Innio N.V. (INIO) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Innio Third Quarter 2026 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Furcillo, VP Investor Relations at Innio. Please go ahead.

Hello, everyone, and welcome to Innio's Third Quarter 2026 Earnings Call. My name is Tim Furcillo, Vice President of Investor Relations at Innio. I am joined by our CEO, Olaf Berlien; and our CFO, Dennis Schulze. With us in the room are also Martin Widner lead in Global Sales for Data Centers and Power Solutions at Innio, Andreas Amberharter, responsible for product management and marketing and Carl Richards, Head of Global Services. Let's have a quick look at today's agenda. First, Olaf and Dennis will present the third quarter results. Then you will have approximately 30 minutes for your questions. Please note that this conference call is being recorded today, October 27, 2026. Before we get started, please do mind the disclaimer. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures can be found in our Form 10-Q for the period ended September 30, 2026, our quarterly earnings release and the corresponding presentation slides. All of which are available on our IR website. We will be making forward-looking statements about our business, market position and future performance. These statements are made only as of today's date. We do not undertake any obligation to update these statements, except as may be required by law. These statements involve known and unknown risks and uncertainties that may cause our actual results to differ materially from those anticipated or implied today. For additional information on risks and uncertainties, please refer to our SEC filings. Unless otherwise specified, all comparisons refer to Q3 2026 versus Q3 2025. The remarks are presented using AI-generated voice replicates. The Q&A session will be conducted live with the CEO and CFO. And with that, I will hand the call over to Olaf.

