving as this is a very special business with some very special people and I shall miss it enormously. And I would like to thank all my colleagues within the group for their talent and for the commitment that they have in delivering huge amounts of fun and excitement to Rank's customers. I'd also like to thank our shareholders for their personal support to me over the past 8 years. However, while sad to leave, I'm absolutely delighted to be passing the baton to Richard, who is doing and will continue to do a superb job on behalf of the Rank Group, its colleagues, its shareholders and of course, its customers. So for today, I've just carved out a very small speaking part for me, a quick overview of half 1 performance, and then I will fully hand over to Richard, who will take you through the detailed first half financial numbers and talk some of the key trends, the strategic challenges and the opportunities ahead. And notably, of course, how we're still on track to get the group to an operating profit of GBP 100 million and beyond. Right to business, and we've had another good half in terms of our commercial and financial performance with revenue and profit growth across all of our businesses. So here are the headlines. Like-for-like net gaming revenue was up 6% at GBP 419.8 million. Underlying like-for-like operating profit rose 15% to GBP 40.6 million. The group's underlying operating profit margin was 9.7% and that was up from 8.9% in half 1 last year. Our return on capital employed continues to progress, up 2.6 percentage points, to 15.9%. At a group level, our employee engagement score, which is -- has always been very important to us, has risen again and is now at 8.2, that's out of 10, which reflects the level of energy and drive within the Rank business. Within the Grosvenor Casino business, average weekly net gaming revenue was up 6% to GBP 7.8 million per week, which has been supported by the rollout of 850 additional gaming machines following the legislative change last summer, a rollout that commenced in late August and completed in December. In the Mecca Bingo business, net gaming revenue was up 4%. And in Enracha in Spain, net gaming revenue was up 6%. Digital revenue grew 8% with Grosvenor growing 17% and Mecca Bingo was up plus 5%. And the Yo business in Spain was back into growth for the half as we had expected. And in terms of current performance, we've had a very strong Christmas and New Year trading period and that has continued through January with trading very much in line with our expectations. So another good half year period for the group, reflecting the strategy we have in place, the priorities we've set and the quality of execution by our talented colleagues. And on the strength of the performance and the confidence in the business, notwithstanding the very significant increase in digital gaming taxes we faced from April, the Board has recommended an interim dividend per share of GBP 0.01. Richard, over to you. Richard Harris: Good morning, everyone. And for one final time, thank you, John. I'll spend a bit of time taking you through the key drivers of performance as well as updating on that plan to deliver at least GBP 100 million operating profit in the medium term. So starting with the operating profit improvement in the half. Like-for-like revenue growth of 6% contributes GBP 14.5 million of additional profit after deducting all direct costs. That's partially offset by higher employment costs of GBP 6 million, which have grown 4% on the prior year due to the higher national minimum wage and the impact of higher national insurance contributions. Over the full year, employment costs are expected to increase by a similar percentage. Depreciation costs were higher in the year due to the capital investments we've been making in the business, and the higher statutory levy also impacted performance in the half. However, overall operating profit is up 15% on a like-for-like position from last year. Net free cash flow in the period was GBP 3.8 million. And within this, we've continued to make targeted investments with strong expected paybacks. Capital expenditure was GBP 27.6 million as a result. For the full year, we've adjusted the CapEx guidance to be in the range of GBP 50 million to GBP 55 million. And the change from the previous expectation of GBP 60 million is just a timing point with the reduction being deferred into next year. There was a working capital outflow of GBP 5 million in the period, which was in line with expectations and you can expect working capital to be broadly neutral for the full year. Cash flows in relation to separately disclosed items were GBP 5.5 million. So that includes income and outgoings associated with closed venues, but also the GBP 6.5 million impact of the Spanish payment fraud. It's worth dwelling on that for a moment because it's not something we expect to happen and we have taken the issue extremely seriously. As soon as we became aware of the matter, we put in place additional preventative measures with immediate effect to ensure no further risk to the business. The investigation has concluded and we've made some further improvements to the group's payment controls as a result. Returning to the slide. In the table on the right-hand side, you can see how the net free cash flow has converted through into closing net cash of GBP 39.4 million. There's deferred consideration of GBP 1 million received from the business disposal that concluded in December 2024. Some shares have been bought for the outstanding LTIP schemes. And last year's final dividend of GBP 9.1 million was paid in the period. Including lease liabilities, net debt was GBP 165 million. As a reminder, in the second half of last year, we extended the leases on a number of key strategic properties in Grosvenor that will come into the end of their lease term and that materially increased our lease liabilities. As reported in today's announcements, we've also capitalized gaming machine leases onto the balance sheet in Mecca. Lease payments in the cash flow increased to GBP 23.4 million for the same reason. So moving into the business unit detail for last year -- the first half, I should say. Grosvenor venues grew by 6%, driven by visit growth. Following growth of 8% in Q1, revenue in Q2 was up 4%, impacted by lower consumer confidence in the run-up to and immediately after the November budget. Subsequently, trading over Christmas and the New Year period was strong. Gaming machines were the fastest-growing product vertical with revenues up 11% due to the early benefit of the new machine rollout. I'll go into more detail on that in a moment. Table gaming revenues grew 2% and electronic gaming was up 6%. London performance has particularly benefited from the refurb of the Vic, where total revenues were up 13% on the same period 2 years ago. So that's prior to any refurb disruption. And over that same 2-year period, gaming machine revenues are up 26% with additional machines and gearing in mid-November. So I'm very pleased with how that's performing. Employment costs were the main headwind for Grosvenor, growing GBP 3.8 million in the period. And as a result, like-for-like operating profit was up marginally at GBP 20.9 million. Colleague engagement scores in Grosvenor remain excellent as we continue to reap the benefits of our cultural change program, "From Like to Love." At the Capital Markets event we held in October, we laid out our plans to deliver average weekly NGR of GBP 9.5 million and to improve operating profit to over 13.5%, an increase of at least 500 basis points. A critical part of that plan is enabled by the casino reforms, where we can increase the number of gaming machines from 20 per license to 80 per property. 850 additional machines were rolled out before Christmas, an increase of around 65%. That's in line with our planned timetable. In casinos where we've only been able to increase machine numbers from between 20 to between 30 and 40, revenue growth has generally been very strong with examples of casinos in which the average revenue per machine has increased with additional supply. Where we've significantly increased the available machines from, say, 20 to 80, the revenue per incremental machine has inevitably been lower and we're working to increase the customer awareness and stimulate demand. Demand levels are gradually building as customers become aware of the better availability and choice of both machines and content. And just as a little reminder, here's the maturity curve that we expect the casino estate to go through. We're currently early in the launch phase and in the venues that have received additional machines, we've been able to satisfy the unmet demand as expected. Considerable focus has now been applied to optimize machine mix, product layout and service levels at an individual casino level. In H2, we'll also launch a new gaming machine rewards scheme that enables customers to earn and redeem rewards directly onto the gaming machines themselves. Grosvenor now has 6 machine suppliers, an increase from the historic position of 2 primary suppliers, providing a much broader choice for customers. And further suppliers and game packs are being trialed in the second half of the year. The speed, focus and direction of the next phase in machine rollout will be shaped by customer and performance data. Player behavior, player preferences and demand curves will inform investment into our estate, ensuring we continue to deliver strong return on investment. The second component of the land-based reforms is the ability to offer sports betting in casinos. We're trialing a full sports betting proposition in Luton and Leicester as well as a reduced offering in Reading South. Learnings from the trials will determine the options for wider estate rollout. And over time, sports betting has the opportunity to broaden the appeal of casinos. We're excited to understand how our customers respond to these trials. In table gaming, we continue to add more innovative side bets and progressive jackpots into our live table proposition. We've completed the rollout of our table management system across the whole estate and that uses AI-led real-time recommendations and data to optimize table opening and pricing across the estate. There's much more performance upside to come from that. The ongoing refinement of our approach to safer gambling revolves around the better use of data and technology, improved processes for identifying and addressing potentially harmful play, developing the skill sets of our colleagues and supporting colleagues in improving their interactions with customers. In H2, we're trialing facial recognition technology in a number of our venues to more quickly identify customers who may present a higher risk. Turning now to digital. The first half of the year saw further progress with like-for-like revenues up 8%. Within this, the U.K. business was up 9%, driven by strong growth in average revenue per user, reflecting the appeal of our products and our service to the regular customers that we serve in our business. Improvements in data science, enhanced customer journeys, efficient and effective customer incentives, all played a part in driving growth. And those levers will continue to be a focus as we move into a higher tax environment. Grosvenor revenue was particularly strong at 17% and Mecca grew by 5%. Again, revenue growth was slower in Q2 as we faced into tougher comparatives and the lower consumer confidence. However, in absolute terms, we continue to make further progress. Performance in the Spanish digital business also improved with growth of 4% in the second quarter, contributing to growth of 1% for the half year. Improvements in customer proposition, including performance marketing, launch of new apps for Yo and enhanced rewards programs have all contributed to the turnaround after a flat year in FY '25. We successfully became the first licensed bingo operator in Portugal with a soft launch in November. And the important next step is to build liquidity as part of the full customer launch at the end of February. And we're really excited about the opportunity that that presents. At a total level, operating profit for the digital business grew 12% to GBP 17.8 million and that's despite the impact of a higher statutory levy and maximum slot staking limits. As we reported at the time of the November budget, the impact of 40% RGD on the bottom line of the U.K. digital business is GBP 46 million before mitigating actions. Since then, we've already taken a significant cut to marketing spend that's further away from the customer transaction, including canceling above-the-line spend and TV sponsorship deals. We've also started negotiations with suppliers with the main benefits expected by the beginning of April and there are further efficiency improvements also expected by that date. So the majority of the heavy lifting in terms of mitigating actions has been done. However, it is reasonable to expect that the U.K. digital gaming industry will change significantly with higher taxation. We're already seeing operators planning to exit the market and it's inevitable that there will be reduced competition in the license market over time. In a world of higher taxation and lower competition, we'll take an agile approach to promotional investment, performance marketing and customer incentives. Our base plan does not see us reducing spend in this area as they are critical levers to driving long-term growth, albeit from a new lower profit base. We believe that going forward, the strength of our casino and bingo brands, the billboard effect of our venues and the attractiveness of our cross-channel experience will be key to driving growth. They will enable our digital business to rebuild profitability over the coming years as the market stabilizes with less competition and lower marketing investment. With that in mind, our focus on improving the customer proposition remains steadfast. In the second half of the year, we'll deliver a unified membership scheme to Mecca customers across venues and online. It will allow us to deliver an improved and more personalized experience across channels. The live casino experience also improved in the second half of the year with new live slot streaming products, improved venue-led casino content and again, enhanced customer journeys. The new bingo platform goes live in Spain this quarter, removing the capacity constraints we faced over the last 12 months or so. Moving to land-based bingo. Revenue growth in Mecca was 4% in the half, all driven by an increase in spend per head. Main stage bingo revenues were down 1% off the back of investments we've made in additional prize money, which we believe is key for the long-term health of the business. We introduced 600 new Mecca Max tablets across the estate as customers increasingly embrace the appeal of electronic bingo via tablet-based play. 59% of customer visits were played on electronic terminals, with those Max customers now accounting for 75% of main stage bingo revenue. Gaming machine revenue in Mecca grew by 9% and now accounts for 43% of our NGR. We're committed to providing the best gaming machine proposition in the industry and completed 5 gaming machine area upgrades in the half. We've also continued to focus on modernizing our external profiles with 5 new signage schemes. As with Grosvenor, the largest cost in Mecca is employment costs, which were up 2.9% due to the impact of national living wage, employees national insurance, but partially offset by cost efficiencies. As a result, like-for-like operating profit was up GBP 2.7 million from GBP 0.7 million last year. And in Spain, there was further revenue and profit growth from our estate of 9 well-invested flagship Enracha venues. Revenue was up 6% on a constant currency basis. And similar to Mecca, spend per head was a key driver of revenue growth. The ongoing investments in product, service and environment has seen gaming machine revenues in Enracha grow 10% and this included the initial benefit of an upgrade to the gaming machine area in Cordoba. In the first half, we also completed the refurbishment of our Sabadell venue in Catalonia and that's opened this week to customers. Underlying like-for-like operating profit in Enracha grew 5% to GBP 5.9 million. The abolition of the current 10% bingo duty effective from April this year provides a much more sustainable platform for Mecca's future, delivering an annualized benefit of GBP 6.5 million. This means the target of delivering double digit operating profit is now expected to occur next financial year, alongside much improved cash generation. Unified membership will materially improve the data quality we have in our Mecca venues. It allows customers to use their app as their membership card and receive personalized offers and rewards, something that's not been possible so far. We'll continue the rollout of signage schemes and gaming machine area upgrades. These low-cost investments are delivering returns in under 18 months and will help to further improve Mecca profitability. Further legislative reforms are on the horizon for Mecca and the future looking much brighter than it has since before the pandemic. On Enracha, we're trialing an immersive bingo experience called Bingo Boom in Seville, targeting a younger demographic in an enlarged venue. This is just one great example of the propositional improvements we're trialing in Enracha. So bringing all of that together, the group is well placed for further revenue growth in the second half of the year. We had a strong Christmas and New Year period. Performance in January has been in line with our expectations and we have a strong pipeline of initiatives to drive performance. In Grosvenor, the early results from the launch of the additional gaming machines reaffirm our confidence in the medium-term opportunity. It's great to be up and running. On digital, we have a clear plan to deliver average weekly NGR -- sorry, in Grosvenor, we have a clear plan to deliver average weekly NGR of GBP 9.5 million and 500 basis points margin improvement in the medium term. On digital, we have taken the financially responsible actions needed to significantly reduce the impact of RGD at 40%. The plan is in place to reset the business, but without impacting the attractiveness of our customer offering. We've got clear strengths that allow us to continue growing revenues in what is seismic shift for the industry. And as I mentioned, the abolition of bingo duty will see us deliver the target of double digit operating profit in Mecca next year. So the group retains a clear path towards delivering its target of at least GBP 100 million annual operating profit in the medium term. And as we continue to execute that plan, we'll also focus on the strategy required to grow shareholder returns beyond the medium-term ambition. So that concludes the formal part of the presentation. But just before I move into Q&A, it would be remiss of me not to take this opportunity to register my own thanks to John as he prepares to retire from his role as CEO of Rank. He's suitably embarrassed, I hope. He's been great to work with. I've learned plenty from him and he leaves us, as you've hopefully heard today, with a really strong foundation on which to build. I personally owe him a great deal. I know that Rank owes him a great deal. But perhaps most of all, the entire U.K. gambling industry owes him a debt of gratitude because as you all know, he's been a tireless advocate for the industry that he loves. So thank you, John. And now, we'll move to Q&A. Richard Harris: Please, can I ask that before you ask your question -- one hand has gone up already -- you give your name and your company? We'll start with questions in the room and I'm sure there will be some questions online, so we'll take those as well. Ivor Jones: Ivor Jones from Peel Hunt. You talked, Richard, about adding reward schemes into the gaming machine offering Grosvenor. In terms of profit -- in terms of revenue consequences, is that going to be marginal? Or is it like a big dip in terms of marketing spend, which we should watch out for and then you'll see recovery? How will it work? Richard Harris: I'm glad you're asking questions one at a time, Ivor, because there's only me to answer them today. So thank you for that. So is it -- are you going to see a big increase in marketing spend? No. But what this is, is a tailoring of approach to each individual venue based on their competitive environment to other gambling venues they've got around them. And it's trying to give us the best possible rewards incentives based on the customers that we want to attract to our venues going forward as well as the customers that come to us today. So is it a big marketing spend? No, it's not. But is it an enhancement of the offer as we gradually build revenues in game machines? Absolutely. Ivor Jones: On digital, in Grosvenor digital, why was -- I probably asked this before, but why again was Grosvenor digital revenue growth so strong? Was there something in the extra marketing cost push that drove that? What was driving it? Richard Harris: Yes. So Grosvenor at 17% was particularly pleasing because the second half compared to last year was particularly tough as we had a higher win margin at that point in time. So to grow 17% on that, we were delighted with that. It's a number of factors, I think. So we've been making good consistent improvements to the customer proposition in Grosvenor for quite some time. So roll back 12 months or so ago, we were launching new Grosvenor apps. So the performance from that has continued to benefit results. As a consequence of RGD, we've definitely had a shift from some of our smaller brands aren't cross-channel brands, so everything other than Grosvenor and Mecca in the U.K. We've diverted some of the marketing spend towards Grosvenor because we're seeing greater returns there and we expect to see greater returns in the future. So undoubtedly, that's played a contributing factor as well. Ivor Jones: You didn't mention cross-sell from the venues. Is that because it's not important for driving Grosvenor digital? Richard Harris: It absolutely is. I'd say in terms of the progress we've made on that in the last 12 months that has contributed directly to performance, not so much at the moment. There's some additional stuff on there around venues content that will improve the offer. But I wouldn't point it out as being a single contributing factor to performance in the first half, but it is a much greater contributory factor to our growth in the future. Ivor Jones: And can you carry on and talk about the proprietary brands? What's the future for them in an RGD, 40% RGD world? Richard Harris: Yes. So with Grosvenor and Mecca, the opportunity we still think to grow the business is significant because of that billboard effect, the venues experience, the cross-channel experience. When you piece all that together, Grosvenor and Mecca have got a very strong future. And we'll continue to invest in customer incentives, free bets, et cetera, to make sure that that offer is as attractive as possible as it can be. For the smaller brands, we're working through exactly what they will look like in RGD world of 40%. But the role they play is likely to be different. We're likely to invest less in marketing because the returns aren't anywhere near as great. Tax has gone up by almost double. So the returns are going to be less, but we still think they'll play a role from a casino and bingo perspective in supporting the Grosvenor and Mecca brands. Are they going to be big drivers of growth? Probably not. Ivor Jones: Let me pass the microphone, maybe come back at the end if there's time. Richard Harris: Fighting over who gets the next question. There we go. Richard Stuber: It's Richard Stuber from Deutsche Bank. Just a couple for me, please. First of all, I guess, given the increase in RGD, do you feel that some of your venues may now be slightly more marginal in terms of the ability to cross-sell into a -- sort of a valuable customer? I guess from the Mecca side, less so because you've got the abolition of bingo. But in terms of any growth in casinos, are there some which are slightly more marginal, or are you rightsized? And the second question is, I guess, also on the back of RGD, does -- because of the returns you get from U.K. customers, does that maybe sort of change your view in terms of where the incremental spend may go? So in other words, would you invest maybe more in Spain now or other parts of Europe versus the U.K.? Richard Harris: So taking the first one, actually, I think probably the opposite. So I think the importance of cross-channel in a 40% RGD world increases because the lowest cost of acquisition that you'll find is from customers that are playing with you in venues. So the role and the relationship between the venues and the digital proposition, they've been a big focus for us in the recent past. They'll continue to be a big focus for us going forward. So I don't think RGD at 40% changes the dynamics of a venue in the Grosvenor estate. The point about switching returns, I'll be a little bit careful about saying this because historically, we haven't capped out what the marketing spend is with a fixed budget in either of our Spanish business or our U.K. business. What we're trying to do is drive performance and maximize returns. If we're getting very strong returns, there is more money to be spent on marketing. So when I talked about customer incentives, free bets, performance marketing earlier and how that will be critical going forward, could there be a chance that we increase investment there because that's the right thing to do to drive growth and drive returns? Absolutely. So I don't see it as a decision between U.K. and Spain -- or U.K., Spain and Portugal going forward. But the teams have got the responsibility to maximize the returns that we're getting from any investment spend. David Brohan: David Brohan from Goodbody. Just 2 questions from me. Firstly, in light of the RGD changes in the U.K., would you potentially consider M&A to scale up your digital presence there? And then secondly, just on the GBP 100 million-plus operating profit target, could you help us out a bit in terms of the time line and the building blocks there, again, given the changes to RGD? Richard Harris: Yes. So taking the first one on M&A, David. So I think it's inevitable there will be operators in the kind of long tail that leave the market. From our perspective, the kind of primary focus, we've done the heavy lifting around mitigating actions that we want to take at this point in time. We've got a clear plan to delivering a profitable business in U.K. digital going forward and also a clear plan that allows us to grow going forward. So it's not just about surviving and being viable. It's about having a healthy, strong business that will be able to grow in the future. So right now, I wouldn't want to kind of commit either way to M&A. It's kind of a bit early to tell really. Nobody really knows how this is going to play out. We've got other examples around the world of how things change where tax rate goes up, increased consolidation and so on. But I think from our perspective, right now, we're focused on delivering the best possible results we can do in our brands. And from there, we'll always consider what the next move are -- what the next move is strategically. In terms of the GBP 100 million operating profit, so as you know, the kind of key levers within that, the additional gaming machine opportunity, that is a key part of getting Grosvenor to GBP 9.5 million per week, but also a key part in improving the operating margin by at least 500 basis points. So that is #1 priority within the business. We're pleased with how that's gone so far. But as you've seen from the growth curve, there's a long way to go and we need to gradually work hard to drive that performance over a period of time. It won't be an overnight thing. It's going to come over a period of time. The second part is, as you kind of rightly pointed out, RGD -- having a profitable business that you can grow going forward, that's going to be critical. But also, I think the abolition of bingo duty gives us some options around Mecca. So that's going to materially improve in terms of profitability. Some of the things that might not have been good investment choices in the past in Mecca might now become good investment choices. I don't think it's going to radically change the amount of money we're making -- change the amount of money we invest into Mecca, but how we think about that business, I think, does change. And we'll continue to kind of drive the Enracha business because it's a great little business and there's still further room for improvement. So from a -- realistically, you can't take a GBP 46 million unmitigated hit to the bottom line without that changing the shape of your plan going forward. So inevitably, there's probably a 12-month lag from where we were prior to RGD at 40%. But internally, super focused on that GBP 100 million and beyond, I'm very confident we can get there. Unknown Analyst: It's [ Rebecca Chacha ] from Investec. Just one question for you, Richard. You mentioned before in your speech that you believe that the market after the RGD changed, the licensed market will be less competitive. What do you think about the potential evolution of the unlicensed market? And what do you think that are the actions that the government will take or... Richard Harris: Yes. So in the run-up to the budget, I think we were relatively clear that we thought the risk around increasing online taxes was that there would be a shift to the unregulated market. And that still feels like that thesis holds. What we do know is that the government have kind of channeled some money to the Gambling Commission to increase enforcement on unlicensed operators. But they need every penny of that investment because it is a growing part of the market and an area that needs increasing focus. So I talked about the license market, particularly in the speech, but we are also very cognizant of we're not just competing with the license market. So free bets, customer incentives, all of that needs to be targeted to drive the best possible performance in our business. Of course, yes, we've got some questions online as well, but we'll finish off all those in the room first. Ivor Jones: Very good. Ivor Jones, Peel Hunt. Could you just remind us of your plans for the cost of the launch in -- the hard launch in Portugal next month? Richard Harris: Yes. So there is relatively significant investment -- in the context of our international digital business, relatively significant investment upfront in this financial year, particularly in order to kind of get -- build that liquidity and grow that business from a standing start. As I mentioned earlier, we did the soft launch in November and the number of customers that we have coming back to our site, without doing any marketing, is encouraging, but it's still very, very early days. So we've got to build liquidity. And in order to build liquidity, that really involves marketing spend. So in the current financial year, based on the level of marketing spend that we intend to put behind that and the level of revenues that we expect, I would expect that Portuguese business to be loss-making this year, but to the tune of small single digit millions. And that's captured in -- I think that's pretty much captured in all analyst forecasts. So that shouldn't be a surprise to people, I don't think. Ivor Jones: Okay. In relation to Mecca venues, you mentioned 2 things, reasonably good growth in machine gaming revenue and the rollout of additional tablets. Is the machine gaming revenue increase on physical devices, or was it partly driven by virtual machines on the tablets? And does that lead you to invest in more tablets because it drives up the machine revenue growth? Richard Harris: So the vast majority of machine revenue income comes from physical cabinets, not on the tablets. So that's where all the growth is coming from. And I would pin that to the fact that we have invested heavily in the proposition, whether it be upgrading machines -- upgrading machine areas, the audiovisual, the whole lot is much enhanced. So I put that down to what's driving the revenue growth in gaming machines. On the tablets, customers that play on tablets spend more money with us. They have more fun. They're more regular players. So will we continue to invest in tablets, making sure they're of the best quality, best reliability? Absolutely, because that is a strong part of the offering, 75% of revenues are coming from -- 75% of main stage bingo revenues are coming from those customers. So we want -- they're our best customers. We want them to be well looked after. Ivor Jones: When you replace old tablets with new tablets, do they deliver an uplift in revenue because of improved functionality? Or are you only talking about people going from being paper players to electronic players? Richard Harris: It's both. So every 1% of customers that we can transfer from paper-based to electronic tablets, that is worth -- they're worth more money to us. So they spend more money as a consequence. But also, it's the reliability, the delivery of the service, to make sure you get that proposition right for regular bingo players. And it's about, at peak times, have you got the capacity to deliver everything you need to, to make sure everybody there that wants to play electronic bingo can do so. I think we've probably got some questions online. [ Matt ]. Unknown Executive: Yes. Thank you, Richard. We've got 3 from Greg Johnson at Shore Capital. Can you provide some granularity on the slightly softer Q2 period, especially around the budget and the uplift over the festive period and into January? And are these recent trends more consistent with Q1? Richard Harris: Yes. Good question. So performance -- so revenue growth in the first quarter was 9%. Revenue growth in the second quarter was 4%. I think 2 main factors I'd kind of call out. So we did have a tougher comparative in the digital business in the U.K. in particular, which I mentioned earlier and also the impact of consumer confidence running up to and after the budget. It was pleasing to see that over the Christmas and New Year period, when we're absolutely our best, revenue growth was really, really strong. And then that strength of growth has also continued into January. So really pleased with January performance so far. In both the Christmas and New Year period and January, performance was better than what we saw in Q2 and more in line with what we saw in the first quarter of the year. So appreciating it's early days, we're only 4 weeks into a new financial year -- sorry, a new financial half, but relatively satisfied with our performances at the moment. Unknown Executive: Machine income growth has been much stronger in those casinos which have benefited from installation of additional machines. Given the phasing of the rollout, what was the growth in machine income during Q2, please? Richard Harris: So first quarter gaming machine income was 12% up and it was broadly similar in the second quarter of the year. As you know, we started to launch machines from the middle of August and that rollout continued with a large proportion of the machines coming in at the end of December. So overarchingly, at 16%, we're really, really pleased with that performance. It compares with 4% for gaming machine revenue growth in those venues that didn't have the investments, that [ factor ] of 12, I think, is relatively material and relatively important to us. But from this point onwards, we have to kind of continue to build that growth. So this is about improving the product layouts, improving supplier mix, improving content, improving promotional rewards. The whole gambit is kind of being constantly reviewed in a casino-by-casino level in the context of their competitive environments. So we're supporting the best customer proposition we can in each casino. Unknown Executive: And just a follow-on, have you seen any cannibalization following the rollout of more machines? Richard Harris: Not obviously. Actually, no. So do you feel implicitly that there might be some money that might have been put down on the table that now goes into a gaming machine because you've got -- previously, they were all taken and you weren't able to satisfy that demand. So intuitively, it feels like there might be a little bit. You don't see it in the numbers. So there's no material crossover from gaming machines to table gaming. Unknown Executive: That's it for online questions. Richard Harris: Great. In which case, we'll draw the presentation to a close. Thank you very much.

