Ladies and gentlemen, welcome to the Schindler Q1 Results 2026 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead. Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our Q1 2026 Results Conference Call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO, and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our Q1 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 11:00 A.M. With that, I hand over to Paolo. Paolo, please go ahead. Thank you, Lars. Good morning, everyone. Glad to be back to report on our Q1 results. Overall, I'm pleased with the start we made in 2026, continuing our strong operational momentum from the last year. At the same time, we face a very volatile macro environment, which we are responding to more during this call. Let me start with growth. In terms of order intake, we grew close to 3% in Q1. Well, this is still not the growth level we would be happy with, but let us look together at three important points. First, we are pleased with our product momentum. We are seeing very good traction with our new modular platform in the new installation markets. You remember this was started to be rolled out 2024 in Europe and continued in other zones in 2025. Not only is growth picking up here, but we are also seeing very visible improvements in terms of field installation efficiencies, which helps. Secondly, the ramp-up in our new mid-rise product in the U.S. continues to exceed our expectations. Thirdly, the rollout of our standardized modernization packages is gathering pace, also increasingly facilitating growth in modernizations outside of our existing maintenance portfolio. Finally, in terms of large projects, we are seeing some improvement here too. Large projects grew in Q1 versus the first quarter of last year, and our project pipeline looks promising for the rest of 2026. An additional word on modernization. Growth here continues to stand out. Order intake was up 15% in the quarter, and I'm really pleased to see that our revenue growth was even higher. Our backlog execution continues to move in the right direction globally, and all our regions grew modernization revenue by double digits in the first quarter. We continue to expand our supply chain and field installation capacities, which make us confident that we will continue to execute our modernization backlog successfully throughout 2026. Looking at total group revenue growth, we were off to a slightly softer start in 2026, growing 1.7% in Q1. Revenue in our new installations business was down high single digits in the quarter, with China still the main headwind. We confirm our full-year guidance of a low-to-mid single-digit growth, as Carla will share with you the details later. Now, operationally, as I said, I'm very pleased with the quarter. Our operating margin expanded by another 100 basis points to 13% in Q1, seasonally our lowest margin quarter of the year. Operating cash flow was strong again this quarter at over CHF 500 million. Let me briefly also talk about the broader operational environment as we see it today. It is clear that the crisis in the Middle East brings some challenges we need to respond to. As the revenue contribution from the Middle East makes up less than 2% of the Schindler Group, the top line impact actually remains modest. Serving our customers in this region has been met with some challenges in the past two months, particularly for the new installation deliveries. We have currently around 200 units produced, which are on hold or in transit, and which we are actively looking to deliver to customer sites via alternative routing to still active ports. Outside of that, even the broader impact on our supply chain remains limited. We are facing some additional cost inflation in terms of logistics, fuel and energy costs, and commodities. Carla will provide you all the details on the expected cost impact. In terms of mitigation measures, we are actively working on pricing actions in order to offset these cost pressures, both list prices as well as surcharges across new installation, modernization, and our service businesses. As well as working closely with our supply chain to manage efficiencies on the supplier sides as well. Currency translation is significantly impacting our financial performance with the continued appreciation of the Swiss franc. This quarter, we faced an FX headwind of over CHF 200 million to our order intake. That's 7%. Q1 marks with that one of the highest hit quarters on record in terms of FX headwinds. Last but not least, a word on sustainability and our consistent effort in product developments. We are pleased to be awarded the ESG Award 2026 for our low carbon-emissions steel elevator pilot at the MIPIM 2026. Many of you know the MIPIM is one of the leading real estate events globally in the annual calendar. The award comes at a time when we all are reminded of the importance of energy efficiency. We are proud to be leading the industry with the first ever low carbon-emissions steel elevator installation. Turning now to slide four and our order intake in the first three months of the year. In service, our maintenance portfolio continued to expand with the strongest growth in Asia-Pacific, excluding China. In Americas, while we saw growth in value terms, our selectivity was leading in units recaptured to a modest decrease, confirming our overall strategy. Next, we expect to see a gradual improvement over the coming quarters. In modernization, we have been able to continue with the strong momentum recorded in 2025, with the only exception being Asia-Pacific, excluding China, where orders marginally decreased primarily due to lack of large projects in the quarter. China, again, was the standout, with growth well into double digits as we continue to benefit from the Bund program further scaled up for 2026 from the under 20,000 elevator units replaced last year. In new installations, our global order volumes declined by more than 5% in China. In the rest of the world, our NI, new installation orders, grew double digit, driven