Thank you, Tim. Hello, everyone, and welcome to Innio's third quarter earnings call. Innio delivered a record quarter, exceeding $1 billion in quarterly revenue for the first time. Our teams continue to execute with great discipline, driving growth while improving productivity across the business. The market environment remains highly supportive. Our strong order momentum reflects long-term customer demand with more than $6 billion in equipment order intake year-to-date. As AI and data center expansion accelerates, the need for power continues to grow. Ineo is well positioned to capture this opportunity with reliable, flexible and sustainable power solutions. And we are expanding capacity to meet that demand. Just recently, we reached an important milestone at our Waukesha site, assembling our first yen Barker generator. With that, -- let's turn to the key highlights of the quarter. Let me walk you through the key figures on the top of this page. First, record revenue. Total revenue for the quarter was up 57% year-over-year. Second, profitable growth. Adjusted EBITDA grew even faster than revenue, rising by 70% year-over-year, driven by increased operating leverage. Dennis will discuss this in more detail later. Third, disciplined execution. Equipment revenue grew 86%, reflecting strong backlog conversion. Let me emphasize, our projects are progressing as planned with no delays or cancellations. And fourth, excellent revenue visibility. Equipment order backlog reached $8 billion, up 142% year-over-year. With $2.2 billion in Q3 equipment orders, our last 12-month book-to-bill ratio stands at 3.3x. Building on this performance, we are raising our full year adjusted EBITDA guidance by $60 million at the midpoint to between $780 million and $800 million. Dennis will walk you through our outlook in more detail later. On the next slide, I'll highlight 3 major order milestones that reinforce this momentum. Starting on the left, a 620-megawatt follow-on order from a leading data center developer. We also entered into a long-term service agreement covering the first 500 megawatts of previously ordered capacity. In the center, we secured a 450-megawatt order from Liberty Energy to provide behind-the-meter power for large-scale data center projects in North America. Delivery is scheduled for 2028. And on the right, we extended our strategic partnership with Aggreko through 2031. The agreement includes a minimum of 450 megawatts of embark engine capacity to be ordered and delivered by the end of 2027. It also includes access to agreed capacity levels for the remainder of the agreement and a multiyear service agreement for the existing fleet. Together, these commitments show that customers are building their long-term strategies around Innio and support sustained profitable growth. On the next slide, let's take a closer look at Innio's business. As a reminder, this slide, which we shared last quarter shows our 2 business segments: equipment and services. On the bottom left, you can see equipment represented 58% of revenue over the last 12 months, up 6 percentage points from full year 2025. With 67% of equipment order intake, data centers offer a significant growth opportunity for Innio. At the same time, our long-standing core markets remain strong. Services on the bottom right, contributed 42% of revenue. Over the next decade, our growing installed base is expected to generate attractive recurring high-margin revenue. The equipment backlog and the higher service intensity of data center applications provide further support for long-term profitable services growth. With that, let me explain how these 2 segments reinforce each other. Here, you can see 1 of the key strengths of the Innio business model, our service flywheel. We shared this slide also last quarter, -- so let's keep this short. On the left, equipment order intake increased from $3.9 billion in 2025 to $6.8 billion over the last 12 months. This drove our backlog to a record $8 billion, providing excellent revenue visibility. On the right, our expanding installed base delivered $1.5 billion in services revenue over the last 12 months. And over its lifetime, each engine generates around 2.5x its original equipment EBITDA in Services EBITDA. And as our installed base grows, so does our long-term services opportunity. Let's now look at the next slide to see why AI data center customers choose Innio. Innios technology delivers a compelling value proposition for AI power. Let me remind you why customer demand for our solutions is so strong. There are 6 key reasons. First, our solutions allow for modular deployment, which shortens the time to power. Second, we have a proven technology with a large and global installed base of 44 gigawatts installed over decades. Third, our solutions have the ability to follow rapid AI load swings. Fourth, we have competitive life cycle costs. Fifth, our solutions have operational flexibility across multiple use cases. And sixth, we deliver strong environmental performance, including near 0 water consumption. This is part of a comprehensive sustainability strategy. For the fifth consecutive year, EcoVadis awarded us its Platinum rating, placing Innio among the top 1% of all companies assessed. Let's now look at where our solutions fit into the broader power value chain and the opportunities this creates for Innio. This slide illustrates the full energy value chain and highlight strong demand on both sides of the meter. On the left, in front of the meter, rising electricity demand and grid constraints drive the need for flexible power solutions that support grid stability. We expect our addressable power solutions market to grow by 30% annually through 2030. Increased gas production is also expected to drive 14% annual growth in our addressable compression market through 2030. On the right, behind the meter, rapid data center expansion fuels demand for fast, reliable on-site power independent of the grid. Here, we expect our addressable market to grow by 65% annually through 2028. For Innio, this creates a significant and sustained growth opportunity. Our success in data centers builds on decades of experience powering industrials, utilities and gas infrastructure. This