Latest news with #MorganStanley&Co.LLC
Business Wire
20-05-2025
- Business
- Business Wire
KKR Prices $550,000,000 of 6.875% Subordinated Notes due 2065
NEW YORK--(BUSINESS WIRE)--KKR & Co. Inc. ('KKR') (NYSE: KKR) today announced that it has priced its previously announced offering of $550,000,000 aggregate principal amount of its 6.875% Subordinated Notes due 2065 (the 'notes'). The notes will be subordinated obligations of KKR and will be fully and unconditionally guaranteed by KKR Group Partnership L.P. The underwriters have a 30-day option to purchase up to an additional $82,500,000 aggregate principal amount of notes, solely to cover over-allotments, if any. The offering is expected to close on May 28, 2025, subject to customary closing conditions. KKR intends to use the net proceeds from the sale of the notes for general corporate purposes. Wells Fargo Securities, LLC, BofA Securities, Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, UBS Investment Bank and KKR Capital Markets LLC are acting as joint book-running managers for the offering. The offering is being made pursuant to an effective shelf registration statement on file with the U.S. Securities and Exchange Commission (the 'SEC'). The offering is being made by means of a prospectus and related preliminary prospectus supplement only. An electronic copy of the preliminary prospectus supplement, together with the accompanying prospectus, is available on the SEC's website at Alternatively, copies of the preliminary prospectus supplement and accompanying prospectus may be obtained by contacting the joint book-running managers: Wells Fargo Securities, LLC toll-free at 1-800-645-3751 or emailing wfscustomerservice@ BofA Securities, Inc. toll-free at 1-800-294-1322 or emailing J.P. Morgan Securities LLC at 1-212-834-4533; Morgan Stanley & Co. LLC toll-free at 1-866-718-1649 or emailing prospectus@ UBS Investment Bank toll-free at 1-833-481-0269; or KKR Capital Markets LLC at 1-212-230-9433. This press release shall not constitute an offer to sell or a solicitation of an offer to purchase the notes or any other securities, and shall not constitute an offer, solicitation or sale of the notes in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, pertaining to KKR. Forward-looking statements relate to expectations, estimates, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements can be identified by the use of words such as 'outlook,' 'believe,' 'think,' 'expect,' 'potential,' 'continue,' 'may,' 'should,' 'seek,' 'approximately,' 'predict,' 'intend,' 'will,' 'plan,' 'estimate,' 'anticipate,' visibility,' 'positioned,' 'path to,' 'conviction,' the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. These forward-looking statements are based on KKR's beliefs, assumptions and expectations, but these beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or within its control. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. We believe these factors include those in the sections entitled 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at These factors should be read in conjunction with the other cautionary statements that are included in our periodic filings. Past performance is no guarantee of future results. All forward-looking statements speak only as of the date of this press release. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date of this press release except as required by law.
Yahoo
15-05-2025
- Business
- Yahoo
Q3 2025 Cisco Systems Inc Earnings Call
Ahmed Sami Badri; Head of Investor Relations; Cisco Systems Inc Charles Robbins; Chairman of the Board, Chief Executive Officer; Cisco Systems Inc R. Scott Herren; Chief Financial Officer, Executive Vice President; Cisco Systems Inc Meta Marshall; Analyst; Morgan Stanley & Co. LLC Tal Liani; Analyst; BofA Securities Aaron Rakers; Analyst; Wells Fargo & Company. Joseph Cardoso; Analyst; JPMorgan Chase & Co. Michael Ng; Analyst; The Goldman Sachs Group, Inc. Matthew Niknam; Analyst; Deutsche Bank AG Amit Daryanani; Analyst; Evercore ISI Simon Leopold; Analyst; Raymond James & Associates, Inc James Fish; Analyst; Piper Sandler & Co David Vogt; Analyst; UBS Securities LLC Karl Ackerman; Analyst; BNP Paribas Securities Corp Adrienne Colby; Analyst; Citigroup Inc. Sebastien Naji; Analyst; William Blair & Company, L.L.C. Operator Welcome to Cisco's third quarter fiscal year 2025 financial results conference call. At the request of Cisco, today's conference is being recorded. If you have any objections, you may disconnect. Now I would like to introduce Sami Badri, Head of Investor Relations. Sir, you may begin. Ahmed Sami Badri Good afternoon, everyone. This is Sami Badri, Cisco's Head of Investor Relations, joined by Chuck Robbins, our Chair and CEO; Scott Herren, our CFO; and Mark Patterson, our Chief Strategy Officer. Cisco's earnings press release and supplemental information, including GAAP to non-GAAP reconciliations are available on our Investor Relations website. Following this call, we will also make the recorded webcast and slides available on the website. Throughout today's call, we'll be referencing both GAAP and non-GAAP financial results. We will discuss product results in terms of revenue and geographic customer results in terms of product orders unless stated otherwise. All comparisons will be made on a year-over-year basis. Please note that our discussion today will include forward-looking statements, including our guidance for the fourth quarter and fiscal year 2025. These statements are subject to risks and uncertainties detailed in our SEC filings particularly our most recent 10-K and 10-Q reports, which identify important risk factors that could cause actual results to differ materially from those contained in our forward-looking statements. With respect to guidance, please also see the slides and press release that accompany this call for further details. Cisco will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. Now I'll turn it over to Chuck. Charles Robbins Thanks, Jamie, and thank you all for joining us today. Q3 was another strong quarter for Cisco, with revenue, margins, and earnings per share all above the high end of our guidance ranges. We also generated solid growth in annualized recurring revenue, remaining performance obligations and subscription revenue, which all support our future performance. In addition, we received AI infrastructure orders from web-scale customers in excess of $600 million in Q3 and bringing our year-to-date total to well over $1 billion, surpassing our original fiscal year 25 AI order target a full quarter early. The performance of our core business continues to produce strong cash flows, underpinning our commitment to deliver consistent capital returns. In Q3, we returned $3.1 billion in capital to our shareholders through share repurchases and dividends with a total of $9.6 billion in value returned year-to-date. Our overall strong performance was a result of accelerated product innovation and solid execution by our teams driving sustained demand for our technologies. Total product orders grew 20% year-over-year or 9% on an organic basis, excluding Splunk. Despite the uncertain macro environment, this demonstrates the valuable outcomes we are delivering for customers in the era of AI. Looking at demand in more detail by customer market. I'd also like to remind you that Q3 of fiscal year 24 included six weeks of spot contribution. Enterprise product orders were up 22% year-over-year in Q3, driven by double-digit growth in the Americas and APJC. Public sector orders were up 8% with growth in all geographies as governments around the world continue to trust Cisco as their end-to-end technology partner. Notably, US federal orders grew double digits in Q3, after a challenging first half. During the quarter, our AI-powered cloud managed Meraki for government networking solution also achieved FedRAMP authorization from the US government. Product orders from service provider and cloud customers continue to be strong, up 32% year-over-year, driven by triple-digit growth in web scale with three of the top six web scalers each growing orders in the triple digits. Now some color on demand from a product perspective. Networking product orders grew double digits driven by web-scale infrastructure, enterprise routing, switching and our industrial IoT products. Campus switching orders grew high single digits in Q3 against a tougher prior year compare, demonstrating the continued demand for our campus portfolio to enterprise customers. We also saw triple-digit sequential growth in orders for our Wi-Fi 7 portfolio in Q3. Year-to-date orders for our industrial Internet of Things portfolio comprised of ruggedized catalyst products grew 35% year-over-year. As strategic infrastructure and manufacturing begins to onshore to the United States, Cisco is well positioned to help connect and protect these capital-intensive investments at scale. Our data center switching orders were up double digits year-to-date compared with the same period last year. Cisco was recently ranked as a market leader in Gartner's Magic Quadrant for data center switching. This is a testament to our ability to address the full range of data center switching use cases and our vision to simplify operations while enhancing security, which is essential for critical application deployments. As I mentioned earlier, the AI infrastructure orders we have received from web-scale customers were exceptionally strong in the quarter, exceeding $600 million in bringing our year-to-date total to well over our $1 billion target for fiscal year 25. As expected, the product mix of these orders was more than two thirds in systems with the remainder in optics, demonstrating the growing importance of our technology to web-scale customers for their AI training use cases. AI orders from enterprise customers continue to show momentum as this large nascent market opportunity starts to unlock. Enterprises are seeking simple, seamless, scalable, and secure solutions for their AI deployments which we are ready to deliver through our expanding partnership with NVIDIA. During the quarter, we announced our intent to create a cross-portfolio unified architecture, where NVIDIA will enable Cisco Silicon One to become the only third-party silicon that is included as part of the NVIDIA Spectrum ex Ethernet networking reference architecture. Cisco will also build interoperable systems combining NVIDIA Spectrum silicon with Cisco operating system software allowing customers to simultaneous standardize Cisco networking and NVIDIA technology in the data center, across front and back-end networks. We also announced a Cisco secure AI factory with NVIDIA, which will embed security end-to-end. From the application to the workload to the infrastructure, using solutions like Cisco AI Defense and hybrid mesh firewall, enabling enterprise customers to build and secure data centers to develop and run AI workloads. Yesterday, we announced a new multiphase investment program in the Kingdom of Saudi Arabia. Saudi Arabia announced a new AI company, HUMAIN, and we will be a strategic technology partner contributing to their AI infrastructure build-outs. This partnership aligns with Saudi Vision 2030, contributing to the Kingdom's transformation into a diversified digital economy and enhancing its global and regional competitiveness in the AI era. In addition, we have joined the AI infrastructure partnership alongside BlackRock Global Infrastructure Partners, MGX, Microsoft, NVIDIA, XAI and Energy Partners GE Renova and exterior energy as it seeks to invest in secure, efficient, and scalable infrastructure to support AI workloads. We also announced an expanded collaboration with G42, the UA based Global Technology Group to advance how secure AI infrastructure and innovation can be scaled across public and private sectors. These investments and partnerships highlight our market position as a global leader and preferred partner in AI networking solutions as well as our commitment to collaborating across the industry to create a strong global ecosystem for AI. Additionally, we expect the sovereign AI cloud opportunity to ramp in the near term and that Cisco