by EMEA and Asia, again excluding China. Moving to the market outlook on slide five. We have decided to keep our outlook unchanged for the time being while continuing to closely monitor the effects from heightening geopolitical tensions on construction markets both in Middle East and globally. Foreign investment has played a significant role in driving growth within Middle Eastern real estate markets in recent years. Therefore, we remain attentive to any potential impact on investment flows to the region. Construction input costs were still at elevated levels already prior to the onset of the conflict in Iran eight weeks ago. These, together with rising oil and gas prices, are likely to contribute to further cost increases placed on builders and subsequently on homebuyers. Resurgent inflation has also altered the global interest rate outlook from a trajectory of steady reductions to one that now carries an increased risk of further rate hikes, with implication for both demand and supply within the real estate sector. In spite of these challenges, we did observe robust activity in modernization markets across nearly all regions. However, at this time, we are not revising our outlook upwards, preferring to await confirmation of the continued strength in the coming quarters. New installation, just to call out a few selected markets, construction activities continued to gradually pick up in Germany with multifamily building permits up close to double digits on the 12-month rolling basis and strong growth in new orders recorded by builders in the residential sector. Activity in Brazil remains solid, driven by affordable housing. In the U.S., there have been mixed signals as multifamily permits and starts have risen in spite of Architectural Billing Index remaining below 50 for 33 consecutive months. In China, construction remains under pressure with all key lead indicators such as floor space started and real estate investment down by more than 10% again in Q1. With that, let me turn over to Carla to walk us through our financial results in more details. Thank you, Paolo. Good morning, everybody. A pleasure to have you on the phone. Let's take a look at the financial results. Slide seven, the usual summary slide of the current quarter compared to the last four quarters. As Paolo said, we are pleased with the operational momentum in the first quarter. Margins up 100 basis points year-on-year, both reported and adjusted EBIT. Another quarter with a very good operating cash flow, even if we didn't quite hit last year's exceptional high level for the first quarter. Finally, we moved our net profit margin into double digits, which is also a very pleasing development. Now, a quick word on currency. As mentioned, we have been facing accelerating FX headwind in recent quarters. In terms of the revenue impact, it amounted to more than CHF 180 million in the first quarter, so close to 7%. This obviously comes from the appreciation of the Swiss franc versus our main currency exposures, particularly the dollar. The headwinds from some of our smaller exposure, such as the Indian rupee, are also having a notable impact. Now, looking back over the last 10 years, the cumulative FX impact shaved off over CHF 3 billion of our top line and over CHF 350 million of EBIT. Now, moving to our top line development on slide eight. Giving you some insights, what we see in our different regions and in our different segments. First of all, regionally, we grew the order intake and the revenue in local currencies in all regions outside of China. At the order level, China cut 1.5 percentage points of group growth in the quarter, with order growth, as a result, 4.3% excluding China compared to the reported 2.8%. The standout region was Europe, particularly Northern Europe, which show high single-digit order growth in the first quarter on a reasonably tough comparison from last year. Overall, very pleasing to see growth here, including a very good development in Germany. Now looking at our business segments, as Paolo mentioned already, modernization contributed strongly to the order intake and the revenue in the first quarter, both growing at 15%. New installations, order intake stabilized this quarter, but revenues declined high single-digit, with China down over 20%. Finally, growth in service business continues to be accretive to the group growth overall. From this slow start of the year now, we expect to see a modest but gradual improvement over the next three quarters, consistent with our full year guidance of low- to mid-single-digit growth. Now growth in our order backlog was up 2.5% year-on-year, 3% sequentially in local currency. Driven by modernization, which was up 15% year-on-year, and the backlog margin improved somewhat sequentially. Now moving to EBIT and EBIT adjusted. You can see here on the slide, the FX impact is also hitting our EBIT bridge. This quarter, -CHF 23 million. Now, the good news is that we are more than offsetting this by operational improvements, which was +CHF 33 million in the first quarter, which is in line with the quarterly levels we saw throughout 2025. We are maintaining our productivity momentum with savings coming from SG&A, procurement, supply chain, and field efficiencies. Particularly the latter has picked up in recent quarters, which is pleasing. Now price and mix were contributors to the CHF 33 million operational improvement, but less so than efficiencies. Our equation pricing plus efficiency outweighing inflation remains firmly positive, with both inflation and pricing likely to gradually increase over the coming quarters. Now moving on to the net profit and the operating cash flow on slide 10. Good development in net profit driven by our operational improvement, which is more than offsetting a decline in financial income as well as FX headwinds. Now margins into double digits. Operating cash flow was good, reaching CHF 532 million for the quarter, just shy of last year's exceptionally strong performance. Again, uptick in our operating earnings drove