diversified foundation gives us proven technology and an established network to support customers for the long term. We will now take a closer look at 1 of the most important drivers of behind the meter demand. The rapid build-out of AI data centers. Let's move to the next page. The rapid growth in power demand is creating a major challenge for the U.S. electricity grid. Expanding the grid will take time and capacity constraints are likely to persist. Let me highlight a few numbers that illustrate the scale of the problem. First, on the left, -- average grid connection waiting times have increased from less than 2 years between 2000 and 2007 to more than 6 years today. And on the right, the U.S. could face a shortfall of up to 80 gigawatts of firm power capacity by 2030, increasing the risk of reliability problems. This creates a long-term opportunity for Innio. Our on-site power solutions allow customers to secure electricity without having to wait for the grid. And on the next slide, I will explain why gas engines are particularly well positioned to meet this demand. This slide summarizes why customers choose our gas engines. It compares our gas engines with simple cycle gas turbines, combined cycle gas turbines and fuel cells across 5 key criteria: fast start and load following, part load efficiency low redundancy requirements, fast and flexible deployment and CapEx. Gas engines offer a strong combination. They respond quickly to changing power demand maintain high efficiency at part load and allow customers to add capacity in modular steps. They also require less CapEx than fuel cells. For AI data centers, this combination is particularly valuable. Customers need reliable power that can follow rapid low changes and scale with their growth while limiting upfront investments. On the next slide, let me double-click on 1 of the criteria that is becoming increasingly important, water usage. Water use is attracting growing attention and our engines need almost none. On the left, U.S. media coverage highlights growing concerns about the water demands of data centers and their power supply. Water availability is an increasingly important issue across political parties in our largest market, the United States. On the right, the comparison shows our advantage. Innios type 6 engines use less than 0.1 liter of water per megawatt hour compared with approximately 200 liters for the turbines shown. This near 0 water consumption is a clear advantage for customers, particularly where water availability is constrained. Turning to the next slide. we will bring these advantages together with the economics and long-term customer commitments. This slide shows how leading economics and proven performance translate into long-term customer commitments. Customer commitments provide the strongest evidence that Innio is being selected for lasting value beyond near-term equipment availability. Starting on left economics. Bloomberg New Energy Finance puts the levelized cost of electricity of gas engines at $103 per megawatt hour. This is the lowest cost among behind-the-meter technologies and 26% below fuel cells. In the middle performance, customer and industry statements highlight our fast response to changing power demand and the reduced need for battery support. And on the right, customer commitments. Customers are reserving capacity well into the future with noncancelable nontradable slots. They are also signing multiyear supply agreements that anchor long-term relationships. These commitments reflect Innios operational flexibility and extensive service network. Our service agreements cover major overhauls, extending engine lifetimes and supporting continued operation. And these advantages remain relevant even after customers connect to the grid. Let me explain why on the next slide. Even if grid access becomes available, there are compelling reasons for customers to choose behind the meter power solutions. Starting on the left, behind the meter solutions provide backup during grid disruptions and have the ability to adapt to rapidly changing AI loads. They also reduced exposure to grid charges and rising electricity costs. On the right, based on the assumptions shown Bloomberg NEF puts the marginal generation cost of a gas engine at $43 per megawatt hour. That is 51% lower than the $89 for grid power. Together, these economic and operational advantages support continued engine operation long after grid connection. And this value proposition resonates across a broad and growing customer base. Let's move to Page #16. What matters here is simple. Our customer base is broadening, and our routes to market are becoming more diversified. On the left, you see 2 different routes to market. When we sell equipment directly to a customer, demand can naturally be more concentrated. But when we sell to energy as a service companies, rental companies and channel partners, -- the customer base becomes more diversified. Behind those partners is a broad range of end customers, leading hyperscalers, oil and gas companies and critical infrastructure providers. Broader routes to market mean more end customers across more markets. Many of these engines are installed on site to power data centers. the underlying need for power extends beyond any individual intermediary, and our engines are designed to serve these sites for decades. The strength of our technology puts us in a privileged position allowing us to be highly selective when choosing customers. We prioritize customers that have either secured long-term offtake agreements with hyperscalers or frontier AI labs or have a clear line of sight to securing such agreements. We can also confirm that we have not allocated any meaningful volumes to Neo cloud operators. Let's move on to the right-hand side. where we show how our equipment order intake is evolving. Our largest customer accounted for approximately 20% of order intake in 2024 and 41% in 2025. In our preliminary near-term outlook, the largest customer share is approximately 21%. Innios growth is built on a broad base of strong customers and partners backed by firm orders and long-term commitments. With that, let me hand over to Dennis for the financial discussion.

