Financial Data and Key Metrics Changes - Adjusted EBITDA for the first quarter was $75.2 million, with earnings per share at $0.72, and net sales reached $872.9 million, reflecting a year-over-year increase [4][13] - Earnings increased from $28.4 million or $0.56 per share in the prior year quarter to $36.8 million or $0.72 per share in the current quarter [13][15] - Estimated pre-tax inventory holding gains were $5.6 million compared to losses of $16.6 million in the prior year, marking a favorable swing of $22.2 million [16] Business Line Data and Key Metrics Changes - Automotive shipments increased by 17% year-over-year, with shipments to the Detroit Three OEMs growing nearly 13% against a 5% production increase [21][22] - Direct sales volume constituted 63% of the mix, up from 56% in the prior year quarter, while toll processing volumes decreased by 22% year-over-year [20][23] - The construction market saw a modest decline of 3%, while agricultural volumes dropped nearly 50% due to ongoing challenges in the agricultural equipment market [22] Market Data and Key Metrics Changes - Market pricing for hot rolled coil peaked at $950 per ton in March but has since decreased to approximately $800 per ton due to softer market demand [18] - The company shipped approximately 929,000 tons during the quarter, down 7% compared to the prior year quarter, primarily due to decreased toll volume [19][20] - The energy and container markets experienced modest increases, while the heavy truck market saw a 7% decline [22] Company Strategy and Development Direction - The company is focused on electrical steel investments and margin-accretive growth, with production in Canada expected to start in early calendar year 2026 [7][8] - The expansion of the facility in Mexico is set to begin production soon, supporting the electrification of transportation [8] - The company is leveraging artificial intelligence to enhance operations and back-office functions, aiming for improved efficiency and cost savings [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism despite market uncertainties, emphasizing the importance of agility and collaboration in navigating challenges [5][6] - The company anticipates continued growth in the automotive sector and is preparing for potential market recovery in 2026 [32] - Management highlighted a disciplined approach to capital allocation and a commitment to generating strong free cash flow [11][24] Other Important Information - The company reported a cash outflow of $5 million from operations and a free cash flow outflow of $34 million, impacted by increases in working capital [24][25] - A quarterly dividend of $0.16 per share was announced, payable on December 26, 2025 [24] Q&A Session Summary Question: Can you provide more details on the Sedum transaction and mezzanine financing structure? - The Sedum acquisition was financed with $60 million in cash and the contribution of a facility, with the minority interest classified as mezzanine equity due to its unique structure [30][31] Question: What are the future opportunities in the automotive sector? - Management remains cautiously optimistic about the automotive market, expecting to gain further market share and positive momentum in 2026 [32] Question: How does the company manage the impact of Section 232 tariffs on electrical steel laminations? - The company has seen little impact from the tariffs, as customers are willing to pay them, and a significant portion of the customer base is USMCA compliant [35] Question: Will the closure of the Worthington Samuel facility impact toll processing volumes? - The decline in toll processing volumes is primarily due to market conditions and the closure of the facility, with some additional impacts from customer decisions [42] Question: What is the expectation for direct sales volume moving forward? - Direct sales volume is expected to remain in the 60% to 65% range, with toll processing making up 35% to 40% [44]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported approximately $8.3 billion in revenue, exceeding guidance by roughly $800 million, with core operating income at $519 million and a core operating margin of 6.3%, a 50 basis point improvement year-over-year [8][9] - GAAP operating income totaled $337 million, with diluted earnings per share at $1.99 and core diluted earnings per share at $3.29 [8][9] - Full-year adjusted free cash flow was over $1.3 billion, with a healthy balance sheet showing a debt-to-core EBITDA ratio of 1.3 times and cash balances of approximately $1.9 billion [11][12] Segment Performance Changes - Regulated Industries revenue was $3.1 billion, with a year-over-year increase of approximately 3% and a core operating margin of 6.5% [9] - Intelligent Infrastructure revenue reached $3.7 billion, driven by strong demand in cloud and data center, with a core operating margin of 5.9% [9][10] - Connected Living and Digital Commerce revenue totaled $1.4 billion, reflecting a