CSX Corporation (CSX) Q1 2025 Earnings Conference Call April 16, 2025 04:30 PM ET Company Participants Operator - Conference Call OperatorSean Pelkey - EVP and Chief Financial OfficerKevin Boone - EVP and Chief Commercial OfficerMatthew - Conference Call ModeratorJoe Hendricks - President and Chief Executive OfficerMike Corey - EVP and Chief Operating Officer Conference Call Participants Rika Hernane - Analyst, Deutsche BankTom Waterwicks - Analyst, UBSChristian Weatherby - Analyst, Wells FargoKen Hexter - ...

Kinder Morgan, Inc. (KMI) Q1 2025 Earnings Conference Call April 16, 2025 04:30 PM ET Company Participants Rich - Executive (providing the opening forward‐looking disclosure and natural gas market update)Kim - CEO (presenting financial results and discussing management succession) Rich all include forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any ...

Financial Data and Key Metrics Changes - Prologis reported a core FFO of $1.42 per share, including net promotes, and $1.43 per share excluding net promotes, both exceeding forecasts [15] - Occupancy at the end of the quarter was 95.2%, a decrease of 70 basis points from year-end, attributed to strong retention [15] - Net effective rent change during the quarter was 54%, with cash basis at 32%, leading to same-store growth of 5.9% and 6.2% respectively [16][17] - The company raised approximately $400 million in new capital for its flagship open-ended funds, with a similar amount in redemptions, resulting in a near-neutral capital raise [20] Business Line Data and Key Metrics Changes - Prologis leased 58 million square feet, nearing record levels, and broke ground on several build-to-suit developments [10] - The data center business saw an increase of 400 megawatts in power capacity, totaling 2 gigawatts in advanced stages [19] - The company started approximately $650 million in new developments, with nearly 80% in built-to-suits averaging 16-year lease terms [17] Market Data and Key Metrics Changes - The operating environment showed a post-election uptick in leasing, with increased proposal volumes and conversions, particularly in transport, food and beverage, consumer products, and electronics [22] - Net absorption for the quarter was 21 million square feet, with global rents declining by 1.5%, primarily in Southern California [88] Company Strategy and Development Direction - Prologis aims to leverage its global footprint and diversified rent roll to navigate market disruptions and capitalize on emerging opportunities [12][14] - The company plans to reduce development start guidance to $1.5 billion to $2 billion, reflecting uncertainty in the capital markets [33] - The strategy emphasizes investing in markets where goods are consumed rather than produced, aligning with long-term growth prospects [14] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential recession and inflation, noting that decision-making among customers is slowing due to tariff uncertainties [11][12] - The company remains confident in its ability to weather economic fluctuations, citing a fortress balance sheet and contractual revenue streams [13] - Management anticipates increased inventory levels as businesses stockpile, with e-commerce expected to gain market share [30] Other Important Information - Prologis received a credit rating upgrade to A2 from Moody's, making it one of only two public REITs with an A-flat rating from both agencies [21] - The company is advancing towards its goal of one gigawatt of solar and storage capacity, with over 900 megawatts either in operation or under development [20] Q&A Session Summary Question: Insights on customer interactions and demand - Management noted that consumption is closely tied to GDP growth, and while a recession would impact consumption, long-term trends remain positive [44] Question: Clarification on leasing and occupancy - The occupancy drop was attributed to a high volume of leases rolling in the first quarter, with retention at 73% [51] Question: Impact of Amazon's market presence - Prologis has signed significant deals with Amazon, with the e-commerce segment showing strong leasing activity [65] Question: Opportunities in the current environment - Management indicated that it is too early to identify specific opportunities, as the market is currently in a wait-and-see mode [69] Question: Demand for smaller spaces - Smaller spaces typically have lower occupancy due to shorter lease terms, but replacement costs are rising, providing some protection against supply issues [124][126]

