Financial Data and Key Metrics Changes - Order intake increased by 7% in Q4 2025, reflecting sustained improvement over the past year, with comparable sales growth also at 7% year-on-year [5][6] - Adjusted EBITDA margin improved by 160 basis points to 50.1% in Q4, and for the full year, it reached 12.3%, exceeding the outlook despite tariff impacts [5][6][21] - Net income for Q4 increased to EUR 397 million, with adjusted diluted earnings per share from continuing operations at EUR 0.60, a 20% year-on-year increase [24][25] Business Line Data and Key Metrics Changes - In Diagnosis and Treatment (D&T), comparable sales grew by 4% in Q4, with Image-Guided Therapy achieving double-digit growth [17] - Connected Care delivered 7% comparable sales growth in Q4, driven by strong demand in monitoring and enterprise informatics [18] - Personal Health saw a 14% growth in Q4, with significant contributions from grooming and beauty products [19][20] Market Data and Key Metrics Changes - North America remained the strongest growth driver, with double-digit growth in order intake across various segments [7][14] - In China, tender activity increased but faced challenges due to centralized procurement and longer processing times, leading to a cautious outlook [14][15] - Europe showed stable capital spending, while select international regions increased healthcare investments, particularly in Indonesia and India [15] Company Strategy and Development Direction - The company is transitioning to a focus on profitable growth acceleration, targeting mid-single-digit sales CAGR and mid-teens margins by 2028 [6][11] - Continued emphasis on innovation, particularly AI-enabled and patient-centric solutions, is expected to drive future growth [9][10] - The company aims to enhance patient impact and quality while simplifying operations and strengthening supply chain resilience [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with strong order intake momentum and a robust innovation pipeline [26][81] - The outlook for 2026 includes expected comparable sales growth of 3%-4.5%, with a focus on North America and international regions [16][26] - Management remains cautious about the near-term outlook for China while recognizing its long-term growth potential [14][66] Other Important Information - The company completed the sale of its emergency care business as part of its portfolio simplification strategy [19] - A new EUR 1.5 billion productivity program is set to launch for the 2026-2028 period, building on previous productivity initiatives [29] Q&A Session Summary Question: Inquiry about gross margin improvement and order intake by modality - Management confirmed ongoing gross margin improvement across the board, with expectations for continued strength in 2026 despite tariff impacts [33][34] - Order intake for D&T was 5%, with strong contributions from Image-Guided Therapy and ultrasound, indicating a positive outlook for 2026 [37][38] Question: Clarification on 2026 guidance and margin buffers - Management acknowledged the dynamic environment and emphasized the importance of productivity and innovation for margin improvement [40][41] Question: Performance of Precision Diagnosis and Q1 phasing - Management indicated that Precision Diagnosis returned to growth, with expectations for stronger performance in 2026 driven by new innovations [48][49] - Q1 is expected to start at the lower end of the growth range due to seasonality and tariff impacts [50][51] Question: Update on personal health performance and Section 232 investigation - Strong performance in personal health was attributed to market share gains and healthy sell-out trends, with inventory levels now aligned with market averages [56][57] - The Section 232 investigation remains ongoing, with potential implications for tariffs but no definitive outcomes yet [58][59] Question: Insights on the China market and personal health margins - Management expects stabilization in China, with cautious optimism for personal health sales, while remaining cautious about health system orders [64][66] - The strong margin in personal health was driven by innovation, commercial execution, and productivity improvements [67][68]

Honda Motor (NYSE:HMC) Q3 2026 Earnings call February 10, 2026 03:00 AM ET Speaker2I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Co., Ltd.'s financial results briefing for the third quarter of fiscal year ending March 2026. First of all, allow me to introduce the attendees today. Mr. Noriya Kaihara, Director, Executive Vice President, and Representative Executive Officer. Good to see you, everyone. We have Mr. Eiji Fujimu ...