will be a core system provider for these significant AI training and inference cluster build-outs. As we look at the opportunity that AI presents for Cisco, it is worth reiterating that we frame it in three distinct but connected pillars. First, AI training infrastructure for web-scale customers. combinations of our Cisco 8-K, Silicon 1 optics and optical systems are being deployed by five of the six largest web scalers. Second, AI inference and enterprise clouds. Our generated innovation in hardware and software, coupled with our NVIDIA partnership is designed to simplify and derisk AI infrastructure deployment for the enterprise. And third, AI network connectivity. Customers are leveraging our technology platforms to help modernize, secure, and automate their network operations to prepare for pervasive deployment of AI agents and applications. With a genetic AI, the network is fundamentally constrained and will require ultrafast, low-latency, energy-efficient networks, which we can deliver. Shifting to security. Orders grew in high double digits in Q3. Our security orders included a large multiyear deal with a major financial services company for Splunk's security and observability platforms, which was driven by our combined sales force. This was a win for Splunk from an industry competitor and is a strong proof point of our go-to-market synergy. This was also the largest deal ever for Splunk. Our recently launched security products of Secure Access, XDR and Hypershield collectively added over 370 new customers in the quarter. The majority of our new Hypershield enterprise customers are bundling it with our new in 9300 Smart Switch because of our unique ability to embed security directly into the fabric of the network. Now I'd like to comment on some highlights from our accelerating innovation pipeline. Safety and security will be the defining challenge of Agentic-AI, and we recently introduced several innovations designed to help security professionals harness the power of AI while keeping security at the forefront. These include Cisco XDR correlating attack telemetry across network, endpoint, and cloud, using new AI-powered solutions to empower security teams to understand complex threats and seconds. Agentic AI advancements for Cisco XDR and Splunk to simplify threat detection and response. A new partnership with ServiceNow, which will integrate their security operations capabilities with Cisco AI Defense and the launch of Foundation AI, a team of leading AI and security experts focused on developing cutting-edge technology to address the fundamental security issues of the AI era with novel open source tools, including the first reasoning model to enhance security applications. Just last week, we introduced Cisco's Quantum network in Santa Monica, a revolutionary prototype making real-world quantum networking applications possible in order to speed up the future of quantum computing. These applications will solve complex customer challenges and drive innovation across industries from supply chain optimization to accelerating drug discovery. In addition, we are using Gen AI and genetic systems across our customer experience organization to maximize customer value, deliver great experiences, boost productivity, and create capacity. Today, over 60% of support cases are touched by AI-driven automation, which is driving up the proportion of complex cases we can solve within one day. In addition, low severity cases have reduced as more customers are using our AI support assistant. Also, our AI renewals agent has enabled us to increase the capacity of our renewal specialists. As you can see, we are driving an enormous amount of innovation, and I look forward to showcasing even more new customer-centric solutions at Cisco Live next month. Before I turn it over to Scott, I'd also like to share some important organizational announcements. After careful consideration, Scott has made the decision to retire at the end of fiscal year 2025. As many of you know, Scott joined us in 2020 during a period of great uncertainty around the world and he has been instrumental in driving our transition towards more software and recurring revenue. This has driven greater predictability for our business and increase shareholder value. And I want to thank Scott for all that he has done for Cisco. I am grateful for his partnership as we've managed through many unprecedented situations together. I'm happy to share the beginning day one fiscal year 2026, Mark Patterson, our current Chief Strategy Officer, will serve as Sysco's new Chief Financial Officer. In Mark's nearly 25 years at Cisco, he's held leadership roles in finance, strategy, and operations. He also spent over a decade in sales, working in roles that span every customer segment and geography. Most recently, leading our corporate strategy, development and incubation organization Mark's focus has been on connecting our longer-term strategy and investments with our immediate and urgent growth opportunities. The breadth of his experience, along with his deep knowledge of Cisco and our customers, partners and investor community uniquely position him to help accelerate Cisco's growth in this new role. I'm also excited to announce the promotion of Jeetu Patel to President and Chief Product Officer. Under G2's leadership over the past nine months, he has unified our product vision and strategy and vastly accelerated our innovation pipeline, focusing on delivering even greater value for our customers and our partners. We also announced the appointment of Kevin Will, Chief Product Officer of OpenAI to Cisco's Board of Directors yesterday. These announcements further our confidence in Cisco's long-term success and durability in the era of AI. To summarize the quarter, we are seeing clear demand for our technology across our customer markets. Our innovation pipeline continues to accelerate as we view security deep into our networking products, and our strong performance is fueling our capital allocation model, returning significant value to our shareholders. Now I'll turn it over to Scott for more detail on the quarter and our outlook. R. Scott Herren Thanks, Chuck. We delivered a strong quarter with revenue and earnings per share above the high end of our guidance ranges, coupled with solid margins and operating cash flow. For the quarter, total revenue was $14.1 billion, up 11% year-over-year. Non-GAAP net income was $3.8 billion and non-GAAP earnings per share was $0.96. Looking at our Q3 revenue in more detail. Total product revenue was $10.4 billion, up 15% and services revenue was $3.8 billion, up 3%. Networking was up 8%, with growth across most of the portfolio, led by double-digit growth in switching and enterprise routing, partially offset by a decline in servers. Security was up 54%, primarily driven by growth in our offerings from Splunk and Sassy. Collaboration was up 4%, driven by growth in Devices, WebEx suite and our CPaaS offerings and observability was up 24%. Looking at our recurring metrics. Total ARR ended the quarter at $30.6 billion, an increase of 5% with product ARR growth of 8%. Total subscription revenue increased 15% to $7.9 billion and represents 56% of Cisco's total revenue. Total software revenue was up 25% at $5.6 billion, with software subscription revenue up 26%. Total RPO was $41.7 billion, up 7%. Product RPO grew 10% and total short-term RPO and was $21.1 billion, up 5%. Q3 product orders were up 20% year-over-year, excluding Splunk, product orders were up 9% year-over-year. Looking at product orders across our geographic segments. Americas was up 27%, EMEA was up 4%, and APJC was up 21%. In our customer markets, service provider and cloud was up 32%, Enterprise was up 22% and public sector was up 8% Total non-GAAP gross margin came in at 68.6%, up 30 basis points year-over-year, coming in above the high end of our guidance range. Non-GAAP product gross margin was 67.6%, up 70 basis points driven by productivity improvements and Splunk, partially offset by pricing. Non-GAAP services gross margin was 71.3%, down 30 basis points. The impact of tariffs on our gross margin was favorable to what was estimated in the guidance we provided last quarter. We continue our focus on profitability and financial discipline with non-GAAP operating margin at 34.5%, above the high end of our guidance range. We recorded a non-GAAP tax rate of 17.5% for the quarter, which was favorable by 1.5-percentage-points compared to what was assumed in our guidance, primarily due to an increase in tax benefit from the foreign-derived intangible income deduction and onetime benefits. Shifting to the balance sheet. We ended Q3 with total cash, cash equivalents and investments of $15.6 billion. Operating cash flow was $4.1 billion, up 2%, primarily driven by revenue and earnings growth. From a capital allocation perspective, we returned $3.1 billion to shareholders during the quarter comprised of $1.6 billion for our quarterly cash dividend and $1.5 billion of share repurchases with $15.4 billion remaining under our share repurchase program. We continue to invest organically and inorganically in our innovation pipeline. During Q3, we closed the acquisition of SnapAttack, which adds capability to Splunk and helping organizations power the security operations center of the future. To summarize, we had another solid quarter with top and bottom line performance exceeding our expectations, driven by strong order growth and margins. We remain focused on making strategic investments in innovation across our business to best capitalize on the significant growth opportunities we see ahead, all underpinned by disciplined spend management. It's this powerful combination that continues to fuel our strong cash flow generation as well as our ability to return significant value to our shareholders. Turning to guidance. While we've seen some progress on tariffs, there continues to be uncertainty our guide assumes current tariffs and exemptions remain in place through the quarter. These include the following: China at 30%, partially offset by an exemption for semiconductors and certain electronic components. Mexico and Canada at 25% for the components and products that are not eligible for the current US MCA exemptions. Other countries at a base rate of 10% until the end of the 90-day pause on July 9 and then reverting to country-specific reciprocal tariffs partly offset by an exemption for semiconductors and certain electronic components. And finally, a small impact from tariffs on steel and aluminum and retaliatory tariffs. We'll continue to leverage our world-class supply chain team to help mitigate the impact where appropriate through the flexibility and agility we have built into our operations over the last few years. The size and scale of our supply chain provides us some unique advantages as we support our customers globally. For fiscal Q4, our guidance is we expect revenue to be in the range of $14.5 billion to $14.7 billion, we anticipate non-GAAP gross margin to be in the range of 67.5% to 68.5%. Non-GAAP operating margin is expected to be in the range of 33.5% to 34.5%, and non-GAAP earnings per share is expected to range from $0.96 to $0.98, and we're assuming a non-GAAP effective tax rate of approximately 18%. For the full year fiscal '25, our guidance is -- we expect revenue to be in the range of $56.5 billion to $56.7 billion, and non-GAAP earnings per share is expected to range from $3.77 to $3.79. Sami let's now move into the Q&A. Ahmed Sami Badri Thank you, Scott. Before we start the Q&A portion of the call, I'd like to remind analysts to ask one question and a single follow-up question. Operator, can we move to the first analyst in the queue. Operator Meta Marshall, Morgan Stanley. Meta Marshall Great. And congrats on the quarter. Maybe the two questions for me. Just one, what are you seeing in terms of customer buying behavior right now, just given the uncertainty kind of with some of the tariffs that you laid out and just whether you kind of saw any pull forward potentially in April. And then just maybe as a second question, just any commentary around public sector and federal kind of around the same questions. Charles