the strong performance while net working capital improved, but less so than in the first quarter last year, and hence a bit of a headwind in our year-on-year bridge. We will continue making progress on our net working capital initiatives, and I expect us to have another good year for operating cash flow in line with the last two years. I expect as a result that we continue to show industry-leading cash conversion levels. That means converting well above 100% again in 2026. Now moving to the next slide. In terms of full year guidance, obviously, we confirm the full year guidance. In terms of our revenue growth guidance of low to mid single digits in local currency in 2026, we expect a modest gradual acceleration in from the 1.7% in quarter one, and that assumes continued strong double digits in modernization, stable mid-single digit growth in service, and a gradual easing of the headwind in new installation from the high single digit decline in quarter one. Now on to the margin guidance of 13% in 2026. The improvement versus 2025 is clearly driven by continued productivity improvement, increasingly from field efficiencies. We expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in 2026 as we did in 2025. Now, a little reminder on the mix, which we have as a headwind in 2026. Mix was a tailwind in quarter one, but we expect that to neutralize over the coming quarters. Let me also say a few words on cost inflation. Based on our current assessment, we face some additional inflation from energy and commodity. Firstly, on logistics and fuel costs, we estimate that each of these add approximately CHF 15 million to our annual costs. CHF 30 million in total on a 12-month basis. Outside of that, energy is a small cost category for Schindler, and the inflation would amount to less than CHF 1 million. That is electricity usage in building and so on. Finally, on raw materials, there is no change to the CHF 15 million-CHF 20 million annual cost inflation estimate that we shared with you in February. That is primarily associated with the higher copper and aluminum prices. Putting all of this together, we face up to CHF 50 million of additional cost inflation on an annual basis from the elements I just outlined. Obviously we are working hard on mitigating to offset these elements. Now touching on tariffs, it remains a bit of a moving picture, but our estimate of the annual gross P&L impact remains largely unchanged from what we shared in February. That is approximately CHF 15 million based on current tariff levels. Again, we continue to work hard at mitigating the impact, including making appropriate price adjustments. In conclusion, let me end by thanking, together with my colleagues in the executive committee, all our employees around the world. As you know, unfortunately, many of them are operating in exceptionally challenging circumstances, not least in the Middle East currently. A big thank you to our colleagues there. With that, I hand over to Lars. Thank you, Carla. Let me remind you of our Capital Markets Day, which is scheduled for the 3rd of June this year at our headquarters in Ebikon, Switzerland. We look forward to seeing many of you here at our campus. Please note that the registration to the event closes on the 15th of May. The number of participants are limited. With that, we are happy now to take your questions. I would like you please to limit yourself to two questions only, given the limited time we have available. With that, operator, please. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Andre Kukhnin from UBS. Please go ahead. Yes, good morning. Thank you very much for taking my questions. The main question I have is that now we're heading into this again heightened inflation environment. Given the track record across the whole industry of, say, 2022, can you really confirm to us that the industry attitude towards pricing has changed structurally and now that you have the contract price escalation clauses in place and that you can price proactively as inflation ramps up, and therefore avoid that potential gap in profitability? If we could talk about that would be great. Yeah, I have a quick follow-up on U.S. service orders as well, if that's okay. Andre, good morning, and thank you for the good question. Yes, obviously, we can confirm your expectation that the lessons learned in 2022, how to face inflationary jumps up and down has shaped the industry as well as ourselves. Number one. Number two, in the actual situation, what is happening is a very proactive pricing. Number one, you mentioned yourself following the, in the meantime, established discipline in contracts and all that, as well as I mentioned before, that we are applying, where possible, surcharges to address the super high speed increasing gasoline, oil cost, energy costs, which maybe was not very much the case in 2022, right? It was more on commodities and material. Well, to summarize, your assumption is right. We are executing pricing according to contracts, yes. Obviously, all of you know, there might be also a timing effect, how these pricing actions will come to the books, as when you price NI, it comes then when you bill NI with a longer term, right? Modernization, somewhere in between. On services, the timing to see the pricing, and the subsequent benefit of it, might be shorter. That's really helpful. Thank you. Yeah. My second question is just on the U.S. service orders in your slides that showed it down in Q1. I think that's in units. Could you just talk about how it's doing and how it's performed in value, and how do you see the outlook for this segment for the rest of the year, please? Yes, very good question. Thank you for that. It helped me clarifying something which I was mentioning before. In value, important to know, we grew in Americas, in U.S. too. Service value is growing. On units, as we report on units, we have a slight decrease, which is mainly due to some, yeah, I call it selectivity, some larger accounts we on purpose didn't rebook, as we didn't pursue to