101天前Insight Analytics约5分钟阅读

CAT 2025 Q4 财报电话会议

Operator: Welcome to the Fourth Quarter 2025 Caterpillar Earnings Conference Call. Please be advised that today's conference is being recorded. Please, I would now like to hand the conference over to your speaker today, Alex. Thank you. Please go ahead. Alex Kapper: Thank you, Adria. Good morning, everyone, and welcome to Caterpillar's fourth quarter 2025 earnings call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Joe Creed, CEO, Andrew Bonfield, Chief Financial Officer, Kyle Epley, Senior Vice President of the Global Finance Services Division, and Rob Regel, Senior Director of IR. During our call, we'll be discussing the fourth quarter earnings release we issued earlier today. You can find our slides, the news release, and a webcast recap at investors.caterpillar.com under events and presentations. The content of this call is protected by US and international copyright law. Any rebroadcast, retransmission, reproduction, or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to slide two. Our call today will make forward-looking statements, which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different from the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder and the news release details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For reconciliation of any non-GAAP numbers to the appropriate US GAAP numbers, please see the appendix of the earnings call slide. For today's agenda, Joe will begin sharing his perspectives about our results and provide an update on our performance toward achieving our Investor Day targets. Then he'll share our full-year outlook and insights about our end markets, followed by an update on our strategy. Finally, Andrew will provide a detailed overview of results and key assumptions looking forward. We'll conclude the call by taking your questions. Now let's advance to slide three. Turn the call over to our CEO, Joe Creed. Joe Creed: All right. Well, thank you, Alex, and good morning, everyone. Thanks for joining us today. Our centennial year marked a significant milestone, and we achieved full-year sales and revenues of $67.6 billion, the highest in Caterpillar's history. In a dynamic environment with net tariff headwinds of $1.7 billion, we delivered full-year adjusted operating profit margin within the target range at 17.2% and adjusted profit per share of $19.06. We also generated robust MP and E free cash flow of $9.5 billion in 2025, allowing us to deploy $7.9 billion to shareholders through share repurchases and dividends during the year. Our backlog grew to a record level of $51 billion, an increase of $21 billion or 71% compared to last year. All-time high sales and revenues along with record backlog are evidence of the strength in our end markets and strong execution by our team. Now let me take a minute to walk you through our fourth-quarter results. Sales and revenues were $19.1 billion, an all-time record for a single quarter. The increase of 18% versus the previous year was better than we expected and reflects higher volumes in all three of our primary segments while price realization was about neutral. In particular, volume growth was better than expected in power and energy as we were able to ship more product than anticipated at year-end. Adjusted operating profit margin was 15.6%, and adjusted profit per share was $5.16. Fourth-quarter adjusted operating profit margin and adjusted profit per share were better than we anticipated due to stronger than expected volume growth in Power and Energy. In the quarter, the net incremental cost from tariffs was near the top end of our estimated range. Robust ordering activity across all three primary segments contributed to the very strong backlog growth. Now I'll review fourth-quarter retail statistics for each of our three primary segments, starting with Construction Industries. Construction Industries total sales to users grew for the fourth consecutive quarter, rising 11%, which exceeded our expectations. Increases in North America were better than expected due to strong nonresidential and residential construction. Rental fleet loading and our dealers' rental revenue also grew in the quarter. Sales to users declined slightly in EAME and Asia Pacific, in line with our expectations, and we saw growth in Latin America, which was better than anticipated. For Resource Industries, fourth-quarter sales to users declined 7%, consistent with our expectations. Mining sales to users were lower year over year as customers exercised capital discipline in response to weaker coal prices. In power and energy, our largest and fastest-growing segment, sales to users grew a robust 37%, with another quarter of double-digit growth across all applications. Power generation grew 44%, driven by strong demand for large Gensets and turbines used in data center applications. Strong sales to users in oil and gas were driven primarily by turbines and turbine-related services. Industrial grew from relatively low levels, with the increase driven by sales to users in electric power applications. And finally, transportation increased primarily due to international locomotive deliveries. Moving to slide four. Our full-year 2025 results showed meaningful progress towards achieving the 2030 targets we outlined at our recent Investor Day. As I mentioned, we delivered record sales and revenues of $67.6 billion, resulting in 4% year-over-year growth. This increase was led by record sales in power and energy. Notably, in addition to record sales in power generation, we also achieved record sales in oil and gas due to strength and demand for gas compression. Despite tariff headwinds, full-year adjusted operating profit margin of 17% was within the target range for our level of sales and revenues. Full-year services revenues totaled $24 billion in 2025. We continue to connect more assets, growing the fleet to over 1.6 million and made great progress in other initiatives like condition monitoring, prioritized service events, e-commerce sales, and tech-enabled machines. Our digital and technology initiatives, along with a growing installed base, position us well to increase services revenues towards our goal of $30 billion by 2030. Robust MP and E free cash flow allowed us to deploy $7.9 billion to shareholders through $5.2 billion of share repurchases and $2.7 billion of dividends paid. We're proud of our continued dividend aristocrat status, paying higher dividends for thirty-two consecutive years, and remain committed to returning substantially all MP and E free cash flow over time. Andrew will share more about our cash deployment plans for 2026 in a moment. Turning to slide five. I'll highlight the advancements we made towards our 2030 targets in our three primary segments. In 2025, Construction Industries' growth outpaced the global industry supported by the success of our merchandising programs. As a result, full-year total sales to users growth was 5%, advancing our progress towards the 2030 goal of growing 1.25 times the 2024 baseline. In Resource Industries, customer interest in our autonomous hauling solution remains strong. And we're making steady progress towards our 2030 goal to triple the number of CAT autonomous haul trucks in operation compared to 2024. We ended the year with 827 autonomous haul trucks in operation, up from 690 at the end of 2024. Adoption is expected to accelerate given our proven solution, our expansion into quarries, and our ability to support mixed fleets. For example, last month Caterpillar and Sotrak, our dealer in Brazil, announced an agreement to provide Vale with an autonomy solution for a mixed fleet of more than 90 trucks. Power and energy delivered meaningful progress towards our 2030 goal to more than double power generation sales compared to 2024. In 2025, power generation sales exceeded $10 billion, which is year-over-year growth of more than 30%. We're also on track in our multiyear effort to double our large engine capacity and more than double our industrial gas turbine capacity. As we've discussed, the additional capacity will serve a broad range of applications, and the phasing will occur between now and 2030. Now on slide six. I'll provide our 2026 outlook. Overall, we anticipate full-year sales and revenues to grow around the top of the 5% to 7% long-term compound annual growth rate target. As I mentioned earlier, our record backlog of $51 billion provides strong momentum to start the year. We're also starting to get multiyear visibility in power and energy, as we work closely with our customers to schedule factory orders in line with their project timeline. As a result, approximately 62% of our backlog is expected to deliver in the next twelve months, which is lower than our historical average. The strong backlog coupled with healthy end markets supports our expectation for volume growth in all three primary segments. We also expect all three segments to benefit from positive price realization, about 2% of total sales and revenues, and continued growth in services revenues. Full-year adjusted operating profit margin should exceed 2025 levels but remain near the bottom of the target range for our expected sales and revenue. Our adjusted operating profit margin expectation reflects the ongoing impact of tariffs as well as investments we are making to execute our growth strategy. I remain confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range. Capital expenditures are expected to be around $3.5 billion, driven primarily by our capacity expansion plans. And finally, MP and E free cash flow is expected to be slightly lower than 2025, reflecting the increase in capital expenditures. Now I'll discuss our outlook for key end markets starting with construction industries. Another year of sales to users growth is expected in 2026, supported by elevated order rates and a robust backlog. Overall, the outlook for North America remains positive. As sales to users grow moderately versus last year with construction spending remaining healthy due to IIJA funding and other critical infrastructure programs. We also anticipate accelerated investment in data centers, which will further bolster overall construction spending. Dealer rental fleet loading and rental revenue are both projected to increase compared to 2025. In EAME, economic conditions in Europe are expected to strengthen and construction activity in Africa and The Middle East is projected to remain strong. In Asia Pacific outside of China, moderate economic conditions are expected in 2026. We anticipate positive momentum in China off of low levels with full-year growth in the above 10-ton excavator industry. Growth in Latin America is expected to continue at a similar rate to 2025. Resource Industries had positive momentum in the fourth quarter with growing backlogs supported by healthy orders across a broad range of products. For 2026, sales to users are expected to increase, primarily driven by rising demand for copper and gold, positive dynamics in heavy construction in quarry and aggregates. Most key commodities remain above investment thresholds, and customer product utilization is high, while the age of the fleet remains elevated. With modest increases in commodity prices projected in 2026, we expect rebuild activity to increase slightly compared to last year. And finally, for power and energy, the 2026 outlook is positive. Robust backlog growth in the fourth quarter was driven by continued momentum in both power generation and oil and gas. We anticipate growth in power generation for both CAT reciprocating engines and solar turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI. Additionally, we're starting to see orders for Prime Power trend higher as data center customers look for alternative power solutions to keep pace with their growth. For example, yesterday, we announced an order for two gigawatts of reciprocating generator sets for a prime power application from American Intelligence and Power Corporation. Generators will be used to support the initial development phase of the Monarch Compute Campus, which has a total potential of about eight gigawatts of power generation. This represents one of our largest single orders for complete power solutions. The value of the order will be reflected in our first quarter 2026 backlog. We expect to deliver the generator starting in late 2026 through 2027. This exciting announcement is one of four orders we've booked with at least one gigawatt of Caterpillar equipment for data center prime power. After reaching record levels in 2025, oil and gas is expected to see moderate growth in 2026. Reciprocating engine sales are expected to increase driven by strong demand in gas compression applications. Solar turbines oil and gas backlog remains healthy with continued solar oil solid order and inquiry activity. And as a result, we expect another year of strong turbine sales comparable to our record 2025 performance. Demand for products in industrial applications is expected to grow moderately in 2026, as we see continued recovery from previous lows. And in transportation, we anticipate full-year growth in rail services and locomotive deliveries. I'll close on slide seven with an update on our strategy. Since our Investor Day in November, the Executive Leadership Team and I have engaged our employees and dealers around the globe to launch our refreshed enterprise strategy for profitable growth. Our mission statement, solving our customers' toughest challenges, is creating strong alignment around keeping customer needs at the center of everything we do. The strategy is centered on three pillars for profitable growth: commercial excellence, being the advanced technology leader, transforming how we work, all built upon a foundation of continued operational excellence. I look forward to advancing the strategy with regional leaders and dealers throughout 2026. And finally, we were excited to kick off the year with a showcase and keynote at CES 2026 in Las Vegas where we unveiled the next era of industrial AI and autonomy. This was an important opportunity to demonstrate our advanced technology leadership by highlighting Caterpillar's significant role in creating the invisible layer of the tech stack. The critical minerals, reliable power, and physical infrastructure that the digital world relies on to function. We made exciting announcements, including the launch of our new CAT AI assistant, which will allow customers to more easily buy, maintain, manage, and operate their equipment. We also announced a commitment to the most important part of the invisible layer: people. Caterpillar pledged $25 million to ensure the future workforce has the tools they need to make advanced technology possible. With that, I'll turn it over to Andrew for a detailed overview of results and key assumptions looking forward. Andrew Bonfield: Thank you, Joe, and good morning, everyone. As usual, I will begin with a summary of the quarter and then provide brief comments on the performance of the segments. Next, I will discuss the balance sheet and free cash flow, and conclude with comments on our high-level planning assumptions for 2026 as well as our expectations for the first quarter. Beginning on Slide eight. Sales and revenues of $19.1 billion reflected an 18% increase versus the prior year. As Joe noted, this was an all-time quarterly record. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 15.6%. We generated strong MP and E free cash flow of $3.7 billion in the quarter, and $9.5 billion for the full year. This was our third consecutive year with more than $9 billion of MP and E free cash flow. Moving to Slide nine, I'll discuss our top-line results for the fourth quarter. Sales and revenues of $19.1 billion exceeded our expectations driven by stronger than anticipated volume in power and energy. Versus the prior year, stronger sales volume supported the sales increase. Price was about neutral and roughly in line with our expectations. Volume growth reflected a 15% year-over-year increase in total sales to users, and a favorable impact from changes in dealer inventories. Total machine dealer inventory decreased by about $500 million in the quarter compared to a $1.6 billion decrease last year. The decrease in the fourth quarter was larger than we had anticipated, primarily due to stronger than expected sales to users in Construction Industries. Services revenues increased in the quarter compared to 2024. Moving to operating profit on Slide 10. Operating profit in the fourth quarter decreased by nine while adjusted operating profit of $3 billion was about flat versus the prior year. As I mentioned, adjusted operating profit margin for the fourth quarter was 15.6%, slightly stronger than we had anticipated driven by volume being better than expected, partially offset by higher incentive compensation expense. Versus the prior year, the 270 basis points decrease was primarily due to higher manufacturing costs driven by tariffs. Excluding tariffs, our fourth-quarter margin was higher than the prior year. For the full year, excluding the impact of tariffs implemented in 2025, margin was in the top half of the target range. Moving to slide 11. Profit per share was $5.12 in the quarter. Adjusted profit per share was better than we had anticipated at $5.16, excluding restructuring costs of 52¢ and mark-to-market gains of 48¢ for the remeasurement of pension and other post-employment benefit plans. When you exclude the impact of mark-to-market gains from other income and expense, we had a headwind of about $73 million, which was mainly driven by the absence of foreign exchange gains related to MP and E balance sheet translation that occurred in the prior year. Excluding discrete items, the provision for income tax in 2025 reflected a global annual effective tax rate of 24.1% as compared with 22.2% in 2024. This is in line with our expectations. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.14 as compared to 2024 and benefits of the full year by about $0.66. Moving to Slide 12, I'll now discuss segment results. Construction industry sales increased by 15% in the fourth quarter to $6.9 billion. This is roughly in line with our expectations as the stronger sales to users were about offset by a larger than expected decrease in dealer inventory and slightly unfavorable price realization. Compared to the prior year, higher sales volume reflected stronger sales to end users and the positive impact from changes in dealer inventories. Dealer inventory decreased less during 2025 than during 2024. Fourth-quarter profit for construction industries decreased by 12% versus the prior year to $1 billion. The segment's margin was 14.9%, a decrease of 470 basis points versus the prior year. The margin decrease was primarily due to higher manufacturing costs driven by tariffs, which had an impact of about 600 basis points on margins. Margin was lower than we had expected due primarily to higher incentive compensation and a slightly unfavorable price realization, which offset the impact of stronger volume. Turning to Slide 13. Resource Industries sales increased by 13% in the fourth quarter to $3.4 billion, which was in line with our expectations. Sales volume was slightly more favorable than we had anticipated, while price realization was a slightly larger headwind than we had expected. Compared to the prior year, the sales increase was primarily due to higher sales volume driven by the impact from changes in dealer inventories. Fourth-quarter profit for Resource Industries decreased by 24% versus the prior year to $360 million. The segment's margin of 10.7% was a decrease of 510 basis points versus the prior year primarily due to higher manufacturing costs driven by tariffs, which had an impact of about 490 basis points. The margin was lower than we had anticipated, primarily due to higher short-term incentive, higher tariffs, and a slightly unfavorable price realization. On slide 14. Power and energy sales increased by 23% in the fourth quarter to $9.4 billion. Sales exceeded our expectations driven by stronger than anticipated volume, particularly in power generation and oil and gas. Compared to the prior year, sales increased primarily due to higher sales volume and favorable price realization. Fourth-quarter profit for Power and Energy increased by 25% versus the prior year to $1.8 billion. The segment's margin of 19.6% increased by 30 basis points versus the prior year on the higher volume. The tariff impact was about 220 basis points. The margin was stronger than we had anticipated, primarily due to favorable volume. Price was also slightly more favorable than we had anticipated. Moving to slide 15. Financial products revenues increased by 7% versus the prior year to about $1.1 billion, primarily due to a favorable impact from higher average earning assets partially offset by the impact from lower average financing rates. Segment profit increased by 58% to $262 million. This was due in part to a favorable impact of higher margins at insurance services, due to lower loss ratios, higher average earnings, and a lower provision for credit losses, also benefited profitability. Our customers' financial health remains strong. Past dues were 1.37% in the quarter, down 19 basis points versus the prior year, and our lowest year on year-end on record. The allowance rate was 0.86%, the lowest ever reported in any quarter. Business activity at Cat Financial remains healthy. Retail credit applications increased by 6%, and our retail new business volume grew by 10% versus the prior year. In addition, demand for our used equipment remains healthy on relatively stable pricing, inventories remain at historically low levels. Conversion rates remain above historical averages, as more customers choose to buy equipment at the end of the lease term. Moving to slide 16. As I mentioned, we continue to generate strong MP and E free cash flow, with $9.5 billion in 2025, which was slightly higher than 2024 despite an $800 million increase in capital expenditures. In 2025, we deployed about $7.9 billion or 84% of our MP and E free cash flow to shareholders. We continue to expect to return substantially all MP and E free cash flow to shareholders over time. This quarter, we expect to enter into a larger accelerated share repurchase compared to the $3 billion ASR we executed in early 2025. Our balance sheet remains strong with an enterprise cash balance of $10 billion at the year-end. In addition, we held $1.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on slide 17. Before I begin, I'll remind you that my comments today assume the rail division within Power and Energy, as was the case through year-end 2025. In March, we will file an 8-K recasting our historical periods to reflect the movement of our rail division to resource industries. This will establish an appropriate baseline for evaluating future segment-level performance and expectations. If necessary, we will also update any of our segments' specific forward-looking assumptions impacted by this change. Obviously, there will be no impact on the enterprise-wide assumptions. Now let me start with our expectations for the full year. As Joe mentioned, we expect enterprise sales and revenues to grow versus the prior year, likely around the top end of that 5% to 7% CAGR target, on higher volume and favorable price realization. We anticipate sales growth across each of our primary segments, with Power and Energy delivering the strongest year-over-year rate of growth supported by the robust backlog. Growth in this segment will be paced by the timing of bringing capacity increases online over the next few years. Our planning assumption is that the $500 million decline in machine dealer inventory in 2025 will be offset by an increase by 2026, a tailwind to 2026 sales. As Joe mentioned, we expect favorable price realization to account for a roughly 2% increase in sales for the full year. For perspective on the quarterly sales cadence, we anticipate the lowest sales of the year to occur in the first quarter, which aligns with our normal seasonal pattern. On Enterprise adjusted operating profit margin, excluding the impact of tariff costs, we expect to be in the top half of the target range at our anticipated sales level, supported by favorable price realization and volume. Specific to volume growth, we anticipated the attributable profit pull-through or incremental margin to reflect our recent operational performance, which has been impacted by tariffs. In contrast to prior years, we are committed to investing for long-term profitable growth, which includes capacity investments, will impact depreciation expense, and higher technology and digital spend. We believe these investments will support future absolute dot OPEC dollar generation, which I'll remind you is our definition of winning. Including the impact of tariffs, we expect margin to be near the bottom of the target range. I'll provide some perspective, but let me explain how we intend to report to you about tariffs as we move forward. The absolute dollar value of new tariffs imposed in 2025 was $1.8 billion. Mitigating actions can come in two forms. First, those that reduce the direct tariff exposure bill, which will include actions like sourcing changes. These reduce the actual dollar value of tariffs paid. And second, there are cost control actions and pricing, which help reduce the impact on our profitability. Most of the actions taken in 2025 related to cost controls, which could be specifically attributed to tariff mitigation, and these amounted to around $100 million, resulting in a net incremental tariff impact of $1.7 billion. Looking forward, it will become increasingly challenging to pass out and track whether cost control or price action is directly tied to tariff mitigation versus being taken in the normal course of business. Therefore, going forward, we report our absolute incremental tariff cost, which will only take into account those mitigating actions that reduce the absolute value of the tariff exposure. As a reminder, the incremental tariffs we report are measured against the 2024 baseline year. For the full year, incremental tariff costs are expected to be around $2.6 billion, which is $800 million higher than incurred in 2025. If we did not take the actions we plan to take in 2026, this bill would be around 20% higher. We expect incremental tariff costs of around $800 million in the first quarter, a level similar to 2025. The run rate should improve towards the second half of the year as we take actions to reduce our tariff exposure. Finally, please remember that tariffs are volume sensitive. We will continue to take actions to manage our costs in the normal course of business and remain committed to operating within our adjusted operating profit margin target range with the goal of being around the midpoint of the range over time. Now concluding our expectations for the year, we expect restructuring costs of roughly $300 million to $350 million. Our global annual effective tax rate is anticipated to be 23% excluding discrete items, MP and E free cash flow should be slightly lower than 2025 reflecting the high CapEx of around $3.5 billion in 2026. Now turning to slide 18. To assist you with your modeling, I'll provide color on the first quarter. Starting with the top line, we would expect stronger sales and revenues versus the prior year. We anticipate stronger volume in K, including sales to users growth, and a tailwind from machine dealer inventories. We expect a more typical machine dealer inventory build this quarter aligning with a seasonal pattern to the first quarter build in excess of $1 billion. This compares to flash levels in 2025. We also anticipate a favorable impact from price realization. In Construction Industries in the first quarter, we anticipate strong sales growth with the increase versus the prior year, driven by volume and favorable price realization. We expect continued sales to users growth with our confidence supported by the strong order rates and backlog. In addition, we anticipate a sizable benefit from changes in dealer inventories given a more typical seasonal pattern build in the first quarter. In Resource Industries, we anticipate strong sales growth versus the prior year driven by volume, including healthy sales to users growth, and a favorable impact from changes in dealer inventory. Price realization should be relatively flattish, though we anticipate favorability as we move through the year. In Power and Energy, we anticipate sales growth versus the prior year driven by strength in power generation and oil and gas, along with favorable price realization. As is typical, we expect first-quarter sales in power and energy will be the segment's lowest of the year and sequentially lower than 2025. This expectation aligns with the seasonal pattern. Now I'll provide some color on our first-quarter margin expectations. Excluding incremental tariff costs, we expect a higher adjusted operating profit margin percentage year over year supported by strong volume and price realization, partially offset by higher manufacturing costs and SG&A and R&D expenses tied to our strategic investments. As a reference, we would expect some seasonal margin uplift in the first quarter compared to 2025. Including incremental tariff costs at a level similar to the fourth quarter or around $800 million, margin is expected to be lower than versus the prior year. Now on to first-quarter margin expectations by segment. In Construction Industries, excluding incremental tariff costs, we anticipate a higher margin percentage compared to the prior year, on favorable price realization and volume, partially offset by higher manufacturing costs. In Resource Industries, excluding incremental tariff costs, we anticipate a slightly lower margin percentage compared to the prior year, favorable volume is more than offset by unfavorable manufacturing costs and higher SG&A and R&D expenses, including spend on strategic investments in autonomy. We do anticipate some unfavorable mix impact, as we expect proportionally higher sales of original equipment compared to the prior year. In Power and Energy, excluding incremental tariff costs, we anticipate a higher margin percentage compared to the prior year, driven by favorable price volume and price realization, partially offset by higher manufacturing costs, particularly spend including higher depreciation related to our capacity expansion project. During the first quarter, we anticipate around 50% of the incremental tariff costs will be in construction industries, 20% in resource industries, and 30% in power and energy. All segment margins are expected to be lower than they were in 2025 after taking into account incremental tariffs. So turning to Slide 19, let me summarize. In a year marked by uncertainty, our team delivered record sales and revenues, maintained adjusted operating profit margin within our target range, and achieved a healthy adjusted profit per share of $19.06. We generated $9.5 billion of MPE free cash flow, our third consecutive year of generating over $9 billion. For 2026, we anticipate sales growth across all three primary segments, driven by stronger volume and price. We also anticipate services revenue growth. Excluding the impact of incremental tariffs, we expect the operating profit margin to be in the top half of our target range, but near the bottom, including tariffs. And we expect MP and E free cash flow to be slightly lower than 2025 reflecting slightly the higher capital expenditures. We continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand to join the queue. If you would like to withdraw your questions, simply press 1 again. Please note, we are only allowing one question per analyst. Your first question comes from the line of Mig Dobre with Baird. Your line is now open. Mig Dobre: The thing that obviously stood out most in the quarter was just a very impressive order growth and backlog growth that you had. And I guess my question related to this maybe twofold. First, can you comment a little bit about what's happening in some of the other segments outside of and maybe P and T or power generation? And then as you sort of think on a go-forward basis, if I understand correctly, you got roughly $20 billion of backlog that is not going to be delivered in the near term. And it sounds like this figure might further grow as we think about Q1. So how do you think about these deliveries that now are stretching to '27 and beyond? And I'm asking through the lens of price cost, making sure that you know, you are ensuring that you have the proper margins and the proper pricing given how volatile just the cost picture and the tariff picture has been. Thank you. Joe Creed: Yeah. Good morning, Mig. This is Joe. Thanks for that question. There's a lot in there. I'll try to make sure I get to most of them. So we are really excited. I'm really excited about how we finished the year with our backlog at $51 billion, you know, at 70% higher than year-end prior and $11 billion higher than where we finished, you know, the third quarter. So as you suggest, I'll talk about it and frame it in the way of order rates that we saw in the fourth quarter, and they were strong in all three segments. It's not just power and energy. CI had one of its best quarters from an order standpoint, ever, supported by both the growing industry that we think confidence, in the industry in '26 from us and our dealers, and strength in our STUs. You know, we've continued to outperform the industry and we'll we hope to try to do that again here in 2026. I'd say for CI as well, just keep in mind, we're also returning to a more normal seasonal pattern. So the selling season, you know, coming in the spring and us getting ready for that, we entered 2025, you know, at a much slower pace. And so we're getting back to more normal seasonal patterns in CI. RI had a great order run rate in the quarter. It's one of the best quarters since 2021 that we've seen, and that's supported by strength in heavy construction in North America as well as some good mining orders, particularly in South America related to copper mining. And then obviously, power and energy had a really strong order intake quarter as well. Power generation continued to be strong. We're seeing more deals, a little more mix into prime power like the one that we announced yesterday, which obviously wasn't in this backlog figure. It'll come in in the first quarter. But we've had four now prime power orders of greater than a gigawatt. We've had a handful of other sizable orders that were less than a gigawatt. The other thing there is we're seeing strong orders in oil and gas, particularly for gas compression. So, you know, the more power that is needed out there, we're gonna move a lot of gas. We have to feed turbines and engines to continue to provide that power. So we had a really, really strong quarter from an order standpoint. And again, it was strength across the board. When it comes to visibility farther out, I think that's a good thing for us. You know, one of the things that we're trying to do, particularly most of that's in power and energy, is work closely with our customers to schedule their orders in our factory to deliver when they need them in their project timing. And what that allows us to do is make sure we're not sending things ahead of time and we can satisfy more customers and make sure every order gets to the customer when they need it. Obviously, as you suggest, you know, we're taking orders farther out, for those types of orders. We have frame agreements for a lot of customers. Those will have inflationary indices tied in there for pricing. And for non-frame agreements, we usually have escalators if they're out past the normal twelve-month type period. So again, really, really happy with the order performance that we had in the fourth quarter and the outlook that we have ahead of us. Operator: We'll go next to Michael Feniger at Bank of America. Michael Feniger: Yes. Thanks for taking my question. Just the 50 gigawatt power by 2030 that number you guys provided in Investor Day. Can you just give us a sense where that kind of finishes '26 and '27? And the genesis of the question is there's always worries that with everyone raising capacity, if data center slows, you know, do we get into an overcapacity type of market? How much of this 50 gigawatt is going into other markets outside of data centers? Energy, gas compression, downstream, and when you're booking these orders, I know Mick talked about pricing. But how are you also thinking about terms and conditions, service agreements, you know, prime moves to backup? Just how are you guys thinking of also preparing yourself for down the road as, you know, as you've seen boom and bust in the past? Thank you, everyone. Joe Creed: Yeah. Thanks, Mike. So when it comes to the capacity increase, we obviously, you know, work all of our industries, kind of work with our customers and figure out what the forecast is. So, you know, there could be puts and takes, forecasts move around, but what we've sort of gauged the capacity we need based on what we see in all industries. We're gonna make sure, like I said, we're gonna move a lot of natural gas in the next few, so we're gonna make sure we take care of our oil and gas customers as well as power generation. And I think rightfully, as you point out in there, you know, some of the things that are also in that capacity, it's not all just assembling finished product. Right? There's supply base, and there's components machining, and component capacity for us to make sure we can grow services. So when we take prime power or gas compression applications that run continuously, right? Those will hit overhaul cycles, and those are great services business for us. So we need to make sure we have capacity in place to do that as well. So all that's taken into consideration. You know, we have we're on schedule. We were able to ship a little bit more at year-end in our large engine facility than we anticipated, which is a great thing. Need to be able to sustain that throughout 2026, and we expect a big chunk of capacity, the first real big step up to come towards the end of this year and heading into 2027. And then the turbine investment started a little later. It'll start to come on a little bit after that. So we continue to stay close to our customers. I mean, talk to hyperscalers and large data center customers weekly and make sure we stay in line with their plans. And like I said, we're starting to take farther out, and I think that's a good thing. Operator: We'll go to our next question from David at Evercore ISI. David Raso: I'm trying to reconcile the sales guide for '26. Right? The roughly 7%. If you look at the backlog that ships the next twelve months, on a year-over-year basis, it's up about 44%. The orders for backlog that ships in the next twelve months are up 36%. And your view of retail being up in '26, just trying to understand why such a low sales growth given the order momentum, the size of the backlog, and you see retail up in '26. And if you indulge me, just a clarification, maybe I missed it. The tariff impact, the $800 million, does that include expected pricing for '26 netting against a gross number? Or is it before any pricing actions? Thank you. Andrew Bonfield: Yes, David. So first, let me answer the second part of your question. That is, it does not take into account any pricing actions. The 2% pricing action we talked about is completely separate. So this is just the incremental cost that we dollar cost that we will actually incur or pay for tariffs in 2026. And then when you talk about the backlog and the sales guide, the one thing I'd just point out to you and Joe mentioned it, was last year, if you remember, we actually did in particular in construction. There was a very low there was no virtually no increase in dealer inventory in the first quarter, which was unusual. So one of the factors that you have to take into account when you're looking at backlog is the fact that, obviously, CI's backlog is stronger, but part of that is for the, and machines for the billion-dollar plus increase in dealer inventory that we expect in the first quarter, which is a difference versus the prior year. So that's one factor. Overall, you know, just to remind you that in power and energy, we are capacity constrained. Obviously, we are basing our estimates based on the capacity we have today. As Joe mentioned, we are obviously trying and we managed to bring it a little bit earlier online. But, obviously, that is not certain at this stage. So, obviously, if we are able to bring something on, there will be some upside in the second half of the year. Operator: We'll go next to Tammy Zakaria at JPMorgan. Tammy Zakaria: Hi. Good morning. Thank you so much. So the AIP announcement last night, could you give some color on what the battery energy storage system opportunity could be for an order of that magnitude in addition to recip engines? Could it be half and half, 25-seventy-five, seventy-five-twenty-five? Or any color on the revenue mix with the engines and BESS would be helpful. And related to that, do you have enough capacity for BESS products should there be more deals like this? Joe Creed: Hey. Good morning, Tammy. Most of that order is gonna be, you know, in generators and natural gas generators. You know, I think you saw as part of the JUUL, it's a complete system. Same similar to JUUL. So when we do have batteries in there, it's a small portion of the overall total. So most of it is gas generator sets. And, you know, as far as capacity goes, that's all part of our capacity planning. So, you know, we feel like we can continue to keep up with the growth in prime power and hopefully continue to see more mix shift that way. Because as we said, you know, that would help from a services standpoint, and we'll have to look at components farther out because obviously even mean more upside to services, you know, in that kind of three to five years half after, after delivery of those gensets. So exciting opportunities for sure. Operator: Our next question comes from Chad Dillard at Bernstein. Chad Dillard: A couple of questions for you on Prime Power. So for that application, what's the future role of backup diesel generators versus BESS? You know, when you're talking to the customers, like, how are you thinking about how that evolves over the next several years? And then also, with regard to your capacity ramp in power gen, do you think you can keep the revenue momentum growing in '26 versus '25? I think it goes up to 30%. Or, you know, should we be angling more towards that 20% CAGR that you've laid out for power gen? Joe Creed: Yeah. A couple of questions there. I think the last one first, as Andrew stated, it's not a demand issue for us. It's really going to be can we bring on supply faster. Kind of what we have in that revenue guide now is what we have high confidence in. You know, if everything turns up heads, remember, it's not just us. We have to bring our supply base along with us. You know, we're gonna get out as much product as we can, and, obviously, that would provide, you know, a little bit of upside if we can continue to outpace our current plans for bringing the capacity online. When it comes to these prime power applications, most of what we're seeing so far is still having backup power, and they're also with gensets. Not with batteries. In fact, in these, they're using our fast start gas gensets for backup power versus diesel when they do a couple of the big orders we've seen for gas prime power. So, right now, we're not seeing, you know, a 100% battery backup. It's mostly generators. Operator: We'll move next to Jamie Cook at Truth Securities. Jamie Cook: Hi, good morning and congratulations. Sorry, Joe, another question on backlog. Just given the strength. Was there anything sort of one-time in that growth number or pull forward perhaps an announcement that you weren't able to press release? You know me understanding that the AIP that goes into next quarter. But just wondering if there's a pull forward in your understanding there'll be lumpiness quarter to quarter, but do you still see an expectation where you can grow your backlog double-digit as we exit 2026 for the full year? And then just again, the growth you're seeing, is there any way do you think you're outgrowing the market for whatever reason, competitive positioning, product, dealer? I'm just wondering if you're getting a greater share of the market relative to your peers. Thank you. Joe Creed: Yes. Thanks, Jamie, and good morning. As far as orders in the quarter, on your first question, I think nothing of significant note where we had something that we couldn't announce. I would, you know, there are a couple of things outside of power and energy. We talked about CI and the seasonality. Would also say, you know, the strong orders in RI again, those are RI can be a lumpy business, and those orders come in big orders. And it's not, you know, steady. So, we're happy to see the orders that came in. You know, I don't know that you can count on repeat every quarter of that. As we exit, we'll see where we exit this year. Right? We wanna ship a lot of product and, you know, I appreciate you asked this question last time as well. I mean, the backlog is a nuanced number. We need it to go up because we're adding capacity and other things. But, you know, if I can, you know, slow that growth in the backlog because I can significantly get more product out while orders are still increasing, that's obviously a good thing as well. So, you know, we're focused on winning as much of the business as we can. You know, we outpaced the industry in CI. I think we are, you know, definitely a market leader in power and energy for what we provide in that space just from a scale standpoint. So and we have the widest offering below 38 megawatts between turbines and engines. And burn a lot of fuel. So we feel really good in our competitive position. From a lead time standpoint, they are extended, but still, you know, we're able we're one of the fastest solutions out there for data centers who are trying to get up and running quickly. So yeah, we'll see how the year plays out, but we have great momentum, and I'm hopefully I'm planning on and expect the momentum to continue throughout this year. Operator: Our next question comes from Jerry Revich at Wells Fargo. Jerry Revich: I'm wondering, Joe, if you could just talk about for the turbine business. You had spoken about potential for it to be used in some key plant applications by utilities. Any update on how those conversations are tracking when we might see those use cases? And then in the prepared remarks, you folks spoke about comparable shipments. 26 versus 25 for turbines. But you're ramping up really significant deliveries in Titan 350s, I thought, in 26 versus 25. So I just want to make sure I'm not missing any outsized shipments in the fourth quarter or any other moving pieces there. Thank you. Joe Creed: Yeah. I mean, we're seeing most, you know, the 350 first units have gone out and we're trying to ramp 350. So it's a relatively new product that's going out there. So, you know, Solar had a record year in 2025. We expect something comparable in 2026. We announced the capacity increase for solar, but, again, we just announced that, you know, middle of last year, late last year, so that's not gonna really have a significant impact on 2026 results. I think we'll see a mix to the larger frames, you know, like the 350 as we're shipping a few more of those in 2026 as well. And then, you know, we continue to work all the deals that we can for power, and we're seeing, you know, traditionally, Solar's business has been, you know, very heavy weighted towards oil and gas. That business is still really strong. But now we're starting to see more of the mix shift into power gen as well. So, you know, we're anxious to get that capacity program moving along and we'll provide updates as we move throughout it. We'd love to get more product out. But right now, you know, that's what we have line of sight to in 2026. Operator: Our next question comes from Rob Wertheimer at Melius Research. Rob Wertheimer: Morning, Rob. So the project scope at the Monarch data center looks interesting, and I wonder if you could give us a mini education. I think that they're gonna use the waste heat from the cat engines to provide cooling to power chillers. You know, there's been an argument that combined cycle in conjunction, you know, combined cycle turbines with steam turbine attached are higher efficiency. I don't quite know how to compare the efficiency with this, but, obviously, using the waste heat is good. And in Juul, I think there was backup diesel with Prime recip and gas. In this case, I think you're just over sort of overbuilding the gas recips and there's no diesel involved? And last question, just, you know, do you get a lot of inquiries on this sort of thing, or is there a robust, you know, kind of quoting and activity pipeline behind it? Thank you. Joe Creed: Yeah. Rob, I need my engineers or Jason to talk to you on the technical specs of it, but, you know, as you're looking at customers who are wanting speed to market, bringing your own power is definitely, you know, one of the ways that they can do that, and we can support them. And I think once you make that decision to go to gas prime power and kind of have your own mini power plant there with the gensets, it's we've been able to sit with them and say, okay. Let's make it as efficient as possible. So, obviously, if we can use the heat to help with the cooling and use that energy on-site, it makes the whole project more efficient, and the competitiveness of it better from a financial standpoint. So we continue to work with all of our customers on that. I think we'll continue to make headways. You know, we also, you know, announced partnerships with Vertiv. We're trying to find ways to make these solutions as cost-effective and efficient as possible for our customers. And we're having a lot of these discussions. Juul, I think in the early days, if I'm not mistaken, was diesel backup, but then switched to actually gas-fired fast start backup power as well. So all natural gas. And I think, you know, the latest one is natural gas as well. So, you know, that's one of the great things about our portfolio. You know, we up to 38 megawatts, we have all sorts of different solutions, and we can configure it however is best for that customer site, what type of fuel availability they have, and the size and what they're trying to do to make it the most efficient. So, you know, we have a team that really sits with customers and has turbine experts and recip experts on it. We have a lot of microgrid experience, and, essentially, that's what these are. And so we're working with customers to put the best solution forward, and I think it's gonna be exciting. We have more and more discussions around it daily. Joe Creed: Roger, we have time for one more question. Operator: Thank you. Today's final question comes from the line of Kristen Owen with Oppenheimer. Kristen Owen: Good morning. Thank you so much for taking the question. Going to ask a rare question on Construction Industries. And just help us unpack some of the demand drivers that you're seeing there. How much of this is just a return to a normalized replacement level? How much of this is actually supported by data center activity? And how much should we expect is embedded in your market share growth for 2026? Thank you. Joe Creed: So I'll make some comments, Andrew. You can chime in here. But, you know, we expect North America to continue to be strong. Obviously, you know, the data center build-out is not just good for power and energy. You know, that drives a lot of construction activity as well. There are a number of other construction projects moving along. And as we said in our prepared remarks, you know, we continue to see that strength here in North America, IIJA spending continuing to go on. The Middle East, in particular, continues to be really strong. And then we expect, you know, China has been really low, and we'll hopefully see some positivity there in above 10-ton excavators coming off of low levels as we enter into this year. From a competitive standpoint, we made great progress and were able to the industry last year. With the strength of our merchandising programs. We have exciting things to continue to roll out. We continue to work on our rental strategy with our dealers. We'll have some things to share at CONEXPO as well. When it comes to our, you know, BCP equipment, the smaller part of the CI lineup, which has a ton of momentum in the industry. So we feel pretty good about our ability in CI. It is some of that order strength is getting back to that more normal seasonal pattern. But we have great confidence around the industry and where it's heading. So with that, I want to thank you all for joining us today, and we appreciate your questions and interest in Caterpillar. Really proud of our team. We had exceptional performance in 2025 as they delivered record sales and revenues, an adjusted operating profit margin that was within our range, and robust MP and E free cash flow. These results demonstrate the strength of our end markets and our team's disciplined execution. So with a record backlog, we enter the New Year with strong momentum and a continued focus on delivering long-term value for our customers and our shareholders. Now I'll turn it back to Alex. Alex Kapper: Thank you, Joe, Andrew, and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our investor relations website as soon as it's available. You'll also find a fourth-quarter results video with our CFO, an SEC filing with our sales to users data. Click on investors.caterpillar.com, and then click on financials to view those materials. If you have any questions, please reach out to me or Rob Wrangel. Investor relations general. Phone number is (309) 675-4549. Now let's turn it back to Audra to conclude our call. Operator: That concludes our call. Thank you for joining. You may all disconnect.