Financial Data and Key Metrics Changes - Prologis reported a core FFO of $1.42 per share, including net promotes, and $1.43 per share excluding net promotes, both exceeding forecasts [14] - Occupancy at the end of the quarter was 95.2%, a decrease of 70 basis points from year-end, attributed to strong retention [14] - Net effective rent change during the quarter was 54%, with cash basis at 32%, leading to same-store growth of 5.9% and 6.2% respectively [15] - The net effective lease mark-to-market ended at 25%, representing an additional $1.1 billion of incremental NOI [15][16] Business Line Data and Key Metrics Changes - Prologis leased 58 million square feet, nearing record levels, and initiated approximately $650 million in new developments, with 80% being build-to-suit projects [9][16] - The data center business expanded power capacity by 400 megawatts, a 13% increase, totaling 2 gigawatts in advanced stages [9][18] Market Data and Key Metrics Changes - The operating environment showed increased leasing activity in sectors like transport, food and beverage, consumer products, and electronics [20] - Net absorption for the quarter was 21 million square feet, with a global decline of 1.5%, primarily in Southern California [79] Company Strategy and Development Direction - The company aims to invest in markets where goods are consumed rather than produced, emphasizing the need for more warehouse space in a disconnected world [13][92] - Prologis plans to reduce development start guidance to $1.5 billion to $2 billion due to uncertainty in the market [31] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential recession impacts on consumption and decision-making, while also noting the resilience of Prologis due to its diversified rent roll and strong balance sheet [11][12] - The company anticipates increased inventory levels as businesses stockpile, with e-commerce expected to gain more market share [28] Other Important Information - Prologis raised approximately $400 million in new capital for its flagship open-ended funds, with a similar amount in redemptions, resulting in a near-neutral capital raise [19] - The company received a Moody's upgrade to an A2 rating, making it one of only two public REITs with an A-flat rating from both agencies [19] Q&A Session Summary Question: Insights on customer interactions and demand - Management noted that consumption is expected to decline in a recession, but long-term trends indicate growth [40][41] Question: Clarification on leasing and occupancy - The occupancy drop was attributed to a high number of leases rolling in the first quarter, with retention at 73% [48] Question: Stress test scenarios and market conditions - The stress test indicated potential occupancy declines and rent drops, with bad debt expectations adjusted to 75 basis points [78] Question: Impact of tariffs on customers - Management speculated that customers could absorb a 10% tariff, with Mexico expected to benefit from shifts in sourcing [86] Question: Demand for warehouse space - The company believes that a disconnected world will require more warehouse space due to the need for inventory and supply chain adjustments [91][92]

Financial Data and Key Metrics Changes - Operating earnings per share increased to 52 cents, a four cent increase from the previous quarter, indicating positive operating leverage and a strong balance sheet [11] - The quarterly operating efficiency ratio improved to 56.7%, operating return on assets rose to 1.25%, and operating return on average tangible common equity grew to 15.95% [11] - Tangible book value per share increased by 13.8% on an annualized basis [12] Business Line Data and Key Metrics Changes - Customer deposit growth was solid, with total deposits increasing by $200 million or 3%, driven by strong growth in interest-bearing money market products [21] - Total loans declined by $182 million during the quarter, influenced by strategic portfolio management actions [22] - Commercial mortgage and residential mortgage loans showed growth, offsetting some declines in other areas [22] Market Data and Key Metrics Changes - The net interest margin increased by two basis points to 3.43%, while net interest income on a non-FTE basis was $251 million, a decrease of $2.5 million from the previous quarter [24] - The average cost of total deposits decreased by 11 basis points to 2.03% [25] Company Strategy and Development Direction - The company continues to execute its strategic transformation through the implementation of Fulton First, focusing on talent alignment, reinvestment for growth, and operational simplification [13] - Loan growth is expected to be in the low single-digit range for the year due to strategic decisions and the current environment [17] Management's Comments on Operating Environment and Future Outlook - Management remains cautious regarding credit quality as customers navigate a volatile environment, despite improvements in asset quality metrics [18] - The company updated its rate forecast to include four 25 basis point cuts in 2025, which may impact net interest income and non-interest income [32] Other Important Information - The allowance