year-over-year decline of approximately 14%, but with a core operating margin of 6.6%, up 210 basis points year-over-year [10] Market Data and Key Metrics Changes - The company anticipates Regulated Industries revenue for Q1 FY26 to be $3.05 billion, up 3% year-on-year, while Intelligent Infrastructure is expected to grow approximately 47% year-on-year to $3.67 billion [13][14] - Connected Living and Digital Commerce revenue is expected to decline by 16% year-on-year to $1.29 billion, reflecting a strategic shift towards higher-margin opportunities [13][14] Company Strategy and Industry Competition - The company is focusing on system-level integration in Intelligent Infrastructure, leveraging AI-related growth across capital equipment, cloud, and data center markets [21][49] - In Regulated Industries, the strategy includes supporting automotive and healthcare sectors while navigating regulatory changes and market dynamics [16][48] - The Connected Living segment is transitioning away from lower-margin consumer products towards advanced technologies in automation and robotics [30][54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth in healthcare and AI-related sectors, despite short-term challenges in automotive and renewables [46][48] - The company expects overall revenue growth of approximately 5% for FY26, with core operating margins expanding to around 5.6% [55][56] - The focus remains on maintaining a strong balance sheet while returning about 80% of free cash flow to shareholders [56][58] Other Important Information - The company completed a $1 billion share repurchase authorization and has a new $1 billion program authorized for FY26 [12] - The anticipated new facility in North Carolina is set to come online in summer 2026, aimed at enhancing AI rack manufacturing capabilities [52] Q&A Session Summary Question: Growth areas in AI - The company expects 25% year-on-year growth in AI revenue, with significant growth in cloud and data center infrastructure, particularly in electrical switch gear [62][64] Question: Healthcare growth outlook - The company anticipates low to mid-single-digit growth in healthcare, driven by drug delivery systems and new business opportunities, despite delays in the Croatia facility impacting margins [63]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2026 was $75.2 million, with earnings per share at $0.72, and net sales of $872.9 million, reflecting a year-over-year increase in performance [4][13] - Earnings increased from $28.4 million or $0.56 per share in the prior year quarter to $36.8 million or $0.72 per share in the current quarter [13][16] - Adjusted EBIT rose to $54.9 million, up $15.5 million from $39.4 million in the prior year quarter, primarily due to higher gross margin and increased equity earnings [17] Business Line Data and Key Metrics Changes - Automotive shipments increased by 17% year-over-year, with the Detroit Three OEMs experiencing a 5% production increase while Worthington's shipments rose nearly 13% [21][22] - Direct sales volume constituted 63% of the mix in the current quarter, up from 56% in the prior year quarter, with a 6% increase in direct sales volume compared to the previous year [20][21] - Toll processing volumes decreased by 22% year-over-year, attributed to softer market conditions and the closure of the Worthington Samuel Coil Processing facility [23][40] Market Data and Key Metrics Changes - Market pricing for hot rolled coil peaked at $950 per ton in March but has since declined to approximately $800 per ton due to softer demand [19] - The agricultural market faced challenges, with volumes down nearly 50% compared to the prior year quarter, while construction market shipments fell modestly by 3% [22] - The energy and container markets saw modest increases, contrasting with declines in other sectors [22] Company Strategy and Development Direction - The company is focused on electrical steel investments and margin-accretive growth, with production in Canada expected to start in early 2026 [8] - Expansion of the facility in Mexico is set to begin production soon, aimed at supplying electrical steel laminations for hybrid and electric vehicles [9] - The integration of AI into operations is a key part of the company's transformation strategy, aimed at improving efficiency and productivity [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the automotive market for the remainder of 2025, despite ongoing market uncertainties [6][21] - The company is positioned to capitalize on opportunities arising from supply chain shifts and customer complexities [6] - Management anticipates potential inventory holding losses in Q2 2026, estimating losses between $5 million to $10 million [20] Other Important Information - The company reported a cash outflow of $5 million from operations and a free cash flow outflow of $34 million, impacted by increases in working capital [24] - A quarterly dividend of $0.16 per share was announced, payable on