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News18
22-05-2025
- Automotive
- News18
Meet Vaibhav Taneja, Tesla's CFO Who Outearned Pichai & Nadella With Rs 1,195.4 Cr Package
Last Updated: Vaibhav is a certified public accountant and chartered accountant, having completed his education at the Institute of Chartered Accountants of India and Delhi University. Indian-American Vaibhav Taneja, currently the Chief Financial Officer (CFO) at Tesla, is the new sensation on social media with his impressive compensation package he's getting from EV maker, outstripping other India-American peers like Satya Nadella, Sundar Pichai, and more. Vaibhav Taneja, currently the Chief Financial Officer (CFO) at Tesla, earned an astounding salary in 2024 that outstripped the remuneration packages of his high-profile peers. Taneja's total earnings for the year amounted to an impressive $139 million (approximately Rs 1,195.4 crore), surpassing Google CEO Pichai's package by 13 times and doubling Microsoft CEO Nadella's compensation. According to reports, Taneja's 2024 compensation included a basic salary of $400,000 (around Rs 3.44 crore), with the majority comprising stock options and equity awards. This substantial package was granted despite Tesla experiencing its lowest sales in 13 years. In comparison, Satya Nadella received a total salary package of $79.1 million (around Rs 680 crore) in 2024, while Sundar Pichai's salary stood at $10.7 million (approximately Rs 92 crore). Who Is Vaibhav Taneja? Vaibhav Taneja is the Chief Financial Officer at Tesla, based in Austin, Texas. With over 17 years of experience working with multinational companies in the technology, retail, and telecommunications sectors, Vaibhav has a strong grasp of US GAAP and extensive experience with financial statement audits and SEC filings. He has worked closely with C-suite executives, audit committees, and board members of both large and small-cap companies, bringing a well-developed problem-solving approach to enhance business processes and prevent revenue leakage. Vaibhav is a certified public accountant and chartered accountant, having completed his education at the Institute of Chartered Accountants of India and Delhi University. Watch India Pakistan Breaking News on CNN News18. Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. Get in-depth analysis, expert opinions, and real-time updates—only on News18. Also Download the News18 App to stay updated! First Published: May 22, 2025, 12:06 IST
Yahoo
22-05-2025
- Business
- Yahoo
Q4 2024 Spanish Broadcasting System Inc Earnings Call
Raul Alarcon; Chairman of the Board, Chief Executive Officer; Spanish Broadcasting System Inc Mike Smargiassi Operator Good morning, and welcome to the Spanish Broadcasting's fourth quarter 2024 conference call. (Operator Instructions) I would now like to turn the conference over to [Mike Smargiassi]. Please go ahead. Mike Smargiassi Thank you, and good morning, everyone. Before we begin, please recognize that certain statements on this conference call are not historical facts. They may be deemed, therefore, to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. In particular, statements about future results expected to be obtained from the company's current strategic initiatives are forward-looking statements. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements. Spanish Broadcasting System undertakes no obligation to publicly update or revise its forward-looking statements. Please also note that we will be discussing non-GAAP financial measures. The company believes that operating income before depreciation and amortization, loss on the disposal of assets, impairment charges and other operating expenses excluding noncash stock-based compensation or adjusted OIBDA, is useful in evaluating its performance because it reflects the measure of performance of the company's stations before considering costs and expenses related to capital structure and dispositions. This information is not intended to be considered in isolation or as a substitution for operating income, net income or loss, cash flows from operating activities or any other measure used in determining the company's operating performance or liquidity that is calculated in accordance with US GAAP. With the formalities aside, I will now turn the conference over to Mr. Raul Alarcon. Raul Alarcon Thank you, Mike. Good morning, ladies and gentlemen, and thank you for joining me today to review the SBS financial results and operational highlights for calendar year 2024. And let me just say that for brevity's sake, if you permit, I'm going to refer mainly to the entire year of 2024 as I believe Q4 was, in many ways, a pretty accurate reflection of the corresponding year and I'd like to avoid being repetitive. So let me begin by saying that in every conceivable way, 2024 was very much a watershed year. Starting in Q1, the company moved expeditiously to replace two C-level officers and to restructure its executive ranks and focus on the strategic initiatives and operational procedures needed to restore EBITDA growth, which has been and will always be our number one priority. We began this process by fine-tuning, retooling and reinvigorating our live and local radio brands, the core of our business by undertaking new talent rollouts in the majority of our markets and staying on the cutting edge of whatever is trending and popular with our listeners not only in their music preferences, but also with the company's on-air hosts and entertainers. A great example of this is the on-air debut of Raul Brindis our new morning talent in Houston, who sky rocketed to the top of the ratings in record time, a bit more on that later. 2024 was also the year of the implementation of our DAVid initiative, which is code for the real-time audio visual redeployment of our leading radio content to live and on-demand digital streaming, principally for our LaMusica platform, the number one Latino music app as well as across our rapidly growing multichannel network of digital video platforms, including our flagship YouTube channels, our soon-to-be announced connected TV distribution partnership and for our output of viral short-form clips for the Instagrams, TikTok and Facebook reels of the world. All of these elements designed to reinforce LaMusica's evolution into a premier audiovisual entertainment destination. As an example, LaMusica is now streaming a selection of the most compelling audio content from the multimedia group in Mexico an arrangement that will surely enure to the benefit of both parties as well as the audience is eager to consume a content that would otherwise be unobtainable. I'll be speaking much more about this in the future. Of course, but let me just say that we believe this transformation of SBS into an audio-visual exhibitor of the most compelling Hispanic content as Nielsen has been confirming for years, holds the key to the future of the company as a global content creator and distributor. We also branched out into the important market of Texas with our December 2024 acquisition of KROI-FM in Houston, the third largest US Hispanic market, where we introduced our newest SBS star host and iconic morning drive personality, Raul Brindis, resulting in the station's stunning ratings climb in less than 90 days. Suffice it to say that the station is now ranked number one among all Hispanic competitors morning-drive and number one, overall in Houston, irrespective of language or format. In terms of streaming the Raul Brindis show has already added over 225,000 unique users as of April with a staggering time spent listening and/or viewing average of 75 minutes. And the company also continued to host the finest multi-act concert performances in Latin Entertainment by enlisting the top performers and participating sponsors in creating successful and profitable live audience experiences. But most importantly, ladies and gentlemen, we successfully accomplished all of these initiatives while significantly growing the company's EBITDA by a healthy 71% versus the prior year, successfully reducing over $16.3 million in costs and increasing EBITDA from $23 million in 2023 to over $40 million in 2024 without any diminution in audience or revenue. This was achieved by undertaking a scrupulous top-to-bottom review of company personnel and a corresponding line-by-line examination on all operational expenses, which continues to this day, as necessitated by the market gyrations and advertiser uncertainties prevalent in recent months. Looking forward, we will continue to innovate, create, regulate and propagate our company's assets in order to best serve our audiences as well as our brand partners and our diverse constituency of stakeholders. Thank you for your time today, ladies and gentlemen. I very much look forward to addressing you again during our upcoming Q1 earnings call. Have a good morning. Operator The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Sign in to access your portfolio
Yahoo
22-05-2025
- Business
- Yahoo
Q1 2025 Lowe's Companies Inc Earnings Call
Kate Pearlman; Vice President of Investor Relations & Treasurer; Lowe's Companies Inc Marvin Ellison; Chairman of the Board, President, Chief Executive Officer; Lowe's Companies Inc William Boltz; Executive Vice President - Merchandising; Lowe's Companies Inc Joseph Mcfarland; Executive Vice President - Stores; Lowe's Companies Inc Brandon Sink; Chief Financial Officer, Executive Vice President; Lowe's Companies Inc Simeon Gutman; Analyst; Morgan Stanley Steve Forbes; Analyst; Guggenheim Securities Robbie Ohmes; Analyst; Bank of America Scot Ciccarelli; Analyst; Truist Securities Seth Sigman; Analyst; Barclays Steven Zaccone; Analyst; Citi Christopher Horvers; Analyst; J.P. Morgan David Bellinger; Analyst; Mizuho Securities Peter Benedict; Analyst; Robert W. Baird & Co. Operator Good morning, everyone, and welcome to Lowe's Companies first quarter 2025 earnings conference call. My name is Rob, and I'll be your operator for today's call. As a reminder, this conference is being recorded. I'll now turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasurer. Kate Pearlman Thank you, and good morning. Here with me today are Marvin Ellison, Chairman and Chief Executive Officer; Bill Boltz, our Executive Vice President, Merchandising; Joe McFarland, our Executive Vice President, Stores; and Brandon Sink, our Executive Vice President and Chief Financial Officer. I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found on Lowe's Investor Relations website. During this call, we'll be making comments that are forward-looking, including our expectations for fiscal 2025. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in the quarterly earnings section of our Investor Relations website. Now I'll turn the call over to Marvin. Marvin Ellison Thank you, Kate. Good morning, everyone, and thank you for joining us today. In the first quarter, we delivered sales of $20.9 billion with comparable sales down 1.7%, in line with our expectations. Despite ongoing challenges in the housing market, I'm pleased with our team's focus and execution in the face of significant macro uncertainty, we continue to deliver operational excellence combined with value and outstanding service to our customers. This dedication drove an increase in our customer satisfaction scores, and we also earned recognition from J.D. Power, which recently named Lowe's number one in customer satisfaction among home improvement retailers. This recognition demonstrates that our investments in technology and our clean and enjoyable stores, along with our friendly and knowledgeable associates all reinforce our commitment to being the most helpful brand in home improvement. And although we are pleased with our continued progress in customer service, our financial results also reflect ongoing pressure in DIY bigger ticket discretionary demand and a slower start to spring versus last year with exceptionally unfavorable weather across much of the country in February. As weather normalized, we were encouraged by our business performance. Customers appreciated our spacious garden centers, great selection of outdoor power equipment and expansive assortment of grills and patio furniture. And they also took advantage of our early spring offers which included special deals for MyLowe's Rewards members. Later in the call, Bill will provide more detail on our approach to spring and the momentum that we're seeing. Before I discuss our Q1 results in more detail, I'd like to spend time discussing our company's commitment to diversify our global sourcing efforts. To provide a better perspective about our global sourcing, roughly 60% of our purchases originate in the US or approximately $30 billion on an annual basis. Over the past several years, we've been partnering with our private and national brand suppliers to diversify our global sourcing efforts. As a result, approximately 20% of our purchase volume is currently concentrated in China. Although we are pleased with this reduced dependency, we're not satisfied, and we're working to accelerate our diversification efforts. Our global sourcing team has identified exciting diversification opportunities in the US and around the globe that we're actively pursuing. We're also using our best-in-class product cost management and sophisticated pricing capabilities, while leveraging the strength of our cross-functional teams across merchandising, assortment planning, supply chain, and finance. We will combine these capabilities and continue to work with our national and private brand suppliers while using a portfolio approach to ensure we continue to bring value and innovation to our customers. In the meantime, let me tell you how we're planning to drive sales growth by continuing to strengthen two key pillars of our Total Home strategy, accelerating our Pro and online growth. I'll begin with our mid-single-digit growth in Pro sales this quarter. Since 2018, this leadership team has transformed our Pro product and service offering, with a powerful program lineup, targeted inventory investments, and a competitive loyalty program. Now that we've established an effective playbook and a strong foundation of execution to serve the small to medium Pro, we're excited to engage a larger Pro with their planned span in a new distribution channel. To that end, we announced a deal in April to acquire Artisan Design Group, or ADG, which is a leading provider of design, distribution, and installation services for interior surface finishes, including flooring, countertops, and cabinets. ADG serves national, regional and local homebuilders as well as property managers. We expect this acquisition to increase our penetration of Pro plan spend and will position us to gain share in a highly fragmented $50 billion market. And with an estimated 18 million homes needed in US by 2033, new home construction is expected to be a major driver of Pro plan spend over the next decade. We've been impressed with ADG's strong leadership team and their customer-centric operating model reflected in the best-in-class customer satisfaction scores that it earned from top builders in the US. The transaction is expected to close this quarter, so we'll provide an update on our progress during our next call. Now let's talk about another key pillar of our Total Home strategy, accelerating online sales. In the first quarter, online sales were up 6% driven by increases in both traffic and conversion rates. We're pleased with the technology transformation that's making these gains possible. For example, we're now able to offer an expanded assortment, more value, and an even wider extended hour with our launch last year of the first online product marketplace in home improvement. While we're still in the early days of this initiative, we recently partnered with Miracle, a global leader in marketplace technology to help us scale even faster. Through Miracle, trusted marketplace sellers will be able to easily manage their catalogs on This will add new product categories across the home and offer DIY and Pro customers a full spectrum of value and premium products. We can accomplish all of this without having to carry the inventory or invest in new fulfillment centers. As we scale our new product marketplace and unlock its potential, I look forward to keeping you updated on our continuing efforts to drive online