Earnings Labs

Emerson Electric Co. (EMR)

Q4 2025 Earnings Call· Wed, Nov 5, 2025

$138.86

-1.84%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

-0.72%

1 Week

-0.01%

1 Month

+2.63%

vs S&P

+1.73%

Transcript

Operator

Operator

Greetings, and welcome to the Emerson Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Colleen Mettler, Vice President, Investor Relations. Thank you. You may begin.

Colleen Mettler

Analyst

Good morning, and thank you for joining Emerson's Fourth Quarter and Full Year 2025 Earnings Conference Call. This morning, I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Mike Baughman; and Chief Operating Officer, Ram Krishnan. As always, I encourage everyone to follow along with the slide presentation, which is available on our website. Please turn to Slide 2. This presentation may include forward-looking statements, which contain a degree of business risk and uncertainty. Please take time to read the safe harbor statement and note on the non-GAAP measures. Before we begin the presentation, I would like to highlight our upcoming 2025 investor conference on November 20. We are looking forward to presenting on our transformed company, a global automation leader set to deliver a differentiated value creation framework. We will discuss the drivers of our 4% to 7% organic growth framework, detail our plans for additional margin expansion and outline our capital allocation priorities. Additional information about this event is now available on our website. I will now pass the call over to Emerson's President and CEO, Lal Karsanbhai, for his opening remarks.

Surendralal Karsanbhai

Analyst

Thank you, Colleen. Good morning. 2025 marked the 135th anniversary of our company. The Emerson Electric Manufacturing Company was established in St. Louis, Missouri in 1890. The development of a reliable electric motor was the vision of 2 Scotland born brothers, Charles and Alexander Meston, made possible by the financial backing of John Wesley Emerson, a former union army officer, judge and lawyer. Throughout nearly 1.5 century of economic cycles, The Great Depression, 2 World Wars, significant technology innovations and a handful of iconic industrial leaders who navigated uncertain waters, our company completed 2025 stronger than ever. We have transformed. We have momentum in our markets. We have great people, and we are optimistic about our future. Thank you to the 70,000 Emerson employees around the world, to our management team, our Board of Directors and our investors for your trust. I am honored to work alongside each and every one of you in our value creation journey. Please turn to Slide 3. Emerson continues to see resilient demand as customers invest in automation technologies to drive digital transformation and enhance efficiency, reliability and safety in their operations. Underlying orders grew 6% in the fourth quarter, driven by sustained demand in our growth verticals and accelerating orders growth in Test & Measurement up 27% and exceeding our expectations. We had a robust finish to the quarter, and I will discuss more details on demand on the next slide. 2025 was another solid year from Emerson. Underlying sales in the fourth quarter were up 4%. Execution was strong in the quarter with adjusted segment EBITDA margin of 27.5% up 1.3 points. We delivered $1.62 adjusted earnings per share in the quarter, at the top end of our guide. For the full year, underlying sales grew 3%, slightly below expectations as Europe…

Michael Baughman

Analyst

Thanks, Lal, and good morning, everybody. Please turn to Slide 7 for a more in-depth look at our 2025 financial results. Underlying sales growth was 3%. Growth was led by Software and Control, which grew 5%; and Intelligent Devices grew 2%. Our process and hybrid businesses were up 4% and were resilient throughout 2025. Our discrete businesses finished the year up slightly at 1% with lingering weakness in automotive and factory automation. While our discrete businesses accelerated through the year, year-over-year volume was down and represented about a 1 point headwind to Emerson sales growth. Pricing contributed 2.5 points to growth as expected. Underlying growth was 5% in the Americas and 3% in Asia and the Middle East and Africa, while Europe was down 2%. Our backlog ended the year at $7.4 billion. Backlog was up 3% year-over-year due to second half orders growth of 5%, which positions us well for 2026. Adjusted segment EBITDA margin of 27.6% exceeded expectations and was up 160 basis points year-over-year. 50 basis points of this expansion was due to a favorable software contract renewal year in 2025 and the remaining 110 basis points of improvement came from positive price cost, the benefit of cost reductions and synergies from the Test & Measurement and AspenTech acquisitions, which more than offset inflation and tariffs. Adjusted EPS came in at $6, a 9% increase year-over-year, and I will provide more details on the next slide. 2025 free cash flow exceeded our expectations. The free cash flow growth was driven by higher earnings and improved working capital efficiency, which helped offset approximately $200 million of transaction-related costs. Our 2025 free cash flow margin was 18%, up 140 basis points from the prior year. Overall, these results underscore the strength of our portfolio, the resilience of our end…

Operator

Operator

[Operator Instructions] Our first question comes from the line of Deane Dray with RBC Capital Markets.

Deane Dray

Analyst

Maybe just start with some clarification on the software renewal. Is this an accounting change that was impacting the guide here? Or is it really like the timing of your contracts that are up for renewal? And then related, you called out a benefit in your 2025 bridge of $0.15. Is that related to this? Or is that separate? Because you are expecting to recoup this in '27 and '28 that you called out?

Michael Baughman

Analyst

Yes. I'll start with the second half first, which is to say your understanding is correct. And thanks for the question on this contract renewal issue. It's an important dynamic that I want to make sure everyone understands. So we have a portfolio of multiyear term license contracts that have renewal dates over several years. And each year, there are so many that are up for renewal. And this year, we had more than normal that were up for renewal, and that's what drove the $120 million increase that we're calling out on the bridges. Next year, we revert to something more normal, but it represents about $120 million headwind in 2026, and it is an accounting dynamic. And remember, since these are multiyear term licenses, you recognize multiyears of the revenue at the time that you execute the renewal. And that revenue recognition pattern is one reason that the ACV or the annual contract value is so important, because ACV has the effect of smoothing out that accounting dynamic. And the other important reason to measure ACV is that it more closely approximates the cash that we can expect out of that portfolio in the next 12 months. So as ACV grows, the cash flows grow. So you have it right. That is the item that we're talking about. It's not a change in our accounting. It's not a change in the accounting rules. It's just an accounting dynamic that exists in revenue recognition for these multiyear term license contracts.

Deane Dray

Analyst

That's really helpful. And just to make sure I heard it correctly, there's no impact on free cash flow. Is that correct?

Michael Baughman

Analyst

That is absolutely correct. And you made another point that I would like to reiterate, which is that this is a dynamic that will reverse in '27 and '28 relatively ratably over those 2 years.

Deane Dray

Analyst

Great. And then just as a follow-up on the Test & Measurement. This was above expectations in terms of orders. You called out some of the verticals. Is there anything else in terms of -- have you really turned the corner here because this was an expectation that you would start to see this, and you did highlight some share gains. But just any other color on the dynamics of that business would be helpful.

Surendralal Karsanbhai

Analyst

No, Deane, there's significant momentum certainly across the 3 categories that I described: semiconductors; aerospace and defense, which has been relatively robust over the last 2 years to begin with. And then most encouraging has been the broad-based portfolio business and that's where the multitude of tens of thousands of customers sit. It touches just about every industry macro that you can name. And seeing that resilience in that business and the return to growth there gives us -- and broad-based geography gives us the confidence that momentum continues and that our guide on Test & Measurement for 2026 is solid.

Operator

Operator

Our next question comes from the line of Andrew Obin with Bank of America.

David Ridley-Lane

Analyst · Bank of America.

This is David Ridley-Lane on for Andrew Obin. Just a quick numbers question. Could we get the orders growth by process and hybrid, discrete, and Safety & Productivity in the quarter? And any color that you could give on how first quarter orders are shaping up?

Ram Krishnan

Analyst · Bank of America.

Well, I think from an orders perspective, process fibrin orders, to your point, I mean, they stayed resilient at mid-single digits. Discrete recovered to driven by Test & Measurement, which exposed in the discrete markets into a high single digit and weights to that 6% orders growth that we reported. S&P orders remained flat to low single digits in the quarter. And we expect good momentum to carry through into the first quarter of this year.

David Ridley-Lane

Analyst · Bank of America.

And then in fiscal '25, excluding this timing dynamic, which I completely understand is driven by ASC 606 and was a long-standing driver of how AspenTech's results were reported. But excluding that impact, you had core ops of 110 basis points margin expansion in fiscal '25. You're guiding for 80 basis points in fiscal '26. It would seem like you have faster revenue growth, less tariff impact, further Aspen synergies. Are there any offsets to consider thinking about for margins in '26?

Michael Baughman

Analyst · Bank of America.