December 26, 2025 [24] - The company ended the quarter with $78 million in cash and $233 million in outstanding debt, resulting in net debt of $155 million [25] Q&A Session Summary Question: Can you provide more details on the Sedum transaction and mezzanine financing structure? - The Sedum acquisition cost $60 million in cash, financed through ABL, with a unique mezzanine equity structure due to foreign currency involvement [28][30] Question: What is the outlook for automotive and opportunities for market share in 2026? - Management is cautiously optimistic, projecting a unit build rate of $15 million and identifying further opportunities for market share growth [31] Question: How does the company manage the impact of Section 232 tariffs on electrical steel laminations? - The company has seen little impact from tariffs, with strong demand and a significant portion of customers being USMCA compliant [33] Question: Will the closure of Worthington Samuel affect toll processing volumes? - The decline in toll processing volumes is primarily due to market conditions and the closure of the facility, with some customer program changes also contributing [40] Question: What are the expectations for volumes in fiscal Q2? - Normal seasonality is expected, with Q2 typically being 3% to 4% below Q1, and no significant demand triggers anticipated [42]

Financial Data and Key Metrics Changes - The company reported second quarter revenue of $897 million, which was above the estimated range due to stronger than expected orders from large corporate customers and favorable shipment timing in the Americas segment [9] - Adjusted earnings per share were $0.45, exceeding estimates driven by higher revenue and favorable gross margins [9] - Organic revenue growth was 4% year-over-year, with 3% growth in the Americas and 8% growth internationally [10] Business Line Data and Key Metrics Changes - The Americas segment achieved an adjusted operating margin of 11%, remaining flat compared to the prior year [10] - The international segment improved adjusted operating results by $5 million compared to the prior year, driven by cost reduction actions [4][5] - Orders grew by 6% in the second quarter, with an 8% increase in the Americas, primarily from large corporate customers [11] Market Data and Key Metrics Changes - The international segment posted 13% revenue growth, including 8% organic growth, with strong results from India [4] - In the Americas, order growth was driven by the financial services and technology sectors, while education customers experienced a decline [11] - The international order decline was primarily due to weaknesses in Germany and France, offset by growth in India and Japan [11] Company Strategy and Development Direction - The company is focused on transforming workplace environments to support new ways of working as employees return to the office [6][47] - The proposed merger with HNI Corporation is expected to expand market reach and combine industry-leading brands [7] - The company is aligning resources to focus on the best opportunities in markets facing macroeconomic challenges [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in large corporate demand, noting it is occurring at a higher level than anticipated [15] - The company is encouraged by the momentum sustained into the second quarter, particularly from large corporate customers [12] - Management highlighted the need for customers to redesign their spaces to attract talent and support new working styles [42] Other Important Information - The company incurred $10 million in restructuring costs in the international segment, primarily related to the exit of salaried employees in EMEA [10] - Total liquidity at the end of the quarter was $427 million, with total debt at $447 million [12] Q&A Session Summary Question: What was the breakdown of volume versus price increases in the outperformance? - Management indicated that the 8% order growth in the Americas was primarily driven by volume rather than price increases, which contributed only a couple of percent [15] Question: Are there plans for additional price increases? - Management refrained from commenting on future pricing actions but noted that they were able to offset year-over-year inflation and tariff costs with earlier pricing actions [16] Question: How do current end markets compare to earlier expectations? - Management stated that the end markets are more favorable than previously anticipated, with strong demand from large corporate customers [17] Question: What is the demand profile in the Americas? - Management noted that clients are rethinking their office spaces, focusing on outcomes and redesigning spaces to support collaboration and connection [24] Question: How did profitability improve in the international segment? - Management highlighted improvements in both Asia-Pacific and EMEA, with Asia-Pacific showing demand improvement and EMEA benefiting from revenue growth and cost reductions [27][28]