for credit losses to total loans ratio increased to 159%, and the ACL to non-performing loan coverage increased to 193% [30] - The company expects to incur up to $14 million of additional non-operating expenses related to Fulton First for the remainder of 2025 [29] Q&A Session Summary Question: Can you talk more about loan growth and strategic offsets? - Management noted that overall pipelines have increased year over year, but they remain cautious about the pull-through rate due to macro uncertainties [38] Question: What is the impact of potential rate cuts on net interest income? - A 25 basis point cut is expected to be a headwind of about $1.7 million annually [44] Question: How is the credit portfolio being managed in light of tariffs? - Management is closely monitoring the credit portfolio for potential impacts from tariffs and government cost-cutting, particularly in the agricultural and manufacturing sectors [50][54] Question: What is the company's stance on resuming stock buybacks? - The capital strategy prioritizes organic growth and corporate initiatives before considering buybacks, especially in the current environment with limited growth opportunities [65] Question: How flexible is the operating expense guidance under different scenarios? - There is potential flexibility in timing for operating expenses, but management is comfortable with the midpoint of the expense range for now [73]

Financial Data and Key Metrics Changes - The company reported net income of $15 million, or $0.85 per diluted share, with tangible common equity earnings of $16 million, or $0.90 per diluted share [13] - Net interest income increased from $49.5 million to $50.3 million, driving net interest margin to 4.27% from 4.17% [14] - The tangible common equity (TCE) ratio improved to 10.13%, up 36% year-over-year, and tangible book value per share increased to $31.07, up 24% [11] Business Line Data and Key Metrics Changes - Loans increased by $131 million, reflecting an annualized growth rate of 15.5% [9] - Organic originations totaled $197 million, up 64% compared to the previous quarter, with total production at $254 million [30] - Non-interest income for the quarter was $10.3 million, up $1.5 million from the previous quarter, primarily due to a death benefit realized on bank-owned life insurance [15] Market Data and Key Metrics Changes - Non-accrual loans decreased by 10.3% to $24.2 million, while non-performing assets declined by 19.6% to $27.9 million [20] - Delinquency over 30 days increased to $18.2 million but remained low at approximately 50 basis points of total loans [22] - The company anticipates a positive credit outlook for 2025, with problem trends below historic norms [24] Company Strategy and Development Direction - The company announced a merger with NBC Corp, which is expected to add approximately $900 million to assets and expand its market presence in Oklahoma [6][7] - The management emphasized a dual strategy of organic growth and strategic mergers and acquisitions, with active conversations for potential deals [10][37] - The company aims to enhance its product offerings and customer experience through the integration of NBC's capabilities [72][74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining margin and earnings growth despite economic uncertainties related to tariffs [43] - The company is focused on managing expenses and improving efficiency to offset potential revenue headwinds [92] - The management team is prepared for growth opportunities and remains disciplined in assessing M&A opportunities [38][37] Other Important Information - The company closed the quarter with a TCE ratio of 10.13% and a tangible book value per share of $31.07, indicating a strong balance sheet [11] - The company has retained approximately $67 million in capital from a common stock raise in December, ready for strategic growth [9] Q&A Session Summary Question: Impact of tariffs on commercial customers - Management noted that customers have provisions in contracts to pass on costs, and there is currently no indication of a slowdown [42] Question: Update on sales initiatives and loan growth - Management indicated they are in the early stages of sales initiatives, with significant contributions from Tulsa and Kansas City [45][46] Question: Expectations for loan purchases - Management clarified that recent loan purchases were a one-time deal and not part of a consistent strategy [53] Question: Community market activity and growth - Management sees significant opportunities in community markets and is focused on building relationships with local businesses [55] Question: M&A confidence amidst market volatility - Management believes there are still opportunities for deals, driven by age of ownership and management in potential target companies [59] Question: Expected deal accretion from NBC - Management expects about 50 cents in accretion for year two post-merger, with specific figures to be provided later [62] Question: Deposit market competition and cost of funds - Management noted a more rational competition in deposit markets and plans to mirror Fed moves regarding deposit costs [66] Question: Margin expectations with potential Fed rate cuts - Management indicated that while they can defend margins, there may be modest upside potential if rates are cut [90]