Robbins Yes, Meta, thank you. I'm going to -- I'll give you some commentary, and then I'm going to ask Scott to give you some data points on this pull-ahead issue. But I'd say from a customer behavior perspective, first of all, we haven't seen any meaningful change in how and they're purchasing. And so we haven't seen any customers really fundamentally slowing down. They're still committed to the technology transition. I think the AI transition is just so important they're going to continue to spend until they just absolutely have to stop. And I think that as of right now, they're still comfortable. As it relates to pull forwards, look, I think I'm sure there was an order here or there from a customer who decided to pull something forward because they were concerned about tariffs. But we looked at a ton of data points to see if we saw any signs of broad-based pull ahead business, and we did not. And I'm going to ask Scott real quick to share some of those data points, and then I'll answer the public sector. R. Scott Herren Thanks, Chuck. And I should remind you, too, Meta, that we didn't motivate a lot of pull ahead by talking about price increases. If you remember, the way we talked about the impact of tariffs to us, we had a number of levers. We have a great world-class supply chain team. Once the tariff scenario stabilizes, there are steps that we can take to mitigate it, as you've seen us do with the China tariffs from the first Trump administration. And only after that, would we consider pricing. So we didn't build a strong motivation. But we looked at -- after speaking to our channel partners who also didn't see any buy ahead or delay behavior by the way, and our own sales team, we looked at channel inventory, which you would think would go up. It did not. It actually was down. We worked closely with the web scalers we understand not just what they have on order, but what they have on hand. Actually, web scaler inventory on hand went down during the quarter. We looked at Meraki activations. We know when a serial number x leaves the factory floor and when it gets activated when we had built up some inventory at our customers, you recall that period of time between shipment and activation extended. It's stayed right where it was, which is back in line with where it was pre pandemic. So there's no indication there. Of course, we look at linearity and in particular, to see if we saw a spike in the third month, which, if you recall, the (technical difficulty) tariffs were announced on April 2. And so if there was some buy-ahead activity, we would have seen a heavier month. We did not see that. We saw the exact same linearity that we had seen historically there. We look at our pipeline for pull-ahead or push outs, nothing out of the ordinary there. And I'd say the last metric is we look at when a customer orders today but request a future ship date. There's always a little bit of that that happens. But we look to see was there a pattern of a lot of orders that came in with a future ship date, and there was nothing out of the ordinary either. So we really don't see any signs of any notable pull ahead or for that matter, push out. Charles Robbins Sami, let me cover the public sector. So just -- I know we put this in the corresponding slides, I think, but Global Public Sector was up 8%. If you just look at the organic growth, it was up 3% globally. We saw -- in the US, we saw strength in federal ironically. So we saw a double-digit order growth in US Federal this quarter. And candidly, that was with our biggest deal slipping out. So that was positive. I would say there still continues to be stress on the civilian side obviously, with agencies that have been shut down with employees who are worried about their jobs, there's a lot of just human capital concern on the civilian side, but it's also important to remember that that's about a quarter of our federal business, 75% of it is intelligence and Department of Defense. So overall, we were pleased with public sector during the quarter. Ahmed Sami Badri Michelle, can we go to the next analyst. Operator Tal Liani, Bank of America. Tal Liani So this year, Meta is growing CapEx by 70%, and you see very strong growth across the board. And the question is I know you're only now ramping networking, but the question is whether 2025, you think is a peak year. CapEx will likely slow down materially slow down. What happens to Cisco in an environment where cloud CapEx is slowing down? Charles Robbins First of all, I don't know that I would suggest that the cloud CapEx, particularly on a global basis, as you see the announcements that were made in the Middle East this week, we're seeing sovereign cloud strategies being built around the world. So I think on a global basis, I don't think that will be the case. And talking to these customers, I don't anticipate that they have a huge demand for slowing down. I think that you may see a different balance between their investments on capital to serve enterprise customers leveraging these models through inference and other things. But I don't anticipate it's going to be that 2025 is going to be a peak year. I think this has many years to run. R. Scott Herren And Tal, just to remind you on the tail end of building out all the public cloud infrastructure for training, there's a significantly larger opportunity in enterprise AI, right, as they build out the capability to do inferencing inside their own data centers. So I think there's a -- in aggregate, the AI opportunity has several years to run at this point. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Aaron Rakers, Wells Fargo. Aaron Rakers And congrats on the quarter and Scott on the future retirement. I guess I'll ask my kind of two quick questions in conjunction here. So I want to -- I think, Chuck, in the prepared comments, you referenced a large sovereign deployment opportunity that is coming here soon. I guess the first question on that is that is that currently in your order book, the $600 million you saw this last quarter? And if not, how do you think about the size of those opportunities? And then a quick follow-on is I think this last quarter, you launched or you started shipping your 51.2 (technical difficulty) I think it's the G200 silicon. Can you just give us an update on what you're seeing in the data center switching side and if that really becomes a catalyst year as we look out over the next couple of quarters? Charles Robbins Yes. Thanks, Aaron. So I think you're referencing the HUMAIN announcement that we made yesterday or the Saudis made early this week, they announced the creation of this company. We've been working with them on this for months and the short answer is there's absolutely no orders in the $600 million from them. They are just getting started. We've got a team of people returning to the Middle East next week to spend more time with them. I think it's important to note on HUMAIN, the CEO there is an individual named Tareq Amin and just to you some background on Tareq he was the CTO at Reliance Jio when we built that network with them over the course of several years. And then he was the CEO of Rakuten when we built with him the Open RAN mobile network in Japan. And so we've been engaged with Tareq since he actually moved into Saudi Arabia and he is a good friend, an old friend. We've been doing large-scale projects with them for a dozen years now. So he knows us. We know him well, and we're looking forward to that opportunity. So I think that's not included in any of our forecasts from our sales teams or anything at this point. On the second point, the G200 chip, I would say it is at the heart of the any of these systems orders. So I made a comment that of the $600 million-plus, two thirds of it was systems, and those systems would be based on the G200, and I would tell you that right now, those customers are telling us that they -- if we could get more capacity out, they would buy more. So it's actually doing well right now. And we've got a number of other chips that are in various stages of the process for the next-generation platforms that we're also looking forward to. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Samik Chatterjee, JPMorgan Joseph Cardoso This is Joseph Cardoso on for Samik Chatterjee. I also wanted to follow up on the Middle East announcements. Maybe a two-parter here is just, can you elaborate on how Cisco is looking to participate here, particularly as it relates to the portfolio? And I know it's early days, but any early insights that you can share into the timing and magnitude of these opportunities for the company as kind of investors are looking to embed it potentially into the model? And then I have a follow-up. Charles Robbins You want to go ahead and ask your follow-up, Joe, we'll just get them both. Joseph Cardoso Yes, sure. And the follow-up is actually just more on the enterprise vertical, particularly campus. Obviously, orders are coming in good on the enterprise vertical. But just curious if you could what are you hearing from customers on this front and the momentum that you're seeing in kind of the order backlog order backlog here and how you're thinking about the opportunity around the recovery relative to when we last put 90 days ago. Charles Robbins Okay. So on the Middle East front, I will just tell you that Tareq made a comment to me that they're behind and they're going to catch up. So I think they're going to spend a lot of money, and I think they're going to spend it as quickly as they possibly can. It's hundreds of billions of dollars at the end of the day that they will be spending. If you go to the HUMAIN their website and scroll down, they list their initial strategic partners. So you can see, but our discussions with them have been around the networking, compute, security, and observability. So that represents a pretty good opportunity for us. And I think there'll be as big as any of the major web scalers in the United States is how I would think about it. On the enterprise campus front, yes, we saw strong orders in campus switching. We saw the triple-digit sequential growth in orders for Wi-Fi 7. We saw really strong growth in our enterprise routing portfolio this quarter. So we still see customers investing heavily in modernizing their infrastructure. And the general belief and feedback that we're getting from these customers is as they get ready to roll out a genetic AI, in particular, the network is absolutely going to be key because of the real-time nature of this communication, and they all want to make sure that while they may not know exactly what those applications are going to look like right now. They absolutely know they're going to need the most modern networks they can have. And I think that's what's driving it right now. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Michael Ng, Goldman Sachs. Michael Ng Congratulations, Scott, on the upcoming retirement. I really appreciate all your time and help throughout the years. As it relates to my two questions. First, I was just wondering if you could talk a little bit more about the networking orders strength in the quarter. How much of that was the broad recovery and things like campus how much did the product cycle of Wi-Fi 7 contribute? And could we expect that to continue over the next 12 to 18 months here or so. And then second, just a housekeeping question. I was wondering if you could just share the organic revenue growth rates for the company and the segment ex Splunk, if you have that off hand. Charles Robbins Okay. I think on the networking order strength, I think it was across the board. As I was saying earlier, I think we saw it in the enterprise switching space, we saw it in -- we saw growth in data center switching. We saw it in we saw strong growth in enterprise routing. We saw that triple-digit sequential growth in Wi-Fi 7. I do think, to your point, it's a 12- to 18-month cycle. I think once the -- once customers begin this, I mean it's just -- it's a standard upgrade cycle that we see -- that we've seen historically. I think the way to think about it is we've talked about the fact that there's a window and there's sort of a time frame where we typically deliver refreshed products, whether it's the Wi-Fi portfolio or the campus switching portfolio. And so when that begins as well, then that will also enhance that ongoing opportunity, I think, as we go to -- as we look to the future. So Scott, do you want to talk a little bit of organic rep? R. Scott Herren Yes. And Michael, thanks for the comments and for the question. First of all, I should say, Splunk is performing in line with or actually slightly ahead of our expectations on both revenue and profitability, consistent with what we told you last quarter. The integration has gone really well. The people side of integration is pretty much complete at this point across all functions. The product integration continues to go along well. And this is the quarter that we actually lapped the acquisition during Q3. And so at this point, it's part of the run rate. I don't really plan on breaking out organic versus inorganic from this point forward. It gets harder and harder given the level of integration we've done across the board to split that out. So not really planning on giving that data point given that it's just part of our overall run rate at this point. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Matthew Niknam, Deutsche Bank. Matthew Niknam And Scott, thank you again for all your help over these last couple of years. My question is on web scale. So obviously, you continue to see very impressive growth here. Maybe, Chuck, if you can talk to what's driving some of the sustained success, the pace of transition away from InfiniBand towards Ethernet and maybe some of the bigger differentiators that are helping you win incremental share across these hyperscalers? Charles Robbins Yes. Thanks, Matthew. Look, I think it's been the intent of these customers from day one to move away from InfiniBand. And the gating factor was held soon did they feel good about the technology. And they feel very good about the technology and how it's enabling them to run these training models over native Ethernet or some enhanced Ethernet that we are delivering. I think that we've talked over the last few years about their desire to have silicon diversity, which we think was one of the key reasons that we got in originally. And now we're delivering high-quality products in the time frame they need the -- if you look at what they're looking for in these products from their partners, there's really sort of -- you have a system that has software and has silicon and then other components. And the real high-value pieces of this are the operating system and the silicon. And as many of them are transitioning hard into running their own proprietary operating systems on these platforms, it's imperative that you have silicon if you want to be competitive long term in this space. And so we're very fortunate that we made the acquisition in 2016. We have a great team that's been developing Silicon One. They're very close to these customers. They work with them every day. And I think the silicon is the key differentiator that's really -- I mean, we're delivering high-quality systems and everything else that they want the services, the experience, the supply chain, all those things that matter deeply. But at the end of the day, if we didn't have the Silicon it would probably make it virtually impossible for us to be successful long term here. Ahmed Sami Badri We move to the next analyst. Operator Amit Daryanani, Evercore ISI. Amit Daryanani I guess I have two as well. Starting with your AI orders at $1 billion. It came in, I think, a quarter ahead of what you had expected and it looks like you're seeing some continued momentum as you go forward with sovereign and enterprise that you talked about. I'm just wondering, how should we think about the growth rates as we move forward on AI orders or AI revenues? It would be helpful to just kind of phase that out-- frame that out a little bit in terms of the forward growth rates. And then if I could just follow up for Scott, your July quarter guide, cut, if I'm not mistaken, it implies revenues are up sequentially, but operating margins are down 50 basis points. Maybe just push out why the margins are coming down in July, while revenues are going up and best luck in your retirement as well. Charles Robbins On the AI orders, how do you think about the growth? I would say just one thing to remember is that these are big customers that are -- and these orders are nonlinear in nature. So we'll see how it goes. But I mean last quarter, we did 350 or something like that. This quarter, we exceeded 600. And as I said earlier, if we could actually -- if we could increase capacity, they would take more. So I think if we're able to execute and increase capacity, we should be able to continue to see this ramp as long as we're delivering and executing, which is one thing I've said all along is we have to execute because if we miss with these customers, then we sit on the sidelines for a while. So we -- the teams are working really hard and I think that's how I think about it. It's nonlinear orders. And as long -- if we can continue to increase the capacity, then we'll continue to see that business improve. Scott, do you want to talk about July? R. Scott Herren Sure. Yes. And you're doing the math right, Amit, first of all, thanks for what you said. You're doing the math right on margins. The biggest difference you can see it's actually in the gross margin line, and that falls through to the op margin line. And that's really a full quarter and I laid out the assumptions for you in the opening commentary on tariffs. It's a full quarter of the tariffs being in effect, and we reflected the full cost without mitigation and that's the big driver that we see sequentially going from Q3 to Q4. Still feel good about putting up the midpoint of the guide at 11% EPS growth. Ahmed Sami Badri Michelle, we can move to the next caller. Operator Simon Leopold, Raymond James. Simon Leopold I'll ask both upfront. The first one is, Chuck, I think last quarter, you had sort of alluded to an upcoming campus refresh. And I would think Cisco's sort of do. What I'd like some help with is understanding the maybe historic perspective of when you've had these refreshes how to think about that? Because when I reflect on the last one, 2017, 2018, that occurred when you were shifting customers to subscription. So I feel like that's a tough metric to use to understand the potential. And then the follow-up may be a bit simpler, which is how do we think about the impact of tariffs, understanding they're changing every day. But given everything we know, after July 9, what would be the effect of tariffs based on the July 9 end of the pause? Charles Robbins Yes, Simon, I think you -- first of all, I think your point relative to the 2017 kickoff of the campus refresh is a very valid one. So it's hard to say. We've also seen some strength over the last 12 months in the enterprise campus business. So here's what I would tell you, though, as we look to really drive this over the next 12, 24 months, I think that what's most important to our customers right now is that we embed security deep into the network. And so what you're going to see is you're going to see a focus on enabling agentic AI and enabling security and security services in the network so that our customers can do this in line, which is going to be necessary for us to solve the AI problem. I'll tell you, I had a discussion with a Cisco of a Fortune 100 company a couple of weeks ago, G2 and I were together. And we started talking about security and she stopped us and said, listen, if you can't paint a picture for me, define an architecture for me, multiyear architecture that has me removing every physical firewall for my infrastructure that I want to talk to you because if it's not embedded in the traffic flows, it's never going to happen. It's not going to work. And so what I would tell you on this is just envision that we're going to deploy security everywhere out through the network infrastructure. And that plus AI, I think, will give customers reasons to really look at these platforms. R. Scott Herren Yes. And Simon, on your second question on the impact of tariffs after July 9. I mentioned in the opening commentary that we've built into our forecast that underpins the guide for Q4 an expectation that on July 9, those that exempt that pause ends and we go back to the reciprocal tariffs that were announced on April 2 with the two exemptions, the US MCA exemption still in place and the semiconductor and certain electronic component exemption still in place. So we've reflected that in the guide for Q4. I think it's a little bit hard right now to predict what is going to happen on July 9 and what agreements get put in place between now and then. But just wanted to protect the downside in the guide. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator James Fish, Piper Sandler. James Fish Nice quarter. And Scott, congrats on your upcoming retirement here. And look, I don't want to rain on the freight here. But if I look at networking here, it returned to growth, but it was also against a very easy compare and even still down versus a couple of years ago. If AI really isn't substitutionary of existing non-AI networking real estate with some of these web scales and enterprise is growing the rates are calling out, why isn't this sort of growing faster than even the 8% on the comp here? And then just following up on Simon's question before, as my follow-up. Can we just an update as to the exposure between data center versus campus within networking? And how we should think about the price per port kind of playing out here as we're seven, eight years now down the road? Charles Robbins On the first one, I think the short answer is that most of this AI infrastructure has not begun to flow through revenue yet. Scott, I don't know if you want to. R. Scott Herren That's right. We said all along that we thought the -- when we put the $1 billion target out for the year, that was a sales target, not a revenue target, but we said we thought that would begin to convert to revenue in the second half of the year. And we saw that again, the first piece of that in Q3, and we expect to see a bit of it again in Q4. Charles Robbins And I think on the data center versus campus, clearly, the data center with a higher speed, you're going to see a higher per port cost, but you're going to see much higher volumes in the campus. So I think they sort of normalize each other out over time. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator David Vogt, UBS. David Vogt This is Andrew for David. I wanted to ask a question about the text of the $600 million of AI orders. You mentioned that they tend to be nonlinear and they're very large customers. I'm wondering if you're starting to see bigger orders is a large component of that $600 million and with the customers where you're having the most success? Or are you really seeing sort of a diffuse kind of large growing orders across a number of customers that you mentioned you had three going triple digits. And the follow-up question I wanted to ask is just -- I'm not sure if I missed it, but could you give an estimate of roughly what you think the impact of tariffs are in your guidance for Q4 for gross margin? Charles Robbins Yes, Andrew, I think you nailed it. You almost answered the question for us. I mean we have three of the six that grew triple digits. So I think it's fairly balanced. I would tell you that we when I would look at these customers, we're seeing acceleration across all of them. So it's all positive, but there are -- in this case, we had three that were just super high growers next quarter, maybe a different there. So we'll see, but it's pretty balanced. R. Scott Herren And then on your question on the tariff impact and the what I wanted to do is make sure you understood the assumptions that were built into it. So we walked through those China at 30%, Mexico and Canada, where it's not eligible for the USMCA exemption at 25%, 10% everywhere else until July 9 and then reverting back to the reciprocal tariffs and then a small impact on us for the tariffs on steel and alumina and retaliatory. That's all built into the guide. I haven't broken out and quantified the dollar value that goes with that and I'm a little reluctant to it because the puck keeps moving on this. What I wanted you to understand is that everything that we know today, the impact of those has been built into the guide for Q4. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Karl Ackerman, BNP Paribas. Karl Ackerman I have two, and I'll just ask them at the same time as well, please. So the extended partnership with NVIDIA is an endorsement of your Silicon One family and certainly underscores your opportunity as enterprises deploy AI compute. I was hoping you could quantify your AI orders for enterprise at our incremental to the $1 billion of AI order target you have for cloud. And then second, when might Silicon One offer co-packaged optics solutions as you seek to broaden your data center switch offering. Charles Robbins Yes. Thanks, Karl. I would say -- first of all, I'd say the NVIDIA partnership, we've had a couple of phases of the announcements and a lot of the solutions that we're going to deliver to the enterprise are still to be delivered. So most of them start rolling out like 60 days from now, and then they'll just -- they'll be flowing after that. So first thing I want to just clarify is we haven't seen a lot of upside yet in the enterprise from that. I would say the enterprise AI orders is a little more difficult for us to flag these, but we have been trying to do so, so that we have a baseline. And what I will tell you is that we're definitely seeing acceleration, it's in the hundreds of millions of dollars, not in the billions yet that we're seeing. But again, there's a lot of dependence on the sales force flagging these things properly when you get into that scale with the number of enterprise customers that we have. On the Silicon One CPO question, I think it's important to remember that we've demonstrated CPO in 2023. And at the time, there wasn't a significant amount of customer demand for it for lots of reasons. But we have a team of people that are working on it. We will embrace it. I think that it's going to be driven by customer desire and I think that's going to be driven by a combination of power benefit as well as speed requirements. And as soon as customers are asking for it, we'll be first in market ready to deliver it. Ahmed Sami Badri We can move to the next analyst. Operator Atif Malik, Citi. Adrienne Colby It's Adrienne Colby for Atif. It's been a while since you talked about your AI pipeline versus your AI orders. So I was hoping you could update us on what that part of the funnel is looking like. And secondly, I was hoping with the departure of parcel you could update us on the search there for a new head of go-to-market. Charles Robbins Yes. So we -- correct me if I'm wrong, Scott. We don't give out pipeline for AI at this point. So we did that a long time ago. And again, it was the $1 billion target in the pipeline stuff was really to give you all more confidence that we were serious in this space. And I think the results have now said that these customers are taking us seriously. So we won't be doing all that on an ongoing basis. And then, yes, we named a new head of go-to-market, Oliver Tuszik, who was most recently running our Europe, Middle East, Africa region and before that was running our global partner organization. When before he came to Cisco, he was a CEO of a partner. So he has a really deep understanding of our go-to-market model and we announced him a week ago. Ahmed Sami Badri Michelle, we can move to the next analyst. Operator Sebastien Naji, William Blair. Sebastien Naji I wanted to ask about your networking business and in particular, your hyperscaler customers, and in particular, the usage of a white box given that Cisco can provide that broad range of offerings from the chip to white box to the full system. Can you maybe just comment on whether you see white box eating up a big part of the spending pie? And is it AI that's driving that share shift or something else that's happening? Charles Robbins Well, what I would say is that I don't think we've seen a meaningful shift between what they buy from us versus when they buy white boxes. To your point, when they want to buy white boxes, we can work with them to actually integrate our silicon and actually manage the process for them and help deliver that product. But we see the predominance is still buying systems. And I think it's just up to -- every hyperscaler has a different set of kind of issues that lead them to the answer. And in some cases, some of them have had an answer two years ago that now has changed, and they're doing it a different way. So I'm not sure there's a real clean answer across the customer base. R. Scott Herren Yes. And just a quick reminder, Sebastian, we said this earlier, but of the more than $600 million in orders that we took during Q3. Two thirds of those were systems as opposed to optics and optical. So we're seeing the shift to systems that we had predicted in the Q2 call. Ahmed Sami Badri Thank you, Sebastian. I'm now going to hand it over back to Chuck for some closing remarks. Charles Robbins Yes. Let me just thank all of you again for joining and reiterate that how pleased I am with our progress and how proud I am of what our teams have done. I'd also like to once again thank Scott. He's been a great partner for me for the last five years helping drive the transition. And as I said earlier, dealing with some pretty complex situations over the years. I'm excited to have Mark step into the role. Mark and I have worked closely together for 18 years. So we -- he has a great set of experiences here at Cisco and will bring a lot into the role. As we look ahead, I think the AI opportunity for us, we believe, is a strong one. We think we're well positioned. We believe that because we -- from a technology and a portfolio perspective, we play across the full stack. We have networking, we have security, we have Silicon, which I think are all very important. We have secure AI solutions that we're delivering in the marketplace. We also have the partnerships and the investments. We have the NVIDIA partnership, which is delivering critical solutions for our customers. This week, we announced the HUMAIN partnership the AIP investments, the G42 partnership, and there are more to come. And I think the other thing we have is we have global presence, we have customer trust, we have the ability to understand both the cloud customers as well as the enterprise customers and the public sector customers. So when it gets when these sovereign clouds are being discussed, we have a unique perspective across all of those segments. We understand what they need in long-term partnerships. We have a great team that are delivering right now, strong execution and great results. I'm really proud of what they've done. So I look forward to talking to you soon. And Sami, I'll hand it back to you. Ahmed Sami Badri Thank you, Chuck. Cisco's next quarterly call, which will reflect our fourth quarter and fiscal year 2025 results will be on Wednesday, August 13, 2025, at 1:30 PM Pacific Time, 4:30 PM Eastern Time. This concludes today's call. If you have any further questions, please feel free to contact the Cisco Investor Relations department, and we thank you very much for joining the call today. Operator Thank you for participating on today's conference call. If you would like to listen to the call in its entirety, you may call 1-800-876-5258. For participants dialing from outside the US, please dial 203-369-3998. This concludes today's call. You may disconnect at this time.
Business Wire
30-04-2025
- Business
- Business Wire
Solaris Energy Infrastructure, Inc. Announces Proposed Convertible Senior Notes Offering
HOUSTON--(BUSINESS WIRE)--Solaris Energy Infrastructure, Inc. ('Solaris') (NYSE: SEI) today announced its intention to offer, subject to market and other conditions, $110,000,000 aggregate principal amount of convertible senior notes due 2030 (the 'notes') in a public offering registered under the Securities Act of 1933, as amended. Solaris also expects to grant the underwriters of the notes a 30-day option to purchase up to an additional $15,000,000 principal amount of notes solely to cover over-allotments. Morgan Stanley & Co. LLC and Santander US Capital Markets LLC are acting as joint book-running managers for the offering. The notes will be senior, unsecured obligations of Solaris, will accrue interest payable semi-annually in arrears and will mature on May 1, 2030, unless earlier repurchased, redeemed or converted. Noteholders will have the right to convert their notes in certain circumstances and during specified periods. Solaris will settle conversions by paying or delivering, as applicable, cash, shares of its Class A common stock, par value $0.01 per share ('Class A common stock'), or a combination of cash and shares of its Class A common stock, at Solaris's election. The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at Solaris's option at any time, and from time to time, on or after May 1, 2028 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of Solaris's Class A common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If certain corporate events that constitute a 'fundamental change' occur, then, subject to a limited exception, noteholders may require Solaris to repurchase their notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering. Solaris intends to use the net proceeds from the offering to purchase from Solaris Energy Infrastructure, LLC ('Solaris LLC'), its operating subsidiary, a subordinated convertible note to be issued by Solaris LLC with substantially similar economic terms as the notes, and Solaris LLC expects to use such net proceeds to fund growth capital for additional power generation equipment, including new natural gas turbines and complementary 'balance of plant' electrical equipment, to support customer activity. In a separate press release, Solaris also announced that Morgan Stanley & Co. LLC and Santander US Capital Markets LLC, each acting severally on behalf of itself and/or its affiliates (in such capacity, the 'delta offering underwriters'), intend to offer, in a separate, underwritten offering, a number of shares of Solaris's Class A common stock borrowed from third parties (the 'concurrent delta offering'), to facilitate hedging transactions (whether physical and/or through derivatives) by some of the purchasers of the notes. The number of shares of Solaris's Class A common stock subject to the concurrent delta offering will be determined at the time of pricing of the concurrent delta offering, and is expected to be no greater than commercially reasonable initial short positions of such hedging investors in the notes. The completion of the offering of notes is contingent on the completion of the concurrent delta offering, and the completion of the concurrent delta offering is contingent on the completion of the offering of notes. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, any Class A common stock in the concurrent delta offering. The offering of notes is being made pursuant to an effective shelf registration statement on file with the Securities and Exchange Commission (the 'SEC'). The offering will be made only by means of a prospectus supplement and an accompanying prospectus. An electronic copy of the preliminary prospectus supplement, together with the accompanying prospectus, is available on the SEC's website at Alternatively, copies of the preliminary prospectus supplement, together with the accompanying prospectus, can be obtained by contacting: Morgan Stanley, 180 Varick Street, 2nd Floor, New York, New York 10014, Attention: Prospectus Department and Santander US Capital Markets LLC, 437 Madison Avenue, New York, NY 10022, Attention: ECM Syndicate, by email at equity-syndicate@ or by telephone at 833-818-1602. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities referred to in this press release, nor will there be any sale of any such securities, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. About Solaris Solaris Energy Infrastructure, Inc. (NYSE:SEI) provides scalable equipment-based solutions for use in distributed power generation as well as the management of raw materials used in the completion of oil and natural gas wells. Headquartered in Houston, Texas, Solaris serves multiple U.S. end markets, including energy, data centers, and other commercial and industrial sectors. Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, statements regarding the anticipated terms of the notes being offered, the completion, timing and size of the proposed offerings, the intended use of the proceeds and the other risks discussed in Part I, Item 1A. 'Risk Factors' in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 5, 2025. Forward-looking statements are based on Solaris's current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, Solaris's actual results may differ materially from those contemplated by the forward-looking statements. Factors that could cause Solaris's actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the factors discussed or referenced in Solaris's filings made from time to time with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Factors or events that could cause Solaris's actual results to differ may emerge from time to time, and it is not possible for Solaris to predict all of them. Solaris undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Yahoo