continue, to fully stick with our overall strategy we have. Now to the second part of your question, Andre, very clear, we, and also myself, expect in the course of the year also to not to record, to recap or to catch up on units growth. Value is already, and units should follow during the year. Very helpful. Thank you very much. Thank you. Thank you, Andre. Next. The next question comes from Daniela Costa, Goldman Sachs. Please go ahead. Hi. Good morning. Thank you for taking my question. Just wanted to ask you sort of on the path of savings and inefficiency from here and also on mix, you gave great detail on the whole inflation items and commented already a lot on price. Wonder on those two elements and the cadence from here. That's the first question. The second question, just for an update on where or how do your views stand regarding when service regulation could change in China? Thank you. Maybe, Carla, you can elaborate on the efficiency gains. Yes. We can come back on China. Good morning, Daniela. Happy to take your question. Yes, as I said earlier, it is clear that we have these inflationary impacts, but we expect them to be offset by the pricing. Paolo just outlined our view in terms of pricing. There might be here or there a bit of a timing effect, but that clearly will not derail us. From that perspective, the increased inflation will be offset by the pricing. Coming to the real efficiency, there is not as such a big change to what we shared before. We are still looking for the approximately CHF 200 million of efficiency coming in mainly the four pillars that you're well aware of. It's clear that the composition slightly changed, but the overall numbers, they stay in line with the projections that we shared. And- Does that answer your question, Daniela? Yes. Maybe just of the CHF 200 million, sort of how much is left and... Well, it's clearly that the main contributions are coming from supply chain and procurement savings. What is currently picking up is the field efficiency savings. Whatever now in the future will be a bit going on the moderate side in terms of incremental from supply chain procurement of, or the SG&A will be picked up or will be offset by the pickup with the field efficiency both in the well, actually in the three activities, NI, Mod and in the service. Yeah. Thank you. Yeah, let me catch up on China. That's a very good question. Regulation in China, let me start. Whenever it will come, I said it also before, you remember, this will have a positive and welcome impact to the industry and also to us. However, it has been just postponed for another six months. Now it's expected that it will be published earliest end of this year and being enforced end of next year. Well, if we put these two informations together, it's become obvious that any impact can only be expected in the course of 2028. Well, now we can be philosophical and it's quarter two, quarter three, I don't know. Hence we have to be a bit more patient. I think we can have a full insight into the expected benefits first when we have studied documents again, maybe Q1 next year, we have a better insight. However, also important to know that by now, in all our plans, expectation, outlooks, we didn't include yet any significant contribution of it already now. Therefore, yeah, we have all to be patient and catch up on this, in my personal opinion, in one year from now. Unfortunately, we can say. Very clear. Thank you. Yeah. Thank you, Daniela. Next. The next question comes from Midh a Vivek from Citi. Please go ahead. Thank you very much, everyone, and good morning. I have two questions. My first is on the order intake, particularly in Europe, EMEA up double digits for the quarter. The market outlook is still for 0%-5% growth on a full year basis. I was wondering if you might be able to give us some color, maybe breaking that down between how much you think was underlying market developments in the quarter itself, how much was a pickup in the larger project orders, and whether you think there was any contribution from any market share gains. Thank you very much. Vivek, thank you for the question. I'll address all the points one after the other. Number one, EMEA up. Yes, it's not a big secret. Maybe with some differences between central, northern European countries, and yeah, most of EMEA at the moment. We are pleased to see that Europe, as EMEA for us, or Europe, is contributing positively to our order intake, which was a bit expected, and is coming. Number one. Number two, how it is between the pickup on large projects and the rest of the business. This is also, I must say, a bit different country by country, as you can imagine. We see now also, to be anticipated, a bit of a slowdown in large projects signed in the whole Middle East region. It's not a secret. The large project pipeline list was, or is, including also a portion of those projects. We are always a bit more on the cautious side. Now we don't, how to say? We keep it on the list, but we don't count on them short term, while the rest of the projects still look promising. Talking countries and markets, well, I was mentioning before, we are happy to see Germany picking up, as we were seeing last year. Let's keep fingers crossed that now the darkest period is behind us in Germany, and we can confirm at the moment everything is confirming is right. Also other markets are coming nicely in. Spain, Italy. There are many more. Summarizing on the commodity sector, going well. In the commercial segment, different country by country, large projects, as you can imagine yourself, is now a bit in the light of geopolitical movements, different between infrastructure projects, which continues, and private finance projects, which one could say they might be a bit delayed until the financial situation now, globally speaking, has been clarified. Very clear. Thank you. My second question is a follow-up on the cost inflation topic. One cost item you didn't mention, particularly on the raw material side, was steel. Would you be able