Financial Data and Key Metrics Changes - Company revenue for Q2 fiscal year 2026 was $129.6 million, a 3% year-over-year increase [5] - Adjusted EBITDA reached 20% of revenue, with total company adjusted EBITDA growing 72% year-over-year to $25.9 million [5][16] - GAAP net income was positive at $13.3 million, marking a significant turnaround from a $19.7 million loss in the prior year [16] - Non-GAAP EPS was positive at $0.04, beating guidance [5][16] Business Line Data and Key Metrics Changes - QNX revenue was $63.1 million, representing a 15% year-over-year growth, with an adjusted EBITDA margin of 32% [5][17] - Secure Communications revenue was $59.9 million, with annual recurring revenue (ARR) growing by $4 million to $213 million [11][12] - Licensing division revenue was $6.6 million, exceeding expectations [14][18] Market Data and Key Metrics Changes - QNX design wins were ahead of plan in Q2, with a solid pipeline for the second half of the fiscal year [6][10] - The Secure Communications division saw reduced customer churn and improved dollar-based net retention rate (DVNRR) to 93% [11][13] Company Strategy and Development Direction - The company is focusing on growth in the QNX division, particularly in automotive and safety-critical software [10][25] - Strategic partnerships with companies like BMW and Qualcomm are being leveraged to enhance product offerings [6][9] - The introduction of a new recurring revenue business model through hosted services is expected to create a more predictable revenue profile for the SecuSmart business [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the fiscal year, citing a stronger than expected first half and reduced uncertainty in the market [20][23] - The company anticipates continued growth in QNX and Secure Communications, with raised full-year revenue and adjusted EBITDA guidance [21][22] Other Important Information - The company repurchased approximately $20 million worth of shares during the quarter, totaling 5 million shares at an average price of $3.97 [18][19] - The company expects to generate between $35 and $40 million in operating cash flow for the full fiscal year [23] Q&A Session Summary Question: Insights on QNX operating leverage and guidance - Management highlighted strong operating leverage in QNX, with expectations for improved gross margins as royalty mix increases [28] Question: Strategic approach to the China market - Management noted a shift in the China market towards safety-critical software, which aligns with the company's strengths [31][33] Question: Drivers of QNX's back-end loaded revenue outlook - Management indicated that the revenue pattern for QNX has historically been back-end loaded, driven by the timing of design work and development seat licenses [36][38] Question: Update on backlog and growth sustainability for QNX - Management confirmed a solid pipeline of opportunities for QNX, with optimism for maintaining double-digit growth [44][45]

Financial Data and Key Metrics Changes - Company revenue for Q2 fiscal year 2026 was $129.6 million, a 3% year-over-year increase [5] - Adjusted EBITDA reached 20% of revenue, with total company adjusted EBITDA growing 72% year-over-year to $25.9 million [16] - GAAP net income was positive at $13.3 million, marking a significant turnaround from a $19.7 million loss in the prior year [16] - Non-GAAP EPS was positive at $0.04, beating guidance [5][16] Business Line Data and Key Metrics Changes - QNX revenue was $63.1 million, representing a 15% year-over-year growth, with an adjusted EBITDA margin of 32% [5][17] - Secure Communications division reported quarterly revenue of $59.9 million, with annual recurring revenue (ARR) growing by $4 million to $213 million [11][12] - Licensing division generated revenue of $6.6 million, exceeding expectations [14][18] Market Data and Key Metrics Changes - QNX design wins were ahead of plan in Q2, with a solid pipeline for the second half of the fiscal year [6][10] - The Secure Communications division saw reduced customer churn and secured significant contracts with government entities [12][13] Company Strategy and Development Direction - The company is focusing on growth in the QNX business, particularly in automotive and safety-critical software [10][32] - Investment in R&D and sales and marketing is expected to drive future growth, particularly in the GEM opportunity [28] - The company is exploring new recurring revenue models, such as hosted services for SecuSmart [12] Management's Comments on Operating Environment and Future Outlook - Management noted a decrease in uncertainty regarding tariffs and government policies, which is expected to positively impact guidance [20] - The company anticipates continued growth in QNX and Secure Communications, raising full-year revenue and adjusted EBITDA guidance [21][22] - Positive cash flow is expected for the remainder of fiscal year 2026, with operating cash flow projected between $10 to $20 