Financial Data and Key Metrics Changes - Revenue for 2024 was $1.8 million, down $4.8 million from 2023, primarily due to a reduction in government contracts [24][25] - Operating expenses for the year were $24.9 million, which is a $36.8 million improvement from 2023 [25] - Net loss for the year was $134.9 million, an increase of $84.2 million from the previous year, mainly due to a $127.6 million loss on extinguishment of debt [27] - Adjusted net loss for the year was $26.1 million, compared to $34.3 million for the prior year, showing an $8.2 million improvement [28] - Cash at the end of 2024 was $1.2 million, compared to $0.7 million at the end of 2023 [29] Business Line Data and Key Metrics Changes - The company recognized revenue for commercial operations of the Aquanaut vehicle for the first time in its history [25] - The acquisition of C-Trepid is expected to provide a significant backlog of work and reduce customer concentration [14][34] Market Data and Key Metrics Changes - The offshore market is experiencing a resurgence, with stable oil prices and increased long-term investments in infrastructure [73][76] - The company anticipates 2025 to be one of the busiest offshore markets in the past decade, with strong demand for its services [45] Company Strategy and Development Direction - The company is transitioning from a research and development focus to a commercial revenue-generating model [8] - Plans for 2025 include leveraging lessons learned from the inaugural offshore operations and enhancing the capabilities of the Aquanaut vehicle [10][36] - The government contracting side is expected to provide stability and larger upside compared to seasonal commercial contracts [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming offshore season, citing eagerness from customers to adopt autonomous technology [12][13] - The company has cured its noncompliance issues with NASDAQ and is focused on securing necessary cash for 2025 [22][17] - Management expects significant revenue growth in 2025, projecting revenues greater than $16 million [59] Other Important Information - The company filed restated financial statements due to a correction in accounting treatment for a complex debt transaction [19] - The acquisition of SeaTrepid is seen as a game-changer, providing access to a broader group of early adopters [14] Q&A Session Summary Question: What is the potential revenue for 2025? - Management is confident that revenue will be significantly higher than 2024, projecting greater than $16 million [59] Question: What differentiates the company's autonomous underwater vehicles from competitors? - The company has a leadership position in manipulators for autonomous underwater vehicles, offering unique capabilities such as untethered operation and depth capabilities of 3,000 meters [61][62] Question: What are the capital requirements for the business? - The company is exploring non-dilutive approaches to bring in capital for additional assets based on demand, with potential revenue generation of $6 to $8 million per season per asset [66][69] Question: What market dynamics are contributing to a strong offshore season? - Stable oil prices and long-term investment commitments in offshore platforms are driving demand, along with regulatory inspections and decommissioning activities [73][76]

Financial Data and Key Metrics Changes - The IT services revenue for Q4 was $2.6 billion, reflecting a sequential decline of 0.8% and a year-on-year decline of 1.2% [11] - For the full year, IT services revenues were $10.51 billion, showing a year-on-year decline of 2.3% [12] - Operating margins for Q4 were at 17.5%, flat sequentially but expanded by 110 basis points year-on-year [11] - The net income grew by 6% quarter-on-quarter in Q4 and 19% for the full year, with an EPS of INR 12.6, a growth of 20% year-on-year [30] Business Line Data and Key Metrics Changes - The Americas region one grew 0.2% sequentially and 6% year-on-year, while Americas region two de-grew 1% sequentially and 1.8% year-on-year [13] - Europe de-grew 2.5% sequentially and 6.9% year-on-year [13] - The BFSI sector de-grew 0.5% sequentially but grew 0.8% year-on-year [14] - Capco performed well, growing 6.5% sequentially and 11.5% year-on-year [15] Market Data and Key Metrics Changes - The company closed 17 large deals in Q4 with a total value of $1.8 billion, and