to give us a quick summary of your exposure there and what sort of assumptions you've made around that? Thank you. Yeah. I take it. Yeah, please, Carla. Go ahead. Yes. Actually, when it comes to the steel, we locked in actually for the longer term. It creates less volatility for us for the remainder of the year, to be honest. Yeah. That's why I didn't mention it. Very clear. How much of a price increase do you need to put through just relating to the steel on the new orders? Oh, that's a good question. Actually, the price increases placed in the new orders now are less related to one single component, right? It's a more general price increase you place, right, to the customers. At the moment, obviously, there are more items contributing to the price increases, and I was mentioning before to Andre, we have learned in 2022, as I guess the whole industry, but we at Schindler, we also learned in 2022 how to address pricings much better than ever done in the past. That here, I must say, it's a bit difficult to assign to each inch of the price increase one component. We also have copper moving, we have oil moving, we have energy moving. We have wage inflations moving very different country by country. That actually the pricing you set in the new orders now is a combination of all these, and also not a secret, is also a bit different country by country as reflecting on especially wage inflation. This varies a lot among the countries. Very clear. Thank you very much. Thank you, Vivek. Next. The next question comes from Nic Hudson from RBC Capital Markets. Please go ahead. Yes. Morning, everyone. Thanks for taking my questions. Firstly, I was just hoping you could comment on the growth components in service, so kind of the mix of unit growth, price, net of mix and churn, and then also dynamics in the repair business, which from competitors, it sounds like that's been quite strong recently. Thanks. Well, looking at value growth in service, I must say the unit growth and the value growth, one could say is quite aligned. It's not that we are generating an additional value growth by overpricing anything. At the moment, we can confirm that our growth in value is, if you look to the different markets, very much in line with our growth in business, sorry, in units. Carla, something? Yeah. Well, maybe just adding. Yeah When it comes to the portfolio and in units, we definitely are positioned very favorably when it comes to the churn rates, when we see what is going on in the market. I think that is a very good point, and we still are on a neutral basis when we compare the churn with the recoveries overall. That is where we are in terms of our portfolio evolution. As Paolo mentioned already, in terms of pricing, I think we remained also very disciplined there, and we will continue. Whatever comes from inflation, we will definitely make sure that it is recovered. Yeah. Okay, great. My second question revolves around the sequencing of growth for sales in America's new installations. I think we've had a couple of decent years of order intake in units, and I would imagine that pricing has also been quite solid there. I'm just curious as to when we start to see that feeding through a bit more meaningfully into new equipment sales growth. Well, it's now difficult to say in which months we see it, but we can confirm that at the moment, the positive trend we were also referring to in the past continues. Let us keep fingers crossed nothing changes, right? Now very soon we will also see it contributing subsequently to our order intake as well as I was also mentioning last quarter, and it is unchanged. We are also participating more and more in large projects, which then going forward will also contribute on both order intakes and then with the timeline you have to create the revenue also contributing there. We don't change our constructive positive outlook on the U.S. in terms of new installations. Yeah, your observation is right. Revenue will be subsequently generated, large projects, but slower commodities coming linearly. Not to forget modernization, which is also coming very strongly and with a shorter delivery time, obviously, right, between the order intake and contribution to revenue. Great. Thank you very much. Thank you Nic. Next. The next question comes from Martin Flückiger from Kepler Cheuvreux. Please go ahead. Morning, gentlemen. Morning, Carla. Thanks for taking my two questions. First one is on your remarks regarding building permits ramping up in Europe over the last few quarters. I appreciate those comments, but I've recently also checked that according to ECB, European Central Bank data, the mortgage volumes in Europe have started to turn more or less flattish. They were down in January, but slightly up in February. If you compare that to the growth we have seen, which was clearly double-digit, up to 40%, 50% or more percent in 2025 depending on the month, that seems to be noteworthy. I was just wondering whether you had any thoughts on that development with regards to financing decisions in Europe being postponed which ultimately could hit your residential exposure to the region. That's my first question, and my second question is on CapEx. I noticed CapEx was up sharply year-on-year in Q1. Just curious how we should think about that number going into the remaining quarters and what kind of comments you could make on CapEx guidance for the full year? Thanks. Hey, Martin. Good morning. Let me take the first one, and the second one I will happily pass to Carla for the CapEx. That's a good one. How would we expect the financing structures availability, especially in Europe, I think is your question, might impact the green shoots we have seen coming, especially let's talk about the largest markets we have, like Germany, Spain, Italy, and so on. First of all, by now in the residential segment, and allow me to speak briefly in 20 seconds in segments, then we and me personally expect in the worst case a bit of a different scenario in residential one could expect based on