million for Q3 [23] Other Important Information - The company repurchased approximately $20 million worth of shares during the quarter, totaling 5 million shares [18] - The QNX division is expanding its developer community through educational initiatives [10] Q&A Session Summary Question: Operating leverage in QNX - Management sees significant leverage in the QNX model, with expectations for improved gross margins as royalty mix increases [28] Question: Approach to the China market - The company is focusing on safety-critical software in China, capitalizing on market shifts towards higher performance capabilities [31] Question: Drivers of QNX's back-end loaded revenue - Revenue trends for QNX have historically been back-end loaded, driven by the timing of design work and development seat licenses [36] Question: Backlog growth in QNX - Management indicated that Q2 showed a recovery in backlog growth after a weaker Q1, with a solid pipeline for the second half [44]

Financial Data and Key Metrics Changes - In fiscal year 2025, the company achieved a revenue growth of 7%, adding $5 billion in revenue, with over $80 billion in bookings [5][22] - Adjusted earnings per share (EPS) for Q4 was $3.03, reflecting a 9% growth compared to the previous year [15][21] - Free cash flow for Q4 was $3.8 billion, and for the full year, it was $10.9 billion, up 26% year over year [15][23] Business Line Data and Key Metrics Changes - Consulting revenues for Q4 were $8.8 billion, up 6% in U.S. dollars and 3% in local currency [17] - Managed services revenues for Q4 were also $8.8 billion, reflecting an 8% increase in U.S. dollars and 6% in local currency [18][23] - The capital projects business grew 49% year on year, reaching $1.2 billion [9] Market Data and Key Metrics Changes - In the Americas, revenue grew 5% in local currency, with significant contributions from banking and capital markets [18] - EMEA delivered 3% growth in local currency, driven by insurance and life sciences [18] - Asia Pacific revenues grew 6% in local currency, led by banking and capital markets [19] Company Strategy and Development Direction - The company aims to be the number one partner for the tech ecosystem, with 60% of revenue coming from partnerships with top technology companies [7] - A significant investment of $3 billion in Gen AI is expected to drive future growth, with revenue from advanced AI reaching $2.7 billion in FY25 [8][9] - The company is focusing on a three-pronged talent strategy to upskill its workforce and enhance operational efficiency [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for FY26, citing strong bookings and a solid pipeline for large transformation deals [46] - The overall market conditions have not shown significant changes, and the company remains focused on delivering results [25][26] - The management highlighted the importance of AI in driving growth and productivity, emphasizing that AI is seen as expansionary rather than deflationary [48][49] Other Important Information - The company initiated a business optimization program with an expected total cost of approximately $865 million, aimed at talent rotation and divestiture of non-aligned acquisitions [16] - The company plans to return at least $9.3 billion to shareholders through dividends and share repurchases in FY26, reflecting a 12% increase from FY25 [43] Q&A Session Summary Question: Visibility on revenue growth and discretionary spending - Management indicated strong demand for large transformation deals and a solid backlog, with guidance for FY26 reflecting a range of 2% to 5% growth [46] Question: Thoughts on AI-driven productivity and potential deflationary effects - Management does not see AI as deflationary but rather as expansionary, with savings being reinvested into new priorities [48][49] Question: Balance between Gen AI and managed services - Both consulting and managed services are expected to grow in the low to mid-single-digit range, with managed services becoming increasingly strategic [54][56] Question: Details on CapEx investments - The company expects about $1 billion in CapEx for FY26, primarily for expanding real estate and leasehold improvements [63] Question: Client behavior in using Gen AI - Many clients initially attempted to implement Gen AI independently but later sought assistance for scaling, highlighting the need for change management and process reinvention [78] Question: Expected savings from the business optimization program - The company anticipates savings of over $1 billion from the optimization program, which will be reinvested in the business and workforce [81]

Financial Data and Key Metrics Changes - In fiscal year 2025, the company achieved a revenue growth of 7%, adding $5 billion in revenue, with over $80 billion in bookings [6][7] - Adjusted earnings per share (EPS) for Q4 was $3.03, reflecting a 9% growth compared to the previous year [16][22] - Free cash flow for Q4 was $3.8 billion, and for the full year, it was $10.9 billion, up 26% year over year [16][24] Business Line Data and Key Metrics Changes - Consulting revenues for Q4 were $8.8 billion, up 6% in U.S. dollars and 3% in local currency [18] - Managed services revenues for Q4 were also $8.8 billion, reflecting an 8% increase in U.S. dollars and 6% in local currency [19][24] - The capital projects business grew 49% year on year, reaching $1.2 billion [10] Market Data and Key Metrics Changes - In the Americas, revenue grew 5% in local currency, with significant contributions from banking and capital markets [19] - EMEA delivered 3% growth in local currency, driven by insurance and life sciences [19] - Asia Pacific revenues grew 6% in local currency, led by banking and capital markets [20] Company Strategy and Development Direction - The company aims to be the number one partner for the tech ecosystem, with 60% of revenue coming from partnerships with top technology companies [8] - A significant investment of $3 billion in Gen AI is expected to drive future growth, with revenue from advanced AI reaching $2.7 billion in FY25 [9][10] - The company is focusing on reinvention services, integrating all capabilities into a single unit to enhance service delivery [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for FY26, citing strong bookings and a solid pipeline for large transformation deals [47] - The overall market conditions remain stable, with no significant changes anticipated [26] - The company expects revenue growth in FY26 to be in the range of 2% to 5% in local currency, with an estimated 1% to 1.5% impact from federal business [41][42] Other Important Information - The company initiated a business optimization program with a total expected charge of approximately $865 million, aimed at talent rotation and divestiture of non-strategic acquisitions [17] - The board declared a quarterly cash dividend of $1.63 per share, a 10% increase over the previous year [44] Q&A Session Summary Question: Visibility on revenue growth and discretionary spending - Management indicated strong demand for large transformation deals and a solid backlog, with guidance reflecting a range of discretionary spending scenarios [46][47] Question: AI-driven productivity and potential deflationary effects - Management does not view AI as deflationary but rather expansionary, with efficiency gains being reinvested into new priorities [48][49] Question: Balance between Gen AI and managed services - Both consulting and managed services are expected to grow in the low to mid-single-digit range, with managed services becoming increasingly strategic [54][55] Question: CapEx investments and their allocation - The company expects about $1 billion in CapEx, primarily for expanding real estate and leasehold improvements [63][64] Question: Client behavior regarding Gen AI and agentic solutions - Many clients initially attempted to implement Gen AI independently but later sought assistance for scaling their efforts [82][83] Question: Expected savings from the business optimization program - The company anticipates over $1 billion in savings from the optimization program, which will be reinvested in the business and talent [85]

Financial Data and Key Metrics Changes - Company revenue for Q2 was $129.6 million, growing 3% year-over-year, with adjusted EBITDA reaching 20% of revenue [5][17] - GAAP net income was positive at $13.3 million, marking a significant turnaround from a $19.7 million loss in the prior year [17][20] - Non-GAAP EPS was positive at $0.04, beating guidance [5][17] - Operating cash flow was $3.4 million, with free cash flow at $2.6 million [20] Business Line Data and Key Metrics Changes - QNX revenue was $63.1 million, representing a 15% year-over-year growth, with an adjusted EBITDA margin of 32% [6][18] - Secure Communications revenue was $59.9 million, with annual recurring revenue (ARR) growing by $4 million to $213 million [11][18] - Licensing division revenue was $6.6 million, with adjusted EBITDA at $5.6 million [19] Market Data and Key Metrics Changes - QNX design wins were ahead of plan in Q2, with a solid pipeline for the second half of the fiscal year [6][10] - The Secure Communications division saw reduced customer churn and secured significant contracts with government entities [14][15] Company Strategy and Development Direction - The company is focusing on growth in the QNX business, particularly in automotive and safety-critical software [10][22] - Strategic partnerships with companies like Qualcomm and NVIDIA are being leveraged to enhance product offerings [9][33] - The introduction of a new recurring revenue model through hosted services is expected to create a more predictable revenue profile for the Secusmart business [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the fiscal year, citing improved visibility and reduced uncertainty in the automotive market [22][40] - The company is raising full-year revenue and adjusted EBITDA guidance due