for the full year, 63 large deals worth $5.4 billion were closed, reflecting a year-on-year growth of 17.5% [15] - The healthcare sector de-grew 3.1% sequentially but grew 0.1% year-on-year [14] - The consumer sector de-grew 1.3% sequentially and was flat year-on-year [14] Company Strategy and Development Direction - The company is focused on driving consistent, profitable growth and has identified five strategic priorities to achieve this [10] - There is a strong emphasis on AI-powered solutions and consulting-led services to meet client needs [18] - The company has realigned its global business lines to better serve customer needs, effective April 1st [24] Management's Comments on Operating Environment and Future Outlook - The management noted that clients are approaching tech reinvention cautiously due to an uncertain macroeconomic environment and recent tariff announcements [9] - There is an expectation of a sequential revenue decline of 3.5% to 1.5% in constant currency terms for the upcoming quarter [27] - The management remains optimistic about the deal pipeline and expects to stabilize and bring growth back in Europe [121] Other Important Information - The company finished the financial year with a free cash flow as a percentage of net income at 118%, with gross cash including investments at $6.4 billion [31] - The company has hedged about $2.4 billion of forex derivative contracts as of the end of Q4 [32] Q&A Session Summary Question: Which verticals are seeing the highest impact currently? - The CEO noted that sectors like consumer and manufacturing, particularly automotive and industrial, are experiencing significant impacts due to the uncertain economic environment [38] Question: How is BFSI performing in the US and Europe? - BFSI is seeing good traction in the US and APMIA, but there are headwinds in Europe [41] Question: What is driving the weak revenue growth despite strong bookings? - The CFO explained that timing differences in deal conversions and ramp-downs due to lower discretionary spending are affecting revenue growth [53][54] Question: What is the outlook for Europe and its impact on overall performance? - The CEO mentioned that Europe has been a challenge, but there is a strong pipeline of deals and new leadership focused on improving performance [66][120] Question: How does the company plan to maintain margins in a weak revenue environment? - The CFO indicated that while there will be pressure on margins, the company aims to keep them in a narrow band through operational efficiencies and cost management [96][100]

Financial Data and Key Metrics Changes - The company achieved high single-digit sales growth of 7% in Q1 2025, with adjusted earnings per share (EPS) growing 11% to $1.09, finishing at the high end of the guidance range [12][29][27] - Excluding COVID testing sales, sales growth was over 8% [12] - Gross margin expanded by 140 basis points, and operating margin increased by 130 basis points compared to the prior year [27][30] Business Line Data and Key Metrics Changes - Nutrition sales increased by 7%, driven by high single-digit growth in adult nutrition and double-digit growth in US pediatric nutrition [14] - Diagnostics sales declined by 5%, primarily due to a decrease in COVID-19 testing sales; core laboratory diagnostics grew 6.5% excluding China [15][29] - Established a new system, Alinity N, for molecular nucleic acid testing, representing a billion-dollar market opportunity [17] - Medical devices sales grew 12.5%, with continuous glucose monitors achieving over 20% growth [19] Market Data and Key Metrics Changes - Sales in the EPD segment increased by 8%, with double-digit growth in more than half of the key 15 markets [18] - The US dollar's weakening had a favorable impact on sales compared to exchange rates at the time of the previous earnings call [29] Company Strategy and Development Direction - The company is focused on navigating the complexities of a dynamic economic environment, including the impact of new tariff policies [10][11] - A diversified business model is emphasized as a strength, allowing the company to manage global challenges effectively [10] - The company plans to launch over 25 key new products over the next three years, contributing to sustained growth [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining guidance despite tariff impacts, estimating a few hundred million dollars in tariff-related costs for 2025 [45][46] - The company is actively assessing various scenarios to mitigate tariff impacts and is optimistic about its manufacturing network's flexibility [50][52] - Management expects the second half of 2025 to outperform the first half due to new product launches and improved market conditions [102] Other Important Information - The company is investing in R&D and expanding its portfolio in biosimilars and