the strong demand we have in all large markets and already made decisions on financing, on building permissions and so on. We would expect a more resilient new installation order intakes going forward. In other words, the expected growth rates in residential we might still expect. When it goes to large projects, I was mentioning before, I would move to a more differentiated picture. We see at the moment everything which is more related to infrastructure, public investments is continuing as planned. Here I would also see your point of volatile mortgages and so on, but it doesn't play a big role here for the moment. Yes, you have a good observation. Fully privately financed developments might see a bit of a delay. However, if I look over Europe at the moment, day-to-day, still decisions made to progress on projects, excluding Middle East. All in all, if we have to expect some changes going forward, I think it's appropriate to be more cautious on large projects, private financed, followed by large projects in infrastructure, which we see more safe, sort of saying. Residential, we would expect for 2026, more or less as planned. I hope this address your first question, and Carla. Yes. Takes up on CapEx. Yes, Martin, thank you for the question. Good observation. Yes, in our CapEx investments in Q1, they amount to CHF 46 million versus indeed CHF 18 million last year. That is actually a real estate replacement investment. It comes from the purchase of a land plot in Switzerland for replacement of a factory. That is actually what's there. It's not like a trend to further increase now the CapEx going forward. It's actually, I would say, a one-off that you see there. Yeah. Thank you, Martin. Okay, thanks. Next. The next question comes from Martin Hüsler from Zürcher Kantonalbank. Please go ahead. Yes, thank you, and good morning, everyone. I have two questions. The first one, when it comes to claiming a refund of overcharged U.S. tariffs, what is your approach here? Yes. Obviously, we are looking into that. We are doing our homework, and then we will conclude at the right time to file for it. Yeah. Your guidance of impact of U.S. tariffs doesn't actually include any, let's say, payback of what you paid. No, no. Absolutely not. Okay. Given the uncertainty about the timing, et cetera. When it comes, it comes. Yeah. It's an upside, but we don't count on it in the numbers that I shared. Yeah. Thank you. The next question, maybe a bit broader one. When it comes to consolidation in the sector and the opportunities to expand your service footprint, mainly, I guess, what is the reason for a rather cautious approach for external growth that we see for Schindler? Martin, morning. Well, conscious approach, I leave it to you to judge. What we said and we are working on is, yes, we like to expand our portfolio footprint also by inorganic investments, I think is what you refer to, right? What we said is, at the same time, we would not jeopardize our overall strategy, which we call profitable growth, by doing things which afterwards look good but aren't. This being said, when we look at external opportunities, it's what Carla always calls the bolt-on acquisitions and even maybe large acquisitions, we always prove them against our midterm strategy, and we will talk a lot also on the upcoming Investor Day with you guys. Therefore, I would not confirm that we are not interested in expanding our footprint inorganically, you were saying externally. Yes, I would confirm that we still make sure it fits to us and it fits to what we promise to every of our investors we intend to do in the next many years with the portfolio. Yeah. Please. Martin, we have our own criteria for actually assessing opportunities and if they fit our plans, yes or no. We stick to this criteria. What is clear for us, what we are not going after, that is overpriced assets and also loss-making business. There we stay away from because if we acquire things, we want to actually generate a return on it. Okay. Fully understand. Thank you. Thank you, Martin. Next. The next question comes from John Kim from Deutsche Bank. Please go ahead. Hi. Good morning. On modernization, I'm wondering if you could characterize what you see as the trajectory on contribution margins over the next two to three years. Also maybe a bit of color here, given the strength of China on unit counts and the Bund program, how you see mix geographically evolving from current levels, I suppose. John, let's take the second part first. Do we see a geographical mix? First of all, well, I must say, if we look at the distribution of the installed units on this planet, obviously there will be, over the years, an increasing contribution, also modernization coming from China. The longer term we look at the modernization business, and I'm talking five to 10 years, the more the contribution will be out of China, obviously, right? As half of the units installed on this planet are, for whatever reason, installed in China. This is anticipated, at the moment, obviously, the biggest potential for the very next years in terms of value, in terms of margins, is obviously there, where the installed base is much more aged and the market's much more mature. Obviously you can. It's the Americas, it's Europe and Asia Pacific outside of China. This is the second part of the question. The first one, and then I will leave to Carla to give more color if you like. Well, we expect the modernization business also in terms of contribution to the bottom line to continuously improving and continuously evolving. As mentioned before, we are doing a lot in terms of products, in terms of processes, in terms of expanding capacities, production, as well as installation. We talked about in the past also here, we will have some more points for you when we see us in June. There we can only expect over the course of the next years an increasing contribution. Carla, please, anything to add on that? No? Okay. Thank you. One follow-up, if I may. Historically, you've provided some very useful color