Financial Data and Key Metrics Changes - Order intake increased by 7% in Q4 2025, reflecting sustained improvement over the past year [5] - Comparable sales growth was 7% year-on-year, broad-based across all businesses and geographies [5] - Adjusted EBITDA margin improved by 160 basis points to 50.1% in Q4 2025, despite tariff impacts [5] - For the full year, adjusted EBITDA margin was 12.3%, exceeding the outlook [6][24] Business Line Data and Key Metrics Changes - Diagnosis and Treatment (D&T) saw comparable sales growth of 4% in Q4, with strong performance in Image-Guided Therapy [20] - Connected Care delivered 7% comparable sales growth in Q4, driven by double-digit growth in monitoring solutions [21] - Personal Health achieved 14% comparable sales growth in Q4, with all three businesses contributing [22] Market Data and Key Metrics Changes - North America remained the strongest growth driver, with sustained double-digit order intake growth [7][15] - In China, tender activity increased but faced challenges due to centralized procurement, leading to cautious near-term outlook [16][19] - Europe showed stable capital spending, while select international regions increased healthcare investments [17] Company Strategy and Development Direction - The company is focused on profitable growth acceleration, targeting mid-single-digit sales CAGR and mid-teens margins by 2028 [6][12] - Continued emphasis on innovation, particularly AI-enabled and patient-centric solutions, to drive future growth [10][12] - The company is enhancing patient impact and quality while simplifying operations and strengthening supply chain resilience [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with strong order intake momentum and improved execution [29] - The company expects comparable sales growth of 3%-4.5% in 2026, led by North America and international regions [19][30] - Management remains cautious about the near-term outlook for China but sees long-term growth potential [16][19] Other Important Information - The company generated EUR 1.2 billion in free cash flow in Q4 2025, despite a tougher comparison base [27] - Adjusting items decreased to EUR 179 million in Q4, reflecting a strong commitment to reducing these over time [26] - The company ended the quarter with approximately EUR 2.8 billion in cash and a leverage ratio improved to 1.7 times [28][29] Q&A Session Summary Question: Insights on gross margin improvement and order intake for D&T - Management confirmed gross margin improvement across Philips, driven by innovation and productivity, with continued margin expansion expected in 2026 despite tariff impacts [36][38] - Order intake for D&T was 5%, with strong contributions from Image-Guided Therapy and ultrasound innovations [39][40] Question: Clarification on 2026 guidance and margin buffers - Management acknowledged the dynamic environment and emphasized the importance of productivity and innovation for margin growth [43][44] Question: Performance of Precision Diagnosis and Q1 phasing - Management indicated that Precision Diagnosis returned to growth, with expectations for stronger performance in 2026 driven by new innovations [50][51] - Q1 is expected to start at the lower end of the growth range due to seasonality and tariff impacts [52][53] Question: Drivers behind strong personal health performance - Management highlighted market share gains and strong demand across geographies, with inventory levels now aligned with market averages [58][60] Question: Update on Section 232 investigation - Management stated that the investigation is ongoing, with potential measures that could replace tariffs but refrained from speculation on outcomes [61][62] Question: Outlook for China and margin dynamics - Management expects stable growth in China, with cautious optimism for personal health but uncertainty in health systems due to tender processes [67] - The strong margin in personal health was attributed to innovation, commercial execution, and productivity improvements [70][71]

Financial Data and Key Metrics Changes - In 2025, total underlying replacement cost profit was $7.5 billion, supported by high upstream plant reliability and refining availability despite a weaker oil price environment [3] - Operating cash flow reached $24.5 billion, with a $2.9 billion adjusted working capital build during the year [3] - Capital expenditure was reduced by 10% compared to 2024, with organic CapEx at $13.6 billion [3] - Return on average capital employed increased to around 14% in 2025 from 12% in 2024 [8] Business Line Data and Key Metrics Changes - In Gas & Low Carbon Energy, the underlying result was $1.4 billion, down from $1.5 billion in the third quarter due to lower realizations [8] - Oil Production & Operations reported an