101天前Insight Analytics约5分钟阅读

GJF.OL 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Gjensidige Q4 2025 Results Presentation Call hosted by Mitra Hagen Negard, Head of IR; and Geir Holmgren, CEO. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to Mitra Hagen Negard to begin today's conference. Thank you. Mitra Negård: Thank you, operator, and good morning, everyone. Welcome to this fourth quarter and full year 2025 presentation of Gjensidige. My name is Mitra Negard, and I am Head of Investor Relations. As always, we will start with our CEO, Geir Holmgren, who will give you the highlights of the quarter and the year, followed by our CFO, Jostein Amdal, who will run through the numbers in further detail. And we have plenty of time for Q&A after that. Geir, please. Geir Holmgren: Thank you, Mitra, and good morning, everyone. We have concluded a strong year, driven by solid efforts across the organization. We moved forward with confidence, guided by a clear commitment to honoring our purpose of being there for our customers when it matters most. Over the course of the year, we processed nearly 1 million claims, including a higher volume related to Storm Amy, maintaining a strong emphasis on speed and efficiency. We always continue to introduce innovative solutions that help prevent damage and simplify everyday life, further strengthening the value we provide. Our customers continue loyalty confirms the relevance of what we do. In parallel, sustained efficiency initiatives have contributed to a return to strong profitability. So let's turn to Page 2 for comments on our fourth quarter results before moving on to the full year results. We generated a general insurance service result of NOK 1.297 billion. This result includes a total of NOK 502 million in expenses related to a reduction of the book value of the core IT system and the downsizing of our workforce in Denmark. Adjusted for this, the insurance service result was up almost 8%, reflecting continued strong revenue growth, efficient operations and continued good cost control. The combined ratio when adjusting for the expenses I just mentioned, was 83.8%, and I'm very pleased with the 0.7 percentage points improvement in the underlying frequency loss ratio. Our investments generated returns of NOK 482 million, contributing to a profit before tax of NOK 1.754 billion and a solid return on equity of 27.3%. Jostein will revert with more detailed comments on the results for the quarter. Turning to Page 3 and looking at the year as a whole. We delivered on all financial targets. Our combined ratio improved by 2. 5 percentage points to 83.4%, thanks to a strong revenue growth of 11.5%, supported by successful implementation of pricing measures and continued operational improvements. Our cost ratio at 12.7% was well within our target. Adjusted for the NOK 502 million in expenses I just mentioned, our cost ratio was 11.5%. We have a solid capital position with a solvency ratio of 188% at the end of the year after subtracting total dividends of NOK 14.5 per share. Investment returns for the year were good, which together with the results from our pension business contributed to a return on equity of 27.3%. So let's turn to page -- to the next page for further comments on the proposed dividend. The Board has proposed a total dividend of NOK 7.250 billion for the year, consisting of a regular dividend of NOK 5 billion and a special dividend of NOK 2.250 billion. The regular dividend is equivalent to NOK 10 per share, up more than 11% from 2024. The special dividend is equivalent to NOK 4.5 per share. For our Norwegian general insurance customers, this once again bodes for distribution of a solid customer dividend from the foundation, Gjensidigestiftelsen. The regular dividend corresponds to a payout ratio of 76% for the group. The proposal requires approval from the FSA since the total amount, including the special dividend, exceeds 100% of net profit in Gjensidige Forsikring. Based on very strong capital position for the group, we expect the application to be approved. We have made a small technical revision of our dividend policy to clarify our target to pay out growing regular dividends. No other amendments have been made and the revision does not change our existing practice. Moving on to Page 5. The process of replacing our core IT system in Denmark started in 2018. The system is fully implemented for our Private portfolio in Denmark, and we are currently carrying out thorough testing and quality assurance before starting full implementation for the Commercial portfolio. We are strongly convinced of the operational benefits of the new core IT system in Denmark. Due to technological advancements and the continual evolution of business requirements, it has become evident that the operational lifespan of the existing core systems in Norway and potentially also in Sweden can be extended by several years. We now have high optionality in evaluating future alternatives. We expect to make the decision regarding Sweden first based on thorough assessment of business needs, available technology and the requirements for a system that offers sufficient flexibility to adapt to changing conditions. I will now turn to the next page. Private property insurance in Norway saw lower underlying profitability this quarter, mainly due to fires. Claims frequency was high, reflecting the impact from the Storm Amy in October with a claim recognized as a large loss, primarily in the corporate center. Repair costs developed as expected with 4% increase year-on-year. We continue to raise prices, though more moderately, with average premiums up just over 14% last year. And over the next 12 to 18 months, we expect the repair cost inflation to remain in the 3% to 5% range. Our current average price increase is 9%. For private motor insurance in Norway, underlying profitability improved year-on-year, supported by targeting prices and claims frequency was flat, reflecting Storm Amy and an underlying increase estimated at 1% to 2%, offset by the impact from a mild December. Repair costs rose 4.1% and average premiums increased 16.5%. Inflationary pressures are easing, but are likely to stay in the 3% to 6% range. Our current average price increase for private motor is 10%. And finally, on this slide, following 2.5 years of targeted pricing measures following large shift in both claims frequency and average claims cost, we will adjust the level of detail presented going forward as the underlying trends are now well established. I would nevertheless like to emphasize that we will continue to price at least in line with the development in claims cost. So moving to Page 7. The strong growth momentum in Norway continued this quarter, reflecting price increases across the Private and Commercial segment as well as some volume growth in Private. The general renewals for Commercial are solid, reflecting strong competitiveness in the SME part of the Commercial market. Our consistently high retention rates represent a strong vote of confidence from our customers. Underlying profitability for Private Norway improved year-on-year, while natural inherent volatility resulted in a lower underlying profitability for Commercial Denmark. Commercial. Denmark showed improved profitability in both the Private and Commercial portfolio, reflecting positive underlying development alongside reserve adjustment and normal inherent volatility. It is also very encouraging to see high retention for the Commercial portfolio. We continue to implement measures to enhance profitability in Denmark, most recently through a reduction in the workforce. While this may have a short-term impact on growth for the Private portfolio, it is a deliberate and expected trade-off to strengthen profitability. Our Swedish operations continue to build on their positive trajectory, showing sustained progress underpinned by solid growth and strengthened profitability. We have recently concluded the renewal of the majority of our reinsurance programs. We are satisfied with the required capacity -- that the required capacity has been renewed with unchanged retention levels. Reinsurance premiums represent approximately 2% of our premium income and the renewals were completed at lower risk-adjusted premium levels. Over to Page 8. I'm pleased with the strong sustainability progress through 2025 and the recognitions highlighted here. I'm also particularly pleased to have received renewed confirmation of our AAA rating for -- from MSCI. Our focus on damage prevention continues to create customer value, business impact and support our broader sustainability ambitions. Sustainability is at the core of our business, and we firmly believe that sustainable operations are essential to long-term value creation. So with that, I will leave the word to Jostein to present the fourth quarter results in more detail. Jostein Amdal: Thank you, Geir, and good morning, everybody. I will start on Page 10. We delivered a profit before tax of NOK 1.754 billion in the fourth quarter. The insurance service result was NOK 1.798 billion when adjusting for the increase in operating expenses related to the reduction in book value of the core IT system and the expenses related to the reduction in the workforce. The result also reflected higher large losses, which included NOK 349 million in claims related to the Storm Amy, net of reinsurance and including reinstatement premium. Higher runoff gains contributed positively. Private delivered a higher result, driven by both Norway and Denmark. The improvement in Norway reflects continued strong revenue growth and the lower underlying loss ratio for motor, travel and accident and health insurance. We also achieved a further decrease in the cost ratio. The positive development in Private Denmark was driven by a combination of revenue growth, reserve adjustments for property insurance and an improved cost ratio. Commercial also delivered a higher insurance service result. In Norway, the insurance service result reflected revenue growth, partly offset by natural inherent volatility in claims for property and accident and health insurance, while motor insurance showed improved profitability. In Denmark, higher results were driven by revenue growth and improved underlying frequency loss ratio for all the main products and a lower cost ratio. In Sweden, the increase in insurance service result was due to improved underlying profitability and revenue growth. Property insurance in both portfolios, private motor and payment protection insurance showed better profitability. Higher runoff gains also contributed positively. The Pension segment reported a pretax profit of NOK 187 million, mainly driven by a higher net finance income. The net result from our investment portfolios amounted to NOK 370 million in the quarter, with positive returns for most asset classes. Other items was minus NOK 100 million this quarter, with the improvement mainly reflecting a positive year-end balance related to the transfer of profits to Natural Perils Fund. In addition, mobility services had a higher result. Following the completion of ADB Gjensidige earlier this month, this is the last quarter in which the results of the Baltic business are reported. The decrease in result was due to a lower insurance service result and net financial income. Turning over to Page 11. Our strong growth momentum continued in the fourth quarter with insurance revenues for the group increasing by 10.4% in local currency. The increase was mainly driven by pricing measures across the Private and Commercial portfolios in all geographies in addition to higher volumes in Private, Commercial in Denmark and in Sweden. The growth in the Private segment was driven by both Norway and Denmark. Private Norway showed a strong growth momentum even when excluding the home seller insurance product. This strong development was primarily driven by price increases in all main product lines. But I'm also very pleased to see that volumes increased not insignificantly for motor, property, travel and accident and health insurance. The growth in Denmark was also strong, thanks to price increases and higher volumes for all main products. Growth in Commercial was also driven by both Norway and Denmark. In Norway, the growth was driven by price increases for all products and solid renewals. As in the previous quarters last year, growth for some products within accident and insurance and for larger customers was muted due to a continued focus on profitability improvements. Growth in Commercial Denmark was driven by price increases for all main products and higher volumes for property, accident and health and liability insurance. Growth in Sweden was primarily driven by higher volumes related to leisure both and payment protection insurance in the Private portfolio and motor insurance in the Commercial portfolio. Price increases for all main product lines also contributed to the growth in insurance revenue. Turning now to Page 12. The loss ratio increased by 1.3 percentage points, reflecting an increase in large losses. Higher runoff gains contributed positively. I'm very pleased with the development in the underlying frequency loss ratio, which improved by 0.7 percentage points, reflecting improvements in all segments and geographies except Commercial in Norway. Let's turn to Page 13. Our commitment to operational efficiency remains strong. The group's cost ratio was 15.9% this quarter. Excluding the expense related to the core IT system and workforce reduction in Denmark, the cost ratio improved by 0.8 percentage points, reflecting revenue growth, targeted efficiency measures and strict cost discipline. Both geographies in Private and Commercial in Denmark showed a lower cost ratio. We continue to strengthen our competitiveness, particularly in Denmark, and we're working to optimize our cost base across the group to create greater capacity for future investments in technology and growth. Over to Slide 14 for comments on our Pension operations. We are very pleased with the performance of our Pension business, which delivered a pretax profit of NOK 124 million, including the change in CSM this quarter. The increase over the fourth quarter in 2024 was mainly driven by a higher net finance income in addition to a positive effect from discontinuation of reinsurance contracts during the quarter. Higher profitability for the disability pension product also contributed positively, whereas lower results for child pension negatively impacted the results. Net finance income was NOK 73 million, reflecting running yield return from real estate, marginal spread tightening and an increase in interest rate levels. The unit-linked business continues to grow with a number of occupational members increasing by almost 18,000 members and assets under management up more than NOK 17 billion year-on-year. This drove administration fees and management income higher. However, higher expenses due to the growth in business weighed on the result, bringing it down compared with the same quarter in 2024. Moving on to the investment portfolio on Page 15. Our investment portfolio generated positive returns from most asset classes, driven by running yields, lower credit spreads and positive equity markets. The match portfolio net of unwinding and the impact of changes in financial assumptions returned around 50 basis points, mainly reflecting lower credit spreads and the fact that the investments did not fully match the accounting-based technical provisions. The free portfolio returned around 70 basis points, driven by running yields, lower credit spreads and positive equity markets. The risk in our free portfolio remained low. A few words on the latest development of our operational targets on Slide 16. Customer satisfaction in the fourth quarter of [ 77 ] was in line with the same period last year, but remained slightly below our target. We continue to take steps to further improve our customer offering and satisfaction levels. Retention in Norway remained high and stable at 91%. Retention outside Norway was unchanged at 84%, but we're pleased to see that Commercial Denmark increased retention from 85% to 86% this quarter. The improvement in the digital distribution index this quarter reflects a significant increase in digital sales and digital service as well as a steady number of digital customers. Distribution efficiency progressing well, primarily as a result of higher sales in Private Norway. Digital claims reporting was stable during the quarter with a slight increase in Sweden and automated claims processing in Norway improved further. Turning to Page 17. We had a solvency ratio of 188% at year-end, down from 191% last quarter. Note that the completion of the sale of operations in the Baltics will have a positive impact of approximately 5 percentage points on the solvency ratio. This impact will be recognized in the first quarter of 2026 as the transaction was completed after year-end. Solvency II operating earnings and returns from the free portfolio contributed positively to eligible own funds. Note that the reduction in book value of the core IT system does not impact eligible funds. The seasonal impact from premium provisions reflecting growth and higher profitability contributed to the operating earnings. The proposed dividend for 2025 reduced eligible own funds by NOK 3.1 billion this quarter. In addition, more of the Tier 2 capital is eligible this quarter. The impact from growth on the non-life capital requirement was offset by an approval of a minor change in internal model. Capital requirement for life decreased due to annual update of the model assumptions and parameters. Capital requirement for market risk increased due to recalibration of certain parameters and higher exposure towards equities in our Pension business. And with that, I hand the word back to Geir. Geir Holmgren: Thank you, Jostein. To sum up on Page 18, I'm encouraged by the progress we made in 2025, demonstrating our strong financial and operational resilience. We will continue our effort to retain our leading and unique position in the Norwegian market, while strengthening profitability and growth both in and outside Norway. We will ensure that pricing remains ahead of claims cost development and maintain a disciplined focus on operational efficiency. I am confident that we remain on a positive trajectory toward delivering on our financial targets for 2026. So finally, on Page 19. Before we open up for questions, a reminder of our Capital Markets Day on 26th of February. Please refer to the invitation published on 15th of January for further details. And with that, we will now open up the Q&A session of this presentation. Operator: [Operator Instructions] And the first question today comes from the line of David Barma from Bank of America. David Barma: So firstly, I wanted to ask you about the Danish business in the quarter on the Private side. And you note there was a support from reserve releases during the quarter. Can you come back on that and explain what that is, please? And then secondly, on private conditions and pricing conditions in Private Norway, please, the helpful comments you show on the pricing impact in January are still really positive. You're now at record combined ratios. So can you give us some color on how long you think that can last and what the rationale is to still be pricing that much ahead of claims inflation in 2026? And then lastly, coming back on the core IT system announcement. Can you explain your decision regarding this change and whether we should expect you to make further investments on your Norwegian and Swedish systems in '26? Jostein Amdal: Thank you, David. I'll start on the first one. As we -- as I said and we wrote during the year, reserves on claims already reported will be adjusted as they are going through the claims adjustment process. So that's a very natural part of the business. And in the fourth quarter, we have seen a positive effect on claims in -- especially property, Private Denmark, which were reported earlier this year. And that's improved, of course, the results in the fourth quarter in Private Denmark. We're not disclosing exact amounts there, but there's nothing particular or special about it. It's a natural part of the process. And we see that the underlying improvement in Private Denmark is very high in this quarter. But if you look at the year -- the whole year figures, they are not affected by those kind of intra-year movements on the reserves, and they also show a very solid improvement in the underlying frequency loss ratio of 4.5 percentage points. So there is a steadily increasing improvement, I would say, in the underlying profitability of the Private business in Denmark. Geir Holmgren: Yes. Regarding the Private business in Norway, I'm very satisfied with the development -- positive development we have had in the past. I see that we have succeeded with all our profitability measures, including changing terms and conditions, high retention levels or deductibles and also pricing measures. If you -- now in January, as mentioned and as you can see in the presentation, we are still increasing prices both for motor and property, which is above the inflation levels we are seeing at the moment. I will see that we have to consider on an ongoing basis what to do during the next quarter. So I can't share any comments on future pricing, but we will always have a position where we are doing the repricing at least in line with all the inflation numbers we are seeing. If you look at the retention level, still very high. We have very loyal customers in Norway. We have been through the Storm Amy and also in -- by the end of the year, we had a storm in the northern part of Norway. We see that the customers are very happy with the way we are handling the claims, which is very positive and probably our main purpose of being relevant for customers that we are helping customers when they actually need us. So -- and your last question regarding the core IT systems and what about investments in Sweden and Norway. We are doing an assessment what to do in Sweden as Sweden is definitely a smaller portfolio. So we have to definitely be assured that -- make sure that we are doing investments in Sweden, which are in -- at a level which could be easily handled by the Swedish business alone. The reduction on the book value we are doing this quarter gives us definitely higher optionality on what to do in Sweden and in Norway on a later basis. And the positive thing here is that we see that technological development we have seen in the past and definitely, we see the next years gives us more an improved optionality to what to do and -- which also I expect to have a good impact on expenses used in relative to Norwegian core IT system going forward. David Barma: Just coming back on the first one on Denmark. Is this a step change in profitability in the market? Or is it more a function of conservativeness in the attritional and how you book your attritional loss ratio earlier in the year, that was actually unwarranted? Jostein Amdal: No, I think this is a real improvement in profits, but the magnitude of this is somewhat influenced by these reserve adjustments. But there is no doubt about that in our portfolio, there is a real improvement in the underlying profitability there. Operator: The next question comes from the line of Vash Gosalia from Goldman Sachs. Vash Gosalia: I have 2 questions. The first one on claims frequency. So here, when I talk about claims frequency, I would love to get your inputs on how do you expect that to develop ex natural catastrophe? And what I'm trying to understand is, obviously, you're growing pricing at 9%, 10% with claims inflation mid-single digits. But I guess to get a better view on combined ratios, it would be helpful to understand how you think frequency is going to develop. And the other part to this particular question is, obviously, Norway is a bit more ahead of the curve in terms of vehicle adoption or new vehicle adoption. Do you see a structural decline as a result of that in your claims frequency, especially in motor? So that's the first one. The second one is on your cost ratio. So obviously, that has -- it's pretty strong adjusted for the NOK 502 million. And even in 3Q, it was pretty strong, in my opinion. So just trying to understand, is that like the new normal level? And can we expect that to improve further? Or is that -- or would you say that's like a fair level for our models and our forecast? Jostein Amdal: I'll start, Geir. Thank you, Vash. I mean we need to distinguish between the different products if we talk about claims frequency because they will be different. And with reference to nat cats, I assume you're mostly focused on the property side here. So for private property, we have talked about for a number of years that there is a long-term increase in the claims frequency due to climate change that there will be more water-related damages affecting our private book of business, and we need, therefore, to increase prices a bit more than just the inflation figures look like. And so we have done. We don't have any specific forecast for you on the claims frequency for neither property nor motor, except from what we've shown you in this page in the presentation where we do think there is -- except for these climate-related things on property, a fairly flat development in the claim frequency for property, whereas for private cars, vehicles, we do think there's an underlying small increase in claims frequency ongoing and at the same level that we talked about in the previous quarter, which is 1% to 2%. But the important part is that we are monitoring this very tightly and are ready to adjust pricing or terms if we see any unexpected developments. Geir Holmgren: Regarding cost ratio, you know our financial targets for 2026, and we are reporting cost ratios in the last quarters, excluding the expenses related to the IT core system in the last quarter, you see that it's below 13%. We have an organization where we have a very high level of cost discipline. We are many measures to improve cost efficiency on an ongoing basis. We see that our distribution efficiency, both in Norway and gradually in Denmark is improving based on use of data and how we actually run our business in the distribution area. You see that the hit rates when having a dialogue with customers is at a very high level, around 45% to 50% of every -- of the calls coming in are converted to sales. So -- and you also see on the more operational KPIs in the presentation that we are improving when it comes to automation and digitalization, which is helpful when it comes to cost and cost efficiency. So as an organization, we have a strong focus on cost discipline and referring to our financial targets is my best comment. Operator: The next question comes from the line of Hans Rettedal from Danske Bank. Hans Rettedal Christiansen: I was just wondering if you could clarify for me the write-down in the IT system because it's not completely clear exactly what it stems from, given the fact that you're saying you're extending the lifetime of the Norwegian and Swedish systems, but at the same time, sort of looking into the Swedish system here going forward. Am I correct in thinking that it's the value of implementing the Danish system into Norway and Sweden that's being written down? That's the first one. And then the second one is just again back on pricing in Private Norway. I understand that you can't say anything about the absolute pricing levels for 2026, but just trying to get understanding of what your expectation for inflation is because the range, 3% to 5% to 3% to 6% is quite large. So are you sort of pricing at the top end of that or middle end or lower end of that also considering the frequency? That's my 2 questions. Jostein Amdal: Yes. I'll start on the write-down, Hans. It's -- I think you're on to it. It's like we have developed a core system that started out as a group project. And then we see that given the technology development since we started this, the life span of the existing core systems, especially in Norway, but potentially also in Sweden might be enhanced for many more years. And that then when part of the investments that were allocated to kind of the Norwegian future core IT system is now taken down to 0. So the remaining book value is related to the Danish core system. And with the remaining book value, which we now have disclosed at a bit more than NOK 600 million, we do think we have a fairly cost-efficient core IT system covering both claims and sales and so on in Denmark. And also note that this system is in use for private. It's working well. And we're now in the process of implementing it for commercial Denmark. It will take some time, but we're doing it in a very thorough way and testing so to make sure that there is as little operational disturbances as possible when moving from one core IT system to another. Geir Holmgren: Yes. Regarding pricing in Norway, yes, it's not easy to comment on future pricing ambitions. But our core ambition is to price at least in line with the development of claims cost, which include that we have to be on the -- more on the conservative side when looking at the inflation interval, which also -- before we know the exact numbers on the inflation, we have to be assured that we are at least pricing in line with what we see on an inflation basis and claims development. So I have to admit that our starting point on doing this assessment is at the top end of the intervals commented. Hans Rettedal Christiansen: That's helpful. I was just wondering, just a quick clarification on the IT system. Maybe just why it sort of works in Denmark, but then it doesn't work in -- or you don't think it will work in Norway and Sweden. Jostein Amdal: I'm sorry, Hans, I was probably unclear. What I meant was that it is working in Denmark, but the existing system, which we have had for a number of years, is going to work for a longer time in Norway. We're not saying that we're not going to use the Danish system also in Norway and Sweden, but especially for Norway, this will be a number of years into the future before we are moving to any other -- any new core IT system. And the one we're using in Denmark is one of the candidates for a future Norwegian system. Geir Holmgren: I would say that now we have gained higher optionality when it comes to what to do in Norway and Sweden. And it's also a measured -- message here that actually, at the moment, we are very satisfied with how the system works in Norway. It gives us using all -- if you look at all the technological development we have been seeing during the last couple of years and what we expect in the future, we don't have to use the core system in Denmark also in Norway. We do have more alternatives, which is positive. Operator: And the next question comes from the line of Youdish Chicooree from Autonomous Research. Youdish Chicooree: If I may, please, I would like to stay on the topic of your core IT system. I was just wondering, I mean look, is there not a benefit from operating a unified system across all your geographies because I know some of your peers do that. And when you talk about the life span of the Norwegian system expanding by several years, it just sounds like you're just delaying the possibility of having like one platform across all your geographies. So your thoughts on the potential savings you could have further down the line by making the investments today would be interesting. And then secondly, on -- just on pricing and the competitive environment. You're still pricing at a decent margin above your expected claims inflation. I was wondering about whether there's been a change in the competition landscape considering that some of your other peers have talked about doubling the market share from single digits. So any comments around that would be actually quite helpful. Geir Holmgren: Yes. Starting with the core IT system. I would say if you looked at Norwegian platform, and I would say that everything we do in Norway, all the processes, including claims, distribution, everything is not only dependent on the core IT system. We are using technology in all our processes across our business. And my core idea a couple of years ago was to enhance the operational benefits of having operations in both Norway and Denmark. So we are seeing synergies on the way we are doing on the distribution side, how we use data. We are facing synergies on how we run the business, both in Private and Commercial segments in Norway and Denmark. It is not only dependent on having one single IT platform across the markets. It's more how we use data, how we have a common management team across Norway, Denmark and how we run the processes -- the core processes related to our business. So I would say that we have done many measures. We are facing progress when it comes to have more on the operational benefits and synergies across Norway and Denmark. So it's not dependent alone on a common core IT platform. Jostein Amdal: Yes. On the competitive landscape, it's -- I'm not sure I know which players you're referring to that are doubling their market share or have ambition of doubling their market share. Our experience is that competition is still very rational and disciplined. We still see all the major players having fairly similar or rather similar profitability targets, especially if we adjust for the cost advantage that Gjensidige has compared to the peers. And we don't see really any shifts in the competitive landscape so far at least. And that goes for both Norway and Denmark and Sweden. Operator: [Operator Instructions] The next question comes from the line of Thomas Svendsen from SEB. Thomas Svendsen: Yes. So a question on Sweden. It seems to be a very strong also underlying results for Q4 -- to be at Q4. So how will you describe the business in Sweden? Is this sort of a highlight or sort of underlying picture in Sweden? So this is a new better level in Sweden? And also how is price increases accepted in Sweden by the clients? Geir Holmgren: Thanks, Thomas. Well, I'm very satisfied with the development we have seen in Sweden during the last year. Very good profitability. We have a stable market position even though it's a minor or a smaller position. But if you see all the development we have done in the Swedish business during the last couple of years, we are doing progress when it comes to automation. We are doing progress when it comes to use of digital solutions. We are doing progress when it comes to risk selection and our competence and capabilities on underwriting. So I think that underlying development in the Swedish business is very healthy, and it's -- so it's a very good run and business with good progress. If we look at market conditions, it has been stable. We see that we are succeeding with the risk selection we are doing. And you can also in the presentation, see the growth numbers we are having in Sweden. But having this stable position is a good asset and strategically right for Gjensidige. Thomas Svendsen: Okay. And then maybe the final question on the IT system. So you wrote it down earlier in the year as well. So what has changed or what did you discover during Q4? I guess it was not smoothing of earnings, but that something has happened during Q4? Geir Holmgren: Yes. In the third quarter, we had a termination on the core IT system in the Pension business, which is a different system. So now we are running this business with the existing system and also recognize that we had a longer life span on the existing system. What we are doing now in this quarter is to give us higher optionality to what to do in Sweden and Norway because when we started this core system project many years ago, it was stated as a group project. Now we are giving ourselves a higher optionality to look at this as a Danish project. And then we have a good time and can use the time to decide what to do in Sweden and Norway with no kind of tense situation where we had to conclude in due course. Thomas Svendsen: And I guess if you just look at Q3 and Q4 in combined, I guess there are some learning points. And how we -- do you think for future investments in AI and new technology? Would you be very strict on that? Geir Holmgren: Yes. Definitely. I would say that we have picked up learning points, not only in the last 2 quarters, but during the couple of last years. I will see that now we are running IT project in -- and we have done this assessment very -- and used competent resources to do the assessments. And now we are running IT project with high level of management attention and with high level of control and steering, of course. And all the learning points we are picking up learning points for -- regarding all kind of investments and processes we are running. So it's not only on the IT core system. We always have to improve the way we are doing our business and running our business, including core IT systems investments. Operator: Our next question comes from the line of Qian Lu from UBS. Qian Lu: This is Qian Lu from UBS. Firstly, just a quick clarification on the IT system. So you mentioned that this write-down has kind of given you optionality as to what to do in Norway and Sweden. So does that mean it's still possible for us to see like utilization of this core system in Norway and Sweden in the future? And then secondly, just some long-term questions on autonomous vehicles, which are on the heavy debate lately. I'm keen to understand what you're seeing in the Norwegian market. So to what extent is the speed of change of the car fleet in Norway different to other Nordic countries and Continental Europe? When do you expect to see advanced AVs that L2+ to become a majority of the car fleet? And are you ensuring any AVs in your book at the moment? Jostein Amdal: Yes. On the IT system, we are definitely not saying that we're not going to use the Danish system. We are saying that by expanding the horizon for when we start a core -- a change of the core IT system in Norway in some areas, that was the reasoning behind the write-down of the IT system. But the current Danish system is definitely one candidate for -- also for Norway and Sweden in the future. Geir Holmgren: When it comes to autonomous driving, this is definitely a long-term trend. It's something we have followed for many, many years. As you know, we have a separate mobility strategy, which is integrated with our business and especially our motor insurance business. So having feet on ground with the RSA company is important and an important part of our mobility strategy. When it comes to risk development, you will probably see that over time, due to autonomous driving, you will see that risk and claims frequency could be reduced. But on the other side, we also see that the OEMs, the car producers will need to increase their kind of liability due to responsibility regarding the autonomous cars. And we don't expect this to have a short-term impact. The average age of the car in the Norwegian car fleet is above 10 years. We see that even though 97%, 98% of the cars -- new cars sold today are EVs, the total share in the total car portfolio is approximately 27% of the total car fleet. So it takes a long time before actually this will have a larger impact. And then you probably see that Nordic driving conditions are very different from what you see other places. And you need a lot of data to make the autonomous cars being able to have this autonomous driving on Norwegian and Nordic roads as well. So our response to that is that we are following this development very closely, and we are having our mobility strategy to be relevant for the OEMs and car retailers forward. And yes, and there are also opportunities regarding risk and risk exposures related to the autonomous cars, which are very interesting also on a long-term basis. Operator: [Operator Instructions] The next question comes from Michele Ballatore from KBW. Michele Ballatore: So I have 3 questions. So the first question is about the message, the change in messaging the dividend. So how should we read that? Why did you -- have you decided to change it? So that's the first question. The second question is on the special dividend. I mean it's quite a sizable special. I mean it's -- can you help us understand in terms of the expectation on this particular metric? I mean how should we think about this -- its development in the future? And then the third question, I'm really sorry to come back to the IT system thing. But I think -- I mean I will phrase the question slightly different from the others. If we look at the impact that this -- in terms of benefits, depreciation or whatever, the impact that this IT system had in the previous quarters or in the previous years, have they -- I mean are they going to change? I mean it's -- if you -- were this impact more optimistic, less optimistic? I'm trying to understand what will change in terms of the future versus the past. Geir Holmgren: Thank you. Starting with the minor changes regarding the dividend policy statement. It's -- if you look at what's been happening during the last -- or over many years, the actual dividend, regular dividend has been increasing year-by-year. So it's -- so changing the statement high and stable nominal dividend seems to be relevant to actually face what's actually happening. So it's a revision, which now reflects the actual situation we have seen in the past, and it doesn't change any practice going forward, I would say. When you go to the size of the special dividend for 2025, if you look at our dividend policy and everything we -- and what we actually is our main kind of thinking in the management and in the Board is that we don't aim to have much surplus capital in the group. We have this solvency interval, 140% to 190%, which is something we have to have in mind when stating the proposed dividend. So with this in our mind, we are -- and doing this forecast on the capital situation in the group as well, it seems to be very right to propose a dividend. And in this situation, a surplus dividend of NOK 4.5, which reflects the capital situation in the group and also what we have said, not having too much surplus capital in the group as well. Jostein Amdal: On the question on the IT system, the way we book this is that it's capitalized as we develop it. And then when we start taking the system in use, it's into annual depreciations affecting the P&L. And when we started using the private -- using the system for the Private segment in Denmark, we started depreciating on the kind of the investments allocated to the private segment in Denmark, and that's been included in the accounts for the previous quarters. The write-down now doesn't change this because what's remaining on the book value is related to Denmark, and we start depreciating the cost allocated to the commercial part of this system when we start taking into use in Denmark. And then over time, of course, we do have costs related to the existing system. And then that -- those costs will be fade out as we move the portfolio from one system to the other. Operator: There are no further questions. So handing back over to you, host, to conclude. Mitra Negård: Thank you. Thank you, everyone, for good questions. We will be participating in roadshow meetings in Oslo today and in other cities abroad after our Capital Markets Day, which, as mentioned, will be held on the 26th of February. Please see our financial calendar on our website for more details. Thank you for your attention, and have a nice day.