growth. Now allow me to transition to how we're leveraging new AI capabilities to better serve our customers. In collaboration with Open AI, we launched MyLowe's, the first AI-powered Home Improvement Virtual Adviser. Since home improvement is inherently complex, MyLowe's provides step-by-step instructions for any project with any level of complexity from how to fix a leaky faucet to how to build a deck and everything in between, and it helps customers find and purchase the right tools and materials for their projects directly on or the Lowe's App. We're encouraged by our progress in leveraging AI to streamline the customer experience and I commend our technology and digital team for their outstanding contributions. Notably, in Q1, Lowe's mobile app earned a prestigious Webby Award and was recognized as the best mobile app for 2025. This is another reflection that our investments in technology and innovation are paying off. Before I wrap, let me update you on our commitment to be a good neighbor in the communities where we do business. Earlier this month, we celebrated our commitments to supporting our communities by announcing our efforts to measure our impact in a new way, through our Here to Help initiative with a goal to deliver 10 million square feet of impact nationwide this year. This includes our ongoing efforts to create safe, affordable housing respond to disasters and revitalize communities like our five-year $100 million commitment to improve home towns across the country. This new initiative reflects our commitment to improve the communities where our associates live and work, and we look forward to providing you with updates later in the year. In closing, I want to thank our frontline associates for their continued hard work especially in this key spring selling season. And with that, I'll turn it over to Bill. William Boltz Thanks, Marvin, and good morning, everyone. We're pleased that our first quarter sales were in line with our expectations, driven by broad-based strength in Pro and Online across multiple merchandising categories. Beginning in hard lines, after a slow start February, our spring season is off and running. As the weather improved, we delivered solid growth in key categories, including patio furniture, fertilizer, grass seed, generators, and irrigation. Customers responded to our innovation products and new affordable designs even when it came to some discretionary purchases. For example, our private branded Ashton 5-piece patio dining set by Style Selections was a big hit at less than $400. We're also continuing to earn DIY customers' loyalty through MyLowe's Rewards. We just marked the first anniversary of this program, which has more than 30 million members who spend nearly 50% more than non-members. We're cultivating their loyalty and using data-driven marketing to engage them with the right message at the right time to convert sales. For example, during our Spring Fest event, we offered members special deals every two weeks on lawn and garden products, patio furniture, outdoor power equipment and more, plus member-only doorbusters in-store and online. And new this year, in early April, we launched Mulch Madness. During this event, customers saved on five bags of Mulch for $10, and for the first time, members also received 5x bonus points and a free gift. We also brought customers industry-leading innovation this spring with products like the new EGO Line IQ Attachment-Capable String Trim. This product makes it easy to load the trimer line with the push of a button, and its attachment capabilities mean it can convert into eight different tools, including an edger, hedge trimmer, and pole saw. This is one of more than 20 new EGO items they're launching this year. We're also in stock with the industry's best brands to help customers complete all the projects like Scotts Fertilizer, Miracle-Grow Soils, Toro Lawn Mowers, along with products from Craftsman and Kobalt. Now turning to Building Products. We delivered positive comp sales in Building Materials and Rough Plumbing with strength in roofing, drywall, plumbing repair, water heaters, and air circulation categories. And in Lumber, we delivered growth in siding, treated lumber, and composite decking. In fact, Lowe's has the largest selection of composite decking brands, including the top two with Trex and TimberTech along with an improved offering from Deckorators. Let's talk about Home Decor. Our continued strength in appliances helped us deliver growth in both transactions and average ticket and we saw growth across all major categories, including refrigeration, laundry, cooking, and dishwashers. As the industry leader in appliances, we have the widest assortment of top brands using our market delivery model, we can deliver these big and bulky products next day to virtually every ZIP code in the US. And Of course, our knowledgeable Red Vest associates are always there to help customers choose the right products and highlight new and innovative items that can meet their needs. For example, we're introducing the next step in all-in-one laundry with the new Samsung bespoke AI vented all-in-one combo washer and dryer. This one machine washes and dries closing just over an hour without having to transfer loads and it uses the existing 110-volt outlet and dryer vending found in most homes. Our Paint department has become the home center color authority where we instill color confidence in consumers with trusted Sherwin-Williams colors. We're excited to see the new marketing campaign from Sherwin-Williams, which uses their iconic color palette to entice customers to shop Lowe's, including the Pro campaigns, where we continue to gain traction with our compelling value and expanded assortment. And while we're energized by new and innovative products, we're also mindful of the current market dynamics. Bigger ticket project spend remains under pressure in interior categories like flooring and kitchens and bath, with many customers still dosing to delay those larger purchases. I'd like to spend a few minutes discussing our approach to spring. Our teams have never been more in sync as we prepared for this important season. Our stores, supply chain, inventory, vendor, and merchant teams have worked hard to make sure that we provide the best service product value and innovation to our customers. For this spring season, we are ready with strong in-stocks across our core categories, including our seasonal items so that we can serve both our DIY and Pro customers with great values on items that they are looking for as we head into the upcoming Memorial Day, Father's Day, and July 4 holidays. Looking ahead, I'm not only pleased with the great deals and innovation that we have for our DIY and Pro customers. I'm also excited to see some of the best in-stock positions during my tenure at Lowe's. And when you combine that with the outstanding staffing and customer service in our stores, the result was our recognition as number one in customer satisfaction among home improvement retailers from J.D. Power. As I wrap up, I want to thank all of these teams as well as our MST associates for their support, partnership, and great execution this spring. And now with that, I'll turn the call over to Joe. Joseph Mcfarland Thank you, Bill. Good morning, everyone. Let me start by thanking our frontline associates for their hard work and dedication during the spring season. Their efforts are paying off with customer satisfaction scores up 100 basis points over last year, as we leverage better technology and ongoing process improvements to enhance the shopping experience. Turning to Pro. In our most recent survey, Pros indicated that project backlogs remain healthy, but they are feeling a little less confident as might be expected, given the uncertain macro environment. Although Pros may be a bit cautious right now, our ability to deliver mid-single-digit growth in Pro sales comp in Q1 is a reflection that our strategy is working. One highlight this quarter, we're really pleased with the successful nationwide relaunch of our Pro Loyalty Program. The updated program now called MyLowe's Pro Rewards, allows Pros to earn points from day one and is much more intuitive to use. Just one example. Pros only need to provide their phone number and check out, getting them back to the job site faster, and joining has never been easier with the addition of our new Spanish language enrollment option. With the program that's easier to use and understand, we're expecting greater utilization, driving repurchases and higher spend. Another way we're driving momentum is through our new technology Workbench for our Pro sales associates. They can use this digital tracking tool to quickly identify their leads and prioritize the quotes to close. This drives both the betterment customer experience and greater associate productivity. As discussed earlier, our planned acquisition of ADG represents a natural step in driving pro penetration by extending our reach with the new cohort of Pro customers, single and multi-family home builders. Turning now to our perpetual productivity improvement or PPI initiatives. In conjunction with the rollout of MyLowe's on for customers, we've also released MyLowe's Companion for our store associates built on the same technology. With immediate access to product details and project advice and inventory information, this AI-powered app gives associates the product and project knowledge to sell with confidence regardless of tenure or experience. Associates across all 1,700-plus stores can access MyLowe's Companion on their mobile devices, marking the first time a retailer has successfully implemented this kind of technology at scale. With this knowledge at their fingertips, our associates can quickly feel confident in answering customers' questions, even if they've just started in the store or been asked to cover a new department. We're also driving productivity with our gig delivery network, which has been an important component of our enhanced omnichannel customer experience. We're now using this capability to help us mix spring demand, specifically during the Mulch Madness event that Bill just mentioned. In the past, this high-traffic event will take a valuable flatbed distribution capacity. But this spring, we shifted a portion of the volume to gig delivery. This provides an efficient delivery experience for customers buying Mulch, while freeing up capacity to meet the delivery needs of other Pro and DIY customers. We're also pleased to announce that our East Ashville store reopened earlier this month after damage from Hurricane Helene. During the hurricane, the store has submerged in over 18 feet of water. So we are thrilled that we are now able to reopen it to serve our customers and community. And we're on track to open 5 to 10 new stores later this year, in line with what we shared at our analyst and investor conference. Of course, all of this is only possible because of our hard-working associates. As a demonstration of our appreciation, we closed our stores on Easter for the sixth consecutive year, giving associates time on this very special day to rest and recharge with family and friends. As I wrap up, I want to take a moment to thank our veterans, including our veteran associates who can be identified with our camouflage vests. Lowe's is ranked among the top military-friendly brands in the US, which speaks to our company's commitment to the military community. As a marine, I couldn't be more proud of Lowe's efforts to honor those who served, especially as we approach Memorial Day. Looking ahead, with excellent spring staffing levels and ongoing innovation across technology and service, I'm confident that we're offering a best-in-class omnichannel shopping experience for our customers this season. To close, I want to congratulate our store associates for being recognized by J.D. Power as the number one customer satisfaction among home improvement retailers. This is a testament to their ongoing commitment to serving our customers. With that, I'll turn it over to Brandon. Brandon Sink Thank you, Joe, and good morning. Starting with our first quarter results. Diluted earnings per share of $2.92 were in line with our expectations. Q1 sales totaled $20.9 billion, and comparable sales were down 1.7%, in line with our expectations as we cycled over an earlier start to spring last year. Comparable average ticket was up 2.1%, with continued growth at Pro and Appliances, somewhat offset by ongoing pressure in DIY discretionary project demand. Comparable transactions declined 3.8%, partly driven by unfavorable weather earlier in the quarter that pressured spring traffic, which make up a larger portion of our transactions this time of year. And given the poor weather early in Q1, comps were down 5.4% in February, up 1.7% in March, and down 2.6% in April. As our stores are closed on Easter Sunday, we estimate that the later timing of Easter benefited March comps and pressured April comps by a similar amount. Adjusting for the Easter shift, comp sales were down approximately 0.9% in March and up approximately 0.2% in April. Gross margin was 33.4% of sales in the first quarter, up 19 basis points from last year, driven by multiple PPI initiatives as well as some modest improvement in Shrink and Credit revenue. SG&A of 19.3% of sales de-levered 56 basis points driven by lower sales volumes, the wrap of incremental wage actions for frontline associates, and higher health care-related costs. Operating margin rate of 11.9% declined 50 basis points versus prior year and the effective tax rate was 23.9% in line with the prior year. Inventory ended Q1 at $18.3 billion, in line with prior year, with strong in-stocks across the store, including key spring seasonal items. Turning now to capital allocation. In the first quarter, we generated $2.9 billion in free cash flow. Capital expenditures totaled $518 million as we continue to invest in our strategic growth priorities, including the construction of new stores expected to open later this year. In the quarter, we paid $645 million in dividends at $1.15 per share. And in April, we repaid $750 million in debt maturities helping us deliver adjusted debt-to-EBITDAR of 2.99 times and our return on invested capital of 31% at the end of Q1. Last month, we announced a definitive agreement to acquire Artisan Design Group for $1.325 billion. We plan to use cash on hand to finance the transaction, suspend share repurchases this year, and repay the remaining $1.75 billion in bonds maturing in September. The transaction is expected to close in Q2, and it's expected to be accretive to diluted earnings per share in the first full fiscal year after closing. Looking forward to the remainder of the year, today we are affirming our fiscal 2025 outlook. We continue to expect sales ranging from $83.5 billion to $84.5 billion with comparable sales in a range of flat to up 1%. We expect operating margin in a range of 12.3% to 12.4% and full year diluted earnings per share of approximately $12.15 to $12.40. We also expect capital expenditures of approximately $2.5 billion as we invest in our Total Home strategic priorities and begin to ramp up new store builds. Please note that this outlook does not include any potential impacts related to the acquisition of Artisan Design Group. To assist with your modeling, here are a few items to keep in mind for the second quarter. We continue to expect comp sales in the first half to be roughly flat with approximately $400 million in spring demand shifting into Q2 where we are cycling particularly poor weather. As Bill mentioned, we also have strong in-stocks, including in critical seasonal categories as well as visibility up into our supply chain, so we're confident that we can meet customer demand this spring. Taking this into account, we expect second quarter comp sales to be approximately 150 basis points above the bottom end of our full year guide. We also expect second quarter operating margin rate to be approximately 10 basis points above the prior year adjusted operating margin rate. And in closing, we remain confident in our team's ability to execute at a high level and manage through this challenging environment as well as any team in retail. We continue to invest in our Total Home strategy and remain focused on delivering value to our customers and our shareholders. And