Thank you, Olaf, and hello, everybody, from my side as well. I will walk you through 4 main topics today. First, the financial highlights of the quarter; second, the performance of our equipment business and the visible operating leverage that is coming through; third, our services business and how we are laying the foundation for future growth. And lastly, our financial policy and our increased full year 2026 guidance. Let's start with Page 18. Innios relentless operational execution is translating into improving metrics across the board as it is shown on this page. Based on very strong order intake, equipment order backlog reached $8 billion in Q3. This reflects 2.4x last year's level with the last 12-month book-to-bill ratio of 3.3x. Moving to the third line, total revenue. We delivered a strong backlog increase in book-to-bill performance while our equipment sales reached a new record. Total revenue was $1.2 billion for the quarter, up 57% year-over-year. Year-to-date, revenue reached $2.8 billion, up 46%. This top line development is driven by our strong backlog conversion as well as continuously added production capacity supporting higher deliveries. Adjusted EBITDA was $245 million for the quarter, up 70% year-over-year. with the margin expanding 1.6 percentage points to 21%. EBITDA grew faster than revenue on the back of realized operating leverage. I will talk more about that in a few minutes. Year-to-date, adjusted EBITDA reached $540 million, up 34% at a 19.5% margin, which includes the growth investments made in the first half of the year. We are well on track to over-deliver on our margin targets for the full year and midterm. Let's now turn to Page 19. As you can see, both segments are contributing to our strong growth. Equipment revenue increased 86% year-over-year to $778 million for the quarter, while services revenue increased 20% year-over-year to $390 million. Together, they combine a rapidly expanding equipment business with recurring earnings from the installed fleet. Total adjusted segment EBITDA reached $257 million for the quarter, up 65% year-over-year with a margin of 22% compared with 21% a year ago and 20% last quarter. Year-to-date, adjusted segment EBITDA was $578 million, up 36% at a 21% margin. There are 2 key points to understand about the margin development. First, third quarter profit growth exceeded revenue growth. Better pricing in the backlog is reaching earnings and higher volumes are improving the absorption of our operating costs and services is benefiting from a favorable mix and scale. Second, the year-to-date margin has stepped up quarter-over-quarter in line with our plan. We invested in capacity, people and our U.S. footprint ahead of revenue to prepare for our growth journey, and equipment now represents a larger share of sales. As volumes rise, we are absorbing those growth investments more efficiently. The third quarter results show that improvement, while the group margin will continue to reflect the balance between equipment and higher-margin services. Let me now double-click on our equipment segment. Year-to-date, equipment revenue was $1.7 billion, up 70% year-over-year. As you can see, data center deliveries are the main driver of the growth, now representing 60% of equipment revenues during Q3. We are seeing very strong demand across data centers, power solutions and compression with customer requests exceeding the capacity we can supply in each business line. Quarterly revenue mix and growth reflect how we allocate available capacity and do not indicate underlying demand. We prioritize projects based on customer commitments, delivery readiness and attractive returns. Let me now move to Page 21. Equipment order intake was $2.2 billion for the quarter. Year-to-date, we generated $6.1 billion of equipment order intake, up 91% year-over-year. Within this, data center orders grew 29% to $1.8 billion, and compression orders almost doubled to $116 million. Power Solutions orders were $265 million in the quarter and $1.3 billion year-to-date, up 23%. As you can see, the order book is broad-based and demand is growing strongly across every business line. We also had record equipment order backlog of $8 billion at the end of the quarter, up 142% from $3.3 billion a year ago and up $1.4 billion in this quarter alone. Our equipment orders continue to exceed rising deliveries. There are a few points that indicate the quality of our backlog. First, Pricing in the backlog continues to improve. As orders convert, this is expected to have a sustained positive impact on bottom line. Second, most equipment orders are take-or-pay with associated down payments and cancellation fees. These terms demonstrate customer commitment and provide certainty as we allocate capacity. Now turning to our Services segment on Page 22. Our services segment provides recurring high-margin earnings from the installed fleet. In addition, there is a clear path to further outsized growth as we convert our backlog. Services revenue grew 20% to $390 million. Year-to-date, it grew 21% to $1.1 billion. Adjusted segment EBITDA grew 37% to $124 million at a margin of 32%, up from 28%. Year-to-date, the services margin stands at 31%. The quarter benefited from a higher share of parts relative to labor and from better absorption of our investments in service personnel and parts capacity. That mix can vary by quarter. Looking further ahead, the data center engines we are installing today at decade-long maintenance demand as they operate with first larger service events expected around 2030. Our services revenue is nondiscretionary and recurring. We deliver spare parts, perform maintenance, overhauls and upgrades on an installed base of around 44 gigawatts as of year-end 2025. Let me spend 2 pages on why this matters so much. Customers can buy services transactionally by part or service event or through a multiyear agreement with an agreed scope. Both models create opportunities for repeat business. Customers depend on uptime. Proprietary engine parts, performance upgrades and trusted local service. The cost of any disruption at the customer side makes reliable support critical throughout the engine's life. Particularly for our larger engines and in data center applications, we expect to capture the vast majority of the full service parts scope, whether customers choose transactional service or a multiyear agreement. Customers rely on our proprietary parts and specialist expertise throughout the engine life cycle. So the key message here is that regardless of the model through which we serve our customers, whether through transactional service