23-04-2025
- Business
- Yahoo
Q1 2025 Cadence Bank Earnings Call
Will Fisackerly; Executive Vice President, Director of Corporate Finance; Cadence Bank James Rollins; Chairman of the Board, Chief Executive Officer; Cadence Bank Valerie Toalson; Senior Executive Vice President, Chief Financial Officer; Cadence Bank Billy Braddock; Senior Executive Vice President, Chief Credit Officer; Cadence Bank Chris Bagley; President; Cadence Bank Manan Gosalia; Analyst; Morgan Stanley & Co. LLC Jared Shaw; Analyst; Barclays Capital, Inc. Catherine Mealor; Analyst; Keefe, Bruyette & Woods, Inc. Brett Rabatin; Analyst; Hovde Group LLC Jon Arfstrom; Analyst; RBC Capital Markets LLC Matt Olney; Analyst; Stephens, Inc. Michael Rose; Analyst; Raymond James & Associates, Inc. Stephen Scouten; Analyst; Piper Sandler Companies Operator Good day, and welcome to the Cadence Bank first-quarter 2025 webcast and conference call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Will Fisackerly, Executive Vice President and Director of Corporate Finance. Please go ahead. Will Fisackerly Good morning, and thank you for joining the Cadence Bank first-quarter 2025 earnings conference call. We have members from our executive management team here with us this morning: Dan Rollins, Chris Bagley, Valerie Toalson, and Billy Braddock. Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to our Investor Relations page at where you'll find them on the link to our webcast, or you can view them to the exhibit to the 8-K that we filed yesterday afternoon. These slides are also in the presentation section of our investor relations website. I would remind you that the presentation, along with our earnings release, contain our customary disclosures around forward-looking statements and any non-GAAP metrics that may be discussed. The disclosures regarding forward-looking statements contained in those documents apply to our presentation today. And now, I'll turn to Dan for his opening comments. James Rollins Good morning. Thank you all for joining us to discuss our first-quarter results. After I cover a few highlights, and Valerie provides additional detail on our financials, our executive management team will be available for questions. First, during the quarter, we received all regulatory approvals to complete our acquisition of First Chatham Bank, and we plan to close May 1. As a reminder, we announced this transaction the last time we had an earnings call, so to be able to get approval and close in under 100 days is fantastic. We're looking forward to working with Ken Farrell and his team at First Chatham and expanding our presence in Georgia. Regarding the first-quarter results, our financials continue to exhibit strength in a number of areas. GAAP net income increased to $130.9 million or $0.70 per share. Adjusted net income from continuing operations increased to $131.4 million or $0.71 per share. And ROA was higher at 1.15%. Our balance sheet management last fall drove an increase in net interest margin of 8 basis points this quarter, and our adjusted efficiency ratio improved by over 100 basis points as managed expenses offset the impact of fewer days in the quarter on revenue. Our teams remain focused on supporting our customers, which resulted in first-quarter loan growth of nearly 4% on an annualized basis, with the strongest growth coming out of Georgia, Florida, and Texas, as those states continue to do well against the national backdrop. Loan pipelines remain solid across most of our regional markets. Merchant commercial real estate activity is as robust as it's been in years. Competition for the best transactions has driven yields down somewhat in recent months, but activity remains high. Deposit balances grew nicely on average. But given typical first quarter volatility, we ended the quarter flat with core customer deposits maintaining stability both in balances and in the mix of non-interest-bearing deposits. Importantly, credit results have been stable overall and were in line with our expectations for the quarter with net charge-offs of 27 basis points annualized. There has certainly been some disruption added to the economy as of late. And while we are alert to the possibility of issues with borrowers, we have not seen any impact yet. Our tangible book value continued to expand, increasing to $22.30 per share, and regulatory capital levels remained very strong with CET1 growing to 12.4%, allowing us the capital flexibility to be opportunistic as we look ahead. I'll turn the call over to Valerie for her highlights on the financials and a few more details. Valerie? Valerie Toalson Thank you, Dan. To add to Dan's comments, our pre-tax pre-provision net revenue for the first quarter increased to $190 million, up over 3% from the prior quarter, driven by solid loan growth and lower expenses. Average loans were up just over $482 million in the quarter, while period-ending loans grew by $310 million or 3.7% annualized as paydowns in the construction and energy portfolios impacted the period-end balances. The growth primarily resulted from strong performance in our mortgage, private banking, and community bank groups, and as Dan noted, more heavily weighted in our higher-growth markets. The quarter's loan growth was right in line also with our expectations of low- to mid-single-digit growth for the year. Average deposits increased $610 million in the quarter, while period-end deposits were essentially flat with a slight decline in brokered deposits, mostly offset by a pickup in public funds. Our deposit mix at quarter end was stable with our non-interest-bearing deposits as a percent of total deposits coming in just over 21%, the same level as they were at year end. We also had $1.8 billion in CDs mature in the quarter, and our teams did a great job of retaining as CD balances also remained stable in the quarter. Referencing slides 9 through 11, our first-quarter net interest margin of 3.46% continued to improve, up 8 basis points in the quarter, largely due to the fourth-quarter payoff of our BTFP borrowings. Loan yields were 6.33% in the quarter, down 9 basis points as a result of the full quarter's impact of the December interest rate cut. New loans came on the books just shy of 7% in the quarter, which is well north of the total portfolio yield, and we continue to have variable rate loans repricing over time. These dynamics help minimize the impact of any interest rate cuts as we look forward through the year. Total cost of deposits kept pace, likewise declining by 9 basis points to 2.35%. New CDs in the quarter came in nearly 20 basis points lower than last quarter at an average rate of just over 14. Our cumulative total deposit beta, excluding brokered funds, ticked up to 30% through the first quarter. Our total adjusted revenue was down just slightly, less than one-half of 1% compared to the prior quarter, primarily due to fewer days in the first quarter. Net interest revenue was down $1.4 million or 0.4% in the quarter due to day count. Adjusted non-interest revenue on slide 12 was down less than $1 million or 1% in the quarter as strong mortgage origination income was offset by lower credit-related fees and the impact of market volatility and number of days on wealth management revenue and deposit service charges, respectively. Even so, our adjusted efficiency ratio improved notably to 57.6%, down 150 basis points from the fourth quarter, driven by lower expenses as we detail on slide 13. While first quarter typically has higher expenses, our adjusted non-interest expense actually decreased by just over $8 million or 3%, driven largely by a $6 million decrease in data processing and software expenses as those expenses normalize for what was an elevated fourth quarter. Total comp expense increased just $600,000 as seasonal increases in employer FICA and 401(k) contribution costs were partially offset by lower commissions and incentive costs. Turning to credit on slides 7 and 8, net charge-offs for the first quarter were $23 million, with about two-thirds of that due to one previously impaired credit. Non-performing loans declined 11% or $29 million in the first quarter, while criticized loans were up 2% and classified loans were down 2%, so pretty stable overall. Our loan provision was $20 million, increased slightly from the prior quarter due primarily to a bit more conservative macroeconomic outlook. When you combine our allowance coverage of 1.34% with our strong and growing capital foundation laid out on slide 14, we believe our balance sheet is well positioned should there be economic disruption in the near future. Our 2025 guidance is on slide 15. We continue to feel comfortable with the ranges we shared last quarter in all categories, and to further clarify, believes that even with the May 1 close of First Chatham that we will still be within these ranges, potentially the higher side of the ranges on the balance sheet side with First Chatham Incorporated. But the revenue and expenses just won't have a material impact this year given the timing and size of the transaction. We are excited about expanding our presence in Georgia and continue to be optimistic on our footprint for both organic growth and M&A fill-in opportunities. Operator, we would like to open the call to questions, please. Operator (Operator Instructions) Manan Gosalia, Morgan Stanley. Manan Gosalia Hi, good morning. Just looking at the loan pipeline, it feels like you're not really seeing the impact of the April 2 announcements just yet. You noted that loan pipelines remain solid, and I think you just pointed to the higher end of the loan growth guide. Can you maybe expand on what you're hearing from clients post April 2? And what gives you the confidence that that level of loan growth will continue? James Rollins Sure, I'll take a stab at that, if I'm coming through on the line. You hear me, Manan? Manan Gosalia I can year you fine. James Rollins You can? Good. We had technical issues this morning. Glad to hear that you're there. Good morning. So yes, we thought we were pleased with what happened with our loan pipeline in the first quarter. We have seen very little, if any, impact so far of the noise. So like you said, it was April, it was after first quarter end. So when you talk about the macro environment, we continue to watch. We continue to listen. We continue to pay attention to what our customers are telling us. There's a lot of noise out there. I think, today, customers are beginning to sit back a little bit and maybe slow. But in the first quarter, we didn't experience any of that. Billy? Billy Braddock Yes, so -- I mean, our current pipeline, we've got a couple of select callout areas. I mean, our equipment finance, our CRE, they're the best pipelines we've seen in years. Regionally, I'd say Texas is the highest, Georgia as well. We've got competitive