on segmentation in Chinese real estate markets, tiers of cities and so forth. I'm wondering if there's anything you could help us on here in the current outlooks. I think with more details we can also touch on China on this indeed, but for now, yeah, segmentation in tiers. I must say, one has to ask if you focus on profitability and you know we have reassessed a lot of our organization in China and how to go forward. There's still a big difference between tier one, tier two, tier three cities. Segmentation remains very similar in terms of business opportunities, and hence, when we will share with you where we like to go in the next couple of years, you will also understand what we plan to do in which segment within China to secure that China contributes to our overall plan going forward. Okay. Thank you. Thank you, John. Next. The next question comes from Lewis Merrick from BNP Paribas. Please go ahead. Yeah. Morning, Paul, Paolo and Carla. Thank you for taking my questions. You mentioned wanting to grow in the U.S. service market and reverse the trend you've seen in 1Q. One of your peers is also seeing challenges growing there. I'm just wondering, are you seeing the competitive environment potentially heat up in the U.S. market, or are there any early green shoots you can point to supporting a turnaround? Thank you. Yeah. Lewis, that's a very good question. Now, and I think you're referring more to the service segment, right? Correct. The U.S., allow me that I talk about us and not about competition. In the U.S., what we see is a clear trend of increasing presence. Let me do it very politely this way, of the ISPs. Very active in the market, which are shaping, kind of, if I may say, the service business in the U.S. It's not Americas, it's the U.S. There's a lot of contribution into that from private equity going into that segment in the ISPs, and hence, yes, the service market environment is changing in the U.S. Is it changing to stay there forever? I don't know. What I can confirm is that we are adjusting and working on it heavily and in high speed, and this is the reason why before I was confirming that we expect our numbers to catch up and continue to improve throughout the year. Thank you. That's all from me. Nothing to add. Thank you, Lewis. Thank you, Lewis. The next question comes from Phil Buller from JP Morgan. Please go ahead. Hi, good morning, everyone. I have two questions, please. Firstly, you're obviously working very hard to mitigate input cost inflation. Is your policy regarding hedging on some of those costs changing in any way given the volatility? The same on FX, the underlying results are obviously good, but FX has been overshadowing that now for quite a long time. Is there anything you plan to do differently in relation to hedging, be that on the cost or FX side? The second question, I know you don't want to front-run the CMD, but can you remind us of what the right level of leverage is for Schindler? I appreciate the comments on M&A needing to have the right returns profile. How does that pipeline look today and the valuation of those assets, is that screening well for you, relative to potential cash returns to shareholders? Thanks. Yeah, thank you very much for the multiple questions. I try to take them one by one. Obviously we have, when it comes to the hedging of the raw materials, there is no change in policies because I believe that we hedge what we can hedge. Now, in terms of the FX impact there, of course, we did quite some work over the prior periods, and especially, then contracts that are in our strong Swiss franc. We converted most of them already in non-Swiss currency. Quite a lot of energy went into that. In order to de facto come to a hedge. When it comes to the capital allocation question, I'm actually looking forward to give you more insight into the Capital Markets Day. Also what the next follow-up is because, yeah, our share buyback program advances very well. If you can give a bit of patience there, I will definitely give full insight into that topic. Thank you very much. Thank you, Phil. Next. The next question comes from Rizk Maidi from Jefferies. Please go ahead. Oh, yes. Good morning. Thanks for taking the questions. Just maybe a little bit of clarification on the pricing element when it comes to service. It doesn't feel like this, according to my calculations, that pricing was not a big component within the service growth. Maybe if you could just shed a bit of light there and give us flavor on how do you see it by region? Secondly, I would like to shift away, hope you don't mind me doing this, away from the results, but just take your view on potential large consolidation in the industry. We know this is quite a very consolidated industry. What kind of impact do you see in the market in terms of density pricing if two of your largest peers merge? Thank you. Maybe, Carla, I take this one. The first one, thank you. The first one on the contribution of the pricing to the service, and bear with me that we don't go now into region by region, but overall, we can say the contribution from pricing is in a mid-single digit range. Therefore, I was saying the overall growth is not over-inflated by pricing. This was my message before, and thank you for helping me clarifying it. But nonetheless, the pricing contribution is in a mid-single digit area, and that's actually what normally you do every year as you cope normally also with inflation. We did in the past, we do now, and maybe now, actually right now, with an additional component to offset the Middle East crisis effects, as mentioned before. Coming to your second question about larger consolidations and without looking at any specific one. Our view is, first of all, if there's a consolidation on highest level, and we can name it, if one or two of the big four would go together. I personally already expressed our opinion and my personal opinion very clearly in the past. One is to ask mid-term and long-term, where is the benefit for whom? This explains for me also the