No, I don't think so. You've got it right. As we look ahead, we've got the drag of the renewals that's about 40 basis points. We've got some synergies and the operations continue to drive about 60 basis points, which is what the operations have been driving for really the last 2 years, right in that 50 to 60 basis points range and that's the margin expansion that we consistently talk about driven by the Emerson Management process and what we expect to continue into the future.

Operator

Operator

Our next question comes from the line of Andy Kaplowitz with Citigroup.

Andrew Kaplowitz

Analyst · Citigroup.

Lal or Mike, just digging a little bit more into that first half versus second half organic guide for '26. The growth in mechanics are what they are, but you also talked about the timing of shipments and how they support the second half growth. Are you expecting any sort of larger project order recovery and or change, for instance, in process markets to get you there? Or is it really just you have the visibility already in the back of the pipeline and everything is -- just talk about the visibility there?

Ram Krishnan

Analyst · Citigroup.

Yes, Andy, Ram here. Yes, we absolutely have the visibility and the momentum that we had in terms of orders in the second half phases that backlog into the second half of 2026. That's point number one. Secondly, if you take out the software renewal dynamic, as Mike explained, the first half growth is 4%, the second half growth and for an overall growth of 5% minus the software renewal dynamic, which is the core growth you've got to look at and that sequential growth second half to first half versus that is about 11%, which is what we executed this year, albeit with a better backlog phasing going into the second half of next year. So we feel relatively comfortable around the second half, first half guide and the software renewal dynamic is what shows up as the 2% and 6%. But in reality, it's 4% and 6% for a weighted average 5% through the year.

Andrew Kaplowitz

Analyst · Citigroup.

Thanks for that Ram. And there's obviously a lot of excitement about power markets. You gave us the data up almost 20% in orders in Q4 in Ovation, 30% for the year. But maybe you can give us a little more color on what you're expecting for '26. Obviously, there's a particular focus on nuclear. You guys have pretty good share there. Maybe you could remind us of that. And order growth was a little bit lower in Q4 than for the year, but do you expect acceleration in '26 in that end market?

Surendralal Karsanbhai

Analyst · Citigroup.

Yes, Andy. Lal here. No, certainly, we're excited about what we're seeing broadly, not just across generating capacity, but transmission and distribution investments, which, as you know, impacts our Aspen business. We expect to continue to see investments across combined cycle in the United States. Coal and nuclear in China and nuclear broad-based across Eastern Europe and the U.K. I think the underlying dynamics of demand driven, of course, by data centers and by the age of the capacity that's in place today should give us a good, and we project a very good 3- to 5-year run in this segment of the business at high single digits to low double-digit growth.

Operator

Operator

Our next question comes from the line of Steve Tusa with JPMorgan.

C. Stephen Tusa

Analyst · JPMorgan.

Just wanted to clarify. So is the first quarter -- the first quarter orders should kind of sustain this, I don't know, like the 5% to 6% type of momentum that you saw in the 4Q? Is that the messaging?

Ram Krishnan

Analyst · JPMorgan.

Yes.

C. Stephen Tusa

Analyst · JPMorgan.

Okay. Okay. Great. And then just on the bridges, it's hard a bit to parse out the software impact. But I think you have $0.50 of ops for the year, which I think is probably, I don't know, a 45% to 50% kind of core incremental. Am I getting into the right ballpark there? And then in the first quarter, you only have $0.05. Is there a reason why those incrementals may be a little bit weaker, kind of putting the software impact aside?

Michael Baughman

Analyst · JPMorgan.

Yes. I think your leverage expectation is about right when you look at the quarter that way. When you look at first quarter, it's really this dynamic of last year being as strong as it was with that discretionary cost and some of the project closeouts and the EBITDA margin that quarter, I believe, was 28%, and so it's sort of a comparison dynamic.

Ram Krishnan

Analyst · JPMorgan.

Yes, and Steve. Yes, we leveraged the 265% in the Q1 of '25, and it just puts us in a -- it's just a tough comparison, not just -- even if you take out the software renewal dynamic, it's a tough comparison for our base operations, just given the dynamics Mike described.

Operator

Operator

Our next question comes from the line of Julian Mitchell with Barclays.

Julian Mitchell

Analyst · Barclays.

I just wanted to follow up a little bit more on the trends in Test & Measurement and discrete, automation. So I think in Test & Measurement, you're guiding still for high single digit growth later in the year despite the sort of pretty tough comp there. Maybe help us understand the visibility on that business. And then in the discrete world, any updates on some of the different end market trends, please?

Surendralal Karsanbhai

Analyst · Barclays.

Julian, Lal here, and I'll start and I'll have Ram add some color as well. Now certainly, we have a high degree of confidence in what we're seeing in 3 of the 4 test and measurement markets, aerospace and defense, semiconductor and then the broad-based portfolio business. However, and this bleeds over into your discrete question, the automotive business continues to be very weak. We're continuing to see weakness in the packaging machine making business, which is very Western Europe dependent, Italy, Germany and of course, impacted in China and the U.S. as well. So that segment, what has been a traditional discrete market has -- is in the flat to low single-digit range, and you've got Test & Measurement in the high range that brings up our broad discrete orders. Ram?

Ram Krishnan

Analyst · Barclays.

Yes. And you said it. And I think from a geographic cut on the Test & Measurement side, very, very strong Asia driven by semicon and portfolio; a very, very strong North America driven by aerospace and defense, semiconductors and portfolio business; and Europe is probably our most muted region because that's where we have a disproportionate exposure to automotive and the EV side. Though, the aerospace and defense piece in Europe as well as the portfolio business is strong. And then in the core discrete business, as Lal described, North America is probably the market where we have good low to mid-single-digit growth in the core discrete business, but Europe and China remain weak in the factory automation and automotive space, as Lal described.

Julian Mitchell

Analyst · Barclays.

That's great. And then just my follow-up question would be around, I know in the past, you'd mentioned some of the project funnel was tied to elements such as hydrogen, clean fuels, carbon capture and so forth. And I suppose domestically in the U.S., the outlook there is worse today because of the subsidy environment changing. I just wondered if that type of activity, if you are seeing pushouts there yourselves and if it represents much of your backlog or it was just something that was in the prospective funnel and never really came into the orders or backlog more fully?

Surendralal Karsanbhai

Analyst · Barclays.

Julian, thanks for the question. Nothing impacted in the backlog. These were projects that we've been highlighting as part of our funnel. there's been a significant reduction in the outlook of projects in this category on a forward basis. So we have adjusted our funnel accordingly, but none of it has been impacted in any backlog in the business. So to give you perspective, the funnel that we showed today at $11.1 billion has approximately a $1.5 billion reduction in S&D projects. And so we've removed a large number of carbon capture and energy management projects. We retained those customer engagements that are still relevant at that point, but that's a very significant reduction in the value of the funnel related to S&D. And that's broad-based across North America, Europe and Asia.

Ram Krishnan

Analyst · Barclays.

And then just to add to that, Julian, the reason the funnel stays flat as we have seen a significant uptick in power generation, certainly LNG, and then continued build-out of the funnel in aerospace and defense and certainly life sciences. So overall, the funnel remains flat. But to your question, appropriately adjusted for the slowness in sustainability and decarbonization project, mostly in North America, but some in Europe as well.

Operator

Operator

Our next question comes from the line of Nigel Coe with Wolfe Research.

Nigel Coe

Analyst · Wolfe Research.

I'm going to probably ask a steeper question on the accounting for AspenTech, so please bear with me here. Can you just explain why this is a onetime issue? And just confirm that this is more of a first half '25 renewal issue comping that as opposed to something this year. So that's my main question. And really, just maybe just talk about the difference in accounting for renewal versus a new contract and why renewals would have this kind of headwind?

Michael Baughman

Analyst · Wolfe Research.

Yes. Nigel, it's not necessarily a onetime event. It's, again, just how the renewal dates stack up in the portfolio of these multiyear term contracts. And when you go into a particular year, there's going to be a number of contracts that are up for renewal. And whatever that is, is sort of the revenue opportunity for that year. And we are certainly, in fact, working a bit to smooth that out. But historically, AspenTech was not concerned with the wrinkles that happened because of this accounting dynamic. Again, I want to stress it's nothing new, and it's not a different accounting. It's just the gap that is used on accounting for these contract renewal dynamics.

Ram Krishnan

Analyst · Wolfe Research.

And Nigel, Ram here. Just to add to that. Now as you rightly pointed out, this dynamic is largely driven by the software renewals within AspenTech. And one of the initiatives we will continue to drive going forward is to manage the renewal dates as we renew these contracts to smooth them out in a fashion where we don't see these dynamics repeat as we move forward. It's certainly going to be a tailwind in '27 and '28 given the reset in '26, but we want to make sure that going beyond '28, we don't have another year where we see these renewals build up in a favorable fashion to reverse in the next year. So it's an initiative now that we're driving the integration of AspenTech that Vincent Servello and the team at Aspen are driving. But it's a good question.

Nigel Coe

Analyst · Wolfe Research.

No. It's a dumb question, I'm sure. And then just thinking about that in the plan, the acceleration within ID from 3% to 5%, first half, second half. You called out some backlog timing. Clearly, with that kind of timing, we're talking here about longer cycle projects. So I'm wondering, are these greenfield projects? And if you can give any details on some of the end markets that's driving that acceleration?

Surendralal Karsanbhai

Analyst · Wolfe Research.

Yes, Nigel, Lal here. Again, I'll reiterate a point that Ram and Mike made earlier. It's important to note that adjusted for the renewals the first half to second half ramp is actually consistent with what we executed in 2025, which is a sequential 11% ramp-up. It would be 4% growth in the first half and 6% in the second half of 5% a year. So that renewal dynamic because it is first half, predominantly first half loaded, really impacts and skews that ramp-up on the underlying business. But to your point, we feel great about the backlog situation. We have good visibility in our Intelligent Device business to execute this plan that we put forward.

Ram Krishnan

Analyst · Wolfe Research.

And just the projects that you referenced that are loaded into the second half that we won in the second half of '25 are in life sciences, in power and LNG, many examples that Lal had in his script. But these are the very same projects, primarily power, LNG and life sciences that will phase into the second half of '26.

Operator

Operator

Our next question comes from the line of Amit Mehrotra with UBS.

Amit Mehrotra

Analyst · UBS.

Sorry, I dialed in a little bit late, so excuse me if this has been asked. But I wanted to talk about power gen, how that funnel is progressing. I imagine there's obviously a lot of electricity demand. Wondering if you could just talk about that and how much visibility you have and kind of at what point does Emerson enter kind of that power gen life cycle versus, say, a turbine?

Surendralal Karsanbhai

Analyst · UBS.

Yes, thanks for the question. We are certainly energized by what we see in the power generation, distribution and transmission markets. Just in context of the funnel and the visibility that we have to the business, we added approximately $1 billion of projects into the $11.1 billion project funnel. That is capturing broad-based modernization and new capacity coming online over the next, let's say, 3 to 4 years. The activity is very robust, not just in the United States, but broad-based into Europe and into China in this segment. That's one area of China growth that we did experience in 2025, and we expect that to continue into 2026. And just to give you perspective, Ovation today controls approximately 30% of all the power generated in the world: over 50% in the United States, over 30% in China, over 30% in Europe. And we have great visibility well ahead because, obviously, we're upstream around turbine and boiler controls to the construction cycle. So we're in those conversations today early with the utilities around the world as they plan out their investments.

Amit Mehrotra

Analyst · UBS.

Great. That's helpful. And just one quick follow-up on software. I know you have this renewal dynamic happening. But I guess I just wanted to ask how software annual contract value is trending versus your installed base? How do you expect that to kind of perform going forward? How do we think about like attach rate trends there?

Ram Krishnan

Analyst · UBS.

Yes. Our ACV, we shared the data -- finished the year at $1.56 billion, up 10%. We expect that to continue into another double-digit year next year. So very, very solid in terms of adoption of software and the cash flow trends are trending with ACV with double-digit growth, and we're operating at a Rule of 45 when you look at cash flow and ACV growth from a software perspective. So very positive trends and consistent with the long-range plan we laid out when we brought AspenTech in.

Operator

Operator

Our next question comes from the line of Brett Linzey with Mizuho Securities.

Brett Linzey

Analyst · Mizuho Securities.

Just wanted to come back to the power discussion 1 more time. So you gave some great examples on the traditional side and talked about nuclear being robust. I know Emerson's valve and instrument content is about 90% of the world's nuclear reactors. Is there any way you can sensitize the content per new reactor or anything you can add on the aftermarket side that you can capture there?

Ram Krishnan

Analyst · Mizuho Securities.

Yes. So in a nuclear reactor or a nuclear power plant, I mean, Emerson, typically, if you get the full scope, which is obviously the control system, the instrumentation and the valves, we get $40 million of content for a complete greenfield nuclear reactor with an opportunity to deliver more than $40 million, $40-plus million over a 10-year annuity from an MRO life cycle services perspective. So that is kind of the scope we operate in nuclear, a lot of valves, instruments and control systems as part of that automation scope.

Brett Linzey

Analyst · Mizuho Securities.

Okay. Great. And then maybe shifting back to Ovation. You saw the strength in orders this year, greenfield modernization. Is this predominantly the power vertical driving this or are you starting to see some sales synergies between Aspen and the legacy Emerson as you mine that installed base?

Surendralal Karsanbhai

Analyst · Mizuho Securities.

No. Certainly, it's a good question. Certainly, as you may recall, in the GGM business, there are absolute synergies between Ovation, which is inside the valves to generating valves in the distribution and transmission networks that utilities owned throughout the world. So we are managing these on a broad account basis, covering both opportunities because very honestly, the distribution and transmission network is in a state of upgrade as well. And if you're going to put the generating capacity onto the grid that we're talking about, we certainly see the investments going into the data systems and the software systems to manage those loads within the grid.

Ram Krishnan

Analyst · Mizuho Securities.

Absolutely. And I think from a customer perspective, a lot of synergies of the same customers we deal with on the generation side are investing Monarch to upgrade their transmission and distribution systems. And then from a product perspective, we're developing Ovation, for example, in substation control that extends beyond generation into transmission and distribution and symbiotically works with monarch to deliver value for our customers.

Operator

Operator

Our next question comes from the line of Andrew Buscaglia with BNP Paribas.

Andrew Buscaglia

Analyst · BNP Paribas.

Yes. I wanted to drill down a little bit on the LNG side of the story. Are you able to quantify what portion of that backlog is LNG? And then do your broader comments around Europe and China weakening impact your view of what's likely to move forward in 2026?

Ram Krishnan

Analyst · BNP Paribas.

Yes. Your first question was what portion of our $7.4 billion backlog is LNG?

Andrew Buscaglia

Analyst · BNP Paribas.

I'm thinking -- yes, that the -- am I confusing with the $11 billion you've put out there?

Ram Krishnan

Analyst · BNP Paribas.

Okay. Of the $11 billion, I think LNG is what, about yes, $2 billion is LNG since you asked of the $7.4 billion of backlog, about $350 million is LNG. And then your second question was dynamics around Europe and China?

Andrew Buscaglia

Analyst · BNP Paribas.

Yes. The kind of the weakening...

Ram Krishnan

Analyst · BNP Paribas.

At this point, obviously, when you talk about China, the core business that we do today, chemical, petrochemical, refining is really what's muted. But we're seeing pockets of opportunity. Certainly, power has remained strong. Our export business in China has remained strong. Shipbuilding and marine, which is a unique market for us, has remained strong. And then T&M, which has a decent-sized business in China, has seen strong recovery. So there are pockets of opportunity. I would say we're prudently and conservatively planning for a flat China. I think it's a wildcard on China recovery. There is a possibility it could recover into the second half of '26, but we haven't built that into our plan. Similarly, in Europe, I think the concerns around sustainability, decarbonization, bulk chemical, automotive and factory automation remain. We haven't seen a catalyst to indicate that those will turn in Europe. So again, a plan for a flat Europe. But certainly, activity around LNG, which is EPC driven in Europe, life sciences, power and specialty chemical is where we will see the opportunity going forward in aerospace and defense.

Andrew Buscaglia

Analyst · BNP Paribas.

Got it. Maybe one more on your capital allocation in that pretty robust cash flow. Your stock is rather cheap probably relative to what you'd expect heading into the new year. So maybe can you talk about your balance between repo and expectations for M&A?

Michael Baughman

Analyst · BNP Paribas.

Yes. We laid out the $1 billion expectation around repo. As far as M&A, that's opportunistic, and there's nothing right now that's in sight that we would say we're going to allocate to. So that's what 2026 looks like.

Operator

Operator

Thank you. Ladies and gentlemen, this does conclude our time allowed for questions and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.