diagnostics, with a focus on enhancing its competitive position [18][90] - The company is also exploring M&A opportunities in medical devices and diagnostics while maintaining a disciplined approach to capital allocation [94][96] Q&A Session Summary Question: Impact of tariffs on full-year guidance - Management confirmed that tariffs will have a financial impact, estimating a few hundred million dollars for 2025, with a focus on mitigating strategies [45][46] Question: State of the EP franchise and Volt approval timeline - Management expressed optimism about the EP franchise, highlighting strong initial feedback for Volt and a potential US approval timeline in early 2026 [65][66] Question: Broader diagnostic strategy and M&A considerations - Management acknowledged challenges in the diagnostics segment, particularly in China, and emphasized the importance of M&A to enhance growth [82][90] Question: Acceleration of top-line growth in the second half - Management indicated that new product launches and favorable comparisons to previous year performance will drive growth acceleration [102][106] Question: Gross margin expectations amid tariff impacts - Management confirmed that tariffs would primarily affect gross margins, but favorable FX movements could help offset some impacts [108] Question: Plans for seeking exemptions from tariffs - Management stated that while they are engaged with industry associations, they do not rely on hope for tariff exemptions and are focused on data-driven strategies [130][132] Question: Diversified model and potential for unlocking value - Management reiterated the value of their diversified model and stated that they are continuously evaluating opportunities to create value without current plans for divestitures [138][140]

Financial Data and Key Metrics Changes - For the fiscal year, sales were $653.4 million, a decline of 1.7% from $664.4 million last year [9][37] - Adjusted operating income for the year was $27.1 million, down from $48.5 million last year [10][39] - Adjusted earnings per share for the quarter and the year were 51 cents and $1.12 respectively [11][37] - Cash at the end of the fiscal year was $208.5 million, with no outstanding debt [11][40] Business Line Data and Key Metrics Changes - In the fourth quarter, sales grew by 3.3% to $181.5 million, with international net sales increasing by 8.8% [10][34] - U.S. net sales decreased by 2.9%, while international net sales increased by 12.2% on a constant currency basis [34][35] - Gross profit as a percentage of sales was 54.2%, up from 53.5% in the previous year [35] Market Data and Key Metrics Changes - U.S. net sales declined by 4% for the fiscal year, while international sales decreased by 0.2% but increased by 0.6% on a constant currency basis [37][38] - The company is closely monitoring the impact of tariffs, particularly a 10% tariff on all global imports and over 100% on certain Chinese products [12][42] Company Strategy and Development Direction - The company is focusing on brand building efforts and has launched a new marketing campaign featuring notable personalities [15][16] - Plans to mitigate cost increases from tariffs include selective price increases and partnerships with vendors [12][42] - The company is committed to maintaining a good, better, best pricing strategy across its brands to cater to varying consumer needs [56] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding future sales due to global economic conditions and tariffs [49][50] - The company will not provide a fiscal 2026 outlook at this time due to the unpredictable impact of tariffs [44][42] - Management emphasized the importance of execution and controlling variable expenses in the current environment [52][58] Other Important Information - The company has restated its financials for the past three fiscal years due to irregularities in the Dubai sales office [6][7] - A charge of $1.8 million was taken in the fourth quarter to cover severance costs related to organizational restructuring [13][36] Q&A Session Summary Question: Could you talk about your marketing strategy this year, given that you plan to spend less - The company will focus more on digital marketing venues for timely adjustments and enhancing messaging with retail partners [47] Question: Are you expecting sales to increase - Management indicated that predicting sales is difficult due to global uncertainties and the impact of tariffs [49][50] Question: Is there a focus on specific product lines or price points - The company is assessing the tariff structure to implement sustainable price increases while maintaining value-oriented price points [55][56] Question: Are there more cost savings initiatives to generate free cash flow this year - The company aims to generate free cash flow and is focused on managing inventory levels and variable expenses [58]