with that, we'll open it up for your questions. Operator (Operator Instructions) Simeon Gutman, Morgan Stanley. Simeon Gutman My first question is on the relationship of comp to expense leverage or operating leverage for the rest of the year. I guess we don't know for the quarter, you gave us a little bit of help with the second quarter but it looks like that ratio is a little bit higher for the balance of the year, something like 25 basis points of expansion for whatever is left in comp. Is that right? Are you getting more of the business? Or is it just the timing because we don't know the comp cadence through the year, and it's the same. I think it was 10 basis points of leverage relationship. Brandon Sink Simeon, it's Brandon. So as it relates to the specifics on the comp guide, let me kind of break it down in terms of first half and second half. The first half, mainly a weather story. We're expecting roughly flat comps over the course of the first half, and we talked about the shift of the $400 million from spring to play out Q1 into Q2. Q1 played out as expected. So as I referenced expecting roughly 1.5% Q2, we feel like we have strong inventory levels, and we're ready. We have a lot of confidence in Q2 expectations. And then implied in the second half is roughly a plus one. We expect to continue to see momentum with our Total Home sales initiatives offsetting hurricane pressure. So that's kind of the shape of the top line. As it relates to margin, we're expecting gross margins to hold roughly flat for the full year. The PPI portfolio initiatives continue to offset cost and inflationary pressures. On the SG&A side, the team continues to outperform there managing a number of lines really well. We got $500 million roughly in OpEx offsetting there across a number of pressures that we're seeing. So that kind of gets you to the guide of 12.3% to 12.4%. Again, Q1 roughly in line with expectations, and that's how we're thinking about Q2 to Q4. Simeon Gutman Okay. And then shifting gears, maybe for Marvin, I wanted to ask about the Larger Pro and Artisan Design Group. I guess, is the deal signaling that you're planning to move quicker here if opportunities present themselves? How we think about that in relation for Lowe's? And then can you talk about how quickly the business is growing organically? Or whatever that growth rate of the business looks like? Marvin Ellison Yeah. We feel really good about the acquisition. We've been really disciplined with how we've managed our capital. And so any time we decide to make any acquisition is well thought-out and then we have a lot of confidence in it. I think the best way to answer your question is as we think about capital allocation, it really remains the same philosophy, and that's we're always going to invest in the business. We're going to always think first about how we can get the healthy return that's going to be long-standing and sustainable. Having said that, we also believe that it's important to find ways to grow. And as we look at ADG, as an example, we think that they are perfectly positioned for the recovery that has to happen over the next decade in housing. To us, we know we're in a repressed period. But as I mentioned, in my prepared comments, you got 18 million new homes needed by 2033 and Artisan Design Group is number one in their marketplace from a perspective of service and overall business, and we think that we have some really attractive adjacencies that we can add to that portfolio. And also during a very fragmented environment, which means that they have a healthy pipeline themselves of potential targets to continue to grow through acquisition. And we're going to allow them to continue to follow a really best-in-class process to pursue those potential targets within their pipeline. We're not changing our strategy. We've just been opportunistic. We feel like that we've created a really nice playbook and execution model for the small to medium Pro. The data reflects that with mid-single-digit positive comps this quarter, but this gives us an opportunity to kind of broaden our Pro portfolio and to now have the ability to be in a separate channel with a $50 billion TAM that just gives us additional opportunity to grow when the market continues to recover. Brandon Sink And Simeon, this is Brandon. Just specifics on financials. ADG delivered $1.8 billion in sales in '24. As I mentioned, we expect EPS to be accretive in the first full fiscal year. So that would be fiscal '26 and we're going to hold on giving anything more specific. We expect to close in Q2, and we'll hold off and be prepared to talk more in August. Operator Steve Forbes, Guggenheim Securities. Steve Forbes Brandon, I think in your commentary, you mentioned a percentage of transactions being sort of spring transactions more elevated in the first half of the year and maybe potentially more elevated in the second quarter this year. So any sort of context to help us better understand sort of how reliant right or how relevant spring is in terms of percentage of transactions first quarter versus second quarter? Brandon Sink I don't know that I'll get into the details, Steve, on Q1, Q2. I'll just say Q1 average ticket up just over 2%, continues to be driven by strength in Pro, also momentum in Appliances. We also saw some benefit from storm recovery projects. As you referenced, comp transactions down 3.9%. It is driven by fewer smaller ticket seasonal transactions and ongoing DIY pressures that we're seeing in the business. Large ticket for us, was slightly positive. Again, that's Appliances and Pro strength and that's a continuation that we saw from Q4. But I would say, as you look out at Q2, and for sure, over the balance of the year, we continue to expect average ticket to be the primary driver of comps, and we would expect to see transactions recover specifically in Q2 as the business starts to get momentum. Steve Forbes And then, Marvin, just a quick follow-up. I think one of the initiatives that wasn't mentioned in the prepared remarks is localization discussed during the Analyst Day and so forth. Any updates on sort of the localization strategy. How that's progressing? How many stores you're touching? How much of the opportunity is still ahead for Lowe's? Marvin Ellison Yeah, Steve. So I'll speak about it more from the standpoint of space productivity because we've taken localization and just really part of a broader initiative on just improving productivity, both in our physical space in our stores and virtually online. So I'll let Bill talk a bit about some of the key initiatives like workwear a pet that we're really excited about and what our plans are to continue to expand that and how we think that's going to give us an opportunity to just continue to have more productive space in our stores. William Boltz Thanks, Marvin. Steve, we're well underway with all three of those initiatives. We'll have Rural completed here kind of end of second quarter, early Q3. Workwear, we're well down the path of having roughly more than 1,000 stores complete by the end of this year and wrapping up early next year for the remainder of those. And then, we continue on the same track with our Pet initiative, and we're excited about that continuing to learn as we go, and continuing to adjust as we go as well as we roll out these stores and as we put these products in, but we're really pleased with the results of all three. Operator Robbie Ohmes, Bank of America. Robbie Ohmes The first question is just I was wondering if we could get a little more on tariffs in terms of pricing impacts that you guys might be expecting? And the impact on the private brand part of your business versus vendor announced price increases? And just color on how you're managing that there? And then I have a follow-up. Marvin Ellison So Robert, I'll take the pricing part, and I'll let Bill just provide a broader perspective on tariffs in general. I think for us, as always, we're going to take a portfolio approach to pricing. We're pleased we've built best-in-class tools for price management that's going to help us navigate any environment, and we have great elasticity data across products and geographies. I think the key for us is the merchants have been cultivating and developing just wonderful relationships with suppliers for the last six years. And this is when those relationships start to pay off. Before I hand it to Bill, I think the key point for us is, that we're going to be really price competitive in the home improvement channel, like we always are. We're not in the habit of donating market share to the competition, and so in this environment, we're going to be as keenly focused on competing on price as we are every single day, and we think we can do that and still deliver on the financial commitments that Brandon outlined in his prepared comments. So I'll let Bill talk a little bit more about the overall global sourcing philosophy that we have here. William Boltz Thanks, Marvin. And Robbie, I think it's important that everyone understands how we look at global sourcing, and we look at it really from two lenses, a direct and indirect perspective. Direct being where we direct import where Lowe's is the importer of record and then indirect, where we purchase from suppliers, and then they are the importer of record. And currently, as Brandon said in his remarks and Marvin said in his, roughly 60% of our purchases are out of the US. The next largest is China sitting at roughly 20%. And you can understand where some of those categories fall, a lot of holiday, [trim and tree], ceiling fans, small appliances, tools, et cetera, make up that 20%. But we've been working really hard over the last four or five years to diversify just as everybody has and partnering closely with both private and national brand suppliers to find different sourcing locations and working to do that. We're also trying to accelerate that as it relates to our private brand portfolio and doing the same with our national brands. And as Marvin said, it all comes down to relationships and we're really pleased with the relationships that we've built over the six-plus years, and we feel like we have a strong track record of managing our assortments, managing the cost as it comes to us, and we'll continue to run our playbook as it relates to that. Robbie Ohmes That's really helpful. And just a quick follow-up for Marvin. Marvin, marketplace, what's the dream for us here? Where do you -- how big could this be? And how important could this be? Marvin Ellison Well, I can tell you that we're excited about it. And the partnership with Miracle is important because it's the number one technology platform for large marketplace sellers. And so it's an easier pivot for them to transition to in an easier pivot for our digital team to load their catalogs in a very, very efficient way in a very time-sensitive way. We have high expectations. As we've looked at the entire retail landscape across the globe, and we look at brick-and-mortar retailers that have demonstrated the most effective omnichannel strategies and sustainable growth. One correlating factor is of marketplace existence. And we're pleased to be the first product marketplace in home improvement. We have, again, high expectations that not only can we manage core home improvement, which our team does really well now, but we also now with a marketplace environment can manage premium and value products and we can do it without adding capital-intensive fulfillment centers and without adding additional inventory to our balance sheet. So early days, but we're excited about the progress, and we're excited about the number of world-class sellers that are eager to join our marketplace, and we look forward to updating you all as this become a more mature initiative. Operator Scot Ciccarelli, Truist Securities. Scot Ciccarelli So given the softer trends you continue to see in bigger ticket products. First, how much of that mix do you think that generally represents? I know just changes quarter to quarter, but kind of on an annualized basis? And then second, what do you think you need to see to unlock greater activity in that segment? Is it improved consumer confidence? Or is it lower interest rates? Because presumably, those are post scenarios? Or is it something else entirely? Marvin Ellison So Scot, I'll take the first part, then I'll let Brandon and Bill join in add any additional commentary. I think from an overall consumer perspective, we feel like our overall consumer remains healthy from a balance sheet perspective. And as we look at the historic demand drivers of our business, they still remain positive, and I've repeated them in the past, home price appreciation, aging housing stock, personal disposable income is now growing faster than inflation. And overall, we see rising real income and lower debt. So overall, our consumer is in great shape. But we still, as we said in the prepared comments, have the DIY customer pulling back on large, big ticket discretionary. And that is, in essence, the issue that we're dealing with. And we believe that part of that is elevated mortgage rates and mortgage rates not falling perceived by many in the marketplace. And so we're just managing that as best we can. So I'll let Brandon and Bill provide any additional perspective after just giving you a view of what we see the consumer. Brandon Sink Scot, I would just add, as Marvin mentioned, consumer overall, very healthy. But for us in home improvement, especially big ticket, the affordability challenge remains the primary concern, inflation rates, as Marvin mentioned, rate still hovering 30-year mortgage around 7%. We've yet to really see at scale the consumer reengage in larger discretionary categories still mainly sitting on the sidelines. I think the good news is the trends aren't getting any worse. You referenced the greater than 500 ticket sentiment has softened a little bit more recently, but we haven't seen that necessarily translated into consumer behavior yet. So for us, as we look out, we're looking for sustained increase in discretionary projects and DIY traffic for the inflection point. We don't have that necessarily expected or baked into '25. It's sort of expected it's going to be more of the same at this point. William Boltz And Brandon, I think the only thing I would add is from a positive or a bright spot perspective, our Appliance business continues to be from a big ticket perspective, a good news story for us. And it's really a trend that's been ongoing since really the back half of last year and has trended into Q1. We saw strength across every single major category, which includes refrigeration, laundry, cooking, dishwashers. The team has done a really nice job of introducing new and innovative products. I spoke to some of those in our -- in my prepared remarks, whether that's all in one laundry, whether that's in cooking, whether that's in refrigeration and then you add in what we've done from a delivery perspective and the market leadership position that we have to be able to deliver to really any ZIP code within two days and same day is something that we're really excited about. And again, roughly 100,000 appliances break every day. So you've got to be ready for that and our in-stock position, appliances have never been better. So those are all positives when we look at that part of the big ticket business. Operator Seth Sigman, Barclays. Seth Sigman Sounded like Q1 was limited by weather. Can you give a little bit more perspective on what you're seeing in the markets where you've had steadier spring weather conditions? How much of those markets outperformed? And just related to that, if you look at the April adjusted comp, the positive 0.2, do you view that as the run rate of the business? And I guess you're kind of guiding to the first half being flat. So is that how you're thinking about it? Marvin Ellison Well, the simplest way for me to answer the question is when the sun is shining, our business performs a lot better. And so when you look at Q1, the variation by geography was driven exclusively by weather. And as weather continues to moderate, our business continues to get better, and that's reflective in the adjusted comp number you reflected for April. I mean we feel good about the trends in May, is consistent with the guidance that Brandon provided and consistent with our expectations. And Brandon, I don't know if you have anything else to add? Brandon Sink No, I would just add, Seth, just in terms of weather benefit, we did see 50 basis points of impact from hurricanes, Helene and Milton from back half of last year that turned into Q1 and those were mostly benefited in our Southeast region. So just in addition to the normal weather, I'll reference that. Seth Sigman Okay. Great. Very helpful. And then as I think about the full year guidance, you talked about first half being flat, it implies the second half could potentially accelerate in that range. If I recall, the initial guidance suggested that it would be more driven by your own initiatives? I'm just curious, is that still the case? Has your view on the macro for the back half changed at all? Just help us bridge that a little bit more. Brandon Sink Yeah. I think, Seth, no change from the macro assumptions from what we laid out in our guide in February. As I mentioned earlier, working through still a number of short-term challenges around rates cautious consumer affordability to lock in effect. Those are all things that we assumed at the beginning of the year. That's still the expectation as we move through Q2 and second half. And you're exactly right. The momentum is really around our Total Home strategy. There is some offset with hurricane pressure in the second half. That was about 100 basis points each in Q3 and Q4. But the benefit from our strategy as we look at both the Pro with loyalty, job site delivery, momentum with extended aisle. Marvin talked about marketplace momentum and with DIY in the second half, some of our category accelerators all that, and the ramp in the momentum is what's included in that second half comp expectation. Operator Steven Zaccone, Citigroup. Steven Zaccone I want to focus on DIY. Marvin curious, do you think the environment has gotten more competitive from retailers outside of the traditional home improvement channel? For example, the e-comm pure place has got bigger in your categories, and one is now growing their focus on rural. Do you see this as a threat to your business as you grow your rural framework? Marvin Ellison No, I appreciate the question. I think that retail has always been competitive. And with the ease of e-commerce coming into any type of space with easily parcel shipped product, it's going to just continue to get more and more competitive. Having said that, we do believe there's a lot to be said about product knowledge, about store environment, about ease of shopability both in-stores and online. And that's one of the reasons why we've invested so much in technology. And one of the reasons why we mentioned in our prepared comments, is reflected in J.D. Power's representation of Lowe's being number one in customer service in the home improvement sector. Yeah, I'll let Joe talk a little bit about some of the things that we're doing to compete with nontraditional competitors based on product knowledge based on giving our associates tools so that they can help customers solve problems in their homes. And we think that's going to be the difference between us growing and maintaining share and also taking share from other competitors that don't have the capital focus or the technology platform to continue to invest in innovation, which we think is going to play a huge role in being competitive. Joseph Mcfarland And Steve, just to follow-up on Marvin's comments, when I think about the MyLowe's app that we rolled out to our associates, and that product, project knowledge right at their fingertips, even for brand new associates, the adoption rate is far ahead of schedule the amount of input that the associates are giving back to the app. And we're really pleased with these tools. In addition, I mentioned our gig delivery network and how we're coming to market for things like Mulch Madness for the DIY customer, without impacting our Pro customer. We have the Extended Aisle in-store, and so really excited about all the different touch points that we have across the DIY network. As we continue our mode shifting to compete online, whether the product is in the store, whether it is in a warehouse or a special our associates are confident and they have access to it at their fingertips today. Steven Zaccone The second question I had also kind of strategic. The acquisition of Artisan Design Group. do you view this as the first of many, like basically do this acquisition grow some of the capabilities of the business and maybe we could see some more M&A in the future? Marvin Ellison No, I appreciate the question. I think the short answer is we're just going to be opportunistic. We believe that we've done a really nice job of being disciplined around looking at potential acquisition targets. Whatever we decide to potentially acquire, we wanted to tie directly to complementing our Total Home strategy, and we think ADG does exactly that. We still want to get this transaction closed as Brandon mentioned, we think that will get done by the end of this quarter. And we're going to just continue to look at all opportunities that we think will allow us to grow, allow us to bring returns to our shareholders and to continue to just use our capital in a very efficient way. So more to come on that. We look forward to just keeping you updated on ADG and how we believe that they can benefit us, and we can benefit them from a category adjacency standpoint that's going to be incredibly complementary in a marketplace we currently are generating $0 of revenue and that's new home construction, and we think that the potential growth opportunities over the decade is going to be incredibly attractive. Operator Christopher Horvers, J.P. Morgan. Christopher Horvers So my first question is on the Pro business, do you think there was any impact to the business related to weather in the first quarter? Mid-single digits, very strong. It did moderate from the pace last year. So was there any impact? And are you seeing improvement in that as the weather has broken? Marvin Ellison This is Marvin. The short answer is, was absolutely impacted the business in Q1. And as the season and weather start to moderate on a more seasonally consistent basis, the business improved along those same exact lines. Again if you do the adjustment for closing in Easter, we had comp improvement each month of the quarter with a adjustment of April being positive -- and we feel great about our Pro business. We feel great about the momentum in that business. And we also are really pleased with the adoption of our updated Pro Loyalty Program, MyLowe's Pro Rewards the ease of use and also the number of new customers that are joining the platform. So we feel like our playbook for the small and medium Pro continues to work, and we have really no concerns about the trajectory of our Pro business. Christopher Horvers And then a follow-up question on the tariff side. Historically, the industry has managed to gross margin rate, especially considering the technology that you referenced, Marvin and the leverage that you have over vendors. Does that remain your expectation, given where tariff rates sit? And then there's never been so much focus on inventory accounting methods. I think your FIFO, and does that portend some benefits, maybe earlier that you would ultimately just get back later, but a little bit of a sign curve around the merchandise margin? Marvin Ellison So Chris, I'll take the first part, and I'll let Brandon join in. From our perspective, I guess the best way for us to think about this is that -- we have tools that will allow us to manage this and manage this in a way that we're going to memorize any impacts to our customers. And as I said earlier, we're going to be price competitive. It's something that we feel is incredibly important to our business, and it's also important for us to maintain market share. And so we're not donating share to any competitor by sitting back and not being price competitive across any of the categories that we're selling, whether they're domestic or imported. We believe that through our portfolio approach and some of the work to build seeing, we do with line structures, we're going to be in great shape. We've done all the math and based on the current tariff environment, we feel very comfortable that we'll be able to deliver the financial guidance that Brandon updated. So I'll let Brandon talk to you a little bit about the accounting in our world and how we see that primarily impacting us in the back half of the year. Brandon Sink So Chris, this is Brandon. On the margin and the inventory piece of this, yes, I referenced earlier, our expectations for gross margin roughly flat for the full year. That's inclusive of any impacts from trade policy. And you referenced our accounting methodology for inventory is first in, first out. So FIFO accounting, which essentially means any incremental cost that we see will flow through our margin as we turn through our inventory layers. I referenced earlier, just the strength that we have in our current inventory. So our current inventory layers and visibility up in the supply chain, we do expect any incremental impact that we see to be more concentrated in the second half of our year, and that's baked into the expectation. So as you think about first half and margin, really minimal impact for any of this activity. And then as Marvin's referenced, as we look out at the second half, we're going to continue to take a portfolio approach with what we're doing and continuing to work through and minimize any impact to our customers. But that's what's baked in our expectation. Christopher Horvers Just to clarify that, meaning like really no FIFO impact early but some headwinds later? Or is it the tailwinds later than the headwinds as you get into '26? Brandon Sink Yeah. So Chris, the actual cost will be flowing through in the second half, but all of our mitigation actions and everything that Marvin and Bill have outlined, we expect to manage and we expect to offset the majority of that. Operator David Bellinger, Mizuho Securities. David Bellinger The first one on Appliances, one of the few categories that outperformed the company. Can you talk about the sales pull-forward if any, that you saw in that category? And also, have you seen any pull-forward in other large ticket categories, furniture, outdoor patio, grills? Anything like that, that helped to lift the Q1 comp later in the period or even early into Q2? William Boltz Yeah, David, it's Bill. We really didn't see anything that we could hang our hat on as being pulled-forward. And so we're specifically to Appliances, as I said in earlier response, really pleased with just the trajectory of that business and how it's performed really since the back half of last year into the first quarter of this year and how it's performing early in Q2. So 100,000 appliances break every day. The efforts that we've put around making that experience easier for our customer and for our associates to sell the product and for our customers to navigate both online and in-store are all things that we're really proud of. And then the work that our supply chain team has done to be able to deliver to virtually anywhere in the United States in two days or less, I think is one of our big competitive advantages. In addition to all the work that the merchants have done to bring just great product and innovation across every single category. And that's what drives this business and that's what we're excited about. Brandon Sink Yeah, David, I would just add, as Bill referenced, with appliances specifically, as we look at unit growth and acceleration. We started to see that early in Q3 last year and saw that accelerate to the better part of the back half of last year, obviously, strength as we got in here to Q1. So the activity sort of pre-post any change in trade policy is there. So at this point, we don't believe we're seeing any indication of any sort of widespread pull forward, but we're going to continue to monitor as we get into the balance of the year. And Rob, with that, we have time for one more question. Operator Peter Benedict, Baird. Peter Benedict The first one is around kind of your extended aisle effort and more specifically as it relates to the Pro and some of the things that you're doing there I know you're expecting some scaling of these micro initiatives, I guess, into the business over the back half of the year. Can you maybe give us a little more perspective on what exactly is happening with the extended aisle and how many vendors are starting to kind of take advantage of some of those capabilities? That's my first question. Marvin Ellison Well, Peter, I don't want to get into that level of specifics. But what I will tell you is as we did a soft launch of this initiative, all the vendors that we were able to get in our system their business performance accelerated dramatically. And so we're excited about this. And also, this also helps us with fulfillment because in many cases, a lot of these Pro vendors have their own delivery capabilities, and they're doing job site delivery in addition to providing us with great cost that we could provide great retailers on to our customers. I'll let Joe add a little bit of color to this because his team, along with Q. Vance's team are managing this really closely in the stores. Joseph Mcfarland Yeah. Thanks, Marvin. And Peter, just important to remember, early innings and says we onboard incremental suppliers throughout 2025 in scale. We're going to continue to see this business grow. Here's what it really does for us. It allows immediate visibility to our suppliers' inventory. And as well, we have our volume pricing and delivery speed all incorporated. We can now generate quotes within minutes, seven days a week, on things that used to take days and four to five days a week. And then as Marvin said, there's an option for direct deliveries right from the supplier to the customer. And so those are just a few of the unlocks that extended aisle gives, and we're really excited about it. Peter Benedict My follow-up would just be beyond the China exposure around 20%. Is there a way to think about where you could potentially take that over time? Or are we kind of at levels where the product coming from there is basically going to come from there? Marvin Ellison So Peter, I'll answer the first part, and I'll let Bill provide some perspective. My request would be for any retailer providing global sourcing percent by country of origin it'd be really good to get a definition of how they calculate that because as Bill articulated, we look at it from a direct and indirect, and we combine together. In a lot of cases, companies look at it only as direct where they are the import of record, and we try to have a really more holistic view of how we view it. So based on indirect and direct, we estimate is roughly 20%. And as we noted, we're working aggressively with our global sourcing team and the combination of Bill's team and Margi Vagell's supply chain team to reduce that exposure and we feel like we're in a great position to do that. And I'll let Bill provide a little bit more perspective on that. William Boltz Yeah. Peter, I covered some of this earlier, but it's -- again, we're looking at in partnership with both private brand and national brand suppliers to find different countries in order to produce this in producing this product. And in addition, as Brandon touched on, looking at SKU by SKU, product category by product category, looking at line structures, looking at assortments, looking at what makes sense going forward. And in some cases, some of those items may not make sense going forward. And so we want to make sure that we do the right thing, sourcing it from the right location and just because we found another country to produce it, it may not end up short term being the right country to do right out of the gate. So we're taking a very disciplined approach and the team is working really hard at it, looking at it across all the categories. And you can just imagine the level and magnitude of work that's required when you have to go do this SKU by SKU, vendor by vendor. Kate Pearlman Thank you all for joining us today. We look forward to speaking with you on our second quarter earnings call in August. Operator This concludes the Lowe's first quarter 2025 earnings call. You may now disconnect.
Yahoo
22-05-2025
- Business
- Yahoo
Q4 2025 VF Corp Earnings Call
Allegra Perry; Vice President - Investor Relations; VF Corp Bracken Darrell; President, Chief Executive Officer, Director; VF Corp Paul Vogel; Chief Financial Officer; VF Corp Simeon Siegel; Analyst; BMO Capital Markets Brooke Roach; Analyst; Goldman Sachs Laurent Vasilescu; Analyst; BNP Paribas Exane Michael Binetti; Analyst; Evercore ISI Matthew Boss; Analyst; JP Morgan Adrienne Yih; Analyst; Barclays Investment Bank Ike Boruchow; Analyst; Wells Fargo Dana Telsey; Analyst; Telsey Advisory Group Operator Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the VF Corporation fourth-quarter fiscal year '25 earnings conference call. (Operator Instructions)Thank you, and I would now like to turn the conference over to Allegra Perry, Vice President of Investor relations. Please go ahead. Allegra Perry Hello, and welcome to VF Corporation's fourth-quarter fiscal 2025 conference call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar and continuing operations basis, which we've defined in the presentation that was posted this morning on our Investor Relations website and which we use as lead numbers in our discussion. Because we believe they more accurately represent the true operational performance and underlying results of our may also hear us refer to reported amounts, which are in accordance with US GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the presentation, which identify and quantify all excluded items and provide management's view of why this information is useful to me on the call will be VF's President and Chief Executive Officer, Bracken Darrell; and EVP and Chief Financial Officer, Paul Vogel. Following our prepared remarks, we'll open the call for questions.I'll now hand over to Bracken. Bracken Darrell Thank you, Allegra, and welcome to our Q4 fiscal 2025 earnings call and our last call of the fiscal year. In our fourth fiscal quarter, revenue was down 3% in line with our guidance of negative 2% to negative 4%.The Reinvent program and our efforts to improve our operating profitability are working well and significantly overperformed on operating income, up by 400 basis points year-over-year to $22 million, exceeding our guidance. Gross margin improved 560 basis points versus last year from lower material costs, less distressed sales, less discounting and higher quality declined 2% as we executed comprehensive structural changes as part of our operating model transition under Reinvent to simplify the company and enable long-term growth. Net debt was down by over a quarter versus last year. We reduced leverage at year-end by a full turn. We're on track to deliver our stated medium-term goal of 2.5x let me share further details on our total revenue growth. At a high level, if you exclude Vans, we're up 4%. So of course, let's talk about Vans. As I've said before, there's nothing that's not working at Vans that we can't fix with what's working in the rest of the business. We told you last quarter that turnarounds are often nonlinear. To be clear, turnarounds can look nonlinear from a numerical standpoint, and this quarter is an illustration of we are methodically advancing all our initiatives. The actions we're taking to drive improved performance and progress in our turnaround are moving forward in a clear linear manner. In fact, at Vans, we're making progress every week to turn around the business. You don't see the results just yet numerically, but you will. And when you do, there'll be high was down 20% in the quarter after being down 8% in the prior quarter. This quarter's step back doesn't tell the whole story. If you adjust for deliberate strategic additions to manage the marketplace and set ourselves up to achieve profitable growth, the revenue decline was down high single digits versus last year and is consistent with last quarter's in another way, 60% of decline this quarter is a direct effect of deliberately reduced revenue to eliminate unprofitable or unproductive business. Of the total Q4 decline in Vans sales, almost 25% of it was driven by reduced store fronts and reduced channel inventory in China. As we've said in prior calls, the turnaround in APAC has been slower. We're taking the actions needed to set that marketplace up for long-term 35% of the total decline was driven by an additional set of deliberate actions, which were also in place last quarter that had a lower impact. These include the closure of value doors, mainly in the US that were margin eroding. The reduction of distressed sales that were unprofitable and the closure of our own stores, also mainly in the US that were unprofitable. And the results of these actions and others are that Vans gross margin is up significantly let me dissect the revenue a bit further. In non-value wholesale, sell-out was slightly up. And in our key accounts, Vans sell-out was up double digits. The balance of 40% of the decline was all driven by DTC, which is primarily due to soft traffic. What are we doing to address traffic? We're evolving our marketing rapidly to drive brand heat, and we'll get that back. As I said, we've demonstrated that we can do this at Timberland, for example, where we also had a period of to answer the question, I'll get later, how do I feel about Vans and its outlook? Good. As confident as ever. We're executing our game plan, as Sun recently laid out. On talent, Sun's building her team has made several key hires, including the Head of Merchandising, and others are well underway. On products, we continue to focus on footwear by bringing in newness that rollout over back-to-school holiday and next spring and beyond. While reigniting the existing core focus on women and youth is starting to show early results with a positive response to the Super Lowpro, which was just launched and sold out in key colorways early on. Girls bought this product disproportionately, a signal that when we have something new and on trend, girls and women will come terms of marketplace, we're pursuing brand elevation through channel cleanup, elevated stores and digital marketplaces, digital experiences. The cleanest of our channels are non-value wholesale, which is a high proportion of new products is showing encouraging results, and we have opportunities to keep driving more new products to increase that momentum and improving marketing. To quickly summarize, we're making the right decisions to build a durable, growing brand over the long term. We're learning every week, and we're making progress. Growth will let me talk about some key highlights from our other brands. In the North Face, revenue for the brand was up 4% in Q4. DTC rose 9%, with positive growth in all regions, including double-digit increases in both the Americas and [EMEA]. From a product standpoint, outerwear was a standout and footwear continued to grow nicely in all continued its strong performance with revenue up 13% in Q4. Wholesale and DTC were both up globally with lower discounts driving higher margins. Momentum in the 6-inch premium boot continued, while other styles also performed well, including Stone Street and Mt Madison. US search interest growth remained strong in the me close by touching on tariffs and the market uncertainty where Paul will go deeper. How are we approaching tariffs? The same way as we're approaching the rest of the business. With a long-term view but a short-term pace. This is, of course, the dynamic situation. But at a high level, we are well positioned to manage the impact. We have an asset-light model, which gives us great flexibility to move things and adjust in fact, over the past several years, we've strategically diversified our supply chain and proactively reduced our US finished goods sourced from China to less than 2% today. We've also taken steps to strengthen our flexibility, learning from prior macro events. We're seasoned. When the tariffs were announced, we immediately activated our team and processes, organized a series of daily meetings to share feedback from Washington and supplier chain opportunities and cost and factory moves, pricing strategy and communications. These continue coordinated, daily and effective. As a result, we have excellent visibility on the whole equation and have activated a plan to effectively manage it. This is also a catalyst to make our business operate with a faster cycle time, the way we will always operate going forward. Looking ahead, clearly, there's a lot of uncertainty out there from a macro standpoint, but we're not at all distracted by goal is to leverage it to improve our business. Our transformation is on track and progressing well and is allowing us to be more agile and nimble, making better decisions more quickly. We're making progress towards our medium-term goals, regardless of the volatility of the macro environment. We continue to advance on our goal to create a unique multi-brand portfolio company. I'm more confident than ever that the actions we're taking will enable VF to return to growth and deliver strong, sustainable value that, I'll now hand it over to Paul to run through the financials. Paul? Paul Vogel Great. Thank you, Bracken. While I normally dive right into the numbers, I did want to start today by addressing the current tariff environment. As Bracken mentioned, we have been highly proactive in addressing the potential impact from the newly implemented tariffs to ensure that we not only overcome any changes from tariff policy, but that we also emerge even stronger as a company. And while we continue to closely monitor the situation, we believe the opportunity to unlock value within VF lies within our control. This is what will ultimately drive improved performance and lead to VF are activating a multi-pronged plan to address the potential impact from tariffs and believe we can offset these. Let me start by sharing some additional information on our sourcing structure into the US. From a total company perspective, approximately 35% of our global cost of goods sold is related to product costs for goods sold in the US. And geographically, our exposure looks like this. Starting with China. China is less than 2% of total cost into the US and some may recall a higher global number for China. That was because we do manufacture in China, but mostly for goods sold within of that, our top sourcing regions of Southeast Asia and Central and South America in aggregate account for about 85% of what comes into the US. Included in the 85%, our top four sourcing countries are Vietnam, Bangladesh, Cambodia and Indonesia in that order. I also want to start at the potential additional costs created by the current 10% incremental tariff for goods coming into the US. To be clear, this is an unmitigated number, meaning it is the total impact on the business if we did absolutely nothing to offset changes in current tariff an annualized basis, the impact would be approximately $150 million in costs. The timing on tariff implementation stays as currently planned, we would see an impact of 65% of the annualized cost in fiscal '26, with most of the impact in the second half of the actually believe we can offset the impact from the tariffs, and we've activated our plans to do so. This entails cost management, select sourcing relocations and pricing actions. We are leveraging our deep and long-standing relationships with our partners and are working with them to ensure that we have the right cost structure. And on pricing, our approach is strategic and thoughtful. We have strong brands, which is always an advantage in pricing. In cost and supply chain locations, remember, we have an asset-light model, as Bracken mentioned. This provides us great flexibility to move things and adjust every confident, we will fully offset these costs and emerge stronger as a business. So now turning to the financial review of the fourth quarter, starting with the P&L. Our Q4 revenue was $2.1 billion and down 3% year-over-year in line with guidance of down 2% to down 4%. Overall, we are flat in the second half of the year as a whole versus last year after being 7% in the first brand, the North Face grew 4%, led by the brand's DTC performance. Vans revenue in the quarter was down 20%, driven by our intentional actions that Bracken mentioned earlier and continued softness in DTC and rounding out the top three, Timberland posted strong results at up 13%.By region, the APAC region grew 2%, while the Americas and EMEA regions were down 5% and 2%, respectively, as we intentionally reduced promotional activity. The Americas is performing in line with expectations and excluding Vans grew approximately in line with Q3 trends. And lastly, by channel, DTC was down 3%, while wholesale was down 2%.Gross margin for the quarter was up 560 basis points to 53.4%, driven primarily by continued cost tailwinds, lower promotions and higher quality inventory versus last year. SG&A was down 2% as faster-than-expected cost savings from the Reinvent program and initiatives more than offset inflation and investment in product and adjusted operating margin in the quarter was 1%, up 400 basis points year-over-year. Importantly, we're making real margin and profitability improvements as we continue to reshape and strengthen the foundation of our business. Finally, adjusted loss per share was a negative $0.13 versus negative $0.30 in Q4 of last me just make one comment on the full year. The adjusted operating margin improved 110 basis points versus last year, and we continue to make great progress to turn this into an efficient and well-run business as we advance towards our medium-term targets that we outlined to you in the to our balance sheet, where we continue to make good progress. Inventories were down 4% or $71 million at the end of the year. Net debt was down $1.8 billion versus last year, down 26%. As we fully paid off the $750 million April '25 senior notes at the end of March, in line with our stated intentions. As a result, our leverage was 4.1 times at year-end, down 1 full turn versus last free cash flow was $330 million, which when added to the sale of non-core assets was $401 million versus our guidance of $440 million. Importantly, cash flow from earnings was in line with our expectations. The delta was due to a timing impact that affected working on to the outlook. As you know, we are not guiding for the full year, but let me give you a few metrics beyond next quarter to give some indication of where we believe we are heading. First, on cash flow. We do expect operating cash flow and free cash flow -- again, not including the sale of noncore assets to be up while you won't see leverage on the operating margin in Q1, we expect to see operating margin expansion in fiscal 2026. We will continue to make progress on our Reinvent work streams and advance towards our medium-term me turn to Q1, which, as a reminder, is our smallest quarter for the year and also one where Vans has an outsized impact on the consolidated growth relative to other quarters. For revenue, we expect Q1 to be down 3% to 5% on a constant dollar basis. We stated in late January that we expected the first half of the year to be similar in growth rates in the second half of the last fiscal year. We expect Vans in Q1 to be similar to the Q4 trend due to the additional actions we've executed on stores and wholesale value a result of these actions, the revenue trends in the first half of fiscal '26 is expected to be slightly below the second half of fiscal '25. Moving down the P&L, we expect Q1 operating loss to be in the range of $110 million to a loss of $125 million. Gross margin will continue to benefit from fewer discounts and promotions and FX, while SG&A dollars are expected to be flat to down slightly versus last we expect Q1 interest of approximately $40 million and an effective tax rate in the range of 13% to 14%, which is higher than last year's reported tax rate. We will continue to provide you with quarterly guidance on tax rate as things evolve.I also want to take a moment to give you context around our long-term tax expense. Given the changes in global tax rates and our geographic mix, we do expect our reported tax rate to increase over the next one to two years and fluctuate quarter-to-quarter. This will have minimal impact on cash taxes, and we will provide quarterly guidance to help you model this going closing, we remain confident in our strategy and are well underway in transforming VF to strengthen our business and navigate any challenges or obstacles that come our with that, we'll now take your questions. Operator Okay. Thank you. We will now begin the question-and-answer session. (Operator Instructions)Simeon Siegel, BMO Capital Markets. Simeon Siegel Thanks. Hey everyone, good morning. So nice job on the gross margin -- nice job on the gross margin improvement. Obviously, the uncertainties there, and you guys were alluding to it, but just maybe any help how you're thinking about gross margin further into the year and then how we should think about how this looks structurally longer term?And then an ignorant question for you guys, sorry, the $313 million free cash flow from this year, does that include anything from Supreme? And if so, can you just talk about bridging the past years $313 million to the expected growth for next year? Thanks guys. Paul Vogel Okay. Yeah. So obviously, you know we don't give out full year guidance. I'd sort of just rear what I said about margins in general. So we expect to see continued improvement on the margin side in fiscal '26. We believe we're still on track to meet the goals we stated at the Investor Day from a few months there's lots of puts and takes for now, but we still feel really good about that. We're not going to guide specifically on gross margin or SG&A right now, but that's kind of what we're headed as I mentioned on my prepared comments. You won't see much of it in Q1, which implies you can kind of make your indication where that will go for the rest of the cash for the $313 million does not include Supreme. What we are trying to do is, I guess, last year, we've given some free cash flow numbers, included asset sales and things like that. Going forward, we're not going to do that. We'll just talk about pure free cash flow. So what we said is, we expect operating cash flow importantly to be up next year. Free cash flow will be up as well. And the magnitude of that, we'll see depending on sort of exactly where CapEx lands for the full year. Bracken Darrell Great, thanks a lot guys. Best of luck for the year. Operator Brooke Roach, Goldman Sachs. Bracken Darrell Hi Brooke. Brooke Roach Good morning. Thank you for taking your question. Hi Brack and Hi Paul. Was hoping that you could talk a little bit more about the onetime strategic reset actions that you are taking at Vans that weighed on fourth quarter results and are expected to weigh again on first quarter results. Can you just give us a sense of when you might be fully through some of those actions that have already been taken and whether or not you're contemplating any additional strategic reset actions to return the brand to health. Thank you. Bracken Darrell Yeah, thanks for the question. We expected that. By the way, I'm on the -- I think, my seventh day of post-COVID. So if Paul sounds like he's sitting far for me in the corner, and he had a leger huddled over there, and I'm in one corner or so if I cough in the middle, you will know So I kind of highlighted in my script. I mean the bottom line is there are four things in there. One is actions in China that are really deliberately set at trying to reduce the overall level of channel availability in China to get it to the right size and the right places. And that really peaked in Q4 and that impact will continue into Q1, Q2 and then fade in Q3 and be gone in then you've got the others that we talked about before, which are the -- we reduced the number of doors of our own doors. We started that in last year, and it really flows through, I think it's the highest quarter this quarter and that will begin to fade as we go into Q1 and then Q2 and then more in Q3 and gone in then you've got value door closures, which we talked about before, peaks in Q4, starts to come down in Q1, Q2, Q3, Q4 and it's gone in Q4. And then the last one is distressed sales, where we're bringing those down. So I think you can kind of say the impact of these will continue kind of proportionately right through Q1 and Q2 and then in Q3, they come down and then come all the way down in Q4. Brooke Roach Great, thanks so much. I'll pass it on. Bracken Darrell Thank you, Brooke. Operator Laurent Vasilescu, BNP Paribas. Laurent Vasilescu Oh good morning. Thank you very much for -- Hi Bracken, how are you? Bracken Darrell Better. Much better. Laurent Vasilescu Thank you very much for taking my question. Good to hear from you guys. So I understand that you're guiding for free cash flow to be higher at $313 million from last year. I think you have the EUR 500 million note due March 2026, should we assume that you refinance that amount or pay it down? And then Bracken, really specifically here, I think I remember a few quarters ago, you called out that you were happy with the portfolio as it stands. Is that still the right way to think about it? I'd love to get your take there as the environment continues to change. Bracken Darrell Sure. I'll let Paul talk. Paul Vogel So I'll take the debt first. Yeah, so we have the next maturity about a year from now. So yeah, between free cash flow, we have about a $2 billion revolver right now, which we'll have access to and so. Our expectation right now is that between free cash flow and drawing a little bit on the revolver, we'll be able to pay that down a year from now and then moving forward again, we expect free cash flow to continue to improve year-on-year, along with our operating performance and our operating margins. And so that's how we'll move moving forward. So we feel really confident that we're in a good place to continue to pay down debt and particularly the one that's coming up in about a year from now. Bracken Darrell On your second question, Laurent, yeah, we're happy with the portfolio. I think it lines up with the strategy we laid out in October. Now that said, there's always things around the edges that we're going to keep raising and we do a kind of a firm review with our board every year. So we're going to go through that. If there's something that doesn't belong in the portfolio, you can bet that we'll exit it, but there's nothing significant that we talk about. Laurent Vasilescu Okay, very helpful. Thank you very much and best of luck. Bracken Darrell Thank you. Operator Michael Binetti, Evercore ISI. Michael Binetti Hey guys, thanks for taking our questions here. Hope you're feeling not to beat a dead horse on the free cash guide. Would you mind just helping us think about the -- I think you said wait to see where CapEx falls out, any initial plan on CapEx and then working capital. I think there's no benefit this year, and you talked about a strategic timing shift. I'm wondering if you shifted some working capital benefit into fiscal '26 as we think about the build then more on the fundamentals on Vans since you mentioned that the next quarter is seasonally important. And maybe you can talk about the strategy for Vans back-to-school, what we'll see this different coming out of Sun and the team. I know it's a seasonally very important part of the year. Bracken Darrell Sure, I'll take that one after Paul. Paul Vogel Yes. So on the -- first on the free cash flow, yeah, the shift was basically -- we had something payable that was due in the very beginning of early April and to avoid any issues and any potential interest and things of that sort of we actually decided to prepay at the end of March, it was literally probably a shift of a couple of doing it, you knew we'd end up -- this is where we end up with free cash flow relative to our guidance, but we'll always do what's right for the business and it was the right business decision to pay at that time to avoid potentially additional charges. So that's why we did it. And yes, so that will kind of flip just from basically late -- early April until late March, and that's what that then on CapEx, again, the operating cash flow will go up, free cash flow go up. CapEx, we have a plan. We're not going to really guide to CapEx right now. We don't -- but to me, CapEx is also we will -- we're looking at remodels. We're looking at store openings. We're looking at things we need to do on the technology side. And we have a plan that we go through and then we kind of look throughout the year, and we'll adjust accordingly depending on what's working and what's not and where we want to double we've got long-term plans in place, intermediate-term plans and then we have always had some short-term flexibility to move up or down based on need. So that's kind of where we are. Bracken Darrell Yeah. And Michael, to answer your second question, I'll just remind you some of the things that Sun said, and she is very deeply executing. It all starts with leadership. We feel so good about having the right leaders in our president roles. And I feel super about Sun, and she is a magnet for talent. She's worked with a lot of people in this industry, and they seem to -- everybody seems to want to work with her. I can see why after I've been around her. So she's attracting the right people. That's the first step, and it's really second thing is product. She's a product person through and through and product is the most important thing we can do on the Vans brand. We're systematically going to continue to roll out new products. This quarter, we rolled out Super LowPro at a very small level and sold out of the top two styles almost immediately, and they were positioned really for women and youth. And so that's a very, very good sign to she's not just focused on women now. She's focused on men, boys, women, youth and footwear first, apparel second and she's well underway there. You might remember the four-season strategy, which plays itself right in. If you look at our social media now, you'll see a lot of activity in surf, for example, which is a lifestyle queue. But we obviously don't have a lot of products for surf, but the lifestyle is there. And so we're going to continue to build as we go through the year into all those four different activities she's talked then making the hard choices to make sure we have the right places to distribute that we're not dragging along unprofitable stores and then profitable value channels, which we've already talked about. And so she's really well underway, and I feel very, very good about our progress. And you'll still see that as we come into [bag] you see a little more and then holiday more, still more and then in spring even more. So it's just going to keep rolling through and cascading. Operator Matthew Boss, JP Morgan. Matthew Boss Good morning thanks. Bracken, maybe just to switch gears a bit. Could you maybe talk to the health of the North Face brand where you see that brand today? Any changes with direct-to-consumer momentum as we move into then maybe just for Paul. I guess what's the best way to think about progress that you are making with cost actions. Where we stand on that curve? Bracken Darrell Yes. So on TNF, I feel really good about TNF. We've got -- you saw we had very strong sell -- direct-to-consumer sales this quarter, which is terrific. It continues to be a good signal. And that's without what I know is coming. So I'm really excited about the whole approach. In terms of spring, I guess the one thing I'd point to in spring is our footwear business, which is really an all-season business, but probably -- and probably literally skews outside of the winter window, and we grew around the world in footwear and strongly, by the I feel good about that. I think it just shows that this brand really has a role to play outside of the winter period. And we are going to get more and more over time, you'll see more and more products come through. A little bit like story on brands, you're going to see every successive season, you'll see more coming from us on that. We have also, by the way, this is a fine point, but we used to develop just two seasons a year. We're moving to the significance of that is that when you do two seasons a year, it is very easy for your design team to design kind of winter and winter because it kind of overlaps when you had I'll explain that any further. I hope I didn't confuse you and making it four forces us to be better in the spring and the summer. And you are not going to see the impact of that this year, but you're going to see -- it's absolutely going to see a next spring and next summer. So that being said, we certainly have good products for this year. So we're going to keep rolling out and have more and more coming. Paul Vogel Yeah. And then on the cost side, I'd say a couple of things actually. So first is we've now achieved $300 million -- actually a little more than $300 million from the first phase of Reinvent, which we talked about. So we've hit our goals and targets there, which is we started to see a little bit from the second initiative we talked about that incremental $500 million to $600 million of operating profit that was split between SG&A and gross margin. We started to see a little bit of that as well in Q4. So if you look at that and you see we beat on the operating income line and the operating margin in Q4 with revenue that was right in-line with our again, you are seeing that we're getting some of that benefit a little bit earlier than we thought. And we are seeing good progress across our DT business, our supply chain, stores, all those areas. And with that, I did mention that SG&A would be flat to down in Q1. So in general, I think you are starting to see it all come through from a cost perspective. Matthew Boss Great, best of luck. Operator Adrienne Yih, Barclays. Adrienne Yih Great. Thank you very much. Hi. Sorry you're sick. Bracken Darrell Yeah, me too. But I feel better now. Adrienne Yih Good, just in time for earnings. So my question is not to keep on the Vans, but it sounds like there are four things that are kind of like non-comp sales headwinds in two of them, the value doors and the reducing of the inventory seem like they are largely done. But the other two kind of at various levels, diminishing kind of follow-ups into all four quarters, is that -- is the comp progress that you are seeing in the non-value doors enough to offset that? Or are you fantastically guiding us to think that Vans will be down throughout the year, all four quarters?And then I guess a follow-on to that is non-value channel demand is one thing, and consumer demand, right? And I think you're talking about the sellout, it's actually getting better. But in your own DTC, what are you seeing in terms of that end consumer talking to you about kind of brand equity, mind share, et cetera. Sorry, we'll do a last one. Go ahead. Bracken Darrell Okay. So first of all, I think your first question, yeah, the answer to the question at a high level is the impacts of those four things will keep appearing in the base in Q2 -- Q1, Q2 and then a lot less in Q3 and then you're gone in Q4 and that's pretty much true for all of them on some level. So they are about the same. They all have their Vans that keep showing, they basically – we are not doing more of them. They just -- once you do these look for example, when you close a door, you lose four quarters of the if you close value channel, use four quarters of the value channel. So those are going to keep trailing through there. They'll be about proportionately the same through those first two couple of quarters and less in Q3 and then gone in Q4. In terms of in-consumer demand, we're still not getting enough traffic into our stores and our websites. And I refer to that in my script. And this is fundamental brand heat. And we're doing a lot of experimenting to see what we need to do to trigger that. And I don't want to let the count of the bag on anything that's ahead of we are certainly learning a ton. And the good news is that when we have traffic and when there is traffic, when you have a curated assortment, as you do in our non-value wholesale, we're actually flat to up. And if you looked at our key accounts, we are really making sure we have the best assortment, the best execution that we can have. We're up double the key now for us is to take the medicine that we've talked about and then get the traffic up. And so that's a function of two things. You got to have things people want to come by and they've got to know about them. And so Sun is working feverishly on developing those new products and Super LowPro is a great example of what's ahead of then the second one is we just got to keep working on that marketing. So we've got a stronger and stronger marketing program. We've made a lot of changes in there. They're not -- you aren't seeing all of them flow through yet, so it's coming. But we'll get there. We've done it in Timberland. We know how to do this. We just got to execute. Adrienne Yih Timberland looks follow-up is either Bracken or Paul, the tariff dollar amount unmitigated if you were to try to mitigate that through pricing, it looks like a low to mid-single-digit price increase across all geos -- well, yes, across the geographies. So, A, when does the inventory come off of the balance sheet and impact you? Which brands, which geos and then just any other color and thoughts on pricing? Bracken Darrell Let me take the first part of that. I'm going to let Paul take the -- when it starts to show up in our P&L. Yeah, sorry about that. Paul just ran out of the room. Yeah, that's -- you're exactly right. To mitigate that, we have a history of pricing. So pricing is not completely foreign to us. We've systematically priced over time. So we're comfortable with our ability to price. I've gone through really dug into this, and we're pretty good at you're right, it's a completely offset that 10% would be a low or a mid-single-digit number but we are not going to do that. We're going to be very strategic about how we price. We're also going after cost. We're going after relocations of manufacturing, as we said in the script. So we're leaving no stone unturned. And we're also not viewing this as a problem that we've just got to try our hardest to offset as much as we can. We view this as an opportunity. We're going to more than offset what comes our way and turn this into an opportunity. That never waste a crisis is not just a cliche, I have gone through three or four of these in my time, I took the mindset of gosh, we'll try to mitigate all we can, and we did, and we got pats on the back by investors and our Board. And then after about a week after we closed the year, I was like, wow, what was I think it if we just said -- if we really have the right mindset, we could have more than offset all of it. And we did the next year. And that's what we're going to do here. So we're really after it. Paul Vogel Yeah. I mean, Bracken out the most I say just from the impact, you'll see most of the impact in the back half of the year. We are not going to be in specific by brand. We don't really disclose sort of the brand geographic mix of our COGS. But yeah, second half of the year, and as I said, the numbers that we gave you, we expect if nothing changes, if the timing of the implementation doesn't change. It is exactly where it is. We'll see about 65% of that, as I mentioned, in fiscal '26, again with most of that coming in the last two quarters of the year. Adrienne Yih Great. Thank you very much. Best of luck and feel better. Bracken Darrell Thank you. I do. I don't sound better, but I feel better. Operator Ike Boruchow, Wells Fargo. Ike Boruchow Hi, good morning guys. Bracken and Paul. Hope you're feeling better, Bracken. I guess just two questions for me. Just one, if we can talk about Vans, maybe not the revenue per se, but can you talk about the thoughts on what you plan to do with the store base from here? I don't know yet what the ending store count was for Q4. But are there more closures you guys are planning? How are you thinking about that strategically?And then maybe, Bracken, higher level on the dividend, I know you've reduced it given what's kind of going on in the business and tariffs and the macro? Like are there any thoughts going on about potentially reducing it further or even cutting it out right? Just curious how you are thinking about cash preservation in that sense. Bracken Darrell Okay. I will take the first, and I'll let Paul take the second one. Yeah, on the store count, we've added our store count pretty aggressively as we suggested in the last two calls. And I think that's great. We're never going to be done. You're always going to be editing away stores that aren't working and adding where you feel like you have opportunities, and we'll be doing both. But I think the heavy lifting is basically done. Paul Vogel Yeah, on the store count, it is down on a percentage term about 7%. Yeah, or so year-on-year, down 8% actually officially globally, I think its 8%. And we are going to continue to look to optimize with no news. I think you've probably seen a majority of it, but we'll see where it goes. And again, it is all part of CapEx. I will strategically look at stores to close. We look at stores open if it makes sense. We'll look at ways to remodel stores. If that makes sense. We've been testing some new remodels that have gone pretty very early days. So we'll see we'll roll them out slowly. Again, that's why I said that we lease some room in our CapEx budget to adjust, right? So we have some new store remodels, not just in Vans but across our entire store footprint. When we get traction, if we think they are working, we'll have the capacity to accelerate remodels if we don't get the ROI on those that we think we will, we can always decide to pull back and think about it other ways. So -- that's how I think about both Vans, but the store count in general and how we're thinking about it from a growth perspective and a CapEx perspective. Bracken Darrell Dividend, I'll start, and Paul can finish. If it feels like I didn't do a good job. There's nothing to announce. We reduced our dividend twice. We took it down to – it's about $140 million a year now. That's always on the table. If we felt like we needed it, we would certainly open that back up. We said our priority is to bring the leverage down under 2.5 times. So if we feel like we needed to do something that we would. But we have made that decision that we -- and I don't anticipate that. Paul Vogel Yeah, no, nothing else to add. Bracken Darrell Thank you. Operator Dana Telsey, Telsey Group. Dana Telsey Good morning everyone. Hi. As you think about the buckets of the gross margin, where you mentioned the product cost tailwinds, the lower promos and the higher quality inventory. How does that relate by channel and by brand and is any of these buckets continue going forward? What's your outlook? Thank you. Bracken Darrell Boy, that's a pretty complex question. I'm not sure how to answer that except I'll take a stab at a higher-level answer, and then I'll let Paul see if he can go deeper to try to help you what we're doing goes forward. So these are not temporary changes to boost our gross margin and they kind of fade over time. We're fundamentally improving our gross margin. The mix between the suggestion here that there is a gross margin difference between wholesale and retail, you had a higher SG&A on one on the retail side and lower SG&A than the other, but then the gross margins coming is we really think that we'll have a pretty balanced balance portfolio of channel choices there that should actually have very strong gross we expect it to carry forward. I mean I'm really excited about the gross margin improvement we are getting in Vans as planned. A lot of this medicine we are taking is absolutely healing the patient just to stay on the theme today. And I think we can certainly see it in our P&L, especially in our gross margin. So we are excited about it, and we have no interest, desire or willingness to backslide on that. So we expect it to stay. Paul Vogel Yeah. I mean I guess I would just add that obviously, the Reinvent initiatives are initiatives that affect all of our brands positively, things like integrated business planning. Again, it's the benefits that Bracken has talked about and why we think it will become a great multi-brand company is the things -- the initiatives that we're doing on the Reinvent side, the things we're doing on integrated business planning, they will affect, and it is a standardized process that will help all of our brands, and so that will help gross margins again, markdown management will help all of our that helps everything. And then as Bracken mentioned, getting rid of some of the distress and the unproductive value doors at Vans helps gross margins there specifically. But in general, most of the initiatives we have, most we talk about really go against all the brands. Bracken Darrell Yeah. I guess -- and maybe I'll parlay that into a close here. So thank you for the question. Paul and I, and I think I can speak from my whole leadership team, we all recognize gross margin is the most important number in any P&L. And so we're absolutely fixated on improving it systematically over last company, we improved 900 basis points almost 1,000 basis points in gross margin over the time I was there. And while I realize this is a different world, different industry, different, I'm very realistic. We have a lot, we have significant improvement in gross margin still. So I expect to continue to make good progress closing, we really are confident about our strategy. We are really well underway in transforming VF to really strengthen the business and navigate whatever challenges from a macro standpoint. They're not going to distract us. We feel good about where we are. We have a fantastic team. We are making great progress, and we'll keep you updated as time goes everyone, for the questions and the engagement, and we'll see you next quarter. Operator This concludes today's conference call. Thank you for your participation, and you may now disconnect. 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Yahoo
21-05-2025
- Business
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Q1 2025 FinVolution Group Earnings Call
Yam Cheng; Head, Capital Markets; FinVolution Group Tiezheng Li; President, Chief Executive Officer, Vice Chairman of the Board, Co-Founder; FinVolution Group Jiayuan Xu; Chief Financial Officer; FinVolution Group Cindy Wang; Analyst; China Rennaisance Alex Ye; Analyst; UBS Yada Li; Analyst; CICC Operator Hello, ladies and gentlemen. Thank you for participating in the first quarter of 2025 earnings conference call for FinVolution Group. (Operator Instructions) Today's conference call is being recorded.I will now turn the call over to your host Yam Cheng, Head of Capital Markets for the company. Yam, please go ahead. Yam Cheng Thank you, welcome. Hello, everyone. Welcome to our 2025 first-quarter earnings conference call. The company's results were issued via Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's email alerts by visiting the IR section of our website at Mr. Tiezheng Li, our Chief Executive Officer; and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with the prepare remarks and conclude with a Q&A this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For information about these non-GAAP measures and the cancellation to GAAP measures, please refer to our earnings press we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risk and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable we posted a presentation on our IR website providing details of our results for the I would turn the call over to our CEO, Mr. Tiezheng Li. Please go ahead. Tiezheng Li Thanks, Yam. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you are pleased to report that FinVolution delivered strong financial and operational results in the first quarter of 2025. So effective execution of our local excellence, global outlook growth are navigating the expected seasonal softness in the sector, we achieved 10% year-over-year revenue growth fueled by our expanding take rate in China and surging international transaction volume grew robustly, up 36% year over year, complimenting China's slightly 7% growth. These successes job a record-breaking quarterly net profit of RMB738 million. The height since our transition to a loan facilitation model in 2019. This is represented increases of 39% year over year and 8% quarter over quarter, assessment to our operational we are mindful of ongoing microeconomic uncertainties, such as global trade tensions, property sector softening, and evolving regulations in China's consumer finance sector. We maintain a cautiously optimistic outlook. This confidence stems from two fundamental strengths in our business our proven resilience. Since our IPO in November 2017, we have successfully navigated multiple challenges, including our transition to an institutional funding model, Indonesia's regulatory change, and the COVID we have delivered consistent year-over-year growth in both transaction volume and revenue for every single quarter since 2021. This track record demonstrates our ability to adapt to regulatory changes and respond to market dynamics with agility and balance risk management with sustainable our strategic diversification initiatives in international markets continue to mitigate the impact of single country risks. Since entering Indonesia in 2018 and the Philippines in 2020, we have systematically built a broad right tech business designed to reduce geographic concentration risk. Our international business generated a total transaction volume of RMB3 billion in the fourth quarter and 36% year-over-year increase. This is outstanding loan balance growing 46% to RMB1.9 international business contributes 20.4% of total net revenue in the first quarter, up from 18.8% in the same period last year. We are on track to achieve our strategic goal of having international business, contribute 50% of the group's total revenue by customer base remains the cornerstone of our long-term growth. In Q1 2025, we maintained strong momentum in borrower acquisition across our markets, onboarding 1.2 million new borrowers, up 62% year over year. This marked our third consecutive quarter exceeding 1 million new borrowers and showing the effectiveness of our AI powered marketing strategy and diversified user acquisition China, we added 512,000 new borrowers, up 37% year over year. In our international markets, we attracted 652,000 new borrowers, up 90% year over year. This marks the fourth consecutive quarter where international acquisitions have exceeded those in China. We expect this trend to continue, thanks to the rising penetration in online lending, as well as our strategic cooperation with lending e-commerce and e-wallet platforms to acquire borrowers in international markets. Our technology initiatives continue to improve efficiency across our are exploring the use of large language models in risk assessment, leveraging their diverse capabilities to automatically extract and analyze and derive insights from unstructured data in consumer credit reports. For instance, the frequency with which a borrower changes a residential address is unstructured, contextual detail that can provide valuable insights into the stability of borrowers' work and the living conditions. Large language models can automatically capture this type of contextual data and convert it into meaningful structured data that can be integrated into our existing risk assessment model to more comprehensively evaluate users' probability of default. In our recent A/B testing, our model achieved observable statistically significant improvements, indicating enhanced risk assessment effectiveness. We've also made substantial progress in automation through our virtual representative integrating large language model, we will upgrade our natural language processing system with intelligent virtual agents that can handle customers' acquisition and a complex workflow. Looking ahead, we plan to expand their role across additional business functions to further boost operational I wrap up, a brief update on our ESG efforts. Our commitment to sustainable finance continues to deliver meaningful impact. In Q1 2025, we facilitated RMB15 billion in financing for 442,000 small business owners, up 15% and 10%, small business loans represent 30% of our China transaction volume, demonstrating our ongoing support for the backbone of China's economy. We further solidified our position as an industry thought leader by serving as a core contributor to the China Finance Consumer Rights Protection Bluebook, a key industry publication developed in a partnership with the National Internet Financial Association of China. With its release in March, we helped shape best practice in consumer protection and financial literacy conclusion, our strong first quarter performance reflects excellent execution of our effective local excellence global outlook strategy. Looking forward, we are well-positioned to capitalize on emerging opportunities while maintaining the agility required to navigate the evolving diversified footprint technological leadership and commitment to sustainable growth position us well to continue creating value for our that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss our operational and financial results. Jiayuan Xu Thank you, Tiezheng, and hello, everyone. Welcome to our first quarter 2025 earnings call. Let's go through our key results for the first quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our first quarter earnings press release for further details. China's macro environment remained uncertain in the first quarter due to global trade there were some encouraging signs. China's GDP grew by 5.4% year over year, while retail sales rose by 5.9% in March. Total social financing expanded 8.4% in March, up from February. Additive manufacturing PMI remained above 50% in February and March, signaling continued recovery the regulatory front, we are pleased to see policies supporting consumption and consumer finance, including increased liquidity and credit supply to boost consumption. Against that backdrop, we delivered a solid domestic performance by leveraging our operational powers and tech China business achieved an increase in take rate from 3.3% to 3.4% sequentially, thanks to our strong partnerships with 114 funding partners that led to a 10-basis-point decline in funding cost. On the credit front, day one delinquency also improved by 10 basis points to 4.6% and our 30-day loan collection rate held steady at 89%.Turning to our international markets. Although GDP growth in Indonesia and the Philippines showed marginally due to trade tensions and the tariff uncertainty, the overall economy remained resilient, bolstered by a large population with solid domestic consumption credit demand for underserved communities in our foodprint market continues to support our strong growth trajectory. Our total international transaction volume exceeded RMB3 billion for the first time, up 36% year over year and 5% sequentially. Outstanding loan balance rose to RMB1.9 billion, up 46% year over year and 9% sequentially. Our cumulative international borrower base has now reached around 8 million Notably, our unique borrowers sold to a record high of 1.7 million in the first quarter, marking an impressive 106% year-over-year increase. As a result, revenue from international markets increased to RMB711 million, up 19.5% year over for Indonesia, while we experienced some seasonal impact in March due to Ramadan, growth continued at a measured pace in the first quarter. Indonesia's consumer confidence index stayed above 120, maintaining its high level for nearly 2.5 years. Unemployment also reached its lowest level in the past 10 years during the first quarter. The change in the interest rate cap imposed at the end of 2024 has had a limited impact on our business as our average loan tenure in Indonesia is less than 6 months. Moving forward, we will closely monitor potential effects from macro economy and domestic transaction volume in Indonesia reached RMB1.8 billion, up 10% year over year, while outstanding balance hit RMB1.2 billion, up 18% year over year. Our user base continued to expand with unique borrowers reaching 671,000, up 32% year over the interest rate cap overhang resolved, we allocated more resource to marketing and focus on quality growth, driving an increase in our new borrowers to 312,000 this quarter, up 69% year over year and 4% sequentially, bringing cumulative borrowers in Indonesia to 5.3 million. We also continue to diversify into offline consumption loan under the multifinance license we acquired, broadening our reach to near-prime customers through scenarios like mobile phone and electronic purchase. All of these efforts drove solid growth in Indonesia amid the seasonal impact of let's zoom in on the Philippines, where we achieved rapid growth and profitability despite Q1 being the traditional low season. In the fourth quarter, our transaction volume in the Philippines reached RMB1.2 billion, up 118% year over year and 18% sequentially. Outstanding loan balance also grew to RMB693 million, up 142% year over year and 26% sequential increase. It accounted for 37% of our international loan balance compared with 23% in the first quarter of 2024. Our outstanding performance in the Philippines has been driven by several key factors, including ongoing improvements in risk management and deeper collaboration with major e-commerce platforms to expand buy now pay later excellent asset quality has consistently attracted institutional funding partners. This quarter, we onboarded the Union Digital Bank as funding partner with several additional institutions in the pipeline. The percentage of loan facilitated by local financial institutions remained around 70% for the quarter. Buy now, Pay later business continued to grow, contributing 30% of Q1 volume, up from 19% in 2024. Going forward, we are confident of maintaining rapid transaction volume growth in the Philippines as we cement our rules in the country, further expand our funding sources and diversify our business on to our financial metrics. This quarter's operational excellence resulted in a strong financial performance. Net revenue for the quarter reached RMB3.5 billion, marking a 10% increase year over year and a 1% increase sequentially despite the low season. Net income was RMB738 million, representing a 39% increase year over year and an 8% sequential increase. Meanwhile, sales and marketing expenses rose by 18% year over year to RMB530 million as we continue to strengthen efforts to acquire new borrowers of higher qualities in both China and international ratio, defined as risk-bearing assets divided by shareholders' equity improved to around 2.7 times. Our total liquidity position consisting of cash and cash equivalents plus short-term investments remained strong at RMB8.5 billion. Next, a brief update on our ongoing efforts to enhance shareholder value. Since 2018, we have continuously returned value to our shareholders in the form of share repurchase and dividends. Recently, our Board of Directors approved our seventh annual dividend in the amount of USD0.277 per ADS, reflecting a EPS increase of 17% year over dividend was distributed on May 7, 2025, bringing our total dividend distribution to shareholders for fiscal year 2024 to USD70.3 million. In summary, strong execution of our local excellence and global outlook strategy drove continued growth in the first quarter of 2025 despite macro headwinds and seasonal softness. We remain confident in capitalizing on China's recovery while maintaining momentum in our international expansion. As such, we are reiterating our 2025 full-year revenue guidance of RMB14.4 billion to RMB15 billion, representing 10% to 15% growth year over that, I will now hand it over to Q&A. Operator, please continue. Operator (Operator Instructions) And for the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, we ask that you please kindly repeat your question in Wang, China Renaissance. Cindy Wang (spoken in Chinese) Thanks for taking my question and Congrats for the great first quarter results. So I have two questions here. First, with recent new regulation on loan facilitation in China, do you see any business impact from it? And what's our basis adjustment for this?And second, so given the recent US tariff uncertainty, have you seen any impact on the Indonesia or Philippines consumption loan demand since April? And how do you expect the international new loan volume in second quarter? Thank you. Jiayuan Xu Okay. Thanks, Cindy. I will take your first question, and Tim will take your second question. Well, your first question is about the new regulations. Yes, it's about the loan facilitation model and the new regulation was announced in April and will be effective in October.I think it's the first time to clearly define the core model of loan facilitation as the loans issued by the traditional financial institutions through the external third-party platforms. So it marks the official inclusion of the loan facilitation business in China's financial regulatory framework and to reference the regulatory authorities formal recognition across the sector. Meanwhile, we noted that the regulations were just following the regulators' focus on consumer finance. We believe it's a positive signal to promote the healthy development of the industry and then to encourage the increase in supply of consumer finance products and boost the consumers' confidence. And if we look at some details in the regulation, we can find the final version to be relatively moderate stance compared with the draft ones as the focus is more on qualitative aspects than the quantitative according to the regulation, banks now are required to implement a white list management system for those cooperative Internet platforms. And the financing costs are clearly defined with all revenue costs should be included and disclosed in the contracts. So we think it will promote the industry's compliance level and benefit those leading platforms, which have the adequate capital, the strong risk management capabilities and high compliance standards. So in conclusion, we believe the overall impact of the new regulation is manageable and it's very -- it's crucial for the long-term development of the industry, okay? Tiezheng Li Cindy, I will answer the second question. Yes, we do have observed the global trade tensions, have introduced certain economic challenges to Southeast Asia. Some of the trade-oriented economies in the region are encountering slower-than-expected economic growth. And right now, many countries are currently engaged in negotiations with the United States to secure favorable tariff rates. And this year, the macroeconomic trend of Indonesia and the Philippines are the first quarter, Indonesia's GDP growth rate decreased to 4.9%, slightly below the 5.2% target. And PMI in April declined by 11% month-on-month to 46.7%. While in the Philippines, GDP growth came in at 5.4%, up slightly by 0.1% from previous quarter and keeping it among Asia fastest-growing economies. Domestic demand continues to drive the economy with consumer spending making up nearly 80% of GDP in Q1. Fortunately, our customers are mainly consumers and the loan demands are less affected by the trade the ground, we've seen some seasonal softness in Indonesia. Remittance slowed things down a little bit, but volume were still up nearly 10% year over year. We expect a nice rebound in Q2 with sequential growth. In the Philippines, it's been a strong start in Q1. Volume jumped 18% quarter on in Q2, we are projecting another solid quarter with good sequential growth. Thank you, Cindy. Operator Alex Ye, UBS. Alex Ye (spoken in Chinese) So I have two questions. First one is on the loan application demand trend in China in the past two months. And do you plan to tighten the credit approval preemptively given the rising macro uncertainty? And how would that impact your full year's loan volume outlook?The second question is regarding the drivers for the improved take rate for the China business and the outlook ahead. Thank you. Jiayuan Xu Thanks, Alex. I will take your questions. Your first question is about the credit demand in April and May. We have delivered solid results in the first quarter. And in terms of the loan application demand, we observed the rate holding steady in April and April, we saw a slight month-over-month decline and rebounded in May has surpassed the March levels. And historically, the main demand tends to be softened slightly due to the seasonal holidays. But this year, we are seeing the moderately better demand. Yes, so that's about the application rate. And in terms of the credit performance, yes, it showed steady improvement in the first quarter and have remained stable in the second quarter so the macro economy still has a lot of uncertainties and given the moderately supportive demand, we have selectively adjusted our risk appetite for marginal assets. And meanwhile, we will closely monitor the macroeconomic trends and the industry development and will dynamically balance between the risk management and the business growth. The performance of April and May, the transaction volumes indicate that a healthy growth trajectory has emerged. So given our current business performance and operation capabilities, we are confident in achieving our guidance of 10% to 15% full-year revenue growth, okay? So that's about the first your second question is about the take rate in our domestic business. Yes. In the first quarter, our take rate in China increased by 10 basis points sequentially, primarily driven by several factors: number one, we further improved the funding cost by 10 basis points quarter-over-quarter; and number two, our loan tenure extended slightly from 8 months to 8.2 months with the improved risk performance. Currently, both risk metrics and funding costs are at historical favorable levels. And looking ahead, we expect that both will remain it will stabilize the take rate at current level. We will continue to drive high-quality growth in China market with refined operations and management. Operator Yada Li, CICC. Yada Li (spoken in Chinese) Then I'll do the translation.I was wondering if you could give more color on the latest business updates regarding the international expansion. Any guidance for revenue and profit in 2025? And besides Indonesia and Philippines, could you elaborate more about the development of other regions as well? That's all. Thank you. Jiayuan Xu Okay. Thanks, Yada. I will take your question. Well, for international markets, despite the uncertainties in the macroeconomic environment, with our proven technological capabilities and the risk control expertise across those diverse markets, it enabled us to deliver a strong first quarter performance. The transaction volume in our international market surpassed RMB3 billion for the first time in this quarter with a year-over-year increase of 36% and a quarter-over-quarter increase of 5%.And the number of unique borrowers reached a historical high at 1.7 million with a triple-digit year-over-year growth. And the revenue from our international market boosted to RMB711 million, marking a year-over-year increase of nearly 20% and accounting for 20.4% of total revenue. And in terms of the revenue and the profit, we maintain our full year revenue growth target of 10% to 15%. The contribution from international markets is expected to increase to 25%. That indicates the growth rate of international revenue will outpace the overall the first quarter, Indonesia and the Philippines collectively achieved a modest profit aligned with our projection. And looking ahead, we expect they will generate a minimum net profit of $10 million in our expansion into the new markets, we have mentioned in the early earnings call, we shared that we recently obtained the banking finance company license in Pakistan. And operation in Pakistan is still in an early stage. Meanwhile, we were actively exploring the new countries to support our long-term means we will -- we aim to deliver at least 15% revenue contribution from international markets by 2030. We would be happy to share if there are any updates. Operator As there are no further questions at this time, I'd now like to turn the call back over to the company for closing remarks. Yam Cheng Okay. Thank you once again for joining us today. If you have any further questions, please feel free to contact us and our Investor Relations team. Thank you so much. Operator Thank you. This concludes this conference call. You may now disconnect your lines. Thank you.