or multiyear agreements -- our services business is sticky and long term. Let me now quantify the service opportunity ahead of us. Our installed base of around 44 gigawatts generates around $30,000 of services revenue per megawatt per year. Last quarter, we provided some color about the map of our backlog and slot reservations. Today, that combined number stands at about 19 gigawatts compared to the over 15 gigawatts figure last quarter. As a reminder, this is the combined figure across our equipment order backlog and slot reservations. These slot reservations are distinguished from our equipment order backlog but are still noncancelable and non-tradable. As these engines enter operation, they expand the installed base. The engines we have in backlog and across reserved slots are expected to create a larger service opportunity per megawatt. Most of these engines are prime power. So they run around the clock and sit at the higher end of our product range. That means more operating hours than the average engine in our current installed base of about 44 gigawatts. We also expect the service scope on these installations to reach beyond the engine into adjacent parts of the installation, which increases the value we capture throughout the engine life cycle. On average, we expect annual service revenue of more than $50,000 per megawatt for our added installed base, around 70% higher than the approximately $30,000 generated by our existing fleet. On the right-hand side, we show how service revenue builds over an engine's operating life. Illustratively, cumulative service revenue exceeds $500 million per gigawatt over the first 10 years. further substantial revenue beyond that. Our recently signed long-term service contract covering 500 megawatts with a major data center operator confirms these assumptions. It includes a major overhaul and extends into a second life cycle, evidencing the customers' long-term commitment to our solution. Based on our current capacity expansion and these dynamics, we strive to quadruple our adjusted service EBITDA to the mid-2030s. Let me now come back to our profitability and discuss the mechanics behind the margin expansion. Let me take you through how this builds up, starting with revenue. Power delivered rose from 0.7 gigawatts in Q1 to 1.2 gigawatts in Q3. So volume is the first driver of our revenue growth. On top of volume, scope and pricing add to revenue per gigawatt. Second, our overhead is not growing in line with revenue. On the right, adjusted SG&A as a share of total revenues fell from 19% in the first quarter to 16% in the second and 11% in the third. The cost base for the ramp is largely in place, the people, the sites, the supply chain organization. Revenue is now growing into it. That is operating leverage. We expect this ratio to improve further as we move into 2027 based on continued expected growth. Third, this shows up in our margins. On the left, you can see that equipment adjusted segment EBITDA margin increased from 7.1% in Q1 to 17.1% in Q3. Fueled by the explained operating leverage and pricing. This more than offset a negative mix effect driven by scope. We also expect our higher-margin backlog to increasingly contribute to an even better overall margin profile. Put together, this is what supports adjusted equipment EBITDA per gigawatt delivered, which more than tripled from $33 million in Q1 to $106 million in Q3. We are delivering more power and generating significantly more earnings per gigawatt, underpinned by price, scope and operating leverage. Capacity execution is what allows us to keep delivering this operating leverage. Our expansion projects in Yanba and Wakusha remain well on track as we scale from 3.5 gigawatts of annual capacity in 2025 toward our expectation of more than 10 gigawatts by 2030. As Olaf mentioned, we recently built the first yen BacaGenerator unit at the Wakashar side, an important milestone toward realizing our planned capacity growth. We will release additional slots in measured conservative stages tied to the ramp meeting timing and specification requirements. This links customer commitments to capacity we can deliver with our quality promise central to the pan. Before I come to the full year guidance, a short word on our financial policy. Our net leverage stands at 2.1x as of this quarter, down from 3.6x at the end of 2025. Our strong operating cash flow is funding the capacity expansion as well as our deleveraging profile. Against that backdrop, our capital allocation framework has 3 priorities: first, invest in profitable organic growth to meet customer demand. We also continue to review M&A opportunities with value creation central to the assessment. Second, reduce leverage. We target net leverage below 2x over the medium term, with continued annual deleveraging. At 2.1x, we are approaching that target. We retain flexibility for selective value-accretive M&A that may temporarily increase pro forma net leverage to 2.5x. Third, assess returns of capital alongside our investment opportunities. We do not intend to pay cash dividends in the near term as we reinvest in the business. We will continue to assess capital returns to shareholders subject to market and other conditions. This brings me to our full year outlook. We are raising it today on both revenue and adjusted EBITDA. On revenue, we now expect between $3.9 billion and $4 billion for the full year, up from the $3.8 billion to $3.9 billion we guided to in July. That is growth of around 50% at the midpoint versus 2025, with equipment at around 63% of the mix. On volumes, we are targeting deliveries of approximately 4.5 gigawatts for full year 2026, which corresponds to approximately 1.5 gigawatts in the fourth quarter. On profitability, we now expect adjusted EBITDA to come in between $780 million and $800 million, plus $60 million versus our guide last quarter. At the midpoint, that is growth of 44% versus the $549 million in 2025 and a group margin of approximately 20%, up from the approximately 19% we guided to in July. Our raised full year outlook implies that we sustained the substantial step-up in earnings achieved in Q3 through year-end. At the midpoint, fourth quarter adjusted EBITDA would be broad consistent with Q3 and more than 60% above the prior year, reflecting continued conversion of our backlog into profitable growth. Our confidence rests on the orders already secured, the pricing in our backlog and the production ramp demonstrated this quarter. We expect pricing, scope and better cost absorption to support fourth quarter delivery. This concludes our prepared remarks. Back to you, Tim.