underlying result of $2 billion, down from $2.3 billion in the third quarter, impacted by lower realizations and production mix [8] - In Customers, the underlying result decreased to $900 million from $1.2 billion in the third quarter, reflecting seasonally lower volumes [9] - Products segment maintained an underlying result of $500 million, with stronger refining margins offset by lower throughput due to higher turnaround activity [9] Market Data and Key Metrics Changes - The company reported a reserves replacement ratio of 90%, up from an average of around 50% in the previous two years [4] - The initial estimate of the Boomerang discovery indicates approximately 8 billion barrels of liquids in place, with plans for an appraisal program to start by year-end [5] Company Strategy and Development Direction - The board decided to suspend share buybacks to prioritize strengthening the balance sheet, creating a more resilient platform for disciplined investments [4] - The company aims to high-grade its portfolio and has increased its structural cost reduction target to $5.5 billion-$6.5 billion by 2027 [7] - The strategic review of Castrol led to the decision to sell a 65% shareholding, expected to generate around $6 billion in net proceeds to reduce net debt [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the tragic loss of four colleagues in 2025, emphasizing an unwavering commitment to safety [2] - The company expects reported upstream production to be broadly flat in the first quarter of 2026, with underlying production slightly lower for the full year [13] - Guidance for capital expenditure in 2026 is projected to be in the range of $13 billion-$13.5 billion, with divestment proceeds expected to be between $9 billion-$10 billion [15] Other Important Information - The company reported a fourth quarter IFRS loss of $3.4 billion due to impairments primarily related to transition businesses [11] - Operating cash flow for the fourth quarter was $7.6 billion, with a cash conversion improvement of 6 percentage points [12] Q&A Session Summary Question: What are the expectations for production in 2026? - Management expects reported upstream production to be broadly flat, with underlying production slightly lower than in 2025 [13] Question: How is the company addressing safety concerns? - The company has taken decisive actions to enhance safety protocols following tragic incidents, including stopping roadside assistance next to active traffic lanes [2] Question: What is the outlook for capital expenditures? - Capital expenditure for 2026 is expected to be in the range of $13 billion-$13.5 billion, with a focus on maintaining capital discipline [15]

Financial Data and Key Metrics Changes - Total underlying replacement cost profit for 2025 was $7.5 billion, with operating cash flow at $24.5 billion, including a $2.9 billion adjusted working capital build [3][4] - Capital expenditure was reduced by 10% compared to 2024, with organic CapEx at $13.6 billion [3][4] - Return on average capital employed increased to around 14% in 2025 from around 12% in 2024 [7] Business Line Data and Key Metrics Changes - In gas and low-carbon energy, the underlying result was $1.4 billion, down from $1.5 billion in the third quarter due to lower realizations [8] - Oil production operations reported an underlying result of $2 billion, down from $2.3 billion in the third quarter, impacted by lower realizations and production mix [8] - In customers, the underlying result was $900 million, down from $1.2 billion in the third quarter, reflecting seasonally lower volumes [9] Market Data and Key Metrics Changes - The reserves replacement ratio improved to 90%, up from an average of around 50% in the prior two years [4] - The company reported a fourth quarter IFRS loss of $3.4 billion, primarily due to impairment charges related to transition businesses [11] Company Strategy and Development Direction - The board decided to suspend share buybacks to prioritize strengthening the balance sheet, creating a more resilient platform for investment [4][15] - The company aims to high-grade its portfolio and has increased its structural cost reduction target to $5.5 billion-$6.5 billion by 2027 [6][15] - Plans for an appraisal program for the Bumerangue discovery, estimated to contain around 8 billion barrels of liquids, are set to start by the end of the year [5] Management Comments on Operating Environment and Future Outlook - Management acknowledged a weaker oil price environment but highlighted strong operational performance and capital discipline [3][15] - For 2026, reported upstream production is expected to be broadly flat, with underlying production slightly lower [13] - The company anticipates net debt to increase in the first half of 2026 before