101天前Insight Analytics约5分钟阅读

ARU.AX 2026 Q2 财报电话会议

Operator: Thank you for standing by, and welcome to the Arafura Rare Earths Limited December 2025 Quarterly Report Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Darryl Cuzzubbo, Managing Director and CEO. Please go ahead. Darryl Cuzzubbo: Thank you, Kylie, and good morning, ladies and gentlemen, and thank you again for joining us for our quarterly update. I'm sure we've engaged with many of you already, but for anyone new my name is Darryl Cuzzubbo, your Managing Director. Again, with me today is Peter Sherrington, our CFO, who again, most of you would be very familiar with. But also joining us today is Tommie van der Walt. Tommie joined us about 12 months ago. He is our Chief Project Officer, and he'll become a regular attendee as we move through FID and into construction. Similar to previous updates, what I'd like to do is just talk a little bit about the macroeconomic developments that we see that are shaping the future direction of the rare earth sector. I'll then talk to how we are going in finalizing the last 10% of the funding with our cornerstone investors that will enable us to call FID. I'll then hand over to Peter, and Peter is going to take us through where we sit from an overall funding perspective. So you can see just how close we are. And then we're going to wrap up with Tommie, who will provide a brief update on our readiness to execute the project soon after calling FID. And then we'll open up to Q&A. So let me first talk about the macroeconomic dynamics that we see at play. So whilst the situation is dynamic, there are a couple of underlying fundamentals that will continue to shape that -- to shape what we see playing out. If I just take you back in time, last April, China introduced export control constraints where China could control who got what rare earths into what region and for what use. These controls remain in place today and provide China the ability to control with precision who does and does not get access to rare earths. They have set themselves up to control rare earths supply in a very targeted manner. China subsequently introduced further export constraints last October, but these will wound back to just those constraints that were introduced in April last year when a 12-month truce was agreed to between the U.S. and China. Now whilst this truce resulted in reduced speculation as to what is at stake should rare earths not be available, the reality is that nothing has structurally changed with respect to an ex-China supply of rare earths. China still controls today nearly 90% of the world supply and will use this bargaining chip as and when they need to until the world diversifies the rare earths supply chain, which is going to take a number of years. You just can't unravel quickly what took the Chinese 3 decades to establish. In this period, we have seen rare earths pricing continue to firm to where just last weekend, the NdPr pricing pushed through the $100 a kilo barrier on the Asian Metals Index. This represents greater than an 80% increase in the last 12 months. It is also worth noting that the world's first ex-China pricing by BMI is consistently higher than the Asian Metals Index, most recently by a further $10 a kilo. This shift has occurred post the announcement of the Mountain Pass deal where the U.S. government introduced a floor pricing of $110 a kilo and post the supply disruptions with Mountain Pass FEED no longer going to China to be processed. The recent event where China stopped exporting dual-use rare earths to Japan further highlights China's readiness to use this bargaining chip as they need, and you would expect China to prioritize their domestic consumption of rare earths over exports should there be a structural NdPr supply deficit, which a number of forecasters are predicting in the medium term. During all of this, we've also observed in our dealings directly with customers that they recognize the need to move away from the Asian Metals Index pricing as this has been the mechanism by which China has prevented a rest of world rare earth supply chain being developed. We note that S&P, a highly regarded global forecaster are, in addition to BMI, now looking to introduce their own ex-China rare earths pricing index. We've seen our own Australian government play a key role here through the U.S. Australia Critical Minerals Framework and the Critical Minerals Strategic Reserve, not only supporting the rare earth sector in Australia and their trading partners, but also potentially introducing a different pricing mechanism, which helped us move to a global functioning market price index. Independent forecasters anticipate that a functioning market index will be in the $140 to $160 a kilo range, reflecting the true fundamentals of medium-term supply scarcity and the strategic value of having a reliable rare earth supply chain. You can see that as time goes on, the establishment of an independent and transparent NdPr index is looking increasingly likely. Now I call these developments out because whilst exactly how geopolitics will unfold is uncertain, there are a couple of things that we can be confident of. Firstly, China will continue to use their tremendous bargaining chip of rare earth supply as and when they need to and have set themselves up to do precisely this. This is going to continue for some time, knowing that it will take years to structurally address the lack of diversification in the rare earth supply chain. As geopolitical tensions inevitably resurface, we can expect elevated investor attention to return to the rare earth sector. So in other words, there is still much to play out in the rare earth sector. Secondly, what I want to emphasize the most is that pricing dynamics are improving, and I am confident that with the right and continued geopolitical support, we will ultimately see a market functioning price index established. Critically, we believe rare earths pricing will move to a higher level that reflects the underlying fundamentals. This is something that is important to us, as you can imagine, because it really is the biggest value driver for your company and something that we are acutely conscious of as we look to lock in the remaining cornerstone offtake agreements. So let me now turn to providing you with our funding update. We have made significant progress with cornerstone investors where due diligence and documentation is in an advanced phase for EFA, the National Reconstruction Fund and the German Raw Materials Fund for an initial EUR 50 million, noting that with the German Raw Materials Fund, a potential second EUR 50 million is subject to a separate decision post locking in a further 500 tonnes of offtake. This has taken a little longer than we had anticipated, but we need to recognize that we are one of the first projects to progress through these newly established government seeded processes. You can be assured that we are progressing this as quickly as possible as demonstrated by the fact that we are either the first or the second project in a long list of projects to progress through these three newly established funding mechanisms. As we round out the funding offtakes, we want to essentially achieve two outcomes. We want to secure the remaining equity with long-term cornerstone investors as fast as possible so we can call FID and get moving into construction. The second outcome is we want to secure as favorable pricing terms as we can for the remaining offtakes, knowing that customer preparedness to move away from the Asian Metal Index is growing with time. The pricing terms that we get today is better than the pricing terms we could have got just a few months ago. And the reality is that this trend is likely to continue. What I'm saying here is that whilst calling FID will be the most significant catalyst for the company in its history. The value of the company will, to a large degree, be defined for the next decade or so by the 7-year contract pricing terms that we are negotiating now. We literally have half a dozen pathways to close out funding. With 90% funding locked in, the question is no longer about whether we will achieve FID or not, but rather are we getting the best possible terms for our offtakes in securing the remaining equity. Faced between closing out funding and offtake agreements quickly versus negotiating hard for a couple of months longer to secure best pricing terms, we will choose the latter given the long-term benefit for the company. Now with that said, we are targeting the end of this quarter to finalize the necessary agreement, which will then enable us to seek shareholder approval next quarter and call FID. I can assure you that we are doing everything we can to secure the best possible terms as quickly as we can, so we could all move on to why we joined the company, which was to build and operate what will be a truly Australian iconic project. With that, now I'll hand over to you, Peter. Thank you. Peter Sherrington: Thanks, Darryl. So Darryl has already set out that it's been a pretty significant period for the geopolitical focus and the impact on rare earths. And there's also been a lot of rare earth corporate activity. So this has been an incredibly busy period for the Arafura team. And we've been successful in making substantial progress in executing the Nolans funding strategy, which I'll cover off in this session. To frame the discussion, I'll refer back to Figure 2 in the quarterly, which is the Nolans Funding Bridge. The Figure 2 graphic sets out the funding strategy for Nolans Project. If you refer to the stacked column on the right-hand side, you can see the company has a total funding requirement of USD 1.6 billion. This cost is substantially made up of the capital cost for construction, but also includes working capital, the financing costs during ramp-up and also the equity-backed component of the cost overrun account. In addition to the total funding requirement of USD 1.6 billion, we have in place completion support facilities of USD 280 million. These remain undrawn under our base case scenario, but it does provide us with total funding sources of USD 1.9 billion. If you've followed the Nolans funding strategy from previous presentations and quarterlies, you'll see that we have now made material progress and addressed specifically the public markets component of the funding solution, which I'll touch on shortly, and have during the quarter, substantially progressed the due diligence and final documentation with our cornerstone investors as already set out by Darryl. This included the announcement by the Australian Prime Minister of conditional approval of up to USD 100 million of equity investment by equity -- by EFA. Indicatively, these sources of cornerstone funding that Darryl has set out leave approximately USD 134 million outstanding, and we're working with multiple pathways being progressed to close out the remaining equity requirement in the near term. As already set out, one pathway includes additional investment by the German Raw Materials Fund. We are seeking to capitalize on favorable magnet FEED market conditions as outlined by Darryl. We've seen an increase in our engagement with European and German partners, in particular, as we look to secure an additional 500 tonnes per annum of NdPr offtake to support a potential further investment by the German Raw Materials Fund. Noting that any further investment from the German Raw Materials Fund would be conditional on securing that 500 tonnes of offtake, it would also require approval by the Interministerial Council. With respect to the debt facilities, excluding ING, all credit approvals are current with EDC refreshing their credit approval during the December quarter. ING have provided a letter of support and are working to finalize their credit approval in conjunction with contractual close of the debt facilities and FID. Those activities are underway now with ING. We saw positive share price momentum through October for Arafura and for a number of rare earths companies in general, following a number of key announcements, including further export restrictions by China in early October and the U.S. Australian Critical Material Minerals Framework in late October as well. Against the backdrop of these activities, we successfully launched and completed a AUD 475 million two-tranche placement in October. This was followed with an associated SPP and Tranche 2 of that raising closing in December alongside the SPP. Again, we're pleased to see the strong participation from existing shareholders, including our substantial shareholder, Hancock Prospecting as well as welcoming a number of new shareholders to our register. We ended the period with cash on hand of AUD 570 million, up from AUD 90 million the previous quarter. The increase included proceeds from the October placement, including the Tranche 2 proceeds and the SPP. And this also included Tranche 2 and SPP funds from an earlier August placement with the settlement occurring in the quarter just completed. The important component here is the increased cash position significantly strengthens the balance sheet and demonstrates the company's ability to move into project execution when strategic equity is secured. Completion of the private placement has significantly derisked the project funding requirement and has provided us with the opportunity to make significant progress with cornerstone investors, offtake groups and final documentation with lenders, knowing that the private placement component of the funding has now been completed. I'll just briefly refer back to the Appendix 5B cash flow. You can see expenditure during the period included AUD 3.4 million in project development activities to support execution readiness as we ensure we can hit the ground running post FID, which is obviously a segue into handing my session over to Tommie, our Chief Projects Officer, who will provide you with a brief update for the project. Thanks, Tommie. Tommie Van der Walt: Thank you, Peter. I'll now provide a short summary of project activities and focus areas at the moment. The appointment of Hatch towards the end of last year was a major milestone in the development of the Nolans Project. Whilst this is a change to our earlier integrated project management team model, Hatch brings a significant depth of engineering and execution experience to our project, particularly in managing the delivery of complex projects, including hydrometallurgical processing infrastructure. Hatch has been involved in the early engineering and design which enables them to transition immediately into execution planning, recognizing that execution readiness is a catalyst to announcing our investment decision. Now Hatch will report directly into the Arafura owners team under the direction of Ed Matthews as the Nolan's Project Director. Ed joins us with more than 30 years of demonstrated capability in the development and delivery of major projects and capital programs, managing major greenfields and brownfields resource and infrastructure projects across Australia, Asia and Africa. We've been actively identifying and recruiting the other critical roles within the owners team with a number of these personnel due to commence in the coming months. Over the last 6 months, we've invested the time in establishing robust procurement processes and developing key relationship with potential suppliers. On the back of an FID announcement, we will launch a competitive process to ensure we deliver the best commercial outcome for the business without compromising on supply certainty, quality or schedule. So that's just a couple of updates as it stands at the moment. I'll now hand back to Darryl to close. Darryl Cuzzubbo: Thank you, Tommie. Thank you, Peter. So as you can see, we're making strong progress on rounding out the last less than 10% of funding and offtakes on the best possible commercial terms whilst making sure that we are ready to execute the project safely, on time and on budget. I'd like to thank the team for their effort to date, the extra time that they have dedicated working across multiple time zones to get us to where we are today and very grateful for their commitment and that of our partners here and abroad. It is all coming together. And on that note, I might just pause and just open up for any Q&A. Operator: [Operator Instructions] We are showing no questions from the phone. We will now move to the company for webcast questions. Penelope Stonier: Thank you, Kylie. The first question we have is from an anonymous shareholder. So the question, Darryl, Lynas has raised just over $1 billion in cash late last year and has a market cap of around $16 billion. They're a proven developer and producer of NdPr mines and has made it known to its shareholders and market that they are looking to increase their exposure and NdPr production. Arafura, one could say, has now moved to a development growth company, which offers a high-quality, long mine life of NdPr production. History shows that most major resource producers in acquisition phase look for companies with high-quality mine life opportunities. Once they target the company have completed all the hard work and derisk the project and are close to development stage, normally leaving long-suffering shareholders who have supported the company for years, not getting to see the full potential upside of the share price. If an opportunistic bid was made whilst the share price is still languishing in the high $0.20 to low $0.30 range, what is the Board doing to prevent a company like Lynas who also has Hancock Investment Group as a major shareholder, making an opportunistic takeover bid for Arafura? Darryl Cuzzubbo: Yes. So thank you, Pen, for that question. Look, I mean, Lynas has mentioned that this is something that we, as a Board, have been very mindful of, right? So we've got our defense strategy in place. We have a defense adviser. Actually, not that long ago with the subcommittee of the Board, we actually went through a number of [ MOCs ] situations. So I feel like from a defense perspective, we're very well prepared for that. As we did our most recent capital raisings, we deliberately targeted long-only investors that obviously helps getting them on our register. And also, obviously, there's things that we can control and can't control around share price. I mean share price is the ultimate defense. And I'm saying the obvious here, right? So the next catalyst is FID, which for us is just around the corner. So I think we're well prepared should there be an opportunistic bid. Penelope Stonier: Thank you, Darryl. The next question comes from Heck Middleton. Why should the shareholders believe and trust the decisions of the company and the Board on this new FID approval when we originally said it would be announced during the first quarter of 2025. Why not start it in November, get the development to production. And I'm sure the balance of funds and cornerstone investors will come in very quickly as they don't want to miss the opportunity at such a discount. And at the same time, we know the future funders and shareholder support. I assume now you've had around 90-plus percent of the total development funds that you are seeking. And if you have a 20% contingency on the total development budget, doesn't that mean you already have full funding in place with just the 10% contingency? Darryl Cuzzubbo: Yes, a good question. So just probably there's a couple of things there, right? So firstly, it has taken us a bit longer to round this out. As I mentioned in the introduction, we are at the front of the queue in a long list of projects with the new government seeded funds. So that demonstrates we're doing something right. If you look at EFA, we were the first from an equity perspective. If you look at National Reconstruction Fund, we were the second and the largest. And you look at the German Raw Materials Fund, we were the second with the first project being a German project. And there's -- as you can imagine, there are many projects that have applied. So for us to be at the front of the queue says something and gives me confidence we're doing everything we can to progress as quickly as we can. Now on your second point about should we go call FID now, we could, right? But we don't think it's prudent. We think the most prudent thing, particularly given we've got less than 10% is to secure that equity so we can go to our shareholders. So we're fully funded. Secondly, we use the tension around securing offtakes to help bring in that equity. And as I mentioned, the pricing dynamics are improving in our favor. So let's ride that wave. When we lock in offtake agreements for the lenders, they have to be essentially a 5- plus 2 or 7-year term. So think about that, you've got a 3-year construction period and then you've got a 7-year offtake. So for the next decade, sure, calling FID is an important catalyst. But the value of your company for the next decade will be determined by the pricing terms that we negotiate in the current offtake. So we think it's prudent. We think it's in the long-term interest of the company to lock in the remaining funding and the offtakes on the best pricing terms. And it's -- as you can see, we're not far from completing that. Penelope Stonier: Thanks, Darryl. I've got a question from Bernard just in regards to that remaining 10% equity on the best possible terms. Is there a risk that this will further dilute the shareholding? Darryl Cuzzubbo: So the 10% -- it's a good question, Bernard. So Peter mentioned that there's USD 134 million left to secure. As we bring those cornerstone investors in for the USD 134 million, they will come on to our register. Penelope Stonier: Okay. I'm going to touch on a couple of -- a general question here. It's just coming through a number of shareholders. Is FID imminent? And do you expect any further delays? And what confidence can you give the shareholders that FID will come within the coming months? Darryl Cuzzubbo: Yes, sure. So look, we're being as transparent as we can. So as I mentioned, we're expecting to round out the agreements by the end of March that would then allow us to call a shareholders' meeting to vote for the last cornerstones coming in. That is our best guidance. If -- but it can go either way. So for example, if there was another geopolitical event, that time frame could come forward. Also, it could be a little bit later if we're not getting the pricing terms that we think we should be getting on the offtake. So there is a level of uncertainty around the time frame. I can assure you what we're pursuing is what will drive the long-term value of the company. We're doing it as quickly as we possibly can as evidenced by our progress compared to other rare earth projects, but there is some uncertainty to the timing because we're not in control of the third parties that we're dependent on. And we're being as transparent as we can on that time line. But in any case, we think that the most plausible outcome is to get these sorts of agreements in place by the end of March. So you can see it close. Penelope Stonier: And just following on from that. So John Hebenton, apologies, John, if I've incorrectly [ pronunciated ] that. Is the German Raw Materials Fund the only thing remaining for FID to be announced? Can you please elaborate? Darryl Cuzzubbo: Yes. Thanks, John. No, it's not. So as Peter mentioned, the USD 134 million, that could include the EUR 50 million from the German Raw Materials Fund, but there are other parties that we're engaging with. There's literally half a dozen options that we're pursuing to land the remaining USD 134 million. And we're doing that, one, make sure we land as quickly as possible. But secondly, so that there's some competitive tension so we can get the best outcome. So John, there are more parties involved. I cannot -- these are commercial and confidence discussions. But as soon as we can say something more on those discussions, we will. Penelope Stonier: Thank you. And just in terms of -- I've got a question here from both Lee Burt and also from John Parkinson. Just providing an update on the joint venture. There's been little disclosure in regards to the talks in the joint venture. Can you advise if this is still something that is possible? Darryl Cuzzubbo: Yes. So thank you, Lee, and thank you, John. So on the JV, it's very much the same as what I said last time. If you go back, I think it was about 6 months ago, I said there was a two-horse race here. And we would close out with the one that was the quickest with a line of sight as to where we're going to get the best return for our shareholders. The JV pathway is not moving fast enough. So all of our attention is on securing the last 10%, so we can call FID. The JV pathway is somewhere in the future. So we're not focused on that. We're focused on landing at the last 10% and calling FID. Penelope Stonier: Thank you. This might be one best directed towards Peter. Is there any contingent on the funding or loans we have with needing the German offtake agreement getting signed? Peter Sherrington: Yes. So we have some volume requirements that we need to meet with our German lenders and Siemens Gamesa covers a substantial proportion of that. We would like some additional volume to provide us with some buffer over their requirements as well. So as we're not just reliant on the existing contracts. So that is a requirement. But probably the major focus is also tying it in with investment from the German Raw Materials Fund as well. So there's two key things that are driving our focus on those German market opportunities. Penelope Stonier: Thanks, Peter. I have a second question from John Hebenton. How do you expect to reassure shareholders that this project will succeed given constant delays? And more importantly, the shareholder value has been destroyed through massive dilution and price -- and share price that is down over 60% from its highs as well as the current price of $0.28 or slightly down today. Can you give a bit more color on that share price movement, please and reassurance from the shareholders? Darryl Cuzzubbo: No worries, John. So just a couple of things right. So the question is around whether we're going to get to FID or not. We're 90% there. So there is no question we're not going to get to FID. The question is, are we going to get to FID on the best possible offtake pricing terms. And as I said, we're close. Now in terms of share market performance, if you compare us to our peers, excluding Mountain Pass and Lynas producers, we've actually done very well. So our share price over the last 12 months is up nearly 110%. You talk about coming off lows. We've moved with the rare earth sector, right? So when there was different geopolitical events, we all -- the rare earth sector rode those waves. But if you take a 12-month view and compare us to our competitors, we've actually done pretty well. And we're going to continue to do that. Now on the dilution front, if you look at Peter talked to the total funding ask, we have maximized out on debt. We have done that deliberately to minimize dilution to our shareholders. So I feel like we're doing everything we can to pull off a capital-intensive project in a way that protects shareholders' value. And like I said, we're not just taking the short-term view here. We're taking a long-term view. We want to get to that FID catalyst, but we're also making sure that we lock in the best pricing terms that will actually more than anything else, define the value of your company for the next decade or so. Penelope Stonier: Thanks, Darryl. I'm going to group two questions together here. In hindsight, would it be a faster path to secure equity funding and offtake with the U.S. rather than relying on the AU market? And then can you provide some thoughts on the U.S.A. floor pricing, its potential to be pulled and how that political move may ripple across into Australia and what the critical minerals reserve. Darryl Cuzzubbo: Yes. It's a very good question. Sorry, who asked that question? Penelope Stonier: Bernard as well as [ Patrick Losav ]. Darryl Cuzzubbo: Okay. So Bernard, Patrick, very good question. So look, with the benefit of hindsight, there's actually nothing I would think we should be doing differently. So just remember, so the U.S. is pushing hard now with the recent administration, but that wasn't the case 18 months ago. So I think we have adapted to reflect what's happening in the different regions. I'm hoping that if you look at the global manufacturing powerhouses, a great outcome for us is to have offtake agreements in different regions on pricing terms that allows us to move to an independent index. I would say if we can pull that off, we will be better positioned than anyone else. So you look at Lynas locked in with Japan, Mountain Pass locked in with the U.S. We've actually -- if we land our intent, we will actually have the most globally diverse offtakes with end customers, and we're trying to negotiate terms where we can move to an independent date. This will position us very well. So in terms of would we do something different? I mean, at the micro level, of course. But at the macro strategic level, no. No, I think this is playing out well for us. And time will prove that. Penelope Stonier: And then just another question related to the U.S. from Thomas Morris. With the U.S. interest in Greenland rare earth supply, does this diminish the prospects for Arafura? Darryl Cuzzubbo: So -- and I just realized I didn't answer Bernard and Patrick's question around the U.S. floor price. So just with the -- let me answer that, then I'll come to the Greenland question. So on the floor price, with Mountain Pass, we actually saw that as a one-off. What's most important to us is that we can move to an independent functioning market index, where we believe the pricing will be well above that floor price. With that said, the -- as you know, the Australian government has been talking about this strategic reserve for critical minerals, including rare earths, and they're talking about a floor price. So if we can secure a floor price, we obviously will. But our priority is to get ultimately better pricing, and that will be on an independent functioning price index. Remember, the Mountain Pass deal, whilst they got a floor price, they had to share any upside with the U.S. government. We prefer to keep the full upside. Now with the Greenland, this is -- and I think I might have mentioned this previously. So the Greenland's resources on rare earths are not well defined. So it typically takes 18 years to find a resource and take it into commercial production. Greenland is probably not even at the start of that 18-year tenure. So any Greenland prospects, if they work out to be economic is many, many years away. Penelope Stonier: Okay. Thank you. Another question from Bernard. What participation will Arafura make with regards to the Australian government's $1.2 billion critical mineral strategic reserve? Darryl Cuzzubbo: Yes. So we -- I think we've taken a proactive and leading position in that. AMEC pulled together the sector, the rare earth sector and put a proposal forward to the government, and it's similar to -- as I was saying before, similar to the Mountain Pass type agreement, where there's a floor where you're sharing some upside above a certain price. And the Australian government is considering that, noting that pretty much not all, but most of the rare earth sector were behind that sort of arrangement. Minister King did make announcement earlier this month on that to progress that concept. It will be administered by the EFA, which are very -- who are very familiar with our project and looking to pass legislation sometime later this year. So we're very engaged with the government on that. We're very engaged with the broader sector on that, and we've been engaged with AMEC and the proposal that was submitted to the government just before Christmas. Penelope Stonier: I've got a question from [ Sapien Nath ]. One of my observations about mining businesses is they're inward-looking mentally, which means focusing just on their business. Technology companies try to develop the ecosystem to improve the sustainability and future prospects. What is Arafura and to make sure that we are a major player and also to make sure to establish the importance of NdPr for the world? Darryl Cuzzubbo: Yes. So it's a very good question. So there's a number of aspects to your question. So firstly, I think if you look at just the rare earths plays, I'd like to think we've been the one that's been advocating for this non-China index the most. Because we see that as the ultimate thing that will open up the rare earth sector across the globe as well as getting good returns for our shareholders. I'd like to think we're taking a bit of a leadership position on that. But we're also mindful that this project has many stakeholders. So we've got a clear pathway to net zero. The power supply, and we'll be able to say a bit more about that in coming months, enables renewables to come in. We're very focused that building up this project just north of Alice Springs. It will bring jobs and prosperity to the local community. So I'd like to think we're taking a very broad look across our stakeholder base, doing what we can to provide that support, but we also need that support in return. We're talking today about Phase 1. But as soon as we post FID, we want to start progressing approvals and engineering for Phase 2. So I'd like to think we're taking a long-term holistic view and taking a global leadership position in getting the sector to move to a non-China controlled index. Penelope Stonier: Okay. I think I've got another question here from Heath Milton. Just want to understand how the Board looks at the volume of shares currently on issue, edging to just under 5 billion shares on issue. Has the Board considered a share consolidation? Or is this something that they will look at believing that it would potentially help in reducing short traders in the stock and help prevent opportunistic takeover? Darryl Cuzzubbo: Yes. So Heath, look, just in the short term, our focus is on just closing out the last 10%, right, so we can get going. However, we are looking at the share consolidation. There's pros and cons, right? So the con is you reduce liquidity. So if we want to become the rare earths stock that's in construction, then investors need to have sufficient liquidity. So that's a bit of a downside with share consolidation. But the other big factor in all this that we're looking at and testing is it may help bring in U.S. investors, and we're actually testing that with the market. So in short, we're looking at it, and we're assessing the pros and the cons. It's not something that I see us doing in the short term as we just focus on rounding out the funding and moving into construction. Penelope Stonier: And just touching on share price movements today. Can you please -- this is from Craig Fishman. Can you please provide any thoughts on why the share price movement has moved to 6%? Darryl Cuzzubbo: Yes. Good question. So let me -- so this is obviously a very dynamic situation. Let me make a couple of comments and I might hand over to you, Peter, for anything to add. So there's probably a couple of things, right, that have been announced or been talked about in the media. So one is around the Mountain Pass floor pricing and whether that's applied to other projects or not. And as I've already said, we have not expected that. We've been pushing for something that we think is better, which is an independent pricing index. But I think that may be impacting the market. And then the second thing is just the Australian exchange rate where the Australian dollar has strengthened against the U.S. dollar given our bank -- there's a better chance of maybe increasing interest rates whilst the U.S. maintaining or reducing. Peter, do you have anything to add to that? Peter Sherrington: No, I would have said the exact same thing. I suppose the Reuters article, which has probably been picked up on today by a number of groups seems to be maybe impacting the share prices of the sector. But as Darryl mentioned, our understanding was the floor price for MP was a one-off. I thought that was pretty clear from some time ago, but perhaps that wasn't so clear to the market. And then probably the major thing, I think, which is driving the share price and the sector and other miners as well today, I think it's sort of not just a rare earth thing is uncertainty over the U.S. dollar exchange rate and how that impacts earnings moving forward and perhaps also interest rates where you've got a capital-intensive project where there's uncertainty over interest rates, that is also a potential impact on earnings. So I think they are probably the key drivers. But in markets, we don't know everything until often after the fact sometimes, but they're our best guess. Darryl Cuzzubbo: Thanks, Peter. Penelope Stonier: Thanks, Peter. So a question from Fredrick Richmond. So far, compared to other rare earth companies, the share price has reacted only slightly to increasing market momentum. Arafura is clearly not seen on the stock market as a serious project that generates sustainable shareholder value. How do you intend to change this and ensure that long-term shareholders in particular, benefit from these developments? Darryl Cuzzubbo: So Fredrick, again, like I just said earlier, like if you look at the last 12 months, we've actually -- our share price has done pretty well. And if you compare us to other projects, you'll see that, right? So our share price has risen 110% in the last 12 months. But you know what, there's always more to do. And like I've said a couple of times, what's in our control is obviously getting to FID and locking in offtake agreements on favorable pricing terms. So the two things that we can do right now that drive shareholder value. We pulled Tommie in. The next phase, construction phase will be tougher, tougher again. And the best way to make sure that we're successful there and deliver shareholder value through that phase is good people and good planning, and that's exactly what we're doing right now. Penelope Stonier: Thank you, Darryl. And in terms of -- I've got a question from Heath Milton as well. Just in terms of coverage and understanding the Arafura story, how does the company propose to be able to develop those relationships and gain greater coverage and then obviously, a greater understanding throughout the sector of where the company is at. Darryl Cuzzubbo: Yes, that's a good question. So I might make a couple of comments. So Penny here has done a lot of work in this space since joining us. So let me make a couple of comments. So the rare earth sector up until recently actually has not been that well understood. Actually isn't that well understood. It's quite a niche sector. So we have spent a lot of time educating research as well as investors on the sector. And obviously, as our profile has grown, as our market cap has grown, we've got increasing interest from researchers. And I think that will happen, that will go to another level again post FID. But we focused heavily on educating researchers on the sector and our project in preparation to encourage them to cover us. Penny? Penelope Stonier: I think you've hit the nail on the head, Darryl. What we are seeing Fredrick as well, in particular and for Heath -- we do have a lot of the investment houses, research analysts that do look to the sector, and they have openly come to us and spoken to us recently and that where part of their challenges is particularly around the price bifurcation, the dominance of China and seeing some traction in terms of having alternative suppliers of NdPr and other rare earths coming to market so then they can actually validate their assessments and their work going forward. So there is -- as Darryl said, we are engaging with the analysts. We're engaging with the research desk. We are doing a lot of work. And I think in terms of that validity of our project, the deal that's being done from EFA, from KfW, from all of our lender group is probably a really good signal that this is a genuine project. We are just that so close that 10% away from securing it, that I think in coming months, you will really see the value in terms of what is coming out of Arafura, particularly as the most advanced project pre-feasibility, preconstruction, we've done our feasibility studies. We are the most advanced and construction ready. It is just that 10%. So I think we're getting good traction in the market on that perspective. Darryl Cuzzubbo: I think as the sector understands the importance of ore to oxide and how that truly differentiates us as well, I think that's going to play in our favor. Penelope Stonier: And one last question from Fredrick. As we look to the parallel pricing systems established outside of China and further full price guarantees potentially by government, what effect will this have on any existing offtake agreements already in place? And do those need to be renegotiated? Darryl Cuzzubbo: Yes. Look, so we did anticipate a change in the pricing environment as we did different offtakes. It's happened sooner than we expected, thanks to the U.S. So we do have provisions to enable a transition. But ultimately, they still need to be negotiated. But this goes to my point earlier, now is the time to negotiate these better pricing terms. Penelope Stonier: Okay. I think another question probably turning more towards the project. Can you please from [ Aman Malik ], how much of the 10% in dollars? How much is this 10% in dollar value and the number of shares that will be added? Darryl Cuzzubbo: Yes. So as Peter mentioned, it's USD 134 million out of a total funding bracket of USD 1.9 billion. So it's actually less than -- is less than 10%. Peter, I don't know if you've got an idea of the shares for that USD 134 million. Peter Sherrington: It will depend on what deal is struck with those particular investors, Darryl. So I think our objective will be to minimize the number of shares and maximize the price that we issue those at. I mean that's always going to be the case. But I think to sort of speculate what that will be now is probably a little bit difficult. Darryl Cuzzubbo: Thanks, Peter. Penelope Stonier: Thanks, Peter. And in terms of -- just to clarify one question from Robert William. Where will the processing plant be built? And what are the processes that are being utilized? Darryl Cuzzubbo: Yes. So Robert, so the process plant will be built at the project site. So that's 135 kilometers north of Alice Springs. One of the differentiators for us is that all of the processing happens on the one site. So if you look at other projects will have the mine separate to part of the process plant and that has a couple of things. It means you've got transportation costs. But the other thing is with rare earths, when you find rare earths, it's found with radionuclides and by having the whole process plant on site, everything that leaves site is clean from a radiation perspective. So this is super important when you're looking at other rare earth projects, this is a differentiator by us going to an oxide, which removes the radionuclides and having it all done on the one site. In terms of -- you asked the question, what is the exact process? It is a complex process, right? So 90% of the CapEx, 90% of the OpEx is tied up with the process plant. But broadly, there are four components. So you've got the mine that makes up 10% of the CapEx. You've got the concentrator that really concentrates the rare earths. And that's pretty low process complexity. So you've got concentrators in copper, gold, et cetera. Then you've got a hydromet circuit, and that's a chemical process that uses different assets to start to pull the rare earths out. That is the most complicated and capital-intensive part of the project. And then the back end, you've got what's called separation. which is where you -- it's the last step where you pull the light rare earths, pull the light rare earths out into an oxide for sale. So if you look at -- you compare us to Lynas, Lynas is, those steps the mine, the content of the mine, obviously, Mt Weld, you've got the concentrator at Mt Weld. You've got the hydromet circuit, which is at Kalgoorlie and then you've got the separation process in Malaysia. We do all of that at the one site. Penelope Stonier: And talking about the CapEx there from Bernard. In terms of CapEx denomination, do you -- are you able to provide a breakdown on U.S. versus AUD on proportion? Darryl Cuzzubbo: I don't have that at hand. Most of it is Aussie dollar, by the way, but there is a U.S. denomination. I'm not sure, Peter or Tommie, you've got any more definitive insight into that. Peter Sherrington: I haven't got the exact figure on me, but the U.S. dollar and euro component of the CapEx is not significant. Our most significant FX exposure is in actual fact on converting the U.S. dollar loans back to Aussie dollars so as we can spend them on the project. So in terms of FX exposure, that's probably our most significant focus. Penelope Stonier: Okay. And one more project-related question on procurement supply. Can Arafura avoid electricity supply problems that Lynas Rare Earths has had? Thank you from [ Jeffrey Propel ] in Miami Beach. Darryl Cuzzubbo: The simple answer to that, Jeffrey, is yes. So Lynas are moving to an off-grid solution. Our solution is already off grid. So we have a gas pipeline that runs through our tenements. We will be tapping into that with an independent power supply. So we will not be reliant on the grid. Penelope Stonier: Conscious of time, I'll probably just wrap up with two more questions. Darryl, prior to the last capital raise last year, the Board said that the cash burn rate was around $1 million to $1.2 million per month. Excluding capital costs -- excluding the capital raising costs, what has been and are now the estimated cash burn rate per month, has that changed materially? Darryl Cuzzubbo: Yes. So as you said, excluding the one-off funding-related costs, our cash burn is a bit over $2 million a month. However, as we get close to FID, we are going to be ramping up our project team and execution readiness so that soon after calling FID, we can release contracts and start construction. So right now, it's a bit over $2 million a month. Penelope Stonier: Okay. All right. Scott McCullough, just thanks team doing a great job. So we appreciate that support, Scott. And just to wind up, Darryl, I'm going to collectively pull in half a dozen questions here, and I think they're all burning to know. Can you please provide updated guidance? What -- when do we anticipate FID now? And what are those key steps that will be required, the catalysts you've spoken about them in the -- at the AGM. What are those catalysts now to be able to call FID and move forward into construction? Darryl Cuzzubbo: So the main catalyst is securing the last 10% of funding but it's linked to the offtake. So we'll be basically using the remaining offtake to pull in equity. And as I mentioned, we want to get as favorable pricing terms as we can on that offtake. And it's like any negotiation, right? So if you're doing a purchase agreement or buying a house, you can always do a quick deal. A better deal always takes a bit more time. So we've been quite tough and deliberate about that. We've been very deliberate in having multiple strategies to create that competitive tension, right? So I would argue we're looking at closing that FID, but we want to get the best possible pricing terms as we can. Now the reality is with the offtakes, we don't need to have -- we want to have all the offtakes in place, but we actually don't need to have them all in place from a lender perspective until debt drawdown, which is about 12 months after we start construction. In terms of finalizing that time line, our best guidance at this point is to finalize those agreements by the end of March, which would then enable us to take that final equity piece to shareholders, which will enable FID in Q2. So we want to by the end of this quarter, get the agreements in place that then enables us to call a shareholder vote in Q2. But I need to stress, right, we're not in control of the time line. We can influence it, but we're not in control of the time line. Penelope Stonier: Thank you. There are just a couple of minor questions here that I will revert directly back to the people who posed those questions. But Darryl, there's no other questions on the phone line. So I might hand back to you to close. Darryl Cuzzubbo: Okay. No worries. Thanks, Pen. So again, thank you, everyone, for joining us today. Please always feel free to send through any questions that you have to the company. Don't need to wait for the quarterly updates. I hope you can see that the pieces are coming together. We are focused on the key items that will deliver the most value that is rounding out the funding, getting the best pricing terms for our offtakes and making sure that we're ready to execute. I look forward to providing you an update again on these activities next quarterly, and we would like to thank you for your continued support. Thank you for dialing in today. Operator: That does conclude our conference. Thank you for participating. You may now disconnect.

101天前Insight Analytics约5分钟阅读

NOKIA.HE 2025 Q4 财报电话会议

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's Fourth Quarter and Full Year 2025 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today with me is Justin Hotard, our President and CEO; along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may, therefore, differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency and portfolio basis, and other financial items will be based on our comparable reporting. Please note that our Q4 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages from the quarter, then Marco will go through the financial performance, and then we'll move on to Q&A. With that, let me hand over to Justin. Justin Hotard: Hello, everyone, and thank you, David. Overall, our fourth quarter performance was in line with our expectations, reflecting disciplined execution across the business. Net sales grew 3% in the quarter to EUR 6.1 billion, with operating profit of EUR 1 billion and free cash flow of EUR 0.2 billion. For the full year, net sales were EUR 19.9 billion and operating profit was EUR 2 billion, slightly above the midpoint of our guidance. Free cash flow conversion of 72% was also consistent with our guidance. Stepping back, 2025 was a foundational year in repositioning Nokia for long-term value creation. We strengthened our portfolio with the acquisition of Infinera, simplified our operating model and set a clear strategy at our Capital Markets Day to focus the company on the areas where we see opportunities for differentiation, scale and sustainable market leadership. Now to give you a bit more detail, let me first turn to Network Infrastructure. In the fourth quarter, net sales grew 7%, driven by optical networks, which grew by 17%. Order intake was solid across both optical and IP networks with a book-to-bill above 1, supported by particularly strong demand from AI and cloud customers. For the full year 2025, we delivered EUR 2.4 billion in orders from AI and cloud customers. This reinforces our view that optical networking will become an even more critical part of the infrastructure to support the AI super cycle, and we are investing to capture near-term demand, while maintaining a long-term perspective on the opportunity. In Optical, our 800-gig ZR and ZR+ pluggable products are shipping with initial units performing well in the field. We now have multiple design wins and are supplying into scale deployments. Our focus is on ramping production to meet the strong demand we see in the market. In IP Networks, we made progress on our expansion into data center switching. We launched two new products in the quarter, the 7220 IXR-H6 switching platform powered by Broadcom's TH6 and our Agentic AI solution for event-driven automation management, which reduces network downtime by 96%. We also secured a design win for our next-generation data center switching platform. These are encouraging steps, and we continue to believe revenue will ramp over time as we expand our presence in this rapidly growing market. In our mission-critical enterprise customer segment, book-to-bill was well above 1 in Q4, supported by a growing pipeline from both new and existing customers. Turning to Fixed Networks. Performance was stable year-on-year in Q4. As discussed at our Capital Markets Day, we are deprioritizing certain customer premises equipment products where we do not have meaningful differentiation and which dilute margins. In Q4, our fiber OLT business grew 16% year-over-year, offset by declines in these areas, I just referenced, that we are deemphasizing. This resulted in overall flat performance for Fixed Networks. As I announced at our Capital Markets Day on January 1, we brought together core software, radio networks and technology standards to form our new Mobile Infrastructure segment. This structure is designed to sharpen accountability, improve profitability and position the business for long-term technology leadership. Core Software, formerly a part of Cloud and Network services is leveraging our differentiated cloud-native core network stack to grow faster than the market and continue improving profitability. During the quarter, we won a 5G core deal with Telia and announced the collaboration with Bharti Airtel on Nokia's Network as Code API platform. We now have more than 75 partners using the platform, including 43 telcos. Radio Networks, formerly a part of Mobile Networks, focused on disciplined execution in a largely stable market. We continue to invest to deliver 5G advanced and O-RAN solutions while innovating to establish a longer-term leadership position in 6G and AI-native networks. A key pillar of our strategy is co-innovation. And in Q4, we announced our partnership with NVIDIA. We continue to remain on track to begin trials and proofs-of-concept on AI-RAN later this year. We also announced a market share expansion deal with Telecom Italia, along with contract extensions with Telefonica Germany and SoftBank. Technology standards remains focused on securing long-term monetization of Nokia's patent assets. We signed several deals in Q4 and continue to maintain a contracted net sales run rate of approximately EUR 1.4 billion. At our Capital Markets Day, we also announced the creation of Nokia Defense, a new incubation unit that will serve as the central R&D hub and go-to-market for our defense portfolio. Our priority is to deliver defense-grade solutions based on Nokia's Mobile and Network Infrastructure technologies for Finland and other NATO countries. Nokia Defense also includes Nokia Federal Solutions in the U.S. and includes the technology we acquired from Phoenix Group in 2024. Based on feedback from customers, we see growing demand for our 4G and 5G technology in military environments, both for national security and tactical applications. This is an area where we are continuing to invest, and we will share updates as we make further progress. Finally, in Q4, we closed the transaction to take full ownership of our joint venture in China, Nokia Shanghai Bell. This gives us greater operational flexibility, and we will bring it into full alignment with Nokia's global operating model. As a part of that integration, we expect to deliver approximately EUR 200 million of run rate cost synergies with integration costs of approximately EUR 350 million to EUR 400 million over a period of 24 to 36 months. Turning to '26. Looking ahead, our focus is on disciplined execution to capture growth in AI and cloud and increase efficiency while we're building a high-performance culture across Team Nokia. We now have fewer, clearer priorities, a simplified operating model and a strategy we are executing with speed and accountability. Network Infrastructure remains our primary growth engine, particularly Optical and IP Networks, where we see strong structural demand. In Mobile Infrastructure, our focus is on gross margin and efficiency, while we continue to invest in our portfolio for competitiveness and market share in 5G and to transform the business for long-term success in areas such as AI native networks and 6G. From a financial perspective, in 2026, we are targeting an operating profit in the range of EUR 2 billion to EUR 2.5 billion. At our Capital Markets Day, we outlined a series of KPIs to illustrate how our strategic direction translates into financial outcomes. Let me revisit those and what we expect in 2026. Our first KPI is to deliver 6% to 8% compound annual growth in network infrastructure between 2025 and 2028 on a constant currency and portfolio basis and 10% to 12% in the combined Optical and IP Networks businesses. In 2026, we expect growth rates in both cases to be in line with these long-term targets. As expected, the product prioritization decisions we have taken will limit growth in Fixed Networks, while we expect growth in our fiber OLT portfolio to continue to occur due to strong underlying demand. Our second KPI is to expand Network Infrastructure operating margin to 13% to 17% by 2028. This is compared to the 9.5% achieved in 2025. In 2026, we expect measured margin expansion as we ramp new products and continuing investing in the long-term growth opportunity we see in the business. The next two KPIs relate to Mobile Infrastructure gross margin and operating profit. In 2026, we continue to expect some top line headwinds from prior contract losses, but otherwise, a stable market environment. Our focus is to continue to target at least EUR 1.5 billion in operating profit, consistent with our performance in 2025. As announced at our CMD on January 1, we have moved four businesses into a new unit called Portfolio Businesses. This includes our Fixed Wireless Access customer Premises Equipment, and Site Operations businesses, both from Fixed Networks, our Microwave Radio business from Mobile Networks and the Enterprise Campus Edge business from Cloud and Network Services. In 2025, these businesses generated net sales of EUR 850 million and an operating loss of EUR 97 million. In 2026, our target is to conclude a future direction for each of them. We currently assume a lower operating loss in 2026 versus 2025. For Group Common, we expect costs of approximately EUR 150 million in 2026 compared with EUR 190 million in 2025. Overall, we see 2026 as a year where we will make meaningful progress towards our long-term targets. With that, let me turn over to Marco to walk you through the financials in more detail. Marco? Marco Wiren: Thank you, Justin, and hello from my side as well. As Justin mentioned, we delivered a fourth quarter, which was in line with our expectations and guidance. Net sales were EUR 6.1 billion, that's up 3% on the prior year. Gross margin was 48.1%, an improvement of 90 basis points, driven by improvements in Mobile Networks and Cloud and Network Services. Operating margin was 17.3%, and this is 90 basis points below the prior year, impacted primarily by increased investments in growth areas, including the Infinera acquisition. We generated EUR 226 million of free cash flow and ended the quarter with EUR 3.4 billion of net cash. Let's turn to the business groups now and starting with Network Infrastructure, where net sales grew 7%. In quarter 4, AI & Cloud customers accounted for 16% of our net sales and 30% of Optical Networks. The book-to-bill for the overall segment was above 1 with strength in IP and Optical Networks. Gross margin declined by 80 basis points to 44.6%. Operating margin was impacted by lower gross margin, along with the increased growth-related investments in R&D and the costs associated with the acquisition of Infinera. And then, let's go to Cloud and Network Services, where we saw a decline by 4% in the quarter, and this was mainly due to a different phasing of revenue recognition this year. The business delivered 6% of net sales growth for the full year 2025. Gross margin increased 650 basis points, partly as a result of the reversal of a provision of EUR 37 million in the quarter. So even without this benefit, we would have seen an improvement in gross margin. Operating margin also increased by 470 basis points with improvement in gross margin supported by reduced operating expenses. And then Mobile Networks, net sales increased by 6%, and this was driven by growth in Middle East and Africa, Japan and Indonesia. Full year net sales were stable and consistent with our expectations. Gross margin was 40.1% due to more favorable mix and lower indirect costs. For the full year, gross margin was 37%. Operating margin was 11.3% in the quarter, reflecting the higher gross margin as well as the impact of lower operating expenses benefiting from the ongoing cost saving program. In Nokia Technologies, net sales declined by 17% in the quarter. Catch-up sales in this quarter were lower than the previous year, and we signed several new deals in quarter 4, and our annual net sales run rate remains at approximately EUR 1.4 billion. Operating profit was impacted by a EUR 20 million impairment charge, and this is related to a prior asset purchase, which we deem to have minimal future value in the context of our product portfolio. Now let's look at the net sales by region. And as you can see here, in North America, we saw strong growth in Networks Infrastructure, whilst Cloud and Network Services and Mobile Networks declined. In APAC, Japan and Indonesia grew, while we saw declines in India and Greater China. And excluding Nokia Technologies, Europe grew 4% with strength in Network Infrastructure. Middle East and Africa grew in both Mobile Networks and Network Infrastructure. And then regarding cash, we ended the quarter with a net cash position of EUR 3.4 billion and the free cash flow was positive EUR 226 million and ending the year with a conversion rate of 72%, which is within our guided range of 50% to 80%. And in the quarter, cash increased as a result of the NVIDIA equity investment, which was EUR 0.9 billion. And we also completed the acquisition of the NSB shares, which impacted cash by EUR 0.5 billion. And this equates to 50% of the net cash in the joint venture, which we paid to the other joint venture equity owner and was consistent with the liability we had already recorded on our balance sheet. We now fully own our operations in China, and that will give us a greater operational flexibility going forward to manage the business, just like Justin mentioned. And today, we have also published recast financials based on the new operating structure, we have implemented at the start of the year. And there are a couple of things that I wanted to highlight to help you understand these figures. You will see some differences in the net sales compared to our prior reporting, reflecting those units being moved into the new Portfolio Businesses segment, as Justin explained earlier. In Group Common, the recast cost base for '25 is EUR 180 million as we have reallocated approximately EUR 193 million of the cost to the primary operating segments to better reflect the nature of these costs. And as discussed at our Capital Markets Day, the operating segments are expected to drive efficiencies in the organizations to mitigate those costs over time that we have transferred to them. However, this reallocation have a short-term impact on the segment profitability in NI and MI. And finally, Justin already introduced our new 2026 financial outlook, but I just wanted to share some comments on additional modeling assumptions for this year. For quarter 1, historic seasonality would imply a 24% sequential decline in our net sales, excluding Nokia Technologies. Considering the above normal seasonality we've seen in quarter 4 2025, we currently expect quarter 1 2026 net sales to decline somewhat more than normal seasonality would imply. We also assume the operating margin to be only slightly better than the prior year. Then for the full year of '26, we expect comparable financial income and expenses of between positive EUR 50 million to EUR 150 million. And we assume a comparable income tax rate of around 26% and 27%, with a slight increase related to the regional mix of profit generation. Cash tax outflows are expected to be approximately EUR 500 million. And we are planning for CapEx of between EUR 900 million and EUR 1 billion as we invest in additional manufacturing capacity for Optical Networks, along with some real estate renewal projects. And finally, we expect free cash flow conversion of between 65% to 75%. With that, let me hand it back to David for Q&A. David Mulholland: Thank you, Marco and Justin, for the presentations. Alicia, could you please give the instructions for the Q&A session? As a reminder and as a courtesy to others in the queue, if you could please limit yourself to one question and a brief follow-up. Alicia, please go ahead with the instructions. Operator: [Operator Instructions] I will now hand the call back to Mr. Mulholland. David Mulholland: We'll take our first question today from Alex Duval from Goldman Sachs. Alexander Duval: A couple of quick questions. Firstly, on Optical, it grew 20% in the quarter, but it seems you're saying it will only grow 10% to 12% in full year '26. You referenced good order momentum as well as a solid percentage contribution from AI. So I wondered to what degree your guidance for the segment reflects conservatism? And secondly, as a brief follow-up, you're guiding to a somewhat sub-seasonal trend into the first quarter for the group. I wondered to what degree that's just normalization of a better than seasonal 4Q or whether there are other factors to take into account? Justin Hotard: Yes, sure. So Alex, good to hear from you, and let me answer your first question. You're right. We obviously grew 17% in Q4 on Optical Networking. When you look at our Optical Networking business, we are being balanced on the 10% to 12% across IP and Optical Networking, as you said. What I would also emphasize is, we are still transitioning from a base that was, was still very telco-centric in '25, so 70-30. And if you think about where we were before that, certainly before the Infinera acquisition, significantly telco-centric. So we're building off that base. We're excited about the order momentum. And then, of course, in parallel, we're working to scale production. So, I think as you and I have talked about, we want to be disciplined in our execution and our predictability. And so therefore, that's why we've guided the way we have. But I continue to be very optimistic about this business and the long-term opportunity for some of the factors like scale across networking, the demand we're seeing in overall fiber, some of the recent announcements in this area. So, I think this is a place where absolutely, it's a strategic priority for us, absolutely, it's a focus of capital allocation. And I believe it's a market that will be a significant player in for many years ahead, but balance on where we are today given the starting point that we had, which is really only three quarters deep in terms of aggressively pursuing the AI & Cloud segment. Marco Wiren: And for the second question, if you look in the past as well, when we have had a very strong and higher than normal seasonality in quarter 4, we easily see a larger decline as well. And this is a little bit based on as well how our telco customers are buying. And this is more, I would say, visible in mobile network area and also the telco customer base that when they have had a lot of purchases in quarter 4 and usually the start of the year, a little bit slower, and that's why we guide that we see a somewhat lower than what we normally see. David Mulholland: Thank you, Alex. We'll take our next question from Richard Kramer from Arete. Richard Kramer: Justin, you're pledging to grow CapEx to really record levels of EUR 900 million to EUR 1 billion. Do you have visibility in your order book of Optical or IP orders? And or is leveraging this investment require additional unannounced wins with hyperscalers? And where are you in that sales cycle? And I have my follow-up. Justin Hotard: Yes. And obviously, Richard, when you think about CapEx investments in manufacturing in Optical, particularly semiconductor manufacturing, as you're well aware, I'm sure, this is not something you invested in a year and you start generating returns. So this is something where we're looking at the long-term trends. And we've got a lot of confidence in the long-term market trend supported by the near-term demand that we see. Richard Kramer: Okay. And for Marco, we saw EUR 300 million of restructuring in '25 and you're guiding to another EUR 450 million in cash outflow. Can investors look forward into 2027 where you think these very heavy impacts on reported versus comparable earnings drop to immaterial revenue levels? Marco Wiren: Yes. I think as we announced already in '23 October that we have this cost-cutting program and efficiency program. And there, we laid out also the different years until '26 where we have this restructuring cost. And we guided by that time that we expect cost savings between EUR 800 million to EUR 1.2 billion, and we said that also the costs to generate these savings will be about the same and also the cash flow is following that. And usually, the cash flow considering that we have more footprint in the European area. And that's usually -- there's delays on acting on those different cost actions that we are doing. And this is the reason why we see that '26 is more heavier on the cash outflow side as well. And -- but we are following the plan well according to what we have laid out earlier as well. David Mulholland: Thanks, Richard. We'll take our next question from Simon Leopold from Raymond James. Simon Leopold: First thing, I wanted to ask about is particularly within the optical space scale across projects are new variant for data center interconnected. Your peers have discussed these projects. Can you elaborate on Nokia's position and how you envision this opportunity developing over the next few years? And then I've got a follow-up. Justin Hotard: Yes. Sure, Simon. Good to hear from you. Just a couple of things here. One, this is a space that we think is a part of the long-term trend on optics. I mean, if you look at the long-term demand on optics, think of the drive around scale across right now as being one of the most significant near term. But obviously, then you have speeds, right? We've gone through the 400- and 800-gig transition very quickly. We're ramping on 800-gig multiple pluggable wins, as we've talked about, a lot of active customer conversations on that space, continued momentum in the market in terms of what we see. But then we expect that 1.6 and 3.2 will come. And when you look at that scale across is the tailwind for both the technology transitions and the demand. And then, of course, over time, we see scale out increasingly be an opportunity for coherent optics. So that's the tailwind we see. The other thing I would just reference as you think about this is routing for us, in particular, scale across is a tailwind for. So switching is much more about the data center racks, the spine-leaf architecture. But when you think about routing, that's another tailwind. But key thing for us right now is spending the time doing the work, co-developing, co-innovating with our customers, making sure we're scaling production capacity to take advantage of this opportunity over the long term. And fundamentally, what I see is a much more mature and larger optical market, driven by the AI infrastructure build-out than we've seen in the past. And I think a much more mature in ecosystem as well. So there's a lot of work to do for us as an ecosystem and as an industry, but I think a much bigger market, and that's absolutely why we're investing into it and why you see us leaning in on capital both in terms of CapEx, but also R&D capital in the space. David Mulholland: Do you have a follow-up, Simon? I guess we'll move on. We'll take our next question from Sami Sarkamies from Danske Bank. Sami Sarkamies: You had 5% growth at IP Networks in '25. What needs to happen for this to step up? Are the bottlenecks related to product offering, customer logos or design wins? And then on timing, how much time do you think we need for improvements. Could it happen already this year as you have signed new customers during last year? Justin Hotard: Sami, thank you for that. Yes, I would just say a couple of things here. First of all, we've talked about the fact that while we were well positioned post the integration of Infinera to go after the Optical Networking platform, this is a space where we've been even a little further behind. So it's been a big focus for me as we started -- as I started. And obviously, for David, as he took over. And in fact, we just announced earlier this week that we have a new Head of IP Networking, Greg Dorai and Vach Kompella, who, for those of you that have been around this industry, know Vach, is an industry legend, he's retiring. But part of that in bringing in Vach's successor was looking for someone that had deep data center experience. So the net of all of that is, as I said at CMD and even in some of our recent discussions with investors, this is a space where I think it's going to take us a little bit of time to see the growth. But I'm really, really pleased with the design win we had in Q4 that I referenced. I'm pleased with the order backlog. But I think this business needs a little bit of time to ramp. Absolutely a big tailwind as a part of the AI and data center build, and encouraging progress on mission-critical where we play in select vertical markets that value scale, security and availability, obviously, things we bring from our legacy in this space in telcos. David Mulholland: Did you have a quick follow-up, Sami? Sami Sarkamies: Okay. I'm wondering on the CapEx outlook, is this going to be like a multiyear undertaking, if you think about higher CapEx or just like 1 year thing? Justin Hotard: Yes. I think what we'll continue to do, Sami, on this, and I'll let Marco comment is, we're always going to show investment against the opportunity we see in the market. So I would look at this as in line with supporting the guidance we've given you for now and really in line on Optical Networking growth as we see it. So obviously, that's -- in the future, if we saw a different growth potential in Optical, we might give you a different view on CapEx. Marco, anything to add? Marco Wiren: No, I -- just building over what you said that we definitely see opportunities, and that's why we believe that it's the right timing to invest more, to capture those opportunities and secure also that we have manufacturing facilities and capacities that are needed be able to deliver those demands that we see that especially in the optical side are increasing. But still, it's not so that there's a huge CapEx investments compared to other data center investments. So these are still quite reasonable investments, and we believe that there's a very good return on those investments as well. David Mulholland: Thanks, Sami. We'll take our next question from Artem Beletski from SEB. Artem Beletski: So I would like to pick your thoughts regarding recent news coming out from Brussels. So, what comes to this Cybersecurity Act, the Digital Network Act. So how do you see those proposals impacting your business outlook, what comes to upcoming years? Justin Hotard: Look, I think on the Cybersecurity Act, the CSA, and the Digital Networks Act, DNA, look, first of all, we're pleased with this. I mean, this is -- these are some of the things we've been calling for. Certainly, since I started, I've been very vocal about. I think the key thing on the Cybersecurity Act around trusted networks is seeing a few things. One is the clarity on replacement schedules. I also think it's important, as we've said, that there's support for network operators, this kind of replacement is a big lift. Now from a supplier perspective, this is well within our capacity. If you think about the pace at which we've deployed out -- deployed networks in India or even in North America in terms of upgrades, the network upgrades that are required in Europe are something well within our scope and capability and manufacturing capacity. But it's a complex technology project. So, we think this is something that we recognize there's complexity and support. And our view is the urgency is now that we need to continue to move. And certainly, for our customers, they need to have clarity because where we're -- the platforms we're investing in today will be all the things that need to become 6G ready in the near future. And if you think about what we talked -- we're talking about AI-RAN as an example of that, that is a great example of where if you buy an AirScale platform today, it's going to be upgradable to AI-RAN as we launch that platform. And so that's the kind of opportunity we're making the investment decision now and having clarity now as an operator. As you run that project over a 2- or 3-year period, we think is particularly important, and that's why it requires support because, obviously, it's not in anybody's budgets to run an accelerated CapEx program amongst our customers. But it's also not just radio. We tend to focus on that. This is actually a really important opportunity for fiber networks and access networks and just as important, because fixed access networks are critical for consumer, they're critical for business. And then, of course, there's the transport networks and all the underlying infrastructure. So this is a pretty significant step. We're very pleased with it. I also think when you link it to DNA and you look at some of the things around spectrum harmonization and you look at the opportunity in Europe, and this is something that I've been certainly vocal about, I was talking about last week in Davos is, this is an opportunity for Europe to reshape its long-term competitiveness, its long-term competitiveness in technology, its long-term competitiveness in infrastructure and innovation and ultimately, national security, sovereignty and economic competitiveness. So I think this is really, really important. And you can just look back at the Internet super cycle to see where the winners in the Internet Super Cycle came from as a result of significant infrastructure investment. When you think about Europe and AI, Europe is incredibly well positioned. It's well positioned because you've got a great industrial automation technologies, obviously, manufacturing industries like automotive and you've got great talent in Europe. And obviously, as being our largest talent base in our -- in the company, we want to see more investment here so we can continue to support the talent here, building technology for Europe to support Europe and see a broader ecosystem develop. David Mulholland: Did you have a quick follow-up, Artem? Artem Beletski: Yes. I would like to ask a follow-up on Optical Networks. And could you maybe comment whether you see some supply-related constraints when it comes to growth? I recall from CMD, so you have been commenting about order growth year-to-date a bit more than 40%, and we do understand that the market fundamentals are really robust on that front. Justin Hotard: Yes. Look, I think it's a great question, Artem. So first of all, obviously, if you think about this broader ecosystem, the one thing I would remind everybody is the consistent thing in the AI data center build, AI infrastructure build has been there have been constraints. There's been power constraints. There's been connectivity constraints. There's been computational silicon constraints. There's news of memory constraints right now. One of the reasons I think when we look at this, we don't see the same dynamics of the telco and Internet bubble that you saw in the late '90s is because this infrastructure build has been consistently constrained. So what we see is, we do see supply constraints that's normal with this kind of scale and build. And obviously, part of our investments is not just in our own capacity but also in supporting the ecosystem and building its capability and capacity. And again, if you look at Optical, Optical is not nearly running at the kinds of volumes that you'd see that the microelectronics industry or the traditional computational electronics industry because it doesn't have the same consumer volume off the side of it that's driven a lot of the automation and capacity that's existed. So, all of these things need to be invested in. And again, this is why we think that the market has great long-term potential given the technology, but also a lot of ongoing investment that we and the entire ecosystem need to cultivate to make sure we can deliver on the long-term success. And it's part of why we think we're favorably positioned with our indium phosphide technology and manufacturing facility. David Mulholland: Thanks, Artem. We'll take our next question from Daniel Djurberg from Handelsbanken. Daniel Djurberg: Yes, on the Mobile Networks, it was clearly better than expected, and some decrease primarily due to North America. And can you comment a bit on North America? Are we comparing apples-with-apples now with regards to AT&T loss? And also do you see any possible inroad again with AT&T with the 600 build, for example, with the FirstNet upgrades? Any comments would be grateful. Marco Wiren: Yes. Thank you, Daniel. Just like you alluded to as well, in '26, we will see some headwinds from North America in the Radio Access Network side, considering the customer losses that we had, and that will have an impact. Otherwise, I would say that in market-wise, we see quite stable market in the Radio side. It's -- where we see growth is AI & Cloud in North America is extremely positive brands there right now when it comes to that segment. Justin Hotard: Let me take AT&T. First of all, and just to remind everybody, AT&T is a very, very large, strategic and important customer for us. They are a customer for us across core networks, fiber access. So if you think about NI and MI, they're a very important customer for us and a very strategic one, given the investments that they're making today and their networks. And we've talked about a little bit of that in the past as well. Look, from my standpoint, as I think about customer opportunities and market opportunities, we want to pursue every piece of profitable market share that we can. And if we're honored to be a part of their network in the future, we'll absolutely take that opportunity. Right now, our focus is on delivering on our commitments to them and to all of our customers. And as we said in the restructuring, as you heard from Raghav at CMD, becoming an easier company to deal with from a customer perspective, particularly for our telcos where we need to do more to be working with them around collaboration, co-innovation and making sure that we help them deliver the simplification and the operating leverage they need in their networks to deliver on their strategies. David Mulholland: Thanks, Daniel, did you have a follow-up? Daniel Djurberg: Yes. Perhaps just a short one on the book-to-bill on Optical and IP Networks being positive still. Can you give some more comments on those on a separate note, i.e. comparing them, the relative magnitude or something? Justin Hotard: Each one is good. Each one is healthy on the book-to-bill. If you put them together, they're good. If you split them, they're good. We're not blending. David Mulholland: Thanks, Daniel. We'll take our next question from Terence Tsui from Morgan Stanley. Terence Tsui: I had a question around the operating guidance for the full year, please, of EUR 2 billion to EUR 2.5 billion. I would love if you can provide some color around the EUR 500 million guidance range, please. You noted that 2025 was slightly ahead of the midpoint. So I'm just interested to learn about reasons to be a bit more optimistic, and reasons to a bit cautious in your thinking. And then the quick follow-up relates to Q1 guide. What FX are you assuming there? Are you using the spot of USD 1.2? Justin Hotard: Marco, do you want to take that? Marco Wiren: Yes. When it comes to the guidance, EUR 2 billion to EUR 2.5 billion, there's a couple of things that we mentioned also at the Capital Markets Day that we will have some new product launches during this year. And always when you have new product introductions, there will be an impact on gross margin as well. And that's what we see. But of course, these product introductions are very important for our longer-term journey and we see very good market opportunities going forward. When it comes to the same opportunities, we also -- just like we have said earlier, we invest in more in our opportunities in AI & Cloud, which will have an impact on the OpEx as well. But we definitely see more opportunities going forward definitely in the AI & Cloud market side. And that's why it's important that we prepare ourselves for those opportunities. But also, this is a transformational year. We are still doing a lot of changes and securing that we are very lean and mean and efficient machine and capture those opportunities in the market. Justin Hotard: Yes. Maybe I'll just add, Terence, I think when you think about the range, right, obviously, what we want to be is disciplined around our guidance and our execution and much more predictable. And I've talked about this quite a bit. Marco has talked about it quite a bit. But that -- the recognition that we are also in two very different business cycles right now, tremendous growth in AI & Cloud, flat market in telco, emerging opportunity in defense and mission-critical enterprise. So, recognizing that the businesses are in a different cycle, the markets are in a different cycle, that's part of the balance of making sure that we're giving you visibility. And obviously, should we see something that changes our visibility, we'll update it. But we want to give you as much visibility as possible and make sure that when we lay out targets, we're consistent, we're predictable and much like we've done for two quarters, we get into a more consistent habit of that. And I'd just remind everybody that, that hasn't been our history, but it's a big part of where I would like to see us go as we go after these growth opportunities to make sure that we give you the visibility and we go do what we say we're going to do. Marco Wiren: The currency rate, we have USD 1.18 in our estimate, and this is based on what we see right now. And if there's any changes in the currency, we will update as well. But remember that we have about at least half of the U.S. revenues, for example, U.S. flows are hedged for the full year. So if we just look a little bit the sensitivity, before hedging a EUR 0.02 move on the USD versus euro would imply an operating profit of EUR 50 million change. But as I said, about half of that is hedged. David Mulholland: Thanks, Terence. We'll take our next question from Felix Henriksson from Nordea. Felix Henriksson: Yes. Partly relating to the previous question on supply shortages. Are you, sort of, expecting to encounter any headwinds from these rising memory prices on your gross margin? And can you just provide some color on your cost exposure to this trend? Justin Hotard: Yes. I would just say, overall, when you think about our bill of materials at a macro level across the company, this is not a huge part of our bill of materials. It's a portion, but it's not a material portion. Second, in terms of supply and commitments, I think our focus right now is on making sure we continue to secure the supply based on the commitments we have, and we do have -- this is a place where we have long-term agreements. And then, of course, I think as you've heard in the industry, I think we expect this to be passed through to pricing. So from our perspective, this is a market effect. It's very consistent across the market. And so we'll address that. But overall, this isn't -- certainly, if you looked at our business overall, you'd say this is not a material part of our revenue, but an important one that we manage. David Mulholland: Do you have a quick follow-up, Felix? Felix Henriksson: Yes. Just quickly on your balance sheet and net cash. I think the end of the year net cash implies around 17% of last 12-month net sales, which is slightly above the 10% to 15% range that you used to have historically. Are you sort of happy with those levers? Or do you see anything that you would want to do with that setup? Marco Wiren: Yes. Thank you. When it comes to the capital allocation, framework is very clear for us. And whenever we see that we can invest more in R&D internally, so that's always our priority #1. And just like we alluded earlier as well, that we see opportunities in -- especially in AI & Cloud customer segment. So we are investing more there. The second priority we have is seeing that how can we strengthen our deliveries and our opportunities to capture those market trends through M&A. And the third one is the dividend. So, we aim for recurring and stable and over time, growing in dividends. And then the fourth is that if we deem to have excess cash, then we can consider share buybacks. So this framework is something we follow. And if there's any news, we will inform you as well. David Mulholland: Thanks, Felix. We'll take our next question from Emil Immonen from DNB Carnegie. Emil Immonen: I just had a question on the investment in the CapEx. It's quite a big step up. And I'm just wondering if it's all about increasing your capacity, how much would you say that your capacity is already utilized? So, are you working at full capacity? Or how should we think about kind of ramping up production and how you plan for that overall? Justin Hotard: Sure, Emil, thanks for the question. So if you think about what we've shared so far, we have an existing fab in California. We've been investing in bringing a new fab online. This is something that Infinera had started before we acquired them, and we're continuing to invest. And this was also the place where we got partial funding in the CHIPS Act from the U.S. government. That indium phosphide fab is the one -- the next one is the one we expect to come online later this year. What I would say is that we're certainly well on track to consume capacity in the existing one, and we absolutely need the new fab to come online to support the demand that we're seeing and to meet our forecast. So, our longer-term forecast because, obviously, as it comes on later this year, it won't contribute as much to production this year. This is a -- this is also critical for us because at the core of our capability and our differentiation is our photonic integrated circuit. It's one of the key elements of the components of these photonic systems, and it's a place where we believe we have differentiation in the product itself. So what we can do and what's a little bit different than when you think about a traditional semiconductor fab or the higher volumes silicon fabs you might consider in computational silicon or memory or others is that our capital investment size tends to be much smaller to add additional capacity. And that's really just the nature of optical technology and also the nature of indium phosphide. So hopefully, that gives you a couple of dimensions to think about, but I would think about the investments we're making really in that new fab supporting '27 demand. They're starting to ramp during '27. We'll have some reduction this year, but mostly in '27. And then think about the ability to add capacity in that fab or in others as being much smaller chunks. So because I realized, well, first of all, while this CapEx is significant for us at an overall level, it's still pretty modest in terms of our CapEx, 5% overall for the company. Secondarily, what I would say is when you think about this CapEx in terms of the broader semi industry, it's really nominal in terms of the overall spend and the size of investments that some of the -- some of our partners in memory and computational silicon make. David Mulholland: Do you have a quick follow-up, Emil? Emil Immonen: Yes. Maybe to follow up on how aggressive do you feel you are? So is this -- it's still -- yes, it's a nominal amount. But would you say that you're aggressive? Or is this kind of you're only investing for the 100% of demand you're seeing right now and you're not wanting to overinvest at this point? Justin Hotard: I think we're -- I think this market is moving, Emil, so quickly that we're -- this is a conversation that is ongoing in terms of where we see the long-term market and where we're investing. And obviously, the other thing here is, right now, if you think about this market, we're vertically integrated. Others are vertically integrated, some are not. You can kind of look at two extremes. Computational silicon is obviously not a vertically integrated game. TSMC, Intel, GlobalFoundries are largely the leaders in that. So you've got a clear segmentation in the value chain. Memory is vertically integrated. So that's the other strategic question we'll continue to think about as we go forward. But right now, we see tremendous value in that vertical integration. And the choice that we're making is to make sure that we have sufficient capacity to meet the demand, recognizing that we're in a very fast-moving market. Scale across is an emerging opportunity, as I touched on earlier. And we also believe that over time, as speeds continue to ramp within the data center, there will be more opportunity for coherent optics within the data center. David Mulholland: Thanks, Emil. We'll take our next question from Jakob Bluestone from BNP Paribas. Jakob Bluestone: Just a quick one. Can you maybe just give us an update on the H1 versus H2 sort of margin phasing that you flagged at the CMD? I don't know if you can maybe quantify how big we should think about that? Or is it just kind of the normal seasonality of the business given it always tends to be a bit Q4 weighted anyway? Marco Wiren: Yes. Thank you. Yes, especially, as we said that this is visible in Network Infrastructure side, considering that we launched new products in the first half, and that's why we see this margin impact. We haven't guided exactly per quarter, but of course, we see that the second half, we should see improvement in the margins in this field as well. But it's just that it takes some time before we come over this ramp-up phase and second half is that why giving a little bit better margin profile than first half. David Mulholland: Thanks, Jakob. Did you have a quick follow-up? Jakob Bluestone: Just a quick one, just on the memory pricing comments. You mentioned that you have long-term contracts. I mean, given it looks like you probably have elevated pricing for at least beyond this year. Can you maybe just give us a sense of those contracts multiyear? Justin Hotard: Yes. I mean, I would think of these as multiyear contracts. And obviously, the supply agreements are multiyear and then pricing varies depending on the contract term. David Mulholland: Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: On Mobile Infrastructure, you don't provide any guidance and notably for sales, maybe given more limited visibility. The LAN market is now stabilizing. Do you see any specific downside or upside to your market share in mobile in 2026 beyond the noncontract loss at AT&T? And the second one is on the cost savings. Where have you finally ended 2025 in terms of cost savings? And what do you expect for '26? Do you plan to accelerate a little bit further the cost-cutting actions beyond 2026? Or you will be more on a normal OpEx run rate going forward? Marco Wiren: I can start. When it comes to mobile markets, as we said earlier, we see that the market is quite stable in '26. And there's some regional variations here. We can see that we could expect some recovery in India. And then there's some other pressures in like LatAm and other areas. Of course, our aim, as we had guided in -- already in the Capital Markets Day is that in the Mobile Infrastructure side, our aim is that we will improve the profitability. So we guide gross margin and operating profit levels. So gross margin, we have said that we aim to 48% to 50% gross margins. And we've said that we will grow from the EUR 1.5 billion levels going forward towards 2028. And of course, our ambition is that whenever there's opportunities to gain market share, we will capture those opportunities in the mobile side as well. When it comes to cost savings, I don't know if... Justin Hotard: I would just add two things. I think one, obviously, there's some mix, as you said. The other thing for us, as we talked about, is we're not chasing revenue for revenue's sake. So I think what you -- what I would think about is the reason we gave you a guidance on gross margin and profit is those are really the two things we're focused on, and maximizing gross margin and profit, recognizing there's some inherent scale we need to maintain in the business. But working with those customers we value and delivering those services where they value our technology platforms and associated services. So those are the ways I would think about the dimension of the approach that Marco was talking about. Do you want to talk about cost reduction? Marco Wiren: Yes, thanks. When it comes to cost reductions, we have the program now, which is running until end of '26. And we believe that we're going to deliver according to those promises, what we have said earlier as well. So, and beyond that, we don't have any cost-cutting programs. What we've said also is that what we do continuously is to secure that we are focused on the efficiency, operational leverage, and secure that we are doing things in the most efficient way continuously. So, this is something that we are getting into everyone's DNA that is the way of working in Nokia. David Mulholland: Thank you all. And apologies to those still in the queue, but we've run out of time. So this concludes today's call. I'd like to remind you that during the call, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all for joining us. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

101天前Insight Analytics约5分钟阅读

PHM 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until then, your lines will be placed again on a music hold. Thank you for your patience. You for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup, Inc. Fourth Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I'd now like to turn the call over to James Zeumer. Please go ahead. James Zeumer: Thank you, Jordan, and good morning. I want to welcome everyone to today's call to review PulteGroup's fourth quarter operating and financial results. Joining me on today's call are Ryan Marshall, President and CEO, and James Ossowski, Executive Vice President and CFO, along with David Carrier, Senior VP Finance. In advance of this call, a copy of our Q4 earnings release and this morning's webcast presentation have been posted to our corporate website at pultegroup.com. We'll also post an audio replay of this call later today. I would highlight that today's presentation includes forward-looking statements about the company's expected future performance. Actual results could differ materially from those suggested by our comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports. Now let me turn the call over to Ryan Marshall. Ryan? Ryan Marshall: Thanks, Jim, and good morning. I hope that many of you have had the chance to review our new investor presentation we posted to our website early December. If you haven't seen it, I would encourage you to take a few minutes to review the deck, which is available on our website. The document is designed to provide a comprehensive review of the fundamental goals, strategies, and results of our company. The process of creating a completely revamped investor presentation afforded us the opportunity to revisit many of the core tenets against which we have been operating for more than a decade. I have to admit that it was gratifying to see that we have consistently operated in alignment with the strategy established in 2011 and how well they have helped us navigate through the housing cycle. It is also gratifying to see that the underlying operating model has delivered such outstanding results. I would note that investors have recognized and rewarded us for this performance as PulteGroup has ranked number one in total shareholder returns among homebuilders for both the past year and the past decade. This is a sustained record of success for which we are rightfully proud. PulteGroup's 2025 operating and financial results further demonstrate the value of our differentiated operating model and emphasize diversification and balance across markets, buyer groups, and spec versus built-to-order production, as well as a highly disciplined approach to project underwriting and overall capital allocation. In a year that saw buyer demand and overall market dynamics be highly variable, I am pleased to report that our operating model helped us to generate annual revenues, margins, and earnings that rank among the highest in the seventy-five-year history of PulteGroup. Among the 2025 financial results that I would highlight, we closed over 29,500 homes and generated home sale revenues of $16.7 billion. We reported full-year gross and operating margins of 26.3% and 16.9%, respectively, and we generated cash flow from operations of $1.9 billion. I would also note that we ended the year with $2 billion of cash after investing $5.2 billion into the business and returning $1.4 billion to shareholders through share repurchases and dividends. I have talked about this on other calls, but a critical driver to PulteGroup's results in 2025 and prior years is our highly diversified business platform. With homebuilding operations now established in 47 distinct markets, we benefit from having a strong presence in the Midwest, Northeast, and Florida, where on a relative basis demand in many of these markets has held up better. Relative strength in these areas helped offset pressure coming from the markets where overall home buying demand was softer, such as Texas and in many of our Western markets. Beyond this broad geographic footprint, PulteGroup continues to benefit from having arguably the deepest and most balanced buyer base in the industry. At 38% first-time, 40% move-up, and 22% active adult, our 2025 closings were in line with our long-term targets. More importantly, our 2025 sales demonstrate the powerful impact such buyer diversity can have on our results. In a year in which demand was more challenged among first-time and move-up buyers, full-year sign-ups among active adult buyers increased by 6% over last year and were up 14% in the fourth quarter over the fourth quarter of the prior year. In addition to the obvious benefit to our subsequent closing volumes, our Del Webb communities routinely deliver our highest gross margins. Del Webb has been and will continue to be an important driver of PulteGroup's superior gross margins and, most importantly, high returns. While I think we all view 2025 as more challenging than anticipated, PulteGroup still reported $2.2 billion of net income, the fifth most profitable year in our history, and generated $1.9 billion in cash flow from operations. Consistent with our disciplined capital allocation process, we used our strong 2025 financial results to invest in the future growth of our company, investing $5.2 billion in land acquisition and development. Inclusive of 2025, PulteGroup has invested a total of $24 billion in land acquisition and development over the past five years. We believe our disciplined land investment will enable us to routinely achieve community count growth in the range of 3% to 5% in 2026 and in the years beyond. As part of our keen focus on advancing a homebuilding platform that can consistently deliver strong financial results, as reported in this morning's earnings release, we have made the strategic decision to divest our off-site manufacturing operations. ICG has proven to be a strong operator that can consistently deliver high-quality house shell components that have delivered many benefits to our extending homebuilding platform. But we have determined that our business and, in turn, our shareholders are best served by us focusing on our core homebuilding operations. After the sale, we will be able to benefit from any innovation and off-site manufacturing achieved by the building component suppliers, many of which are making significant investments in technology and innovation, while we focus on our core competencies. Having recorded another year of strong results, PulteGroup enters 2026 in an exceptional financial position with $2 billion of cash and a net debt to capital ratio of negative 3%. We also control a land pipeline of 235,000 lots that will allow us to continue growing community count in 2026. As such, I am optimistic about the year ahead and PulteGroup's ability to capitalize on any opportunities the market may present. Let me turn the call over to James Ossowski for a review of our fourth quarter results. Jim? James Ossowski: Thanks, Ryan. Consistent with Ryan's comments, our fourth quarter performance capped another year of excellent operating and financial results, which I'm excited to review. We recorded net new orders in the fourth quarter of 6,428 homes, which is an increase of 4% over Q4 of last year. The increase in net new orders for the quarter reflects a 6% increase in average community count to 1,014 in combination with a 1% decrease in absorption pace to 2.1 homes per month. Reflective of the challenging demand conditions we experienced over the course of 2025, we realized a full-year absorption pace of 2.3 homes per month compared with 2.6 homes per month for all of 2024. For the fourth quarter, our cancellation rate as a percentage of starting backlog was 12% compared with 10% in the prior year. For the fourth quarter, net new orders among first-time and active adult buyers increased 9% and 14%, respectively, over Q4 of last year. Comparatively, net new orders in our move-up business declined by 5% from the prior year fourth quarter. By buyer group, net new orders in Q4 2025 were 39% first-time, 38% move-up, and 23% active adult. This compares with 37% first-time, 42% move-up, and 21% active adult in 2024. As we have discussed on prior calls, new community openings are helping to increase our active adult business as we grow that segment towards our targeted range of 25% of total unit volume. For the fourth quarter, home sale revenues totaled $4.5 billion, which is down 5% from the fourth quarter of last year. Lower home sale revenues for the period reflect a 3% decrease in closings of 7,821 homes, in combination with a 1% decrease in the average sales price of closings to $573,000. By buyer group, closings in the fourth quarter were 37% first-time, 39% move-up, and 24% active adult. In the prior year fourth quarter, our closing mix was 40% first-time, 40% move-up, and 20% active adult. In response to the questions we have received, I would note that our Q4 closings included approximately 100 built-for-rent homes. Given our strategic approach to BFR, it has always been a small part of our operations and accounted for less than 2% of full-year 2025 closings. Our year-end backlog totaled 8,495 homes, with a value of $5.3 billion, and we ended 2025 with 13,705 homes in production, of which 7,216 were speculative. Consistent with our stated strategy, our spec inventory is down 18% from the end of 2024. We have remained disciplined in managing spec starts as we rebalance our product mix and work to increase the percentage of built-to-order homes in our production pipeline. Given the number of homes under construction and their stage of production, we expect to close between 5,700 and 6,100 homes in the first quarter of 2026. We also have provided a guide for full-year 2026 closings in the range of 28,500 to 29,000 homes. Based on pricing in our backlog and the anticipated mix of closings, we expect the average sales price of closings to be in the range of $550,000 to $560,000 for both the first quarter and full year of 2026. As Ryan discussed during his comments, given investments made in prior years and a land pipeline of 235,000 lots under control, we expect our average community count for all four quarters of 2026 to be 3% to 5% higher than the comparable quarter of 2025. For our fourth quarter, we reported a gross margin of 24.7% compared with 27.5% in Q4 of last year. As noted in this morning's press release, our reported fourth quarter gross margin includes $35 million or 80 basis points of land impairment charges. In addition to these charges, PulteGroup's fourth quarter gross margin was impacted by higher incentives of 9.9% of gross sales price. This compares with 7.2% in Q4 of last year and 8.9% in 2025. Higher incentives for the quarter were primarily the result of our effort to sell finished spec inventory as we closed out 2025. We currently expect to realize gross margins of 24.5% to 25% for both the first quarter and for the full year of 2026, but recognize that the spring selling season will be a key driver of our financial results this year. Embedded within our margin guide is the expectation that our house costs in 2026 will be flat to slightly down relative to 2025. On a year-over-year basis, we expect our lot costs in 2026 to increase by 7% to 8% from 2025. Our reported gross fourth quarter homebuilding SG&A expense of $389 million or 8.7% of home sale revenues includes an insurance benefit of $34 million recorded in the period. Prior homebuilding SG&A expense of $196 million or 4.2% of home sale revenues includes an insurance benefit of $255 million. We remain thoughtful in managing our overheads as we continue to identify opportunities to adjust spending levels while still meeting our high standards for build quality and buyer experience. For the full year 2026, we expect our SG&A expense to be in the range of 9.5% to 9.7% of home sale revenue. Given the typical lower delivery volumes we realize in the first quarter of the year, SG&A expense in Q1 is expected to be approximately 11.5% of home sale revenues. In the fourth quarter, we reported other expenses of $99 million, which includes a charge of $81 million resulting from the expected divestiture of our off-site manufacturing operations. For the fourth quarter, our financial services operations reported pretax income of $35 million, which is down from pretax income of $51 million in the fourth quarter of last year. Financial services pretax income for the period was impacted by a number of factors, including lower ASPs and closing volume in our homebuilding operations and a lower mortgage capture rate. Our mortgage capture rate in the fourth quarter was 84%, compared with 86% last year. PulteGroup's reported pretax income for the fourth quarter was $655 million. In the period, we reported a tax expense of $104 million or an effective tax rate of 23.4%. Our effective tax rate benefited from renewable energy tax credits recorded in Q4. Looking ahead to 2026, we expect our tax rate to be approximately 24.5%. Our expected tax rate does not take into consideration any discrete period-specific tax events that might occur. For the fourth quarter, we reported net income of $502 million or $2.56 per share, which compares with a reported net income of $913 million or $4.43 per share in 2024. For the full year, PulteGroup reported net income of $2.2 billion or $11.12 per share. Our Q4 earnings per share was calculated based on 196 million diluted shares outstanding, which is down 5% from the prior year and reflects the impact of our systematic share repurchase program. In the fourth quarter, PulteGroup repurchased 2.4 million common shares for $300 million. Including our Q4 activity, we repurchased 10.6 million common shares in 2025 for $1.2 billion or an average price of $112.76 per share. We ended the year with $983 million remaining under our existing share repurchase authorization. In the fourth quarter, we invested $1.4 billion in land acquisition and development, which was evenly split between the two activities. For the full year, we invested a total of $5.2 billion in land acquisition and development, of which 52% went for the development of existing land assets. Inclusive of our Q4 investments, we ended the year with 235,000 lots under control. This is comparable with the fourth quarter of last year but down on a sequential basis by 5,000 lots from Q3 as we continue to carefully review each land deal and make tactical decisions to exit select transactions. It is fair to say that the slower housing environment is beginning to have an impact on the land dynamics of markets around the country. Depending on the market, the seller, and the underlying land asset, we are finding opportunities to renegotiate deals to adjust the timing, the price, or sometimes both. Our land teams have and continue to do an excellent job of reviewing every transaction to ensure deals still meet our risk-adjusted return hurdles given current prices and basis. Our local teams are also looking for opportunities to upgrade positions should land deals that were previously under contract come back to market. As I mentioned earlier, we generated $1.9 billion of cash flow from operations in 2025 as we managed our housing starts, controlled land spend, and closed incremental homes in the fourth quarter. We will maintain the same disciplined approach in 2026 as we align investments in the business with buyer activity. Given current market dynamics and our expected 3% to 5% growth in community count, we are projecting land acquisition and development spend of $5.4 billion in 2026. Assuming this level of land spend and the expectation that house inventory will increase commensurate with an increased level of built-to-order home sales, we'd expect 2026 cash flow generation to be approximately $1 billion. And finally, we ended the year with exceptional financial strength and flexibility as we had $2 billion of cash and a debt to capital ratio of 11.2%. Adjusting for the cash balance, our net debt to capital ratio at quarter-end was negative 3%. Now let me turn the call back to Ryan for some final comments. Ryan Marshall: Thanks, Jim. Appreciating the more challenging market conditions, I still look back on 2025 and say it was a good year. As you heard repeatedly, demand was highly variable as consumers responded initially to movements in interest rates and later to a slowing economy, which pressured jobs, and as important, consumer confidence. All that being said, monthly absorption rates followed a typical seasonal pattern for the year and through the fourth quarter. The first few weeks of January have also demonstrated the expected seasonal increase in demand as we move from December into the start of the new year. It's too early to glean much in terms of the strength of the entire spring selling season other than to say we remain optimistic. As was the case through much of the year, in the fourth quarter we continued to realize stronger homebuyer demand in key markets in the Northeast, and many parts of the Midwest and the Southeast. Fourth quarter demand is seasonally slower, but on a relative basis, we saw positive homebuyer activity in markets that included Boston, the Northern Virginia DC area, as well as Chicago, Indianapolis, and Louisville, and then entering extending down into The Carolinas. Once again, I have to recognize the success of our Florida operations, which generated a year-over-year increase in fourth quarter sign-ups of 13%. Beyond the strength of our land positions and our overall homebuilding operations throughout the Florida markets, data suggests that new and existing home inventories are generally stable to improving modestly. Obviously, a strengthening housing market in the state of Florida would be a huge boost to the industry. We closed out the year with our Texas and West markets continuing to experience sluggish demand trends, although we may be seeing some signs of bottoming in Dallas and San Antonio. At this time, I would tell you that improvements in the pace of sales are likely the result of pricing actions as we work hard to find a clearing price and turn assets. This is particularly true with regard to finished spec inventory that we needed to clear. Looking ahead to 2026, the industry enters a new year with improved affordability as mortgage rates are almost a full percentage point lower than a year ago, and whether through price reductions or incentives, new home prices have reset lower while consumers benefited from another year of income growth as wages increased by upwards of 4%. A more financially capable consumer in combination with an improving affordability picture puts the industry in a much better position heading into the 2026 spring selling season. Given these dynamics, I think consumer confidence will be a critical component to determining just how strong buyer demand will be in the months to come. Before opening the call to questions, I want to recognize and celebrate the entire Pulte team. Beyond the outstanding financial results, you continue to set the industry standard for build quality and customer satisfaction in 2025. You have been relentless in your efforts, and I am so proud of all that you've accomplished in these areas. Now let me turn the call over to James Zeumer. James Zeumer: Great. Thanks, Ryan. Now prepare to open the call for questions. So we can get to as many questions as possible during the remaining time of this call. We ask that you limit yourself to one question and one follow-up. Jordan, if you would, we're prepared to take question and answer, but prepare to implement question and answer now. Operator: Your first question comes from the line of John Lovallo from UBS. Your line is live. John Lovallo: Thanks, guys. I appreciate you taking my questions. And Ryan, I share your optimism heading into the year versus heading into the beginning of last year. I think the setup is a lot better. But, you know, maybe starting with just SG&A, you guys did a really good job of managing that in the quarter despite home sales being down about 5% year over year. Can you just help us with some of the levers that you may have pulled? And what else can be done on the SG&A front? Ryan Marshall: Yeah. You know, John, we didn't make a ton of kind of changes. I think we've always prided ourselves in being balanced and consistent. We put a lot of incremental investment into our people. We're five years in a row now recognized as a top 100 best company to work for. We make incremental investments in quality and customer experience. So aside from that, we've really just tried to run kind of a balanced, thoughtful business, not be wasteful, but make sure that we're, you know, invested in the right places. You know, we have made some targeted reductions in force in a handful of markets. We did that in the November time frame of last year. Pretty small numbers overall. But it was focused in some of the markets that you might expect that were a little slower. Texas and some of the Western markets. Beyond that, John, I wouldn't tell you that there's anything that I'd call out as extraordinary. John Lovallo: Okay. That's helpful. And then I wanted to touch on ICG. I mean, you know, we've been pretty big proponents of off-site construction and the benefits there. I can understand not wanting to vertically integrate it, but I guess the question is, you know, what is your view overall on just technology infusion into homebuilding, you know, as a longer-term solution to the, you know, the chronic undersupply? Ryan Marshall: Yeah, John. I think that's the spot that I would highlight is we are huge proponents of the innovation capability and the ability to incorporate it into the homebuilding machine. And we've learned a lot over the last six years, gotten a ton of benefits in kind of what the overall housing operation has derived from the innovation that's happened there. We've just come to the conclusion that we think we're better off focusing on the core competency of buying land, entitling, developing, building homes. And including ICG, and whoever the eventual owner of that will be combined with many of the other national off-site manufacturers, they're making a truckload of investment in innovation, and we think we'll be able to continue to benefit from those innovations. That innovation spending into the homebuilding operation without necessarily being a direct owner of it. John Lovallo: Yep. Makes sense. Thank you, guys. Operator: Your next question comes from the line of Michael Rehaut from JPMorgan Chase. Your line is live. Michael Rehaut: Hi. Thanks for taking my questions. Good morning, everybody. First question, love to get maybe dive in a little bit to the full-year gross margin outlook that you laid out on the call and appreciate that. Given that it's maybe a step more in the direction of guidance than some of your peers are willing to do. Wanted to understand the assumptions, particularly as you anticipate your first-quarter gross margin it seems like being sustained throughout the year. And what that means in terms of the progression of the year because you think land costs maybe continue to go up throughout the year as it's kind of a long-term trend? So I was just wondering the components of that as you think sequentially throughout the year how are you thinking about promotions if promotions or incentives stabilize? They obviously rose throughout 2025. Know, labor materials, and if there's any positive impact from the divestiture of ICG. Ryan Marshall: Yeah. Hey, Mike. It's Ryan. Appreciate the question. And we take kind of the process of giving guidance very seriously. As I'm sure you can appreciate. We go through, and we try to evaluate every element of every element of the, you know, the P&L that contributes to the margin guide. Our expectations are to really see ASP flat through the year. We've kind of given a guide that's the same for Q1 and the full year. We do expect our house costs to go down slightly. The sticks and bricks, Jim talked about that in his prepared remarks. We're anticipating land cost to increase in the range of 7% to 8%. And we'd expect to see the discounts remain elevated. We'd hope and we'd be optimistic that we can pull back just a tad on those discounts, but you know, broadly, we think they're gonna remain elevated. So you know, we've strived to keep our margins best in class. We'll endeavor to do that in 2026 as well. And as you know, ultimately, we're focused on is driving the best return on investment and we manage kind of pace and price toward an outcome that gives us the optimal return for the shareholder. And look, we think it's worth. And it was the reason in my opening comments I said, you know, that strategy and the way we operate has generated the highest TSR not only for the last year, but also the last decade. So you know, I would say those are the big components of how we think about margin. Michael Rehaut: No. That's great. Thank you for that. And I guess, secondly, you mentioned in your prepared remarks, Ryan, around maybe some of the inventory trends that you're seeing starting perhaps stabilize in Florida. We've seen some of that as well. In certain of our statistics. I was wondering if you could kind of go through your major markets if possible and you know, particularly from a supply from an inventory perspective, as you look at, you know, your major markets, how the trends have been over the last, you know, three to six months? And if you would describe that stabilization as kind of broad throughout your footprint or if there's some areas that are still you know, rising perhaps or even some that are starting to come in a little bit? Ryan Marshall: Sure. Florida is an important market for us, Mike, and we've talked we tried because it's such an important market to us and we think all of housing, really, we tried to talk about it every quarter. It's up 14% over last year, so we had good sales in the quarter. I'd start there. Generally, I would tell you every market is positive but there are some outperformers. The outperformers, Fort Myers, Naples, the East Coast of Florida, so Palm Beach, Vero Beach, kinda Port Lauderdale. Orlando continues to be exceptional. You know, Tampa's been stable, but, you know, not as good as the others. And I put Jacksonville in that same category. Michael Rehaut: Okay. When you talk about that, you're referring to the order trends, not the inventory, just clarifying. Ryan Marshall: Correct. I'm speaking to order trends. That's right. Or that's exactly right, Mike. Michael Rehaut: Thank you. Operator: Your next question comes from the line of Sam Reid from Wells Fargo. Your line is live. Sam Reid: Thanks so much, guys. Wanted to unpack the step up in incentive loads from the third to fourth quarter. I believe they were up about 100 bps sequentially based on the prepared remarks. It sounds like a lot of that was geared towards clearing spec inventory. So we'd just love to hear the levers that you've pulled to clear the spec inventory. Maybe delineate between price reductions versus buy down. And then talk a little bit about incentive load into the first quarter and what's embedded in that guide. James Ossowski: Thanks for the question, Sam. Yeah. The increase in the fourth quarter really was, you know, the incentives to move some of the speculative inventory. We closed a couple extra 100 units, you know, at the over the high end of our guide. And so we got a little bit more aggressive in some places. So that's really where it's coming from. Know, financing incentives for the quarter were flat. It was really just had to get a little bit lean in a little bit more. In some places, and so that's what we did in the fourth quarter. Ryan Marshall: Sam, you had a question on Q1 that I didn't hear. What was your Q1 question? Sam Reid: Just on the incentive load into the first quarter. Talking through the guide path there, Q4 to Q1. Ryan Marshall: Yeah. I point you back to the answer that I gave to Mike. We're, you know, we don't specifically guide to incentive loads. Other than we've given you a margin guide for the quarter. And I made the comment that our expectation is incentives will remain elevated. Sam Reid: All helpful. And then moving to stick and brick. So, obviously, hearing that stick and brick is gonna be lower in 2026, any categories I'm thinking of material categories where you're getting price concessions. We'd just love to hear the wins that you might be achieving here to get the lower stick and brick. And then perhaps also talk through the labor component and just what you're seeing on the labor side. Thanks. James Ossowski: Sure. So, you know, for your benefit in the fourth quarter, our sticks and bricks were $78 a square foot, so slightly less than what they've been for the past year. And as we said in our prepared remarks, they'll be down flat to down slightly next year. Know, some of the things we've seen, a little bit of help on the lumber side, a little bit of help on the labor side. Materials are kind of ups and downs. You know, the one thing I'd say is included in that, you know, the impact of tariffs are in that guide of slightly down next year. So again, I think our procurement teams are doing a great job. The labor is available in the market, and so we see that as a good opportunity for next year. Sam Reid: Always appreciate the color, guys. Thanks so much. Ryan Marshall: Thanks, Sam. Operator: Your next question comes from the line of Stephen Kim from Evercore ISI. Your line is live. Stephen Kim: Yeah. Thanks a lot, guys. Appreciate all the color so far. Your spec levels look like they were pretty well contained by the time you got to the end of the fourth quarter. I'm curious if you think that there's additional reduction there. I think I have you at a set level basically, it's seven specs per community. Wondering, could you give us some sense or, you know, where you'd like to see that as you head into 2026. And assuming that your specs will be less of a headwind, I'm curious why you're not assuming that you might see any reduction in your incentives. If I heard you correctly, Ryan, what I'm getting from your guidance is that your guidance does not assume any reduction in incentives, and that it feels a little conservative to me, so I just curious. Am I reading that right, or is there something maybe that I'm missing? Maybe the spec level you think, you know, may actually rise next year for some reason. So just a little color there combining those. Ryan Marshall: Sure, Steven. So let me start with the specs. We're, you know, we're comfortable with where we're at right now. But we have worked very hard through the last three to four months to make sure that our start rate matches our sales rate and that we weren't adding to the specs that we have. Ideally, what we're really endeavoring to do is to move back more into a built-to-order builder where 60 plus percent of our sales are built-to-order, 40% are spec. The last couple of years, we've kind of been inverted. We've been 60% spec, 40% dirt. And, you know, it won't happen overnight, but we're moving the company slowly back in the direction of more build-to-order. We think that's better for the way that we have our capital allocated to homebuilding business. Our margins are higher on built-to-order, so we're kind of threading that needle. Our financial services team has done a wonderful job helping to put some forward commitments in market that actually can be used on built-to-order homes. So we're finding a way to kind of get the best of both worlds and making sure that we're tackling the affordability challenge while still moving into or closer into a built-to-order model that we want to be. So we go into the spring selling season, Steven, our goal is going to be to sell dirt in a higher percentage than spec while still having some spec available, especially in the entry-level price points. As it relates to the incentives, the spring selling season, I think, is ultimately gonna kind of dictate what we're able to do with incentives. We would certainly be optimistic and hopeful that we pull those down from where we're at. You know, we've given the full-year guide that incorporates assumptions that we've made around the incentives plus the increase in lot cost, which is not insignificant at 7% to 8%. A little bit of a, you know, a tailwind or a help from lower house costs. So, you know, we think the range is at where we sit and kind of early or late January, early February. Think it's a pretty good range. But, you know, we're optimistic that, you know, maybe there's more. Stephen Kim: Yeah. Appreciate that. So if I can just put a little color around what you said, if you were to return back to sort of a DTO mix, I look and see that, you know, pre-pandemic, you all were running kind of, like, three to four specs per community, which is, you know, pretty significantly lower than where you are now. So if I'm reading what you're saying right, it sounds like there's gonna be this transition that's taking place. As that transition does take place, your turnover rate I would think, would go down. Your backlog turnover rate would go down because you wouldn't be carrying as many specs and be doing more build-to-order. Your closings guide that you've given would if I have your backlog turnover ratio going down, in order for you to hit your closings guide, it would assume that your order pace is gonna be up year over year close to double digits. And so I just wanted to make sure that I am doing the math properly here and then I haven't missed something. Ryan Marshall: Yes, Steven. Not having the luxury of seeing your model, I probably wouldn't want to comment on your math. You know, we'd certainly be happy to follow up with you on that. I would say, you know, we've got pretty complicated models on our side as well, and you know, we've gone through and made assumptions on what our new communities are, what absorptions are, what our sales rate's gonna be, and what our monthly start rate is going to be. And it really comes down to kind of that start rate. We do have the benefit of cycle times being back to pre-COVID level cycle times at around one hundred days. So, you know, again, we need spring selling season to continue to cooperate with us and be strong. As long as that happens, we've got the production capability to put the starts in the ground that will allow us to deliver the closing guide that we've given. Stephen Kim: Okay. Great. Thanks, guys. Operator: Next question comes from the line of Alan Ratner from Zelman and Associates. Your line is live. Alan Ratner: Hey, guys. Good morning. Thanks for all the details so far. You know, Ryan, you brought up an interesting point that I was hoping to touch on, you know, in terms of the forward commitments on build-to-order. You know, I think a lot of builders have kind of talked about the fact that that's really difficult to do from a financial perspective just because you're paying for longer lock periods. So I would love to hear a little bit more about those programs that you're offering right now in BTO, what kind of rates you're offering the consumer? And I guess just extending that to the margin profile of BTO versus spec right now, if you could talk a little bit about what that differential looks like. Thank you. Ryan Marshall: Yeah, Alan, what was the last part of that question? I missed it. Alan Ratner: Just the margin differential between DTO and spec. Right now? Ryan Marshall: Oh, sure. Yeah. Yeah. So, Alan, in terms of kind of the forward commitments, it's really driven by the faster cycle times. So, you know, we're overall, for the entire enterprise, we're at a hundred days on single-family. We've got some multifamily in there that takes a little longer. But on single-family, we're a hundred days, and we have some markets that are down into the seventies. So that's the predominant driver. And then, you know, the rates that we can offer on those longer-term rate locks, they're not quite as competitive or as low as what you might see on a spec offer. They're pretty good. You know, they might be within 50 basis points of what we would offer on a spec. So it depends on the community. But, you know, roughly, we're, you know, we're somewhere in the low fives, low to mid fives. So today, you know, roughly a 100 basis points below what you could get kind of in the open market. And then in terms of kind of margin differential, between spec and built-to-order, depends. But, you know, suffice it to say, and I think we've been fairly consistent with this. We have hundreds of basis points higher gross margins when it's built-to-order. And that is simply kind of derived from the fact that when the customer comes in, and they're able to pick out everything they want, that really works well within our strategic pricing model. That allows them to pick their floor plan, their options, their lot premium. And, you know, we've often I don't think we quoted it this quarter, but what we can talk about is the dollars that we make off of lot premiums and options are real. And those margins are great. So outperformance is the customer picks what they want. You know, that's the biggest kind of contributor to the margin outperformance. Alan Ratner: Great. I appreciate that detail. And then second question on price point trends. I know you gave the data for, I think, sign-ups and closings. Sounded like active adult was up solidly year over year, but I guess just more qualitatively, if you could talk about the demand trends and kind of the pricing trends you're seeing at each of your price points and any notable shifts we've seen over the last, you know, call it, couple of months alongside all the policy noise and interest rates hopping around. Any color you can give would be great. Thank you. Ryan Marshall: Yeah. Alan, in terms of price, the biggest change in price came in the first-time segment. So last year, average price in first-time was $467,000. That's down to $438,000. So we're down about 6% in price on first-time, which is where, you know, the majority of the affordability pinch is really being felt. So I think we've leaned in. We've really worked to try and address affordability. Move-up in active adult pricing has really been kind of flat. So, hopefully, that kind of helps give you a little color on what you're after. Alan Ratner: A lot. Operator: Your next question comes from the line of Anthony Pettinari from Citigroup. Your line is live. Anthony Pettinari: Good morning. I was wondering if you could talk a little bit more about the 80 bps of impairments in the quarter and maybe the drivers there. And I think some other builders have reported maybe elevated walk-away costs for their lot options. Are you seeing that? Or just any kind of color you can give us moving into the spring? James Ossowski: Yeah. Thanks for the question, Anthony. So, you know, Ryan touched on it a little bit earlier in some of our prepared remarks. You know, we leaned in a little bit heavier on some incentives where we had a little bit more speculative inventory out there in the market. And so, you know, the thousand communities that we operate in, we had eight of them that, you know, we took a land impairment charge on, which is really just a matter we had to get a little bit more aggressive on pricing. And so, you know, we moved through the inventory. Resulted in a charge. And so as you said, that's what we quoted in here. The other thing that I would tell you is, and it was in our prepared remarks, we've been more disciplined as we've been looking at it. You know, in the quarter, we, you know, we put another 18,000 lots under contract, but we also walked from about 1,000. So we're always prioritizing our land book. And so within that, there was about $22 million of land charges, which is included in our other expense categories for, we classified in the fourth quarter. Anthony Pettinari: Okay. That's very helpful. And then just switching gears, with regards to affordability, do you see the administration's, you know, restrictions on institutional ownership of single-family homes? Do you see that as being impactful in any of the major markets where you're operating? And then just more broadly, are there policies, I mean, a lot has obviously been floated, but are there policies that you think would, you know, could help stimulate housing demand in kind of a sustainable way? Ryan Marshall: So I'll take the build-to-rent question first. Jim shared the numbers for us and for both the full year and the quarter, and they're really immaterial. We had 100 build-to-rent closings in the quarter. So pretty insignificant. Going back to the very beginning of when we even entered into the build-for-rent space, we strategically limited the percentage of volume that we were willing to put toward that. We just, you know, we felt that we wanted to dip our toe in the water, but we didn't want to be overexposed. And, you know, I think hindsight being 2020, that was a great decision. In terms of kind of markets where it could be impactful, significant, I just really don't see it being a big deal kind of anywhere. I know that there is the perception that it's moving prices and taking supply out of the market. Know? So I guess time will tell. We're certainly, you know, going to adhere to the executive order and some of the things that are being talked about. And, you know, if those are the rules of the road, we're gonna play by them, and it won't really have an impact on our business. And then Anthony, I'm sorry. What was the other part of your question? Anthony Pettinari: Yeah. Yeah. I'm just wondering if there were policies that you think could, you know, help with affordability or home construction and help with housing activity that would be, you know, sustainable and positive from your perspective? Ryan Marshall: Yeah. You know, it's we've had conversations with the administration, and the administration has been very active in leaning in and trying to address housing affordability. There's a lot being talked about. As I know you can appreciate, it's hard. Because housing remains very, very local. And so, you know, I think the entire industry, us included, are gonna continue to work with, you know, the administration to try and create more supply, which ultimately will impact affordability. The American dream is and homeownership is at the core of the American dream. And we want to make sure that we're doing everything that we can to keep that healthy, and I think, you know, the administration as well. Anthony Pettinari: Okay. That's very helpful. I'll turn it over. Operator: Your next question comes from the line of Matthew Bouley from Barclays. Your line is live. Matthew Bouley: Hi. Good morning, everyone. Thanks for taking the questions. Wanted to ask another one on the build-to-rent side. I think Ryan, you just alluded to that. I think I heard you say you were, I guess, if I paraphrase, glad you didn't lean as much into it as you could have. But I think the way that executive order was written the other day suggested, you know, purpose-built, build-for-rent would still be potentially okay, if that does all go through. So I'm curious if there's actually an opportunity to do more build-for-rent, or is that given what you just said, the business is still too either cyclical or rate-sensitive, what have you, that you know, it's ultimately not where you want to be focusing your investment. Thank you. Ryan Marshall: Yeah. I would tell you, you know, maybe taking the last piece, Matt, it's just probably not where you're gonna see us lean in no matter what the executive order says. I just think there's better places for our capital that'll drive better returns for our shareholders. You know, we'll see ultimately kind of what the rules end up being when the executive order is kind of fully clarified, what purpose-built means, you know, does that mean the entire community is built for rent? Does that mean it never goes on the MLS? Some, I think, open questions, but no matter how those get resolved, I just I don't see it being a huge part of our business. Matthew Bouley: Got it. Okay. Perfect. Thanks for clarifying that. And then secondly, on the incentive front, you guys in the past have commented on your mix of, I guess, call it financing incentives versus other incentives whether, you know, upgrades and options and so forth. Just curious if you can kind of comment on the trends in both of those and maybe how quickly can the different types of incentives sort of respond to this move lower in interest rates that we've had. James Ossowski: Thank you. Yeah. I would tell you the financing incentives have stayed very consistent for the past three, four quarters. Really, we've seen it more on the other incentives, so primarily discounting on some of the speculative homes we had. So as Ryan touched on, you know, as we get to the spring selling season and we've gotten our spec levels down, you know, there's hope that there's opportunities that maybe you could pull back on that other lever. But otherwise, financing incentives have stayed flat for us. I wouldn't expect it. Matthew Bouley: Okay. Thanks, Jim. Thanks, Ryan. Good luck, guys. Operator: Your next question comes from the line of Trevor Allinson from Wolfe Research. Your line is live. Trevor Allinson: Hi. Good morning. Thank you for taking my questions. A question on your volume performance in the quarter. From an orders perspective, you outperformed historical seasonal trends for the second straight quarter. That in mind, should we think of the roughly 2.3 absorption rate that you did in 2025 as representing a floor for you guys here? And even if we don't get better demand conditions in '26, would you expect to work to drive absorptions at 2.3 level or higher moving forward? Ryan Marshall: Trevor, I think, you know, we would certainly endeavor to do more. We'd always like to sell more. You know, in terms of saying, are we at a floor? That's, you know, that's hard to tell. The market will ultimately kind of dictate that. We have been pretty clear, though, in saying, kind of the way we run our business, we need a minimum amount of volume that's gotta go through every store we tend to target that around two. So, you know, we're above that. You know, we didn't endeavor to do more. You know, in such a way that we can deliver the guide that we've given for the full year. So, hopefully, that helps. Trevor Allinson: Yeah. That is helpful. I think what I was trying to get at was kind of the minimum volume level that you guys would target. That two number is very helpful. Then second, just follow-up question on specs. I think last quarter, you had mentioned your finished spec. Community were about twice your target level. It sounds like you guys made some real effort to move some products in 4Q. So I may have missed it earlier, but where does your do you finish spec for community fit today? And with that in mind, what is your expectation for starts moving forward relative to sales? Thanks. Ryan Marshall: Yeah. Trevor, so as I mentioned, for the last four or five months, we've been matching our starts to our sales. So, you know, we haven't really added to kind of the specs in any kind of way. Our total specs are down versus prior year by about 1,500, so we've made a pretty significant dent in it. Spec finals sit at 2,000. You know, that's the number that's probably a little higher than what I'd ideally like it to be. Just because you got a lot of capital tied up in those homes. So the number in and of itself isn't anything that we're overly freaked out about other than to say, I we can do better. And we'd like to have less finished homes, you know, sitting out there. I go back to, you know, the very first question that I addressed. Ideally, we'd like to see kind of our business revert over time back to, you know, predominantly built-to-order model, we think it is, you know, it's a major contributor of our kind of return outperformance and, you know, it's hard to do. It's hard to run a build-to-order business but we think we know how to do it. We've got a good model that we'll, you know, we'll endeavor to put back in place. Trevor Allinson: Thank you for all the color, and good luck moving forward. Operator: Next question comes from the line of Kenneth Zener from Seaport Research. Your line is live. Kenneth Zener: Good morning, everybody. Hey, Ken. Good morning, Ken. Ryan, team, I wonder, you know, if we find about your business which you report consolidated, and we look at it, if you could give us some comments by your regional disclosure, I'm just using like third quarter as kind of the trend line for you to comment on. Florida looks like it's basing. Texas is obviously, like, still facing headwinds. The Midwest, North, doing excellent. But can you talk about the West? It's a broad area for you. But the gross margins which, you know, would have been higher to compensate for, you know, lower asset turns, it's lower. Is it what's happening in the West? Is it where affordability is most pronounced? So are incentives greater in the West than your other regions? Is it what we've seen last, you know, x call it, quarters? Is there immigration issues or headwinds that are just distinct in the West versus, you know, Florida or Texas? Can you just talk about why that region has appears to have a structurally greater challenge on the gross margin side. Thank you. Ryan Marshall: Yeah. Sure, Ken. You know, we've I think we, along with the entire industry, have been pretty clear for over a year and a half that the West has been a more challenged environment, predominantly driven by affordability. It does have, especially the coastal markets, some of the highest home prices in the country and as interest rates have gone up, it certainly made that challenging. There's also, you know, a lot of tech employment on the West Coast, and the tech sector, I think, has gone through some challenges. That have contributed to the employees in the tech sector being a little more hesitant in moving forward with buying these expensive homes. Know, we are seeing it in the West. We have had very good success in Las Vegas. We've had some, you know, pretty decent success in Arizona. The Colorado market has been, you know, more challenged. It's, you know, expensive, and it saw a lot of the same post-COVID population surge, pricing surge. That Texas saw. So I think it's going through some of the similar things Texas. So that's how I'd characterize the West. An important part of our business. But, you know, as we've highlighted, the fact that we have such a diversified geographic platform even with some of the challenges in the West, we've been able to perform incredibly well because of what our Florida, Southeast, Midwest, and Northeast businesses have done. So, you know, another advertorial kind of pitch for why the diversity in geography is so important to kind of who we are. Kenneth Zener: Thank you very much. Operator: Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is live. Mike Dahl: Morning. Thanks for squeezing me in. Just a couple of follow-ups. Wanted to go back on the incentives. I'm sorry to harp on this, but if incentives were kind of up under dips and the quarter, can you just comment on if you're 9.9% for the quarter, does that imply the exit rate was in the low double-digit range? And when you talk about remaining elevated, are you talking remaining elevated to that exit rate, which likely would have been kind of the highest level that you saw through the quarter and year, or should we be thinking more in line with kind of the average levels that you've seen? Ryan Marshall: Yeah, Mike. We're probably not gonna slice the baloney quite that thin. So, you know, we were nine nine in the quarter. We were nine the prior quarter. So, you know, the exit rate probably was a little higher than nine nine as we move through some of the spec inventory that Jim talked about, which primarily was in the form of just outright price discounts. Financing, as Jim mentioned, was flat. It has been flat for the last three quarters. We move into the, you know, the current year, you know, I wouldn't again, I wouldn't slice the baloney quite so thin on exit rate versus quarter rate. Just look. Our expectation is that we're gonna continue to lean into the forward commitment. It's a real important part of addressing affordability. We're gonna make sure that we're priced right in a competitive way, both against resale and other new home competitors. And then all that said rolls up into the margin guide that we've given them 24 and a half to 25, which, you know, kind of no matter the housing cycle and particularly in this environment, I think is now outstanding margin absolute margin performance. So I guess I'd leave it there. Mike Dahl: Okay. Understood, Ryan. And then second one, just back on ICG, I guess previous experience in, you know, your company and its predecessors had owning some of these assets. Exited. Then when you bought ICG, it was, you know, supposed to be kind of, like, the next evolution and something that would be different. And I guess I'm just wondering, you know, what ultimately catalyzed your decision here that it just for whatever reason, you know, this you reached the decision that this doesn't make sense. And can we think of this as I don't nothing's ever final, but this is basically now your philosophical view going forward that you don't need to have own assets like this in a vertically integrated way. Ryan Marshall: Yeah. I think it's a couple of things. Number one, we bought it right as COVID was starting. So I think the supply chain challenges and some of the things that happen kind of in a post-COVID environment certainly slowed us down, in kind of our ability to get some of the gains out of it that we wanted. We've also seen a lot of the other suppliers off-site manufacturers make tremendous investments into this space. And they've got way more scale than what we have. And so when we think about what's the best kind of allocation of our capital, not only for the current operation, but also to grow, we just think that we're better, you know, we are and our shareholders are better by putting capital to grow in other places. So as much as anything, it's really about kind of a capital allocation question. We really believe in the innovation that we got out of ICG. We believe we'll continue to benefit from that innovation, but it comes down to what's the best allocation of our resources. Both time, money, and focus is probably the short answer. So with that, I think we probably have time for maybe one more question, operator. Operator: Your next question comes from the line of Jay McCanless from Citizens. Your line is live. Jay McCanless: Hey, good morning. Thanks for taking my questions. The first one just wanted to square up the commentary that James Ossowski made about being able to maybe reprice some land deals and relating that to the land inflation you talked about 7% to 8% for this year, is there any chance y'all could work that number down as you rework some of these land deals? James Ossowski: Great question, Jay. I would tell you, you know, the land that we're, you know, under contract or we're seeking to buy right now, the one that we're renegotiating, those are 2027-2028 closings. So, you know, really, the increase that's in our guide this coming year is land we bought a couple years ago. So really don't see the opportunity in the short term, but as we look to the long term, that's certainly our goal to see if we can get some price out of it. Jay McCanless: Okay. Great. And then my second question, you guys, the last couple of quarters, have talked about Del Webb communities more than coming online. Just wanted to get an update on that and see if that's still gonna be the case in '26. Ryan Marshall: Yeah, Jay. It is. You see it in the sign-up trends. In the quarter and even in the full year. You know, we're up to in the most recent quarter, 24% of our closings were from Del Webb. 23% of the sign-ups in the quarter were Del Webb. So there's new communities have opened in the last kind of one to two quarters. We've got some more that are coming next quarter. Which is, you know, what we always said. That, you know, in 2026, you'd see us get back up to that kind of targeted mix of 25%. James Zeumer: With that, we're gonna wrap up this morning's call. We'll certainly be available over the course of the day for any follow-up questions. We thank everybody for your time this morning, and we'll look forward to speaking with you on our next earnings call.