Before we open the line, I ask everyone to ask just 1 question so we can get to as many people as possible. Operator, please open the line for questions.

[Operator Instructions] And this question comes from David Arcaro from Morgan Stanley.

Let me see, how do you expect orders to trend after 3 quarters now a very strong order patterns here. Great to see. How do you expect orders to trend through the rest of the year? And then when you consider blot reservations that you have, how far out are you reserved at this point where are customers incrementally putting in reservations now on the margin?

Thanks, David, for the question. Yes, let me start and then maybe we at Martin and Dennis, if I forget something. I think we have still a very strong pipeline. So I do not see any slowdown for the next years, I'm talking about with customers about projects and '29, '30 and already with '31. So in this case, it's a strong pipeline for the next years. And it's a combination about firm orders and slot reservations. And this brings us really for strong years ahead.

Maybe to add, Olaf. On the slot reservations, as Olaf said, we have a line of sight up to '29, '30, '31 slot reservations are already signed for that period of time. We still have capacity available for '29 and '30 as capacity will be released. And with that, our slot reservation let's say, will turn into order between 6 months from now and 18 months from now, depending on how far out they are for the reserve timing.

I hope that answered the question.

We are now going to take our next question -- and this 1 comes from Joe Ritchie from Goldman Sachs.

So my first question -- I guess my only question is you take a look at your dollar per kilowatt that came through equipment revenue this quarter. It was roughly around $650 per kilowatt. That's a really big ramp from the second quarter. Recognize that, that part of that is going to be pricing. Part of it is probably going to be mixing up into the -- your containerized solution. Can you just maybe unpack that number for us to some degree? Like how much of it was just mix versus pricing? And then is that a good jumping off point as we progress beyond Q3?