falling significantly in the second half [14] Other Important Information - The company completed over $11 billion in divestments, more than halfway towards its $20 billion disposal program [5] - Operating cash flow for the fourth quarter was $7.6 billion, with a cash conversion improvement of 6 percentage points [12] Q&A Session Summary Question: What are the expectations for production in 2026? - Management expects reported upstream production to be broadly flat, with underlying production slightly lower than in 2025 [13] Question: How is the company addressing its balance sheet? - The board has decided to suspend share buybacks and fully allocate excess cash to strengthen the balance sheet [4][15] Question: What is the outlook for capital expenditure? - Capital expenditure for 2026 is expected to be in the range of $13 billion-$13.5 billion, weighted to the first half [14]

Financial Data and Key Metrics Changes - Operating revenue increased by 6.9% year-on-year, reaching KRW 28,244.2 billion [25] - Operating profit surged by 205% year-on-year to KRW 2,469.1 billion, driven by core business performance and one-off gains from real estate projects [25] - Net income rose by 340.4% year-on-year to KRW 1,836.8 billion, while EBITDA increased by 35.5% year-on-year to KRW 6,349.3 billion [27] - Operating expenses remained flat year-on-year at KRW 25,775.1 billion, attributed to lower labor costs and efficient spending [29] - Debt-to-equity ratio at the end of 2025 was 120.7%, with net debt-to-equity ratio decreasing by 0.4 percentage points year-on-year to 37.4% [31] Business Line Data and Key Metrics Changes - Wireless revenue grew by 2.8% year-on-year to KRW 7,155.4 billion, driven by subscriber expansion in 5G, with 5G penetration at 81.8% by the end of 2025 [35] - Broadband revenue increased by 1.9% year-on-year to KRW 2,533.5 billion, supported by GiGA subscriber growth [37] - Media business revenue rose by 1.7% year-on-year, driven by higher IPTV subscriber additions [37] - B2B service revenue grew by 1.3% year-on-year, with AI and IT business growing by 3.1% year-on-year [41] - KT Cloud revenue surged by 27.4% year-on-year to KRW 997.5 billion, reflecting increased data center usage and AI cloud demand [43] Market Data and Key Metrics Changes - The company reported a flat revenue for content subsidiaries year-on-year, despite the divestment of PlayD, due to growth from StudioGenie, Nasmedia, and Millie's Library [41] - KT Estate revenue increased by 15.9% year-on-year to KRW 719.3 billion, driven by strong hotel business and new property developments [43] Company Strategy and Development Direction - The company is focusing on enhancing its fundamentals and regaining customer trust following a data breach incident, with a commitment to cybersecurity improvements [3][12] - Plans include a KRW 250 billion share buyback and cancellation as part of the Corporate Value Enhancement Plan [7][21] - The company aims to solidify its leadership in the AI cloud market with the launch of new products and partnerships with global tech companies [4] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving better performance in 2026 compared to 2025, despite the financial impact of customer compensation related to the data breach [57][61] - The new CEO is expected to maintain the company's shareholder return policy and growth strategy, with a focus on AX-driven innovation [69][70] Other Important Information - The year-end dividend for 2025 is set at KRW 2,400 per share, a 20% increase from 2024 [6] - The company is investing around KRW 1 trillion in security over five years to enhance its information security system [19] Q&A Session Summary Question: What is the financial impact of the customer compensation package regarding the data breach incident? - The estimated benefit for customers is about KRW 450 billion, but not all will be booked as costs, depending on usage [57] Question: Will the new CEO maintain the previous shareholder return stance? - The DPS has been increased by 20% for 2025, and future plans will be finalized by the new CEO and the Board of Directors [65][66] Question: What is the outlook for the wireless business growth following the data breach incident? - Approximately 230,000 subscribers left during the cancellation fee waiver period, but net additions were still positive [79] Question: Why is B2B growth slower compared to peers, and what is the outlook? - B2B growth is influenced by various segments, and when combined with KT Cloud, the growth rate is 6% year-on-year, with KT Cloud showing a 27.4% increase [85][87]

Financial Performance - Operating revenue increased by 6.9% year-on-year, reaching KRW 28,244.2 billion [22] - Operating profit surged by 205% year-on-year to KRW 2,469.1 billion, driven by core business performance and one-off gains from real estate projects [22] - Net income rose by 340.4% year-on-year to KRW 1,836.8 billion, with EBITDA increasing by 35.5% to KRW 6,349.3 billion [24][22] - Operating expenses remained flat year-on-year at KRW 25,775.1 billion, attributed to lower labor costs and efficient spending [26] Business Line Performance - Wireless revenue grew by 2.8% year-on-year to KRW 7,155.4 billion, supported by subscriber expansion in 5G, which reached a penetration rate of 81.8% [32] - Broadband revenue increased by 1.9% year-on-year to KRW 2,533.5 billion, driven by growth in giga subscribers and value-added services [34] - B2B service revenue rose by 1.3% year-on-year, with AI and IT business growing by 3.1% [39] - KT Cloud revenue saw a significant increase of 27.4% year-on-year, reaching KRW 997.5 billion, due to rising data center usage and AI cloud demand [41] Market Data - The company reported a debt-to-equity ratio of 120.7% at the end of 2025, with a net debt-to-equity ratio decreasing by 0.4 percentage points to 37.4% [28] Company Strategy and Industry Competition - The company is focusing on enhancing its fundamentals and rebuilding customer trust following a data breach incident, with a commitment to invest around KRW 1 trillion in security over five years [16][14] - The new CEO, expected to take office in 2026, is anticipated to maintain the company's growth strategy and shareholder return policy [66][62] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving better performance in 2026 compared to 2025, despite the financial impact of the customer compensation package related to the data breach [59][55] - The company aims to improve operational efficiency in the wireless business and expects continued growth in the B2B sector, particularly in AI and IT [80][82] Other Important Information - The company announced a 20% increase in annual dividends per share from KRW 2,000 in 2024 to KRW 2,400 in 2025, alongside a KRW 250 billion share buyback plan [6][18] - The appointment of a new CEO was confirmed, who is known for expertise in B2B and future technologies [9] Q&A Session Summary Question: What is the financial impact of the customer compensation package regarding the data breach incident? - The estimated benefit for customers is around KRW 450 billion, but not all will be booked as costs, depending on customer usage [55] Question: Will the new CEO maintain the previous shareholder return stance? - The dividend per share has been increased by 20%, and the new CEO and Board of Directors will finalize the shareholder return plan for 2026 [62][64] Question: What is the outlook for the wireless business following the data breach? - Approximately 230,000 subscribers left during the cancellation fee waiver period, but the overall impact was mitigated by previous net additions [77] Question: Why is B2B growth slower compared to peers? - When including KT Cloud revenue, the overall B2B growth is 6%, which is not considered low given the market size [84]

Financial Data and Key Metrics Changes - Operating revenue increased by 6.9% year-on-year, reaching KRW 28,244.2 billion [26] - Operating profit surged by 205% year-on-year to KRW 2,469.1 billion, driven by core business performance and one-off gains [26] - Net income rose by 340.4% year-on-year to KRW 1,836.8 billion, with EBITDA increasing by 35.5% to KRW 6,349.3 billion [28] - Operating expenses remained flat year-on-year at KRW 25,775.1 billion due to lower labor costs and efficient spending [30] - Debt-to-equity ratio at the end of 2025 was 120.7%, with net debt-to-equity ratio decreasing to 37.4% [32] Business Line Data and Key Metrics Changes - Wireless revenue grew by 2.8% year-on-year to KRW 7,155.4 billion, supported by subscriber expansion in 5G, which reached a penetration rate of 81.8% [36] - Broadband revenue increased by 1.9% year-on-year to KRW 2,533.5 billion, driven by growth in giga subscribers and value-added services [38] - Media business revenue rose by 1.7% year-on-year, attributed to higher IPTV subscriber additions [38] - B2B service revenue grew by 1.3% year-on-year, with AI and IT business growing by 3.1% [42] - KT Cloud revenue increased by 27.4% year-on-year to KRW 997.5 billion, reflecting strong demand for data center services [44] Market Data and Key Metrics Changes - The company is focusing on enhancing its market position in the AI and IT sectors, with significant investments planned for security and infrastructure [19][48] - The overall B2B market growth is projected to be stable, with KT Cloud's growth expected to continue at a high rate [86] Company Strategy and Development Direction - The company aims to solidify its fundamentals and regain customer trust following a data breach incident, with a focus on cybersecurity and network resilience [3][13] - KT plans to implement a corporate value enhancement plan, including a KRW 250 billion share buyback and increased dividends [6][22] - The new CEO is expected to maintain the company's growth strategy while potentially introducing tactical changes reflecting his philosophy [69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving better performance in 2026 compared to 2025, despite challenges from the data breach [61] - The company is committed to improving operational efficiency in the wireless business and expects stable growth in B2B services [80][83] Other Important Information - The company has set a year-end dividend of KRW 2,400 per share, a 20% increase from the previous year [6] - A new CEO has been appointed, expected to bring expertise in B2B and future technologies [11] Q&A Session Summary Question: Financial impact of customer compensation package and future shareholder return stance - The financial impact of the customer appreciation package is estimated at KRW 450 billion, but not all will be booked as costs [56] - The company plans to maintain a progressive shareholder return policy, with the new CEO and board finalizing future plans [65][67] Question: Outlook for wireless business growth and B2B performance - Approximately 230,000 subscribers left during the cancellation fee waiver period, but net additions were still positive [78] - B2B growth is slower compared to peers, but combined revenue growth, including KT Cloud, shows a 6% increase year-on-year [85][86]

Financial Data and Key Metrics Changes - In 2025, the company delivered $6 billion in revenue with a non-GAAP gross margin of 38.4%, reflecting disciplined execution and alignment with long-term strategy [7] - Free cash flow increased 17% year-over-year to $1.4 billion, achieving a record free cash flow margin of 24% [17][24] - For Q4, revenue was $1.53 billion, with a non-GAAP gross margin of 38.2% and earnings per share of $0.64, exceeding the midpoint of guidance [10][23] Business Line Data and Key Metrics Changes - Automotive revenue was $798 million, up approximately 1% quarter-over-quarter, indicating stabilization in the automotive market [21] - Industrial revenue was $442 million, up approximately 4% quarter-over-quarter, marking the first quarter of year-over-year growth in industrial revenue after eight quarters of declines [21] - AI data center revenue contributed more than $250 million for the full year, with growth in Q4 [12][21] Market Data and Key Metrics Changes - The aerospace, defense, and security segment saw a 70% year-over-year revenue increase, driven by North America and Europe [12] - The company is experiencing improving order trends across core markets, contributing to a positive outlook for 2026 [10][27] Company Strategy and Development Direction - The company has evolved from a manufacturing-centric to a product-centric model, focusing on high-margin product revenue and strategic investments in technology [8] - The introduction of the Treo Platform and expansion into high-growth markets like AI data centers and automotive zonal architecture are key strategic initiatives [7][11] - The company aims to achieve margin expansion through operational efficiency and a refined product mix, with a focus on differentiated products [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand conditions across automotive, industrial, and AI infrastructure markets [15][27] - The company anticipates that the groundwork laid over the past years will enable it to benefit from improving demand conditions [15] - Management highlighted the importance of aligning manufacturing capabilities with market demands to enhance gross margins [19][88] Other Important Information - The company announced a new $6 billion share repurchase program after returning approximately 100% of free cash flow to shareholders in 2025 [18][24] - The company is reducing fab capacity by 12% to improve operational efficiency, which is expected to lower depreciation costs in 2026 [19] Q&A Session Summary Question: What was going on in the other category? - Management noted that excluding exits, the company is above seasonal trends, and the decline in the other category was due to normal seasonality and $40 million in exits [30] Question: Can you discuss the AI data center market and its potential? - Management expressed confidence in the growth of the AI data center segment, highlighting the company's unique capabilities in high-voltage power supply and its broad product portfolio [32][33] Question: What is the expected run rate for non-core exits? - Management clarified that the $50 million exit in Q1 is part of a larger $300 million total for the year, with varying quarterly impacts [37] Question: How do you expect gross margins to progress? - Management indicated that gross margins are expected to improve due to increased utilization and ongoing FabRight initiatives, with a target of reaching low 40s% in the long term [88][90] Question: What is the outlook for the automotive market? - Management expects automotive revenue to be roughly flat in Q1 due to seasonal factors, but overall stabilization is anticipated [50]

Financial Data and Key Metrics Changes - Full year 2025 net sales reached $2.3 billion, an increase of 4.5% from 2024, with growth driven by pricing (3%), acquisitions (1%), and foreign exchange (1%), partially offset by a 1% decline in volume due to weaker housing starts [5][12] - Consolidated net sales for Q4 2025 increased 4.2% year-over-year to $539.3 million, with North America segment net sales up 3% to $416.9 million [17] - Consolidated gross profit increased 3.4% to $235.1 million, resulting in a gross margin of 43.6%, down 30 basis points from Q4 2024 [18] - Adjusted EBITDA for Q4 was $104.7 million, a decrease of 0.9%, resulting in a margin of 19.8% [22] Business Line Data and Key Metrics Changes - North American volumes were down year-over-year, pressured by lower housing starts, with the OEM business delivering strong growth with volume up double digits [7][8] - The component manufacturing business grew with volumes up in the low single digits, driven by new customer acquisitions and expanded capabilities [8] - The commercial business saw flat volumes year-over-year, while the residential business volume declined modestly due to challenging market conditions [10][11] Market Data and Key Metrics Changes - In Europe, full year net sales totaled $499.6 million, up 4.3% year-over-year, with volumes slightly higher compared to 2024 [12] - The North American market faced a decline in housing starts, with expectations of a 2-3% decrease for the year [29][74] - The commercial market is anticipated to be flat to up 1-2% in 2026, while national retail is expected to remain flat to low single digits [40] Company Strategy and Development Direction - The company aims to maintain above-market volume growth relative to U.S. housing starts, with a focus on innovation, customer service, and operational excellence [14][15] - Strategic priorities include expanding digital capabilities and enhancing customer relationships through software and services [9][81] - The company is targeting a 20% operating income margin and plans to return at least 35% of free cash flow to shareholders [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed a conservative view on the housing market for 2026, expecting flat conditions and potential risks from declining housing starts [29][32] - The company remains optimistic about its ability to outperform the market, citing historical performance and ongoing strategic initiatives [30][31] - Management highlighted the importance of maintaining high customer satisfaction and operational efficiency as key drivers for future success [14][26] Other Important Information - The company achieved a recordable incident rate of less than 1.0 for safety, reflecting its commitment to employee safety [4] - Total operating expenses for 2025 increased by 6.5%, primarily due to variable incentive costs and personnel costs [20] - The company has authorized a new share repurchase program for 2026, reflecting confidence in long-term prospects [24] Q&A Session Summary Question: Can you talk about the upside and downside cases to your outlook for flat North American housing starts? - Management noted a conservative view on the market, expecting flat conditions and potential risks from declining housing starts [29] Question: Can you add some more color to the outlook for growth in Europe? - Management expressed satisfaction with progress in Europe, expecting low single-digit growth and focusing on profitability [33][35] Question: What are the expectations for the commercial side or R&R in the U.S.? - Management anticipates flat to low single-digit growth in the commercial market, with ambitions to outperform housing starts [40][41] Question: Can you elaborate on the gross margin outlook for 2026? - Management expects slightly lower gross margins due to tariff costs and pricing dynamics, with a focus on maintaining operating income margins [42][45] Question: How do you view the impact of steel prices on gross margins? - Management is comfortable with current steel prices and does not expect significant impacts on gross margins for 2026 [60][61] Question: How are customer expectations aligning with market forecasts for 2026? - Management indicated that customer expectations are merging with third-party forecasts, but they remain cautious until a market pickup is observed [62][64]