101天前Insight Analytics约5分钟阅读

NDA-FI.HE 2025 Q4 财报电话会议

Ilkka Ottoila: Good morning, and welcome to Nordea's Fourth Quarter and Full Year 2025 Results. I'm Ilkka Ottoila, Head of Investor Relations. As usual, we'll start with the presentation by Group CEO, Frank Vang-Jensen, followed by a Q&A session with Frank and Group CFO, Ian Smith. Please remember to dial in to the teleconference to ask questions. With that, Frank, please go ahead. Frank Vang-Jensen: Good morning. Today, we have published our results for the fourth quarter of 2025. We finished the year well with high fourth quarter profitability, higher business volumes and lower costs. It was a strong result, despite the uncertain environment and despite consumer confidence in our Nordic home markets remained muted. For the full year, we delivered a return on equity of 15.5%, in line with the commitment we made 3 years ago. Our performance reflects the momentum we have built since we set out to reshape Nordea in the autumn of 2019. We have grown our business with existing and new customers and improved our customer experience. We are much more efficient today. Back in 2019, we spent EUR 0.57 to generate EUR 1 of income. Now it takes EUR 0.45. We are much more profitable. In 2019, we ranked near the bottom of the world's 100 largest banks based on return on equity. Now we are firmly in the top 20 and among the best in Europe. And we are creating sustainable value for shareholders. Total shareholder return over this period amount to 322% or 26% per annum. I was especially pleased to see us end 2025 on a high note on one other very important metric, customer satisfaction. Our scores are now 4 to 10 index points higher in all 4 business areas and performance has improved relatively to peers. Our results show that Nordea is performing well. By most measures, Nordea is stronger than it has ever been. We carry that strength into our new strategy period for which we have high ambitions as reflected in our new priorities and financial targets. I'll briefly return to those later. Being a strong and resilient financial services group, we also have the capacity to support our customers effectively in the current unsettled global environment. While the geopolitical backdrop remains uncertain, our focus is on ensuring we are consistently there for our customers with advice, with our capital and with a broad range of financial service and a very strong balance sheet. We're well equipped if conditions shift, no matter which direction they will go in. Our diversification is a key advantage among. Our Nordic peers, we are the most diversified financial services group. Income, lending and profits are well balanced across sectors and across our 4 home markets. We also benefit from operating in our home region with strong economies and fiscal positions and stable political systems. These features help us to navigate through volatility and adjust to external shocks. The largest Nordic businesses are export-driven and will feel some impacts. Still, they distinguish themselves by their quality, innovation and deep tech and engineering know-how and very importantly, by the agility and ability to adapt. That formula has enabled them to establish competitive positions in global market positions that are durable over time. For all these reasons, even while risks to the global outlook remain and impacts are difficult to assess, I'm confident that our region is well positioned to continue performing strongly. With that, let's return to the fourth quarter and look at some of the highlights. Our return on equity was strong at 14.4% compared with 14.3% a year earlier. Earnings per share were EUR 0.34, up from EUR 0.32. Corporate lending grew by 8% year-on-year and deposits were up 1%. Mortgage lending increased by 1% and retail deposits were up 6%. Assets under management increased by 13% to a record high of EUR 478 billion partly driven by higher asset values. Net inflows were strong at EUR 6.5 billion. Total income was flat against the previous year. Our net interest income continues to hold up well, supported by higher volumes and our deposit hedge. As expected, in the declining rate environment, it decreased by 5% year-on-year and by 1% quarter-on-quarter. Some of that due to the policy rate reductions in Sweden and Norway in Q3, which has a full quarter effect in Q4. Net fee and commission income was up 3% with solid growth in savings fee income. Net fair value result was up 28% for the quarter. This was driven by higher customer activity and a stronger result in treasury and our markets operations. Costs decreased by 3% year-on-year, reflecting continued active cost management and stable strategic investment levels. Full year operating expenses were EUR 5.4 billion, fully consistent with our guidance. The Q4 cost-to-income ratio was 46.2%, excluding regulatory fees. Operating profit increased by 3% year-on-year to EUR 1.5 billion. Our credit and asset quality remain very strong. Net loan losses and similar net result amounted to EUR 49 million or 5 basis points, once again, well below Nordea's long-term expectation. Due to continued strong credit quality, we were able to reduce our management judgment buffer by a further EUR 17 million in the quarter. Our strong capital generation continued and our CET1 ratio was 15.7% at the end of the quarter. That puts us 1.9 percentage points above the current regulatory requirements. Given our strong 2025 performance, our Board of Directors has proposed a dividend of EUR 0.96 per share for 2025, up from EUR 0.94 per share for 2024. Today, we have published our outlook for 2026, which is the first year of our new strategy period running to 2030. For the full year 2026, we expect a return on equity of greater than 15% and a cost-to-income ratio, excluding regulatory fees of around 45%. Following our strong Q4, we were able to close our strategy period having met or exceeded all of our targets. Our initial return on equity target was greater than 13%. As the environment shifted, we lifted it to greater than 15% and ultimately achieved 15.5% in 2025. We delivered on our guided cost-to-income ratio, even with a significant step-up in strategic investments and maintained strong credit quality and capital generation. All of this enabled strong shareholder distributions, distributions over the 4 years exceeds EUR 17 billion. This clearly surpassed our initial expectation and was right in the middle of the updated target level. Let's now return to Q4, starting with a look at our main income lines. During the quarter, net interest income continued to hold up well in the lower interest rate environment. Our NII was supported by both higher business volumes and our deposit hedge. The deposit has contributed positively to our income year-on-year, increasing NII by EUR 99 million. As expected, the policy rate reductions affected deposit and equity margins. Our net interest margin for the quarter was 1.57%, quite stable following 1.59% last quarter. We saw an encouraging trend in business activity on the corporate side with lending up 8% year-on-year. Mortgage lending also increased but at a slower rate. The 1% year-on-year increase was driven by Sweden and Norway as housing market activity continued to slowly pick up. Retail deposits were up 6%, while corporate deposits were up 1%. Net fee and commission income was up 3% year-on-year, driven by savings and higher customer activity levels. The higher savings fee income was driven by higher assets under management with positive net flows in all channels and higher asset values. The good momentum continued in our Nordic channels with net inflows at EUR 4.8 billion, roughly equally split between retail funds, private banking and Life & Pension. Net flows from international channels were EUR 1.7 billion with positive net flows in both wholesale distribution and international institutions. Brokerage and advisory income was lower, resulting from lower debt capital market income. The clear positive in the quarter was a very strong income growth from our secondary equities business. Net fair value result was strong in the quarter, increasing by 28% year-on-year. That increase was driven by higher customer activity in foreign exchange and interest rate hedging. We also benefited from good performance in treasury and market making. Costs decreased by 3% year-on-year as planned and in line with our guidance. This reflected stable strategic investment levels and continued active cost management including a reduction in the number of employees. During the quarter, we continued with our strategic investments in several areas, including technology, data and AI. At the same time, we are driving operational efficiency and increased productivity. This is our continued focus, and it is leading to more efficient ways of working and a leaner organization. For the full year, costs were EUR 5.4 billion, representing a modest 1% increase despite the inflationary pressures. The fourth quarter cost-to-income ratio was 46.2%, excluding regulatory fees compared to 47.9% a year earlier. For the full year, it was 45%, and we are targeting to take this down to 40% to 42% by 2030. Our credit quality continues to be very strong. Net loan losses and similar net result for Q4 was EUR 49 million or 5 basis points, well below our long-term expectation of approximately 10 basis points. The provisions in the quarter, were driven by corporates with no industry concentration or specific trends. Due to continued strong credit quality, we reduced our management adjustment buffer by 1/3 of EUR 17 million and it now stands at EUR 276 million. We continue to deliver strong capital generation and maintain our robust capital position. At the end of the quarter, our CET1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirements. We continued to deploy capital to support business growth and we also continue to use share buybacks as a way to return excess capital to our shareholders, where we do not find profitable uses for it. During the quarter, we launched and completed a EUR 250 million share buyback program, our fourth of the year. After that, in December, we launched a new EUR 500 million program which is expected to be completed by no later than the 8th of May. Given our strong 2025 performance, our Board of Directors will propose to shareholders at the AGM a dividend of EUR 0.96 per share for 2025 compared with EUR 0.94 per share for 2024. Additionally, the Board has proposed a distribution of the midyear dividend in 2026, corresponding to approximately 50% of the net profit for the first half of 2026. Let's now turn to our business areas. In Personal Banking, we continued to deliver business volume growth with customer activity, again, highest in savings and investments. Households continue to prioritize strengthening their financial positions, increasing their deposits by 5% year-on-year during the quarter. Many customers are also increased their recurring savings amount and they put more money into investment funds. Q4 net flows in our Nordic retail funds were strong at EUR 1.7 billion, up from EUR 0.7 billion we had in Q3. With lower interest rates supporting confidence, housing markets continue to improve gradually, but the pace remained muted. We increased our mortgage lending by 1% year-on-year. In Sweden, we continued to grow, our mortgage market share capturing 27% of the market growth in the period from October to November compared to a back book market share of 14%. Digital activity continued to grow with app users and log-ins up 3% and 5%, respectively. In our previous strategy period, we set a target to ensure all every day banking needs could be met digitally by the end of 2025. We have now achieved this goal, and it has contributed to a stronger overall experience and that record high customer satisfaction level for personal banking. Total income decreased by 3%, driven by lower policy rates. The lower interest income was partly offset by continued net fee and commission momentum, especially in savings, payments and cards. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 51%, improving from 53%. In Business Banking, we performed well, driving strong volume growth with the support of our strong digital offering. Nordic SMEs continued to adapt well to the operating environment with stable interest rates supporting higher demand for lending. I'm quite pleased with the increased business activity. Lending volumes increased by 6% year-on-year, led by Sweden, but with growth across all Nordic countries. Deposits were up 5%. During the quarter, we improved customer experience by simplifying onboarding and introducing a new digital tool to enable customers to get started faster. We want to be the leading digital bank for SMEs and a big part of that effort has involved making sure our customers' everyday banking needs are met by our digital offering. In 2022, around 40% of our customers' daily banking needs were covered by self-service functionalities. By the end of the 2025, we stood at 80% in line with our target. Total income for Q3 was down 3% year-on-year with higher volumes and higher net fee and commission income partly offsetting lower deposit income. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 45%. In large corporates and institutions, we had a strong quarter, driving double-digit lending growth and higher overall income. Lending volumes were up 10% year-on-year, with particularly strong growth, 20% in Sweden. Deposit volumes decreased by 3% year-on-year. We interpret lower deposit volumes as a sign of increased risk appetite and greater willingness to invest. Debt capital markets activity remained high, if a little lower than in previous quarters, helping us maintain our leading positions for Nordic bonds and Nordic loans overall in '25. During the quarter, we arranged close to 140 transactions for a broad range of issuers that brought the total for the full year to over 600. Our secondary equities business performed strongly and income grew by 26% year-on-year. Nordea markets delivered strong results driven by solid trading performance and increased client activity compared with a year ago. Total income was up 4% year-on-year, mainly driven by higher ancillary income. Net fee and commission income increased by 10%, driven by equities, asset management, products and lending fee income. Return on adequate equity was 15% the cost-to-income ratio improved from 42% to 40%. In Asset & Wealth Management, we drove further strong momentum with growth in all our Nordic channels and strong investment performance. Net inflows in our Nordic channels were EUR 4.8 billion, with private banking contributing EUR 1.6 billion of that. In private banking, we finished the year as we began, with solid momentum and customer acquisition and high levels of customer activity. Overall, customer satisfaction remained at a record high level. In our International channels, we had net flows of EUR 1.7 billion, which was an improvement quarter-on-quarter. About half of that was from international institutions and half from the wholesale distribution channel. Net flows in Life & Pension were EUR 1.3 billion. The performance was again strong across our 4 markets, and we further reinforced our position as Nordics second largest player. Gross written premiums in the quarter amounted to EUR 3.3 billion, up from EUR 3.1 billion a year ago. That took premiums for the full year to an all-time high of EUR 12.9 billion. Assets under management increased by 13% year-on-year to EUR 478 billion, driven by market performance and the positive flows in all channels. Our Empower Europe fund launched in June continued to attract interest during the quarter. It has now secured a net flow of more than EUR 500 million. The fund invests in Europe's energy independence, industrial revitalization and defense. We also saw renewed strong interest in our sustainable investment approach. One of our new BetaPlus funds launched in the summer is already the largest actively managed sustainable ETF in Europe. Total income was down 2% year-on-year driven by lower net interest income. Net fee and commission income was down 1%, driven by customer preferences from lower risk and lower margin products. Return on allocated equity was 30%, that cost-to-income ratio was 48%. All in all, this was a good quarter and a year of success for Nordea. We now have two very successful strategy periods behind us, and we are aiming high for our third. Looking across to 2030, our priorities are clear: To grow strongly in several attractive areas and drive faster than market income growth. To further strengthen our customer offering and to unlock the full potential of our unique Nordic scale. Our Nordic scale is a key source of competitive advantage for Nordea. We have already realized a lot of scale benefits. However, most of the gains still lie ahead. In this next phase, we will take a decisive step to unlock these benefits across Nordea. The priorities and targets we have set are ambitious, and we are fully committed to achieving them. We are targeting a return on equity of greater than 15% each year through to 2030 and significantly higher in 2030 itself. We are also targeting a cost-to-income ratio, excluding regulatory fees, of 40% to 42% in 2030. We are at 45% today and coming down to our target level will be a gradual process. Accordingly, we expect to deliver a return on equity of greater than 15% for the full year 2026 and expect a cost-to-income ratio, excluding regulatory fees, of around 45%. Rest assured that our plan will be executed with the same rigor and focus we have applied over the past 2 strategy periods. We do what we say. We look forward to building on our progress and realizing our ambition to become the undisputed best performing financial services group in the Nordics. Thank you. Ilkka Ottoila: Operator, we are now ready to take the questions. And as usual, please as a courtesy to others, could you please limit yourself to 2 questions max. Thank you. Operator: [Operator Instructions] The next question comes from Martin Ekstedt from Handelsbanken. Martin Ekstedt: So I wanted to first ask about the management judgment allowance. It decreased by only EUR 70 million this quarter against roughly EUR 50 million each over the previous 2 quarters, right? And additionally, only EUR 10 million of that decrease was an actual release. So given I believe you've said at the CMD that you will either use or release the around EUR 300 million buffer that you had when entering '26, over the course of this year. I just wanted to check, should we now see this smaller release in this quarter meaning it's going to be more back-end loaded, the full release in the year 2026 or are you simply seeing a different credit risk environment currently causing you to take a more conservative stance overall? Ian Smith: Martin, thanks for the question. You shouldn't read anything different in terms of our intention on the release of the management judgment buffer. We did, as you pointed out, release more earlier in the year. Actually, Q3 saw quite a big release simply because of a different change in credit conditions, sort of macro related, but no, the portfolio continues to perform well. And as you see with the -- again, a net release of collective over the period, generally, conditions are improving. So there's nothing to read into that. It's simply that we tweaked it in Q4. Our intent remains the same that over time, we will either utilize or release. And as we've said so often, in calls like this, but also in other [indiscernible] that the strength of the portfolio and also the strength of conditions in our home markets means that it's harder and harder to hold on to it. So what we set out at Capital Markets Day remains the case. Martin Ekstedt: Okay. But just to clarify, I think you said that over time, you will either utilize the release, right? But I think at the CMD, you said over '26. Is that correct? Ian Smith: Yes. So that's what we said at CMD, no change. Martin Ekstedt: Okay. Okay. And then just secondly, if I could focus on M&A for a bit. I just wanted to see when we should expect to see some new acquisitions from you. And it is still the base case that you'll be turning your M&A machinery towards Sweden now, as you've said in the past, after your couple of deals in Norway, right? So the Danske piece in Norway deal, I think it was announced in July '23, i.e., it was more than 2 years ago now. In the past, you said that you're aiming for roughly 1 deal per year, considering, was it 25, 30 bps of capital deal, does this also mean that we should see something larger perhaps from you on the M&A front given some time has passed now since the Danske [indiscernible] the Norway deal? Frank Vang-Jensen: Thank you for the question, Martin, it's Frank speaking. We would like to do M&A as long as it's accretive to our business and helpful for our shareholders, but then we need a target -- available target. And it's -- you mentioned Sweden and it's right that we have -- in the new strategy of ours, we have a special strategic focus on Sweden and Norway but we want to grow in all 4 countries. So actually, we are, of course, interested in opportunities across the board as long as it fits well to our strategy. That's what we can say. And then these comes when they come, and you need two to do a tango. And right now, we have really not much to say more than unchanged ambition and we would like to use inorganic as a lever to grow Nordea as well. Martin Ekstedt: Okay. So it's availability on target more than anything else. But does this mean also that you've now saved up some dry powder perhaps? Frank Vang-Jensen: Yes, it's nothing to do with appetite. It's nothing to do with capital. It's nothing to do with us not having a clear view on where that we want to grow and who would we really like to team up with. It's basically about availability. Operator: The next question comes from Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: So the first question is on asset margins. At your CMD, you mentioned that you're not assuming any meaningful margin expansion. Is it reasonable to expect that asset margins will remain broadly stable in 2026? And how does your outlook on margins differ across your key geographies? And across the Nordic margins -- Nordic markets, where do you see the most margin pressure? And where do you believe margins can hold up or even improve? Ian Smith: Thanks, Gulnara. So yes, our base case assumption was that we're not relying on margin expansion. Obviously, very happy to see that come back. But I guess, conditions at the moment are as we've seen throughout 2025, still very thin volumes in the mortgage market and in those circumstances, we do see some of our competitors reducing pricing to try and chase business and things like that. So inevitably, that puts a bit of pressure on mortgage margins. Another feature we've seen, particularly in the second half of 2025 is we grew really, really strongly in corporate lending and particularly in our LC&I business, where our lending is at very much the sort of blue chip and it's been pretty competitive there. So those 2 dynamics have made margin expansion pretty difficult to deliver. So we continue to assume that we won't see margin expansion. History has shown us that when conditions ease and when demand increases as consumer confidence returns, we've seen an improvement in lending margins. And no reason not to expect that, but we do need to see that consumer sentiment improve and the market start moving again on the household side. I mean in terms of just different markets, there really isn't anything to choose between the markets in terms of what we're seeing on margins, particularly. Our competitors are active in most of those markets and where we're seeing them acting aggressively on margins, that's right across the board. But we do, I suppose, have good sort of -- if we split between where things are growing a little bit better, Sweden and Norway versus things being a little bit more flat in -- from a market perspective in Finland and Denmark. So I think that watching Sweden and Norway from a margin perspective is important. But I don't know, Frank, whether you want to add anything to that sort of perspective? Frank Vang-Jensen: No, I think you expressed it very well. So no further comments to that one. Gulnara Saitkulova: And another question on Sweden market share. In Sweden, you have been gaining front book market share. Can you remind us what is driving your ability to stay competitive and grow the front book ahead of the back book? And what do you see as the key levers and competitive advantages that Nordea has in Sweden? And looking ahead, how do you plan to sustain that momentum? And what are the targets that you are setting for the Swedish market? Frank Vang-Jensen: So we are gaining market share, and that's across the board, I would say, in Sweden. And as you know, we have had a special focus on Sweden and Norway for quite long as we have relatively smaller market share than in Finland and Denmark. And back -- I think it's 7 years ago, we decided that there -- now we want to grow our Sweden on mortgages, and we want to grow slightly above our back book market share. And I think we have done that probably each quarter for the last 6.5 years, something like that. So it's nothing new. What is probably a little bit new is that we are growing quite much faster than the back book this year. So 22-ish percentage points of the front book on the mortgage market is where at least the last days that I have and that should compare that with the back book of 14.03% something. So the momentum is strong and -- but it's nothing new. And yes, mortgage is not rocket science. It's about getting many -- retail is about detail. So getting many things right, the customer interface, digital tools, the self-service, getting the entire organization teamed up around what is it that we aim for, how do we do it, ensure that the value chain is effective that we respond well, fast and so on. And then you need to get the pricing right. So we are -- I would say we are slightly above average. So we are not using the tools to buy. We try to position us price-wise where we should in the corridor, but a bit above the average. And that works very effectively. So I'm very happy with the progress the team has made, but that's not really anything new. And when it comes to the auto businesses, they had actually a very nice growth, so SMEs. And within SMEs, we have grown above market for long and continue to do so. In LC&I. In Q4, we had a growth within lending of 20% quarter-over-quarter or quarter -- Q4-over-Q4 last year or '24. So it's -- it's just -- and then corporate banking, by the way, is on fire as well. So it's -- we are just in good shape, and the momentum is great. I don't know if that answered your question, but that's probably the most I can say. Operator: The next question comes from Magnus Andersson from Nordea. Magnus Andersson: It's Magnus Andersson from ABG. You haven't bought us yet as far as I know. Just beginning with a specific one, NII in Norway in Personal Banking was down 11% quarter-on-quarter in local currencies. If you could please shed some light on that? And also related to that comment on the competitive situation in Norway. I think we're getting quite negative signals. Secondly, just on your cost income ratio target, if you could say something about what kind of headcount outlook you have for 2026? And related to costs, anything on the restructuring charge you're supposed to book this year? Frank Vang-Jensen: All right. Thank you, Magnus. Ian, should I start with the competitive situation and then you take all the difficult stuff on the details. Yes, so Magnus, I think Norway is a very competitive country. And it's -- that has almost always been the case. And it's just sometimes it goes even further. Right now, there is a very intense competition and that goes across the board. I think we're doing very well, honestly. But there is a consolidation going on now in the Norwegian market, where the savings banks are becoming fewer and bigger. And then we have the 2 large players, DNB and us basically taking the rest, and then you have a lot of boutiques especially within wealth and investment banking. So it is a very competitive market, but it's also a very interesting market as it's growing. And it's -- as we know, the economy in the country is super strong due to the stronger oil foundation. We're well positioned. We grow across the board. Wealth looks really good. SME, really good. Personal banking looks good on lending and really good on doing more business with the current customers, ours, which has been a strategic initiative, basically race up the customers and cover much more than of the needs than just lending. And that goes very well. They're doing a great job over there. And then we have large corporates and institutions are doing a great job, but it's a tough competition for sure. And that also explains a little bit why the lending is down. But it is -- remember, in Norway, we have our shipping portfolio for the group and shipping has been consolidating itself heavily, which have impacted and then it's a very dollar-based business, which, of course, also impact us. It's -- the dollar has weakened. But I would say, in general, we are very well positioned, I would say. But Ian, do you have anything to add to this more like the strategic assessment or the market assessment before you go into the details? Ian Smith: No. I think you've captured it, Frank. Magnus, so in terms of the detail, yes, we did see a step down in net interest income in PEB Norway in the quarter. I guess a few things are going on in there. I mean, the rate cut in September further reduced deposit margins and where we saw a full quarter impact of that in Q4. Then we've also seen, I guess, in response to the rate cuts, which have been a little longer coming in Norway, a lot of customers have been actively renegotiating mortgage rates, and that really started with the first rate cut and we saw the full effect come through together with a little bit of impact of the September cut in Q4 because we have the usual sort of 2-month lag. And then we only got a partial offset from Nibor because 3-month Nibor didn't move to the same extent. So just a bit of margin pressure in Norway that I think will be felt across the market. I'd be surprised if we didn't see the same things in our competitors there. But look, as Frank says, firing on full cylinders in Norway and really, really pleased with both what we're doing, being able to provide customers with other products and also working with our new customer base that came across from Danske. So I guess those are the moving parts in Norway. In terms of cost, that kind of thing, so yes, we did I guess, through good sort of active management, see the headcount come down during 2025. And as we see us continue to implement our Nordic scale initiative with process improvements, consistency, and indeed, as we start to see some of the early impacts of AI, we would expect to see FTE continue to come down. So I think that trend is set to continue. And then in terms of restructuring, no news to report there. We're still going through our necessary processes, consultation and other things like that. So I guess, to repeat what we said at Capital Markets Day, we don't expect it to be material on a full year basis, certainly lower than the provision we took back in 2019. And we would expect to book that in full in '26. But I guess my advice for now is, because I know some people have made a bit of a guess of what it could be, is I'd say leave it out of estimates for now. We intend to treat it separately from our regular performance KPIs. And when we give our detail, we can talk through it fully then. Operator: The next question comes from Andreas Hakansson from SEB. Andreas Hakansson: So let's start with a quick one, I think. It's following up basically on Magnus' questions on costs. The 45% cost-to-income ratio is all good. Could you just help us a bit? You talked about the 2% cost CAGR over time, but it might be a little bit forward loaded -- or front loaded, so should we think about a 3% cost growth to reach that 45% cost-to-income? Ian Smith: So Andreas, I mean I think the sort of broad consensus is in not a bad place. So somewhere between 2% and 3%, I guess. The things people should bear in mind when thinking about cost-to-income, first of all, do exclude restructuring from that. And then the other is that regulatory fees makes a bit of an impact on cost growth. I mean we've seen really good growth in deposits over the year. Our expectations is that might feed through into slightly higher resolution fee for this year, but we don't have any information on that yet. But otherwise, broadly speaking, I think estimates for cost growth for next year are broadly in the right place. Andreas Hakansson: That's helpful. And then a bit country by country from me as well. And we covered the NII in Norway. But can we just talk a little bit about asset quality in Finland? I mean retail, I think, was at 20 bps, which is some level we haven't seen a retail banking for some time in the region and a business banking 35, so that's on that side. And then on the large corporate side, we saw quite an increase in impaired loans in large corporate in Sweden and Denmark, which was also, I thought, surprising. So could you tell us a bit about what's happening in those markets and in those areas, please? Ian Smith: Yes. So I mean, in terms of the large corporates first, these things are all relative, right? There is a fairly sort of low level of impaired assets across the book. And so where you see a particular situation arise that can have a sort of magnified short-term impact on the metrics. So there's nothing untoward or systemic going on with those movements that you've seen in Sweden and Denmark. In Finland, on both our SME book and on the retail side, we've got a slightly broader base book, a bit more consumer finance in there as a proportion than you see elsewhere in our business. And that tends to mean we have a slightly heavier burden in Finland from credit charges. And then we always have a bit of, I guess, a catch-up on write-off of impairs and other things towards the end of the year. So again, I wouldn't want you to take anything by a concern from that. But we do have a slightly different shape of the book in Finland compared to other countries. Andreas Hakansson: Okay. Fair enough. And then on -- just on the countries as well. If we think about net interest income outlook for 2026, I mean, ECB/Denmark, hasn't cut since June and Sweden cut in September and Norway, we at least believe it will continue to cut a bit further. And with the competitive pressure you talk about, should we see that the NII in Sweden, Finland and Denmark is stabilizing relatively soon, and it will continue to go down in Norway, is that the best way of looking at things? Ian Smith: I think that's a good summary, Andreas. Our expectation, as you say, is for rate stability or sort of rate flat in all countries apart from Norway and then 1 or possibly 2 cuts in Norway. So exactly, as you set out. And what that does is provide a little bit of stability. Into Q1, we've got a lower day count. So arithmetically, that means that we'd see slightly lower net interest income for the group in Q1 this year than the quarter just passed. And then from there, provided that rate picture plays out as both you and I have described then it's about volumes and some impact from margins. And so we're confident that we'll be able to grow as the market grows. And so Q1, probably the trough for NII on a quarterly basis. And then with rate stability, volume should help drive from there. Operator: The next question comes from Namita Samtani from Barclays. Namita Samtani: I just had one. The margin on the asset management business. If I just simply take the asset management revenues divided by the average AUM in '25, it was around 42 bps versus 47 to 48 bps in '22 to '24. So I was just wondering why you think that's the case as flows have been in the higher-margin businesses like private banking and how do you think your asset management franchise stacks up versus peers? Ian Smith: Thanks for the question. So yes, we've talked throughout the year of some of those margin dynamics in asset management and also what we've been able to achieve in terms of flows. So I think to start with, really pleased with the flows, EUR 4.8 billion in our Nordic channels in Q4 and then 1.7% in international. So I think that continued sort of good performance in flows that we saw in Q4 is really encouraging. There's 2 things playing into the -- your arithmetic there on what's happening with margins. The first is, yes, we have seen a bit of a sort of move in preference in the market towards lower-margin product that continues to be plenty of pressure and competition from passive versus active. Our own response to that has been to I guess, plan for it and understand that that's what's happening. And to respond with new product launches and others. And as we said in our report today, some of our sort of BetaPlus products that has a bit of active within them, but also designed to compete with that passive threat, they've performed really well in terms of attracting new money. So a bit of overall margin per share that we see right across the industry. And then something that we saw quite specifically in 2025 is a bit of a preference amongst our customers for lower risk, but then also lower margin products. So if we look at our Life & Pensions business, for example, a strong customer preference for our fixed income products, which we're really good at. So there's a margin and a mix impact going on in there that has driven the effect that you've seen. We're really proud of our asset management business. It's performance, it's a range of products. It's customer preference, all of those kinds of things. So in terms of your question of how we think it stacks up, I think we're in good shape. We recognize that it's a very competitive world out there. And the best response to that is to have the best products and the best performance, and we think we stack up pretty well there. Ilkka Ottoila: And operator, I think we have time for one more question. Thanks. Operator: The next question comes from Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So I had a question on the cost to income outlook for 2026. So you're expecting 45%, which is flat from 2025. While at the CMD, you talked about fall in cost to income every year until 2030. So has anything made you a bit more cautious about the near-term cost to income trend? Yes, so that's my question. Frank Vang-Jensen: Should I take it in. Nicolas, it's Frank speaking. Our ambition has not changed. And what we are saying is around 45%. And of course, we are just recognizing that there is a lot of uncertainty and exactly how the year would play out, we need to be a little bit humble about but there's nothing negative that has happened, and our aspirations are not different to what they have been previously. So we just tried to reflect the start to the year and what is happening in the world, of course, can impact the momentum, but let's see. So don't put too much in that. Ian, I don't know, have you anything that you want to add to this specific question? Ian Smith: No, I think you covered it, Frank. Nicolas McBeath: Do I have room for another question or do you have to wrap up? Frank Vang-Jensen: Yes, you have -- so an extra one is fine. You did only one, so that's fine, so please go ahead. Nicolas McBeath: Okay. So then if may I ask also what explains the strong growth and increase in market share that we see in the large corporate segment in Sweden and Finland? Are you competing with lower margins, taking up the risk appetite or what is the recipe here? Any particular segments that account for much of the growth we're seeing here? Frank Vang-Jensen: So the risk appetite, no. So we are not changing our risk appetite. We are -- we have been there for so many years. So we do know that these things you shouldn't do, that's dangerous. Some will do. Some are doing it, but we are not. But of course, it's a very competitive market for sure. So you would like higher margins, but the market is as it is right now. So then it's about getting more of the customer's business, which we are. Sweden is simply -- we have changed a bit in the organization, leadership and also gotten agreed on the ambition level. And they are -- it's very visible, honestly. They are super ambitious. They're active. They are passionate. They're leaning in and that's what you see in the quarter. Then I -- we cannot deliver a 20% increase year-over-year for all years, but at least we can take a fair share of the market. So that's one. And the other one was about Finland. Now I think it's just about -- Finland has been a bit quiet. And we want Finland to be less quiet in LC&I. And I think that what we see now is a response to that. So no magic, it's just hard work, staying close to our customers and being on the beat. Nicolas McBeath: Any particular segments? Frank Vang-Jensen: In -- within LC&I? Nicolas McBeath: Yes. Frank Vang-Jensen: No. I think no, we are broad. So -- but of course, you cannot -- that will -- yes, we are broad. I would say, we are broadly focused. So there will always be -- in each country, there is always an industry composition that you have to understand, and you will be exposed to these industries then. But nothing really here that sticks out, I would say, not to my information at least. Ian, before we close, is there anything that you would like to highlight before we close the call? Anything we have talked -- not talked about or anything that you want to say? Ian Smith: I think we covered most of the key things, Frank. Maybe just a quick recap of the dynamics that we see going into 2026. So I talked about, we expect NII to come down quarter-on-quarter into Q1, mainly because of lower day count. And if we get that sort of fairly stable rate picture that we've been talking about, then I think Q1 '26 should be the quarterly trough. And after that, NII should grow in line with volumes and margin development. So -- and I think, again, with stable rates, a fairly stable contribution from the deposit hedge. I think as we look at the full year for 2026 on NII kind of expectations at the moment because of what we're seeing with margins and other things is maybe flat to slightly down for the full year. And I guess consensus is maybe a little bit on the high side there. But -- so that's NII. Fees and commissions, we ended the year quite strongly. We'd like to see those activity levels sustained and confidence is going to be key there with everything that's going on in the world. So I think '26, all being well in terms of activity levels, I guess, we expect NCI to increase. But estimating the pace of growth is probably a bit difficult at the moment. And then just a watch out for Q1. Q4, we had annual and semiannual fees of around EUR 26 million that won't be repeated in Q1. And so that was sort of lower day count, probably says that quarter-on-quarter, we might see NCI a little bit down. But look, I think a positive outlook for the year. And lastly, on costs, as I said on one of the questions, I think, broadly speaking, expectations for the full year in a decent place. For Q1, we might see a slightly higher resolution fee than the EUR 35 million we took last year, and we booked all of that in Q1, obviously, so makes it a slightly higher cost quarter than the average. And then we covered restructuring. As I said, I suggest people leave it out of estimates for now, and we'll get back to you when we have something to report, we'll exclude it from our KPIs for the year and as a guidance on size, just repeating what we said at the Capital Markets Day, lower than the provision that we took in 2019. So I think we've covered the key topics, Frank, and I'll hand back to you. Frank Vang-Jensen: Great. Thank you so much. And all, thank you so much for participating. We are here for you. If you have any questions, please revert, but else, thank you for today.