Dennis speaking. Let me take that one. We obviously don't deconstruct the number since we're not giving separate revenue numbers for the container and for the equipment. But I think it's a fair assumption to say that the majority of the increase is really scope driven, as we are increasing our deliveries into the data center market, which comes at higher containerization levels. So there's a lot of scope into that increase. At the same point in time, margin is increasing to reconfirm the joint understanding here we are increasing the margin for the container itself. We are increasing the margin for the equipment piece for the engine in itself. And overall, you will see the mix effect that is resulting to the numbers that we are looking at. In terms of your question of is this is the right starting point. I would say, overall, containerization ratio has been pretty strong -- but overall, for the next couple of quarters, on average, this is a good starting point to take it up with. There might be some swings up and down based on the concrete cutoffs and the deals delivered in each respective quarter. but you should definitely look forward to see numbers north of 600 going forward.

I hope that answered your question, Joe.

Our next question comes from the line of Christ Dendrinos from RBC Capital Markets.

Congratulations on a strong quarter. I wanted to dial in a bit more to the structure of the relationships with data center customers and your energy as a service kind of customers that are servicing those data centers. And I guess specifically, can you speak to the average attach rate of the long-term service agreements -- and do these agreements kind of extend beyond that first major first equipment -- major equipment overhaul. Could it be like a multi-life span agreement?

Thanks, Christopher. So I would say Martin will start. And maybe, Karl, you can add is something from service we should add

Yes. So our contracts and our Full service contracts we were able to sign and negotiate with our customers from the data centers from the co-locators and from the energy to service providers are including the major overhaul, not all of them, but the majority is including the major overhaul and reached 10 years and even up to 15 years.

Cancel card -- but as you asked, Christopher, so there is no real difference between the data center direct customer, Energy-as-a-Service customer or the rental fleet customers. So we all have the same long-term service contracts with these customers.

And maybe to add, which I've got before. The reason for that is that when we sign the new unit contracts with them, there is a back-to-back normally. When they sign then with us the service agreement, they have a back-to-back majority is at the moment, 15 years with their end customers. So that allows them, of course, to sign with us a long-term service agreement going further out of the major law.

I hope that answers the question, Christopher.

We are now going to take our next question, and this 1 is from Mark Strouse from JPMorgan.

So I appreciate the new slides on Page 24. Curious if you can also kind of talk about the service margins, at least directionally speaking. I mean it sounds like with -- at least with the ASPs going higher that we should expect margins to go higher as well. I'm just curious, though, kind of directionally that's slightly higher, materially higher over time. And if you can kind of provide some color around that, maybe around kind of customers, we're hearing some feedback that customers might be looking to self-perform some more of this. What you're seeing there is some of that self-performance maybe in some of the lower-margin parts of service like the EPC work. Just kind of anything directionally speaking on margins would be great.

Okay. So Carl, maybe you start. And -- but the margin -- first of all, Mark, yes, thank you for the question. I think you mean Page 22, you see the margin expansion and service from 29% in last year now to 3.1% this quarter in '26. -- this -- but Carl, maybe .

I think it's a combination for. So overall, we see, for the near term moderate positive margin development because, of course, we continue to invest into ramping up our service infrastructure. Then as we look further out, and that's probably what you're referring to on Page 24 is the minor overhauls then take a stronger share in the service business. This will then be the time where we see stronger increases of margins. So it's -- and that's probably also answering the second part of your question, which was around, okay, where do we expect part of the services to potentially be covered by our customers. the scope that would potentially be covered outside is the labor scope, and it's typically lower margin than the parts scope. So that's why, as Dennis also pointed out on the page earlier, Service business is very sticky and the most important portion of it, which is the parts business.