factors that are still driving win rates. But as far as tariff control, I mean, just anecdotal issues of, hey, we're trying to evaluate how it's going to impact us. If it's going to -- some have taken advantage of it. They pulled some sales and deals forward. But as far as immediate impact on pipeline, we're just not seeing it. It's still staying solid. Manan Gosalia Got it. And then maybe flipping over to the deposit side, broker deposits came down about $200 million or so Q-on-Q. And you noted that there was about $1.8 billion in CDs that matured during the quarter. Can you remind us how much in higher cost deposits roll over through the next of the year? And how much of a benefit you expect to get there? Valerie Toalson Yes, sure, Manan. So we've got about another $3 billion, $3.5 billion of time deposits that mature in the second quarter. Those are just north of $420 million. What we saw this quarter was really the new CDs just new to the bank coming in just north of $410 million. When you look at the kind of the new and renewed rate, though, that was lower, closer to about $360 million. So there's still some incremental benefit that we anticipate seeing as some of those time deposits continue to come on board and renew at a little bit lower rates. James Rollins And I think we're are looking to fund -- we want to fund with the best or lowest possible funding source, and so what you saw in the quarter was brokered CDs were more expensive than wholesale funding for the home loan bank, correct? Valerie Toalson Yes, yes. I think he was asking about the time deposits. James Rollins You said our broker deposits went down. Valerie Toalson Yes. Manan Gosalia Yes. And just to clarify, Valerie, the numbers you just mentioned include both brokered CDs and non-brokered time deposits? Valerie Toalson They do. Our broker came down about -- yes, to your point, $200 million. So the bulk of it was really consumer, core customer time deposits is what we're talking about. Manan Gosalia Great. Thank you. Operator Jared Shaw, Barclays. Jared Shaw Good morning, everybody. Hi. Maybe sticking with the margin theme, you talked a little bit about yield compression from competition. How should we think about sort of the loan yields in the face of growth here and how that's sort of impacting your view of the margin as we go through the rest of the year? James Rollins The loan yields came on good in the second than the first quarter, 6%? Valerie Toalson Yes, just right below 7% of where the new loans came on. James Rollins Yes, so -- but we're certainly seeing the competition. Billy, you've been talking about that for weeks now. You want to talk about the competition? Billy Braddock Yes. I mean, for the larger high-quality deals, we're seeing 25-basis-point yield compression on loans, I would say, across the board. What we're really noticing it is in kind of our merchant CRE construction portfolio. But more broadly, we're seeing it on completed deals as well. So I'd say 25% and some is even 50%, but up 50 basis points for the most part, though, around 25 basis point compression we're seeing over the last three months, I would call it. Valerie Toalson But on your question on the margin, what we are seeing a little bit of that compression on the loan yields, and we would expect, as we go through the year, if we get the rate cuts that are anticipated, obviously, that will impact the loan yield. But given the time deposit repricing as well as just our ability to kind of react quickly to rate changes, we anticipate being able to match that on the deposit costs as we go through the year. So with the outlook today, a fairly stable net interest margin as we go through the rest of the year. Jared Shaw Okay. All right, thanks. And how should we think about capital priorities from here, Dan? It sounds like you're open to looking at deals with the success of the Georgia deal. But how should we think about sort of the dynamic of buybacks and M&A and sort of other uses of capital? James Rollins I don't think anything has changed. The macro environment clearly causes us to want to step back a little bit and look and see what's there. But I think that the same objectives we've had all along, organic growth is number-one goal for us. We want to continue to grow the company. We want to continue to grow within our footprint. All of the other tools are there and in the toolkit, and I think we will use them when they're appropriate. Jared Shaw Okay, thank you. James Rollins Appreciate it. Operator Catherine Mealor, KBW. Catherine Mealor Thanks. Good morning. Just a follow up on the revenue and the NII outlook. So Valerie, if the margin is fairly stable for the rest of the year, then to kind of get to the mid to high end of the revenue guide, probably means we need more balance sheet growth. And so just -- I know this quarter was more of a function of the full quarter's impact of the BTFP. But just kind of curious how you're thinking about just the size of the balance sheet, in particular, the bond-to-bond book and kind of excess liquidity as we move to the back half of the year? Valerie Toalson Sure, yes. Specifically to the bond book, you may have noticed we did add a little bit of borrowings in the quarter. Federal home loan bank borrowings, we added just shy of $800 million of those. And we used that to buy some short-term agency securities at basically about a 120 spread, 115 spread. And so that will add, obviously, to the balance sheet side, but also as we go through the rest of the year, had some really nice income, almost as a hedge, if you will. But potentially while we're seeing good pipelines and good loan growth, there's just a lot of volatility in the economy right now. And so I thought that was a prudent way to protect that net interest income stream. And so when I talk about a stable margin, I'm really talking about net interest margin percentage. But we do anticipate, with the estimates that we've put out there on our guidance, to continue to meet those and seeing a little bit of balance sheet growth as we go through the year. Catherine Mealor Okay, great. And then that variable rate, if we look at the -- my favorite slide, as you know, the one that breaks out the variable rate loans by type and maturity and then the rate. As we look at that variable rate loan, that was a lot more stable this quarter at 6.17%. Do you still think that even as we get cuts, that piece can still move higher? Or are we around at equilibrium with that piece of your loan book today? Valerie Toalson In the near term, it's fairly stable. If you look out at the next one- to three-year bucket, that's when there's opportunity for that to improve. But you're right. Through the rest of the year, that number, based on average, will be fairly stable. Catherine Mealor Great. Thank you. James Rollins Thanks, Catherine. Operator Brett Rabatin, Hovde Group. Brett Rabatin Hey, good morning, everyone. Wanted to ask about the loan growth guidance within the context of energy. And just obviously, you guys had some payoffs in the energy bucket. I wanted to see if the guidance contemplated that coming back, or if that continues to maybe atrophy a little bit. James Rollins Yes, I don't know that any one bucket of loans is going to move the overall guidance that we've got out there. So when you talk about guidance, I think the footprint that we're serving today, we're really proud of what happened in Texas and Georgia and Florida. We think we continue to have opportunities within our footprint. We think we will continue to be able to grow. The lines of business from quarter-to-quarter can bounce all over the page. Billy, we did see some energy change. Billy Braddock Yes, we did -- I mean, so mostly in midstream. Term Loan B market and some M&A activity created some paydowns, but we also added non-new transactions. And I would suggest that that activity is creating an opportunity for us as well. So I anticipate that that will continue to kind of stay level. It's just when paydowns happen at once, it takes a minute to pull back in that one segment. We've also got a renewable and power segment that's been on a -- it's a newer business, probably only a couple of years old. It continue to see some fantastic inroads. Those guys are making our name out there -- well known out there in that sector. And then our C&I teams across the various footprints have had a good quarter, and we continue to see that just based off our footprint. I mean, Texas and Georgia specifically, they're really seeing some good momentum. James Rollins And we've seen good momentum in the community banks. So again, what I like most about our company is the people we've got out front taking care of customers across the footprint. I think we've got real opportunity to continue to grow. Brett Rabatin Okay, that's helpful. And then just back on the capital toolkit, Dan, I'm just curious to hear your perspective on the outlook for M&A, if you're having any conversations or if it's pretty quiet with the uncertainty at this point. James Rollins The volatility in the market causes people to sit back and think. But you're going to see -- transactions are going to continue to happen. Consolidation is going to continue to happen in the marketplace just like we were talking about the noise that's out there. There's a lot of noise. People are trying to figure out what the noise is and how that impacts us. Brett Rabatin Okay, great. Appreciate all the color. Operator Jon Arfstrom, RBC Capital Markets. Jon Arfstrom Thanks, good morning. Great. The CRE comment, I think you said it's as robust as it's been in years. Can you talk a little bit more about what's driving that? And even though it's more competitive, is it acceptable to you guys to put on more CRE? James Rollins There are some great opportunities out there on the CRE side. Billy and Chris can certainly jump in here. But when you look at what -- and I specifically called out the merchant CRE side, so you're talking about the big, gold-plated, large merchant developers that are out there developing projects that are really good. And so what we see is as we continue to have some projects, that will move off of our balance sheet at some point in the not-too-distant future, we believe. And so when you look back at what's happening, there's still opportunities. And it's coming in in the industrial space. It's coming in the multifamily space, and it's coming across our footprint because of the in-migration of people. Billy or Chris? Billy Braddock Yes, John, that's right. So we're seeing -- and keep in mind that we're still getting 55%, 60% loan to cost on these. So we won't see the fundings out of these for 12 to 18 months, and it's backfilling that portfolio that as they start selling. We're having to backfill for when that occurs. But yes, it's multifamily, it's an industrial and it's in the markets that we're serving. So we're seeing -- it's just good robust activity. It's more than we've seen just in the last couple of years. I mean, not since the beginning of time, but just in the last couple of years, we're seeing more activity than we had. Chris Bagley I would just add the -- we've got your question, do we have room, yes, we've got room both on the CAD and the total CRE bucket I think we put that in these slides, but we have room there. The -- and it's coming from the community bank as well. So Billy mentioned the merchant type. But as a bread and butter product for us across community banks. So all that real estate activity is just good bread and butter for us. So we -- and it's hanging in their head. Why is it picking up a little bit? I think the SBB, the liquidity crisis have put a lot of pause on a lot of deals and pipeline months ago. And so you're seeing some of the more strategic thinkers that are thinking three years out getting back into the market. James Rollins It takes a while to become it is online. does that help you, Jon? Jon Arfstrom Yes, that helps. Valerie, one for you on expenses. You obviously had a pretty strong performance on expenses. But anything to call out to maybe set us up for what the second quarter might look like on expenses given the performance in Q1? Valerie Toalson