101天前Insight Analytics约5分钟阅读

NOK 2025 Q4 财报电话会议

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's Fourth Quarter and Full Year 2025 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today with me is Justin Hotard, our President and CEO; along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may, therefore, differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency and portfolio basis, and other financial items will be based on our comparable reporting. Please note that our Q4 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages from the quarter, then Marco will go through the financial performance, and then we'll move on to Q&A. With that, let me hand over to Justin. Justin Hotard: Hello, everyone, and thank you, David. Overall, our fourth quarter performance was in line with our expectations, reflecting disciplined execution across the business. Net sales grew 3% in the quarter to EUR 6.1 billion, with operating profit of EUR 1 billion and free cash flow of EUR 0.2 billion. For the full year, net sales were EUR 19.9 billion and operating profit was EUR 2 billion, slightly above the midpoint of our guidance. Free cash flow conversion of 72% was also consistent with our guidance. Stepping back, 2025 was a foundational year in repositioning Nokia for long-term value creation. We strengthened our portfolio with the acquisition of Infinera, simplified our operating model and set a clear strategy at our Capital Markets Day to focus the company on the areas where we see opportunities for differentiation, scale and sustainable market leadership. Now to give you a bit more detail, let me first turn to Network Infrastructure. In the fourth quarter, net sales grew 7%, driven by optical networks, which grew by 17%. Order intake was solid across both optical and IP networks with a book-to-bill above 1, supported by particularly strong demand from AI and cloud customers. For the full year 2025, we delivered EUR 2.4 billion in orders from AI and cloud customers. This reinforces our view that optical networking will become an even more critical part of the infrastructure to support the AI super cycle, and we are investing to capture near-term demand, while maintaining a long-term perspective on the opportunity. In Optical, our 800-gig ZR and ZR+ pluggable products are shipping with initial units performing well in the field. We now have multiple design wins and are supplying into scale deployments. Our focus is on ramping production to meet the strong demand we see in the market. In IP Networks, we made progress on our expansion into data center switching. We launched two new products in the quarter, the 7220 IXR-H6 switching platform powered by Broadcom's TH6 and our Agentic AI solution for event-driven automation management, which reduces network downtime by 96%. We also secured a design win for our next-generation data center switching platform. These are encouraging steps, and we continue to believe revenue will ramp over time as we expand our presence in this rapidly growing market. In our mission-critical enterprise customer segment, book-to-bill was well above 1 in Q4, supported by a growing pipeline from both new and existing customers. Turning to Fixed Networks. Performance was stable year-on-year in Q4. As discussed at our Capital Markets Day, we are deprioritizing certain customer premises equipment products where we do not have meaningful differentiation and which dilute margins. In Q4, our fiber OLT business grew 16% year-over-year, offset by declines in these areas, I just referenced, that we are deemphasizing. This resulted in overall flat performance for Fixed Networks. As I announced at our Capital Markets Day on January 1, we brought together core software, radio networks and technology standards to form our new Mobile Infrastructure segment. This structure is designed to sharpen accountability, improve profitability and position the business for long-term technology leadership. Core Software, formerly a part of Cloud and Network services is leveraging our differentiated cloud-native core network stack to grow faster than the market and continue improving profitability. During the quarter, we won a 5G core deal with Telia and announced the collaboration with Bharti Airtel on Nokia's Network as Code API platform. We now have more than 75 partners using the platform, including 43 telcos. Radio Networks, formerly a part of Mobile Networks, focused on disciplined execution in a largely stable market. We continue to invest to deliver 5G advanced and O-RAN solutions while innovating to establish a longer-term leadership position in 6G and AI-native networks. A key pillar of our strategy is co-innovation. And in Q4, we announced our partnership with NVIDIA. We continue to remain on track to begin trials and proofs-of-concept on AI-RAN later this year. We also announced a market share expansion deal with Telecom Italia, along with contract extensions with Telefonica Germany and SoftBank. Technology standards remains focused on securing long-term monetization of Nokia's patent assets. We signed several deals in Q4 and continue to maintain a contracted net sales run rate of approximately EUR 1.4 billion. At our Capital Markets Day, we also announced the creation of Nokia Defense, a new incubation unit that will serve as the central R&D hub and go-to-market for our defense portfolio. Our priority is to deliver defense-grade solutions based on Nokia's Mobile and Network Infrastructure technologies for Finland and other NATO countries. Nokia Defense also includes Nokia Federal Solutions in the U.S. and includes the technology we acquired from Phoenix Group in 2024. Based on feedback from customers, we see growing demand for our 4G and 5G technology in military environments, both for national security and tactical applications. This is an area where we are continuing to invest, and we will share updates as we make further progress. Finally, in Q4, we closed the transaction to take full ownership of our joint venture in China, Nokia Shanghai Bell. This gives us greater operational flexibility, and we will bring it into full alignment with Nokia's global operating model. As a part of that integration, we expect to deliver approximately EUR 200 million of run rate cost synergies with integration costs of approximately EUR 350 million to EUR 400 million over a period of 24 to 36 months. Turning to '26. Looking ahead, our focus is on disciplined execution to capture growth in AI and cloud and increase efficiency while we're building a high-performance culture across Team Nokia. We now have fewer, clearer priorities, a simplified operating model and a strategy we are executing with speed and accountability. Network Infrastructure remains our primary growth engine, particularly Optical and IP Networks, where we see strong structural demand. In Mobile Infrastructure, our focus is on gross margin and efficiency, while we continue to invest in our portfolio for competitiveness and market share in 5G and to transform the business for long-term success in areas such as AI native networks and 6G. From a financial perspective, in 2026, we are targeting an operating profit in the range of EUR 2 billion to EUR 2.5 billion. At our Capital Markets Day, we outlined a series of KPIs to illustrate how our strategic direction translates into financial outcomes. Let me revisit those and what we expect in 2026. Our first KPI is to deliver 6% to 8% compound annual growth in network infrastructure between 2025 and 2028 on a constant currency and portfolio basis and 10% to 12% in the combined Optical and IP Networks businesses. In 2026, we expect growth rates in both cases to be in line with these long-term targets. As expected, the product prioritization decisions we have taken will limit growth in Fixed Networks, while we expect growth in our fiber OLT portfolio to continue to occur due to strong underlying demand. Our second KPI is to expand Network Infrastructure operating margin to 13% to 17% by 2028. This is compared to the 9.5% achieved in 2025. In 2026, we expect measured margin expansion as we ramp new products and continuing investing in the long-term growth opportunity we see in the business. The next two KPIs relate to Mobile Infrastructure gross margin and operating profit. In 2026, we continue to expect some top line headwinds from prior contract losses, but otherwise, a stable market environment. Our focus is to continue to target at least EUR 1.5 billion in operating profit, consistent with our performance in 2025. As announced at our CMD on January 1, we have moved four businesses into a new unit called Portfolio Businesses. This includes our Fixed Wireless Access customer Premises Equipment, and Site Operations businesses, both from Fixed Networks, our Microwave Radio business from Mobile Networks and the Enterprise Campus Edge business from Cloud and Network Services. In 2025, these businesses generated net sales of EUR 850 million and an operating loss of EUR 97 million. In 2026, our target is to conclude a future direction for each of them. We currently assume a lower operating loss in 2026 versus 2025. For Group Common, we expect costs of approximately EUR 150 million in 2026 compared with EUR 190 million in 2025. Overall, we see 2026 as a year where we will make meaningful progress towards our long-term targets. With that, let me turn over to Marco to walk you through the financials in more detail. Marco? Marco Wiren: Thank you, Justin, and hello from my side as well. As Justin mentioned, we delivered a fourth quarter, which was in line with our expectations and guidance. Net sales were EUR 6.1 billion, that's up 3% on the prior year. Gross margin was 48.1%, an improvement of 90 basis points, driven by improvements in Mobile Networks and Cloud and Network Services. Operating margin was 17.3%, and this is 90 basis points below the prior year, impacted primarily by increased investments in growth areas, including the Infinera acquisition. We generated EUR 226 million of free cash flow and ended the quarter with EUR 3.4 billion of net cash. Let's turn to the business groups now and starting with Network Infrastructure, where net sales grew 7%. In quarter 4, AI & Cloud customers accounted for 16% of our net sales and 30% of Optical Networks. The book-to-bill for the overall segment was above 1 with strength in IP and Optical Networks. Gross margin declined by 80 basis points to 44.6%. Operating margin was impacted by lower gross margin, along with the increased growth-related investments in R&D and the costs associated with the acquisition of Infinera. And then, let's go to Cloud and Network Services, where we saw a decline by 4% in the quarter, and this was mainly due to a different phasing of revenue recognition this year. The business delivered 6% of net sales growth for the full year 2025. Gross margin increased 650 basis points, partly as a result of the reversal of a provision of EUR 37 million in the quarter. So even without this benefit, we would have seen an improvement in gross margin. Operating margin also increased by 470 basis points with improvement in gross margin supported by reduced operating expenses. And then Mobile Networks, net sales increased by 6%, and this was driven by growth in Middle East and Africa, Japan and Indonesia. Full year net sales were stable and consistent with our expectations. Gross margin was 40.1% due to more favorable mix and lower indirect costs. For the full year, gross margin was 37%. Operating margin was 11.3% in the quarter, reflecting the higher gross margin as well as the impact of lower operating expenses benefiting from the ongoing cost saving program. In Nokia Technologies, net sales declined by 17% in the quarter. Catch-up sales in this quarter were lower than the previous year, and we signed several new deals in quarter 4, and our annual net sales run rate remains at approximately EUR 1.4 billion. Operating profit was impacted by a EUR 20 million impairment charge, and this is related to a prior asset purchase, which we deem to have minimal future value in the context of our product portfolio. Now let's look at the net sales by region. And as you can see here, in North America, we saw strong growth in Networks Infrastructure, whilst Cloud and Network Services and Mobile Networks declined. In APAC, Japan and Indonesia grew, while we saw declines in India and Greater China. And excluding Nokia Technologies, Europe grew 4% with strength in Network Infrastructure. Middle East and Africa grew in both Mobile Networks and Network Infrastructure. And then regarding cash, we ended the quarter with a net cash position of EUR 3.4 billion and the free cash flow was positive EUR 226 million and ending the year with a conversion rate of 72%, which is within our guided range of 50% to 80%. And in the quarter, cash increased as a result of the NVIDIA equity investment, which was EUR 0.9 billion. And we also completed the acquisition of the NSB shares, which impacted cash by EUR 0.5 billion. And this equates to 50% of the net cash in the joint venture, which we paid to the other joint venture equity owner and was consistent with the liability we had already recorded on our balance sheet. We now fully own our operations in China, and that will give us a greater operational flexibility going forward to manage the business, just like Justin mentioned. And today, we have also published recast financials based on the new operating structure, we have implemented at the start of the year. And there are a couple of things that I wanted to highlight to help you understand these figures. You will see some differences in the net sales compared to our prior reporting, reflecting those units being moved into the new Portfolio Businesses segment, as Justin explained earlier. In Group Common, the recast cost base for '25 is EUR 180 million as we have reallocated approximately EUR 193 million of the cost to the primary operating segments to better reflect the nature of these costs. And as discussed at our Capital Markets Day, the operating segments are expected to drive efficiencies in the organizations to mitigate those costs over time that we have transferred to them. However, this reallocation have a short-term impact on the segment profitability in NI and MI. And finally, Justin already introduced our new 2026 financial outlook, but I just wanted to share some comments on additional modeling assumptions for this year. For quarter 1, historic seasonality would imply a 24% sequential decline in our net sales, excluding Nokia Technologies. Considering the above normal seasonality we've seen in quarter 4 2025, we currently expect quarter 1 2026 net sales to decline somewhat more than normal seasonality would imply. We also assume the operating margin to be only slightly better than the prior year. Then for the full year of '26, we expect comparable financial income and expenses of between positive EUR 50 million to EUR 150 million. And we assume a comparable income tax rate of around 26% and 27%, with a slight increase related to the regional mix of profit generation. Cash tax outflows are expected to be approximately EUR 500 million. And we are planning for CapEx of between EUR 900 million and EUR 1 billion as we invest in additional manufacturing capacity for Optical Networks, along with some real estate renewal projects. And finally, we expect free cash flow conversion of between 65% to 75%. With that, let me hand it back to David for Q&A. David Mulholland: Thank you, Marco and Justin, for the presentations. Alicia, could you please give the instructions for the Q&A session? As a reminder and as a courtesy to others in the queue, if you could please limit yourself to one question and a brief follow-up. Alicia, please go ahead with the instructions. Operator: [Operator Instructions] I will now hand the call back to Mr. Mulholland. David Mulholland: We'll take our first question today from Alex Duval from Goldman Sachs. Alexander Duval: A couple of quick questions. Firstly, on Optical, it grew 20% in the quarter, but it seems you're saying it will only grow 10% to 12% in full year '26. You referenced good order momentum as well as a solid percentage contribution from AI. So I wondered to what degree your guidance for the segment reflects conservatism? And secondly, as a brief follow-up, you're guiding to a somewhat sub-seasonal trend into the first quarter for the group. I wondered to what degree that's just normalization of a better than seasonal 4Q or whether there are other factors to take into account? Justin Hotard: Yes, sure. So Alex, good to hear from you, and let me answer your first question. You're right. We obviously grew 17% in Q4 on Optical Networking. When you look at our Optical Networking business, we are being balanced on the 10% to 12% across IP and Optical Networking, as you said. What I would also emphasize is, we are still transitioning from a base that was, was still very telco-centric in '25, so 70-30. And if you think about where we were before that, certainly before the Infinera acquisition, significantly telco-centric. So we're building off that base. We're excited about the order momentum. And then, of course, in parallel, we're working to scale production. So, I think as you and I have talked about, we want to be disciplined in our execution and our predictability. And so therefore, that's why we've guided the way we have. But I continue to be very optimistic about this business and the long-term opportunity for some of the factors like scale across networking, the demand we're seeing in overall fiber, some of the recent announcements in this area. So, I think this is a place where absolutely, it's a strategic priority for us, absolutely, it's a focus of capital allocation. And I believe it's a market that will be a significant player in for many years ahead, but balance on where we are today given the starting point that we had, which is really only three quarters deep in terms of aggressively pursuing the AI & Cloud segment. Marco Wiren: And for the second question, if you look in the past as well, when we have had a very strong and higher than normal seasonality in quarter 4, we easily see a larger decline as well. And this is a little bit based on as well how our telco customers are buying. And this is more, I would say, visible in mobile network area and also the telco customer base that when they have had a lot of purchases in quarter 4 and usually the start of the year, a little bit slower, and that's why we guide that we see a somewhat lower than what we normally see. David Mulholland: Thank you, Alex. We'll take our next question from Richard Kramer from Arete. Richard Kramer: Justin, you're pledging to grow CapEx to really record levels of EUR 900 million to EUR 1 billion. Do you have visibility in your order book of Optical or IP orders? And or is leveraging this investment require additional unannounced wins with hyperscalers? And where are you in that sales cycle? And I have my follow-up. Justin Hotard: Yes. And obviously, Richard, when you think about CapEx investments in manufacturing in Optical, particularly semiconductor manufacturing, as you're well aware, I'm sure, this is not something you invested in a year and you start generating returns. So this is something where we're looking at the long-term trends. And we've got a lot of confidence in the long-term market trend supported by the near-term demand that we see. Richard Kramer: Okay. And for Marco, we saw EUR 300 million of restructuring in '25 and you're guiding to another EUR 450 million in cash outflow. Can investors look forward into 2027 where you think these very heavy impacts on reported versus comparable earnings drop to immaterial revenue levels? Marco Wiren: Yes. I think as we announced already in '23 October that we have this cost-cutting program and efficiency program. And there, we laid out also the different years until '26 where we have this restructuring cost. And we guided by that time that we expect cost savings between EUR 800 million to EUR 1.2 billion, and we said that also the costs to generate these savings will be about the same and also the cash flow is following that. And usually, the cash flow considering that we have more footprint in the European area. And that's usually -- there's delays on acting on those different cost actions that we are doing. And this is the reason why we see that '26 is more heavier on the cash outflow side as well. And -- but we are following the plan well according to what we have laid out earlier as well. David Mulholland: Thanks, Richard. We'll take our next question from Simon Leopold from Raymond James. Simon Leopold: First thing, I wanted to ask about is particularly within the optical space scale across projects are new variant for data center interconnected. Your peers have discussed these projects. Can you elaborate on Nokia's position and how you envision this opportunity developing over the next few years? And then I've got a follow-up. Justin Hotard: Yes. Sure, Simon. Good to hear from you. Just a couple of things here. One, this is a space that we think is a part of the long-term trend on optics. I mean, if you look at the long-term demand on optics, think of the drive around scale across right now as being one of the most significant near term. But obviously, then you have speeds, right? We've gone through the 400- and 800-gig transition very quickly. We're ramping on 800-gig multiple pluggable wins, as we've talked about, a lot of active customer conversations on that space, continued momentum in the market in terms of what we see. But then we expect that 1.6 and 3.2 will come. And when you look at that scale across is the tailwind for both the technology transitions and the demand. And then, of course, over time, we see scale out increasingly be an opportunity for coherent optics. So that's the tailwind we see. The other thing I would just reference as you think about this is routing for us, in particular, scale across is a tailwind for. So switching is much more about the data center racks, the spine-leaf architecture. But when you think about routing, that's another tailwind. But key thing for us right now is spending the time doing the work, co-developing, co-innovating with our customers, making sure we're scaling production capacity to take advantage of this opportunity over the long term. And fundamentally, what I see is a much more mature and larger optical market, driven by the AI infrastructure build-out than we've seen in the past. And I think a much more mature in ecosystem as well. So there's a lot of work to do for us as an ecosystem and as an industry, but I think a much bigger market, and that's absolutely why we're investing into it and why you see us leaning in on capital both in terms of CapEx, but also R&D capital in the space. David Mulholland: Do you have a follow-up, Simon? I guess we'll move on. We'll take our next question from Sami Sarkamies from Danske Bank. Sami Sarkamies: You had 5% growth at IP Networks in '25. What needs to happen for this to step up? Are the bottlenecks related to product offering, customer logos or design wins? And then on timing, how much time do you think we need for improvements. Could it happen already this year as you have signed new customers during last year? Justin Hotard: Sami, thank you for that. Yes, I would just say a couple of things here. First of all, we've talked about the fact that while we were well positioned post the integration of Infinera to go after the Optical Networking platform, this is a space where we've been even a little further behind. So it's been a big focus for me as we started -- as I started. And obviously, for David, as he took over. And in fact, we just announced earlier this week that we have a new Head of IP Networking, Greg Dorai and Vach Kompella, who, for those of you that have been around this industry, know Vach, is an industry legend, he's retiring. But part of that in bringing in Vach's successor was looking for someone that had deep data center experience. So the net of all of that is, as I said at CMD and even in some of our recent discussions with investors, this is a space where I think it's going to take us a little bit of time to see the growth. But I'm really, really pleased with the design win we had in Q4 that I referenced. I'm pleased with the order backlog. But I think this business needs a little bit of time to ramp. Absolutely a big tailwind as a part of the AI and data center build, and encouraging progress on mission-critical where we play in select vertical markets that value scale, security and availability, obviously, things we bring from our legacy in this space in telcos. David Mulholland: Did you have a quick follow-up, Sami? Sami Sarkamies: Okay. I'm wondering on the CapEx outlook, is this going to be like a multiyear undertaking, if you think about higher CapEx or just like 1 year thing? Justin Hotard: Yes. I think what we'll continue to do, Sami, on this, and I'll let Marco comment is, we're always going to show investment against the opportunity we see in the market. So I would look at this as in line with supporting the guidance we've given you for now and really in line on Optical Networking growth as we see it. So obviously, that's -- in the future, if we saw a different growth potential in Optical, we might give you a different view on CapEx. Marco, anything to add? Marco Wiren: No, I -- just building over what you said that we definitely see opportunities, and that's why we believe that it's the right timing to invest more, to capture those opportunities and secure also that we have manufacturing facilities and capacities that are needed be able to deliver those demands that we see that especially in the optical side are increasing. But still, it's not so that there's a huge CapEx investments compared to other data center investments. So these are still quite reasonable investments, and we believe that there's a very good return on those investments as well. David Mulholland: Thanks, Sami. We'll take our next question from Artem Beletski from SEB. Artem Beletski: So I would like to pick your thoughts regarding recent news coming out from Brussels. So, what comes to this Cybersecurity Act, the Digital Network Act. So how do you see those proposals impacting your business outlook, what comes to upcoming years? Justin Hotard: Look, I think on the Cybersecurity Act, the CSA, and the Digital Networks Act, DNA, look, first of all, we're pleased with this. I mean, this is -- these are some of the things we've been calling for. Certainly, since I started, I've been very vocal about. I think the key thing on the Cybersecurity Act around trusted networks is seeing a few things. One is the clarity on replacement schedules. I also think it's important, as we've said, that there's support for network operators, this kind of replacement is a big lift. Now from a supplier perspective, this is well within our capacity. If you think about the pace at which we've deployed out -- deployed networks in India or even in North America in terms of upgrades, the network upgrades that are required in Europe are something well within our scope and capability and manufacturing capacity. But it's a complex technology project. So, we think this is something that we recognize there's complexity and support. And our view is the urgency is now that we need to continue to move. And certainly, for our customers, they need to have clarity because where we're -- the platforms we're investing in today will be all the things that need to become 6G ready in the near future. And if you think about what we talked -- we're talking about AI-RAN as an example of that, that is a great example of where if you buy an AirScale platform today, it's going to be upgradable to AI-RAN as we launch that platform. And so that's the kind of opportunity we're making the investment decision now and having clarity now as an operator. As you run that project over a 2- or 3-year period, we think is particularly important, and that's why it requires support because, obviously, it's not in anybody's budgets to run an accelerated CapEx program amongst our customers. But it's also not just radio. We tend to focus on that. This is actually a really important opportunity for fiber networks and access networks and just as important, because fixed access networks are critical for consumer, they're critical for business. And then, of course, there's the transport networks and all the underlying infrastructure. So this is a pretty significant step. We're very pleased with it. I also think when you link it to DNA and you look at some of the things around spectrum harmonization and you look at the opportunity in Europe, and this is something that I've been certainly vocal about, I was talking about last week in Davos is, this is an opportunity for Europe to reshape its long-term competitiveness, its long-term competitiveness in technology, its long-term competitiveness in infrastructure and innovation and ultimately, national security, sovereignty and economic competitiveness. So I think this is really, really important. And you can just look back at the Internet super cycle to see where the winners in the Internet Super Cycle came from as a result of significant infrastructure investment. When you think about Europe and AI, Europe is incredibly well positioned. It's well positioned because you've got a great industrial automation technologies, obviously, manufacturing industries like automotive and you've got great talent in Europe. And obviously, as being our largest talent base in our -- in the company, we want to see more investment here so we can continue to support the talent here, building technology for Europe to support Europe and see a broader ecosystem develop. David Mulholland: Did you have a quick follow-up, Artem? Artem Beletski: Yes. I would like to ask a follow-up on Optical Networks. And could you maybe comment whether you see some supply-related constraints when it comes to growth? I recall from CMD, so you have been commenting about order growth year-to-date a bit more than 40%, and we do understand that the market fundamentals are really robust on that front. Justin Hotard: Yes. Look, I think it's a great question, Artem. So first of all, obviously, if you think about this broader ecosystem, the one thing I would remind everybody is the consistent thing in the AI data center build, AI infrastructure build has been there have been constraints. There's been power constraints. There's been connectivity constraints. There's been computational silicon constraints. There's news of memory constraints right now. One of the reasons I think when we look at this, we don't see the same dynamics of the telco and Internet bubble that you saw in the late '90s is because this infrastructure build has been consistently constrained. So what we see is, we do see supply constraints that's normal with this kind of scale and build. And obviously, part of our investments is not just in our own capacity but also in supporting the ecosystem and building its capability and capacity. And again, if you look at Optical, Optical is not nearly running at the kinds of volumes that you'd see that the microelectronics industry or the traditional computational electronics industry because it doesn't have the same consumer volume off the side of it that's driven a lot of the automation and capacity that's existed. So, all of these things need to be invested in. And again, this is why we think that the market has great long-term potential given the technology, but also a lot of ongoing investment that we and the entire ecosystem need to cultivate to make sure we can deliver on the long-term success. And it's part of why we think we're favorably positioned with our indium phosphide technology and manufacturing facility. David Mulholland: Thanks, Artem. We'll take our next question from Daniel Djurberg from Handelsbanken. Daniel Djurberg: Yes, on the Mobile Networks, it was clearly better than expected, and some decrease primarily due to North America. And can you comment a bit on North America? Are we comparing apples-with-apples now with regards to AT&T loss? And also do you see any possible inroad again with AT&T with the 600 build, for example, with the FirstNet upgrades? Any comments would be grateful. Marco Wiren: Yes. Thank you, Daniel. Just like you alluded to as well, in '26, we will see some headwinds from North America in the Radio Access Network side, considering the customer losses that we had, and that will have an impact. Otherwise, I would say that in market-wise, we see quite stable market in the Radio side. It's -- where we see growth is AI & Cloud in North America is extremely positive brands there right now when it comes to that segment. Justin Hotard: Let me take AT&T. First of all, and just to remind everybody, AT&T is a very, very large, strategic and important customer for us. They are a customer for us across core networks, fiber access. So if you think about NI and MI, they're a very important customer for us and a very strategic one, given the investments that they're making today and their networks. And we've talked about a little bit of that in the past as well. Look, from my standpoint, as I think about customer opportunities and market opportunities, we want to pursue every piece of profitable market share that we can. And if we're honored to be a part of their network in the future, we'll absolutely take that opportunity. Right now, our focus is on delivering on our commitments to them and to all of our customers. And as we said in the restructuring, as you heard from Raghav at CMD, becoming an easier company to deal with from a customer perspective, particularly for our telcos where we need to do more to be working with them around collaboration, co-innovation and making sure that we help them deliver the simplification and the operating leverage they need in their networks to deliver on their strategies. David Mulholland: Thanks, Daniel, did you have a follow-up? Daniel Djurberg: Yes. Perhaps just a short one on the book-to-bill on Optical and IP Networks being positive still. Can you give some more comments on those on a separate note, i.e. comparing them, the relative magnitude or something? Justin Hotard: Each one is good. Each one is healthy on the book-to-bill. If you put them together, they're good. If you split them, they're good. We're not blending. David Mulholland: Thanks, Daniel. We'll take our next question from Terence Tsui from Morgan Stanley. Terence Tsui: I had a question around the operating guidance for the full year, please, of EUR 2 billion to EUR 2.5 billion. I would love if you can provide some color around the EUR 500 million guidance range, please. You noted that 2025 was slightly ahead of the midpoint. So I'm just interested to learn about reasons to be a bit more optimistic, and reasons to a bit cautious in your thinking. And then the quick follow-up relates to Q1 guide. What FX are you assuming there? Are you using the spot of USD 1.2? Justin Hotard: Marco, do you want to take that? Marco Wiren: Yes. When it comes to the guidance, EUR 2 billion to EUR 2.5 billion, there's a couple of things that we mentioned also at the Capital Markets Day that we will have some new product launches during this year. And always when you have new product introductions, there will be an impact on gross margin as well. And that's what we see. But of course, these product introductions are very important for our longer-term journey and we see very good market opportunities going forward. When it comes to the same opportunities, we also -- just like we have said earlier, we invest in more in our opportunities in AI & Cloud, which will have an impact on the OpEx as well. But we definitely see more opportunities going forward definitely in the AI & Cloud market side. And that's why it's important that we prepare ourselves for those opportunities. But also, this is a transformational year. We are still doing a lot of changes and securing that we are very lean and mean and efficient machine and capture those opportunities in the market. Justin Hotard: Yes. Maybe I'll just add, Terence, I think when you think about the range, right, obviously, what we want to be is disciplined around our guidance and our execution and much more predictable. And I've talked about this quite a bit. Marco has talked about it quite a bit. But that -- the recognition that we are also in two very different business cycles right now, tremendous growth in AI & Cloud, flat market in telco, emerging opportunity in defense and mission-critical enterprise. So, recognizing that the businesses are in a different cycle, the markets are in a different cycle, that's part of the balance of making sure that we're giving you visibility. And obviously, should we see something that changes our visibility, we'll update it. But we want to give you as much visibility as possible and make sure that when we lay out targets, we're consistent, we're predictable and much like we've done for two quarters, we get into a more consistent habit of that. And I'd just remind everybody that, that hasn't been our history, but it's a big part of where I would like to see us go as we go after these growth opportunities to make sure that we give you the visibility and we go do what we say we're going to do. Marco Wiren: The currency rate, we have USD 1.18 in our estimate, and this is based on what we see right now. And if there's any changes in the currency, we will update as well. But remember that we have about at least half of the U.S. revenues, for example, U.S. flows are hedged for the full year. So if we just look a little bit the sensitivity, before hedging a EUR 0.02 move on the USD versus euro would imply an operating profit of EUR 50 million change. But as I said, about half of that is hedged. David Mulholland: Thanks, Terence. We'll take our next question from Felix Henriksson from Nordea. Felix Henriksson: Yes. Partly relating to the previous question on supply shortages. Are you, sort of, expecting to encounter any headwinds from these rising memory prices on your gross margin? And can you just provide some color on your cost exposure to this trend? Justin Hotard: Yes. I would just say, overall, when you think about our bill of materials at a macro level across the company, this is not a huge part of our bill of materials. It's a portion, but it's not a material portion. Second, in terms of supply and commitments, I think our focus right now is on making sure we continue to secure the supply based on the commitments we have, and we do have -- this is a place where we have long-term agreements. And then, of course, I think as you've heard in the industry, I think we expect this to be passed through to pricing. So from our perspective, this is a market effect. It's very consistent across the market. And so we'll address that. But overall, this isn't -- certainly, if you looked at our business overall, you'd say this is not a material part of our revenue, but an important one that we manage. David Mulholland: Do you have a quick follow-up, Felix? Felix Henriksson: Yes. Just quickly on your balance sheet and net cash. I think the end of the year net cash implies around 17% of last 12-month net sales, which is slightly above the 10% to 15% range that you used to have historically. Are you sort of happy with those levers? Or do you see anything that you would want to do with that setup? Marco Wiren: Yes. Thank you. When it comes to the capital allocation, framework is very clear for us. And whenever we see that we can invest more in R&D internally, so that's always our priority #1. And just like we alluded earlier as well, that we see opportunities in -- especially in AI & Cloud customer segment. So we are investing more there. The second priority we have is seeing that how can we strengthen our deliveries and our opportunities to capture those market trends through M&A. And the third one is the dividend. So, we aim for recurring and stable and over time, growing in dividends. And then the fourth is that if we deem to have excess cash, then we can consider share buybacks. So this framework is something we follow. And if there's any news, we will inform you as well. David Mulholland: Thanks, Felix. We'll take our next question from Emil Immonen from DNB Carnegie. Emil Immonen: I just had a question on the investment in the CapEx. It's quite a big step up. And I'm just wondering if it's all about increasing your capacity, how much would you say that your capacity is already utilized? So, are you working at full capacity? Or how should we think about kind of ramping up production and how you plan for that overall? Justin Hotard: Sure, Emil, thanks for the question. So if you think about what we've shared so far, we have an existing fab in California. We've been investing in bringing a new fab online. This is something that Infinera had started before we acquired them, and we're continuing to invest. And this was also the place where we got partial funding in the CHIPS Act from the U.S. government. That indium phosphide fab is the one -- the next one is the one we expect to come online later this year. What I would say is that we're certainly well on track to consume capacity in the existing one, and we absolutely need the new fab to come online to support the demand that we're seeing and to meet our forecast. So, our longer-term forecast because, obviously, as it comes on later this year, it won't contribute as much to production this year. This is a -- this is also critical for us because at the core of our capability and our differentiation is our photonic integrated circuit. It's one of the key elements of the components of these photonic systems, and it's a place where we believe we have differentiation in the product itself. So what we can do and what's a little bit different than when you think about a traditional semiconductor fab or the higher volumes silicon fabs you might consider in computational silicon or memory or others is that our capital investment size tends to be much smaller to add additional capacity. And that's really just the nature of optical technology and also the nature of indium phosphide. So hopefully, that gives you a couple of dimensions to think about, but I would think about the investments we're making really in that new fab supporting '27 demand. They're starting to ramp during '27. We'll have some reduction this year, but mostly in '27. And then think about the ability to add capacity in that fab or in others as being much smaller chunks. So because I realized, well, first of all, while this CapEx is significant for us at an overall level, it's still pretty modest in terms of our CapEx, 5% overall for the company. Secondarily, what I would say is when you think about this CapEx in terms of the broader semi industry, it's really nominal in terms of the overall spend and the size of investments that some of the -- some of our partners in memory and computational silicon make. David Mulholland: Do you have a quick follow-up, Emil? Emil Immonen: Yes. Maybe to follow up on how aggressive do you feel you are? So is this -- it's still -- yes, it's a nominal amount. But would you say that you're aggressive? Or is this kind of you're only investing for the 100% of demand you're seeing right now and you're not wanting to overinvest at this point? Justin Hotard: I think we're -- I think this market is moving, Emil, so quickly that we're -- this is a conversation that is ongoing in terms of where we see the long-term market and where we're investing. And obviously, the other thing here is, right now, if you think about this market, we're vertically integrated. Others are vertically integrated, some are not. You can kind of look at two extremes. Computational silicon is obviously not a vertically integrated game. TSMC, Intel, GlobalFoundries are largely the leaders in that. So you've got a clear segmentation in the value chain. Memory is vertically integrated. So that's the other strategic question we'll continue to think about as we go forward. But right now, we see tremendous value in that vertical integration. And the choice that we're making is to make sure that we have sufficient capacity to meet the demand, recognizing that we're in a very fast-moving market. Scale across is an emerging opportunity, as I touched on earlier. And we also believe that over time, as speeds continue to ramp within the data center, there will be more opportunity for coherent optics within the data center. David Mulholland: Thanks, Emil. We'll take our next question from Jakob Bluestone from BNP Paribas. Jakob Bluestone: Just a quick one. Can you maybe just give us an update on the H1 versus H2 sort of margin phasing that you flagged at the CMD? I don't know if you can maybe quantify how big we should think about that? Or is it just kind of the normal seasonality of the business given it always tends to be a bit Q4 weighted anyway? Marco Wiren: Yes. Thank you. Yes, especially, as we said that this is visible in Network Infrastructure side, considering that we launched new products in the first half, and that's why we see this margin impact. We haven't guided exactly per quarter, but of course, we see that the second half, we should see improvement in the margins in this field as well. But it's just that it takes some time before we come over this ramp-up phase and second half is that why giving a little bit better margin profile than first half. David Mulholland: Thanks, Jakob. Did you have a quick follow-up? Jakob Bluestone: Just a quick one, just on the memory pricing comments. You mentioned that you have long-term contracts. I mean, given it looks like you probably have elevated pricing for at least beyond this year. Can you maybe just give us a sense of those contracts multiyear? Justin Hotard: Yes. I mean, I would think of these as multiyear contracts. And obviously, the supply agreements are multiyear and then pricing varies depending on the contract term. David Mulholland: Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: On Mobile Infrastructure, you don't provide any guidance and notably for sales, maybe given more limited visibility. The LAN market is now stabilizing. Do you see any specific downside or upside to your market share in mobile in 2026 beyond the noncontract loss at AT&T? And the second one is on the cost savings. Where have you finally ended 2025 in terms of cost savings? And what do you expect for '26? Do you plan to accelerate a little bit further the cost-cutting actions beyond 2026? Or you will be more on a normal OpEx run rate going forward? Marco Wiren: I can start. When it comes to mobile markets, as we said earlier, we see that the market is quite stable in '26. And there's some regional variations here. We can see that we could expect some recovery in India. And then there's some other pressures in like LatAm and other areas. Of course, our aim, as we had guided in -- already in the Capital Markets Day is that in the Mobile Infrastructure side, our aim is that we will improve the profitability. So we guide gross margin and operating profit levels. So gross margin, we have said that we aim to 48% to 50% gross margins. And we've said that we will grow from the EUR 1.5 billion levels going forward towards 2028. And of course, our ambition is that whenever there's opportunities to gain market share, we will capture those opportunities in the mobile side as well. When it comes to cost savings, I don't know if... Justin Hotard: I would just add two things. I think one, obviously, there's some mix, as you said. The other thing for us, as we talked about, is we're not chasing revenue for revenue's sake. So I think what you -- what I would think about is the reason we gave you a guidance on gross margin and profit is those are really the two things we're focused on, and maximizing gross margin and profit, recognizing there's some inherent scale we need to maintain in the business. But working with those customers we value and delivering those services where they value our technology platforms and associated services. So those are the ways I would think about the dimension of the approach that Marco was talking about. Do you want to talk about cost reduction? Marco Wiren: Yes, thanks. When it comes to cost reductions, we have the program now, which is running until end of '26. And we believe that we're going to deliver according to those promises, what we have said earlier as well. So, and beyond that, we don't have any cost-cutting programs. What we've said also is that what we do continuously is to secure that we are focused on the efficiency, operational leverage, and secure that we are doing things in the most efficient way continuously. So, this is something that we are getting into everyone's DNA that is the way of working in Nokia. David Mulholland: Thank you all. And apologies to those still in the queue, but we've run out of time. So this concludes today's call. I'd like to remind you that during the call, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all for joining us. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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