to stronger-than-expected performance in the first half [21][23] Other Important Information - The company repurchased approximately $20 million worth of shares during the quarter, totaling 5 million shares [20] - The QNX division is expanding its developer community through educational initiatives, with over 4,000 students participating in QNX learning sessions [10] Q&A Session Summary Question: Operating leverage in QNX - Management indicated strong operating leverage in QNX, with expectations for improved gross margins as royalty mix increases [28][29] Question: Approach to the China market - Management highlighted a shift in the Chinese market towards safety-critical software, which aligns with the company's strengths [31][32] Question: Drivers of QNX growth in the back half of the year - Management noted that the revenue trend for QNX has historically been back-end loaded, driven by the start of programs and design work [36][37] Question: Backlog growth in QNX - Management stated that Q2 showed a recovery in backlog growth after a weaker Q1, with a solid pipeline for the second half [45][46] Question: Sustainability of QNX growth - Management expressed confidence in maintaining double-digit growth for QNX, supported by new programs and a strong pipeline [47][48]

Financial Data and Key Metrics Changes - In fiscal year 2025, the company achieved a revenue growth of 7%, adding $5 billion in revenue, with over $80 billion in bookings [6][24] - Adjusted earnings per share (EPS) for Q4 was $3.03, reflecting a 9% growth compared to the previous year [18][23] - Free cash flow for Q4 was $3.8 billion, with a total of $10.9 billion for the fiscal year, marking a 26% year-over-year increase [18][25] Business Line Data and Key Metrics Changes - Consulting revenues for the year were $35.1 billion, up 6% in U.S. dollars and 5% in local currency, while managed services revenues reached $34.6 billion, up 9% in both U.S. dollars and local currency [25] - The capital projects business grew 49% year-over-year, reaching $1.2 billion, largely driven by organic growth [11] Market Data and Key Metrics Changes - Revenue growth in the Americas was 5% in local currency, with significant contributions from banking and capital markets, while EMEA and Asia Pacific saw growth rates of 3% and 6% respectively [21][22] - The company added 37 clients with quarterly bookings greater than $100 million in Q4, totaling a record of 129 such bookings for the year [10] Company Strategy and Development Direction - The company aims to be the number one partner for the tech ecosystem, with 60% of its revenue derived from partnerships with top technology companies, which grew 9% in FY 2025 [9] - A significant focus is placed on advanced AI, with a $3 billion multi-year investment leading to a tripling of revenue from Gen AI to $2.7 billion [10][11] - The company is implementing a refreshed talent strategy to upskill its workforce, with over 550,000 employees trained in Gen AI fundamentals [13][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for FY 2026, citing strong bookings and a solid pipeline for large transformation deals [46] - The company anticipates revenue growth of 2%-5% in local currency for FY 2026, with an estimated 1%-1.5% impact from its federal business [41][42] Other Important Information - The company initiated a business optimization program with a total expected cost of approximately $865 million, aimed at talent rotation and divestiture of non-strategic acquisitions [19] - The board declared a quarterly cash dividend of $1.63 per share, a 10% increase over the previous year, and approved an additional $5 billion for share repurchases [43] Q&A Session Summary Question: Visibility on revenue growth and discretionary spending - Management indicated strong demand for large transformation deals and a solid backlog, with guidance reflecting a range of discretionary spending scenarios [45][46] Question: Thoughts on AI-driven productivity and potential deflationary effects - Management does not view AI as deflationary but rather as expansionary, with efficiency gains being reinvested into new priorities [47][48] Question: Balance between Gen AI and managed services - Management sees both consulting and managed services growing in the low to mid-single-digit range, emphasizing the strategic importance of managed services [53][54] Question: Details on CapEx investments - The company expects about $1 billion in CapEx, primarily for expanding real estate and leasehold improvements [61][62] Question: Client behavior regarding Gen AI adoption - Many clients initially attempted to implement Gen AI independently but later sought assistance for scaling, highlighting the need for change management and process reinvention [80][81] Question: Expected savings from the business optimization program - The company anticipates over $1 billion in savings from the optimization program, which will be reinvested in the business and workforce [83]