Yes, sure. Yes. We were really pleased with our expenses. There were a few things tweaking some of the long-term incentive plans that brought it down a little bit. But overall, kind of across the board, really nice expense management. As we look out for the rest of the year, we do expect quarterly expenses to increase and still within our guidance of -- I believe, we had 4% to 6% for the year. So I still think we're okay there and that's going to factor in continuing to grow in our businesses. We're growing with good talented people with good technologies that help our efficiency and effectiveness. So we're looking to continue that and go through the year. And so that's, at this point, what I would expect. Operator And your next question today will come from Matt Olney with Stephens. Matt Olney Just want to follow up on the bond purchases and the borrowings behind that, that Valerie mentioned. It looks like this probably came later in the quarter. Any color on the timing of that trade? And any color on just the duration of this trade? Valerie Toalson Sure. It was in the last month of the quarter. And like I said, it's about $785 million of securities. They're zero to 20% risk-weighted agencies, 2.5 duration, about north of 530 on yield, and that's spended by borrowings that are about 420 million, so getting some nice incremental spread there. Depending on where spreads are and so forth, we may end up doing a little bit more of that in the second quarter. We'll kind of see where the rest of the balance sheet falls. But again, just really kind of a little bit of incremental earnings impact for us while we had plenty of capacity on the borrowing side and took advantage of a little bit of spread differential there. Matt Olney And just a follow-up on that, Valerie. It sounds like there is potential to do more of this in the future. Should we consider this with respect to loan growth, if the loan growth slows that the macro deteriorates, this could become potentially more attractive to you guys in the future? Valerie Toalson It's really about the spread. And so depending on what that could look like, that is an option. James Rollins It's all around the spread. Valerie Toalson Yes, yes. We had significantly reduced our securities book, as you know, over the past couple of years. We were down to about 15%. And so we're still well south of 20% and would anticipate that we kind of stay in that range in the foreseeable future. But there's certainly ability to do a little more there should we desire to with the rest of the balance sheet mix. Operator And your next question today will come from Michael Rose with Raymond James. Michael Rose Just two quick ones. Just on the pickup in line utilization. I think that's something we've seen from a bunch of banks across the reporting period so far. Anything to read into that? Are you guys actually adding lines or just looking for some color there. James Rollins I don't think there's anything to add into that. What you've seen on ours is up and down. You've got construction draws that fund into that too. I wouldn't read anything into that at all. Valerie Toalson And it's really within a -- I mean, it's really small. Yes. Michael Rose Got it. I think some of us are still reeling from the liquidity crisis during COVID. James Rollins I understand. Valerie Toalson We all have PTSD for that, yes. Michael Rose Yes, yes. That's a better way to put it. Just one follow-up for me, just kind of sticking with that theme. You guys, obviously, with the MOE, worked out some of the legacy cadence, restaurant exposure. You have some retail. You laid out really nicely in slides 5 and 6. But any areas that you guys are particularly focused on or that you're seeing some concern expressed from customers? I know some of it's obvious, but just wanted to get a better feel for what you guys are doing internally, assuming this could potentially go on for an extended period? James Rollins I think the credit quality picture continues to look stable for us. I mean, we saw a little bit of improvement in a couple of different categories. We saw a deterioration in a couple of categories. Charge-offs were higher off of really just one bigger credit. I think we feel good about where we sit today. The macro environment causes everybody to stand back and say, okay, well, let's see if we can figure out where it's going to come from. I don't know that we're seeing any of that today. Chris? Chris Bagley It's hard. I mean, there's a ton of conversation going on. It's that uncertainty definitely creates some anxiousness across customer set. And that's all of them, right? I mean, it's farmers, builders, developers, manufacturers, retailers, importers. So there's -- we're having a lot of conversations. All of our frontline folks are talking with their clients. We're reporting back up to all of our credit processes and our loan approval processes what the current view of the tariff impact would look like, but because of that uncertainty, it's just hard to handicap it. And we haven't seen it impact our credit numbers today. And specifically to your question, we haven't identified any segment or particular line that's -- that we're overly concerned about. It's really a credit-by-credit type process that we're going through. And all of that could temper a little maybe loan activity or exuberance, I guess, could be tempered a little bit until some certainty gets into the market. James Rollins It's a mix, and just the handful of customers that I talked to in the manufacturing business, a couple of them are telling me you can see a benefit here that this is going to probably help them produce more. Other manufacturers are telling us they're importing most of the inputs, and this is going to -- they're going to have to pass along every bit of the cost increase could be detrimental to them. So it's a mixed bag when you push on what's happened today, still a lot of not a lot of action. Operator And your next question today will come from Casey Haire with Autonomous Research. Moving along, we have Stephen Scouten with Piper Sandler. Stephen Scouten Okay. Any chance you can hear me out there? James Rollins Yes, we can. That's better. Stephen Scouten Okay. I don't know what changed, but -- so just kind of curious about how you think about the loan-to-deposit ratio potentially levering up the balance sheet from here? James Rollins Yes. I think we continue to look to grow deposits. But I think when we look about where we sit today, I think we like the position we're in. We would like to continue to grow deposits. We would like to hang out in the neighborhood where we are up a little bit, down a little bit, but I think we feel comfortable where we're sitting today. That's one of the things we like. Stephen Scouten Got it. Great. And maybe how do you think about incremental M&A? Obviously, the valuations make everything a little more difficult. But given the quick full time line, does it change your outlook on how you think about M&A in the years to come? Or maybe the amount of deals you might be able to put together. James Rollins Not really. I think from an M&A perspective, we're looking for culture. We're looking for the right fit, and I don't think that the speed or the valuations change that. You're still looking for the right folks for us. Benefits is a good thing. We like to speed. The FCB deal was good. We're pleased to be able to get that completed and closed. We'll close that in a couple of weeks here. That's faster than thought. We like all of that, but it's still around people bank with people and the culture is going to be a critical component. Stephen Scouten Yes, makes a lot of sense. And then just lastly, real quick on mortgage income, looked like a pretty good quarter here. Do you think there's an inflection point anywhere, whether it's around the 30-year rate or or just lower rates in general where we could see a more material pickup in mortgage more broadly or kind of how you're thinking about expanding your teams there. James Rollins The fact that the 30 years jumped up in the last week or so, certainly is not helping that team at all. That's a hard question. I don't know what the rate needs to get to, to see a big change. In some of our markets, it is a tight, tight housing market. And so that's part of the picture to is the inventory is just not there. It's an interesting place we find ourselves today. The newer homes, the big builders are buying down rates for first-time homebuyers, which is a positive. It's an interesting environment. Valerie, do you want to talk about mortgage? Valerie Toalson Yes. They had a great first quarter. Typically, first quarter is really low seasonally. But even when you look at its last year really up several hundred in origination. So really nice performance there. The teams continue to do well. To really gear up some of those refis, I mean, it's going to need to drop 50 basis points from here probably. James Rollins Or more. Valerie Toalson Or more, yes, at least to start getting that engine running. James Rollins From a year ago, one of the things that the mortgage leadership team, Scott Dick and his team do, we've retool upscaled our team. So the team that's out there in front of us today on the mortgage group, like talking about Billy's team a minute ago and the community bank team, we're really proud of the folks we've got out taking care of customers. Valerie Toalson Exactly. If I get that that for us. Chris Bagley Another way, when the refi boom hits, when it hits, if it hits, we're going to be positioned well between the manager brought a lot of different areas, including some expanded footprints that are new to us. Operator This will conclude our question and answer session. I would like to turn the conference back over to the management team for any closing remarks. James Rollins All right. Thanks, Nick. It's certainly an exciting and busy time for Cadence Bank and for our industry. We believe we're in an excellent position to be able to continue our path of operating performance improvement. I'm extremely proud of our team's efforts and our progress over the past few years and have high confidence that our unique operating model will support our vision of helping people, companies and communities prosper. Thank you for joining us today. We look forward to visiting with you all again soon. Operator The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Yahoo
11-02-2025
- Business
- Yahoo
Anterix Shares Surge 26% as Company Engages Morgan Stanley for Strategic Review
Anterix (ATEX, Financials) shares jumped 26% to $35.91 at 11:47 am GMT-5 on Tuesday after the company announced it has engaged Morgan Stanley & Co. LLC as a financial advisor to initiate a strategic review process in response to inbound interest, Anterix said in a statement. Warning! GuruFocus has detected 3 Warning Signs with ATEX. Providing private wireless broadband solutions for utilities, the business said the assessment is to evaluate chances to profit from rising demand for its products. Anterix pointed out that there is no guarantee of the result and did not provide a chronology for finishing the procedure. Anterix separately launched a new industry engagement project intended to hasten the implementation of 900 MHz private wireless broadband networks. Along with possible alliances with members of its 120-plus firm ecosystem, the corporation said the endeavor will entail a review of pricing, payment arrangements, and ownership conditions. Anterix's president and CEO, Scott Lang, said the project is meant to cut the time frame for utilities to benefit from private wireless broadband networks. Utilities trying to upgrade grid communications have already shown great interest in the startup, he pointed out. As the leading provider of private wireless broadband, zero debt, and a strong customer pipeline, it does not surprise us that we have had some inbound strategic interest, Lang said. The business underlined once again that it would provide updates on the strategic review process in line with legal responsibilities. Anterix is set to report third-quarter fiscal 2025 earnings on Wednesday at 9 a.m. ET. This article first appeared on GuruFocus.