subsequent impact on what you were just mentioning, pricing and movement in the markets. Consolidation on high level, always we have to ask, is there a benefit for the customers? Yes, no. The answer you can give yourself. Is there benefit for employees? You can give the answer yourself. Is there a benefit on underlying efficiencies by consolidation, which could bring some benefits to the bottom line? Well, here one can speculate and say yes. Good. Let's take this one. To get to these benefits, you have to do a lot before. Here I like to share our and my very personal opinion. You have to put it in the timing. It is quite an intense time, which is not one, two years. It will be longer until you can at all generate this underlying efficiency benefits in your books. In all that period, this consolidation would just work against benefits for customers and employees. If you put it on this high level, then the answer is, for me, quite consequentially logical, that it might have a short-term impact on pricing. However, the opportunity also for others to grow and expand customer and business baseline would also increase. Here, I must say for the industry, there might be a reshaping, there might be changes. However, this also bears opportunities for the others. Different when you look at consolidation on lower levels is what we have talked a lot about in the past. Is what then has a totally different consequence to the market. You were explicitly mentioning, I think, this larger scale consolidations. Thank you for the insights. Thank you, Rizk. Next. The next question comes from Aron Ceccarelli, Bank of America. Please go ahead. Oh, hi. Good morning. Thanks for taking my two questions. My first one is on tariffs. I understand the situation remain extremely fluid at the moment. You highlighted the CHF 15 million that you announced at the beginning of the year. Could you perhaps elaborate a little bit on the new 232 regime, perhaps expanding on your exposure to Mexico and Canada? And if this CHF 15 million, if it could be revised upward because of these new changes? That would be my first question. Thank you. Aron, thank you. Talking exposure to tariffs, for us, it remains unchanged since the last adjustments, which, you know, they were adjusted for Switzerland. There is no change. Carla has mentioned before, in our numbers we are sharing with you today and in the outlook, we don't foresee any downside at all, and also for the moment, no upsides. First part of the answer. Second part of the answer, specific exposure to Canada and Mexico. This is for us quite limited as you know, we have our supply chain base distributed in other markets. It's not Canada and Mexico. It's five other places in the world. This actually reduce our exposure to tariffs a lot. For the moment, no impact to our bottom line and to the numbers presented by Carla. Yeah. Just maybe to add and to be concrete on numbers. Initially, we talked about around CHF 20 million. This CHF 20 million, they came down now to CHF 30 million. Yeah, so we go clearly and as Paolo says, i t just decreases the impact for the reason mentioned here. Yeah. That's clear. The second question is on pricing and your backlog. I understand clearly there will be a lag on the effect of pricing on new orders. I wanted to understand, to what extent if there's any kind of ability to go and reprice some of your existing orders in your equipment and perhaps maybe modernization is easier because of the churn. Try to understand, considering the current situation, if there's any chance you are able to go to your customers within existing orders and say, "Look, things have changed. We might have to revise price upward. Thank you. First of all, do we do it where it is possible? Yes. Is it everywhere possible and in every contract? No. Therefore, do we expect some impact on the backlog positively from pricing? Yes, but it might remain minor, that it is not critical to be now disclosed here, right? Therefore, the effort we are doing, and I said before, we are quite diligent in our pricing discipline, I must say. However, looking explicitly at new installation orders, it also plays a role how old this order is. Therefore, it's quite a diverse picture. I can confirm, where possible and together with the customers, we address it. In some cases, it's obvious it doesn't work. Okay. Thank you. Maybe a quick follow-up. Thank you, Aron. Thank you. We'll take the final question, please, and then we'll close out for today. Last question comes from Midha Vivek from Citi. Please go ahead. Thank you very much for squeezing in my follow-up. It's a follow-up on one of the questions on CapEx, just more broadly on cash conversion. You mentioned earlier it should be again a year of over 100% cash conversion. Your cash conversion's been very strong over the last few years. For how long can you continue with this sort of level of cash conversion? What should we bear in mind regarding the moving items within that? Thank you. Well, I'm actually very convinced that we can continue with this nice cash generation. First of all, we believe, or we are clear, I think, where we go in terms of profit. When I look at the net working capital, I can tell you I still see my pockets where I can further optimize, and I will not let go. Based on the combination of the two, I feel comfortable making that statement. Yeah. I don't know if that answers your question, but I'm very passionate, I must say, about that area. Very clear. Thank you very much. Thank you, Vivek. Thank you, Vivek. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Lars Brorson for any closing remarks. Thank you very much, operator, and thank you all for attending this call today. Please feel free to reach out to me and the investor relations team for any follow-ups you might have. The next scheduled event is our Capital Markets Day on the 3rd of June, and we look forward to seeing many of you there here in Ebikon, of course. With that, thank you and goodbye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye