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Operator: Good afternoon, everyone, and thank you for joining us today for Ategrity's Fourth Quarter Fiscal Year 2025 Earnings Results Conference Call. Speaking today are: Justin Cohen, Chief Executive Officer; Chris Schenk, President and Chief Underwriting Officer; and Neelam Patel, Chief Financial Officer. After Justin, Chris and Neelam have made their formal remarks, we will open the call to questions. [Operator Instructions] Before we begin, I would like to mention that certain matters discussed in today's conference call are forward-looking statements relating to future events, management's plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in our press release issued today, our final prospectus and other filings filed with the SEC. We do not undertake any obligation to update the forward-looking statements made today. Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is also available in our press release issued today, a copy of which may be obtained by visiting the Investor Relations website at investors.ategrity.com. And with that, I will now turn the call over to Justin. Justin Cohen: Good evening, and thank you all for joining Ategrity's fourth quarter earnings call. This is Justin Cohen, and I'm joined here today by Chris Schenk, our President and Chief Underwriting Officer; and Neelam Patel, our CFO. Ategrity once again delivered record results in Q4, demonstrating strength on both the top and bottom line. Gross written premiums grew 30% year-over-year, exceeding our guidance of outperforming E&S industry growth by 20 percentage points. Our 84.9% combined ratio in the quarter is a new record for the company. We continue to profitably grow our market share in the small and midsized E&S space because of the 3 key factors. First, in our core specialty verticals, we have identified market gaps and built targeted products around them, producing structural growth while maintaining strict technical discipline. Second, we have grown our distribution network of nearly 600 partners. Through tight alignment of product and execution, we have driven strong submission volume, including nearly 90% year-over-year growth this quarter. Third, we have engineered our workflows and automation to deliver speed with precision, responding quickly to brokers while maintaining rigorous standards at scale. Together, these factors have driven both growth and margin expansion in a moderating E&S market. Turning to additional dynamics from the quarter. In property, we grew 18% year-over-year with strong sequential acceleration in stark contrast to the overall property market, which contracted as a whole. By focusing on small- and medium-sized attritional risks where we have an underwriting advantage, we positioned ourselves away from the more cyclical large account catastrophe-exposed market. Our 84.9% combined ratio reflects favorable loss experience, business mix and operating leverage. Net earned premiums grew 25 percentage points faster than operating expenses net of fees, driving a 6.1 percentage point improvement in our overall expense ratio even as we continue to invest in growth initiatives and technology. On technology, in recent weeks, the capital markets have focused on the risks of AI to the specialty insurance industry. At Ategrity, over 2 years ago, we developed a clear road map for integrating AI and made critical investments in that direction. Those investments have now been operationalized, and we will provide some additional context later in the call. Finally, stepping back to broader E&S market dynamics, while industry growth has decelerated, it is less the case in our small and midsized segment. Competitive intensity increased marginally again this quarter, but we continue to stand out through our business model and execution, driving growth in our market share. With that, I will turn it over to Neelam to discuss the financial results. Neelam Patel: Thanks, Justin. We delivered another strong quarter with adjusted net income of $25.4 million, up from $22.7 million in the same quarter last year, driven by top line growth, improving margins and continued strength in our investment income. Our gross written premiums were up 30% in the quarter, and the growth was broad-based. Casualty premiums grew 38% and property premiums grew 18%. Net written premiums increased 44%, which reflects higher retention year-over-year. Net earned premiums were up 34%, which is less than net written premium growth because of the natural lagged recognition of our growth trajectory. Net earned premium growth accelerated sequentially due to our expanded premium base and the impact of the reduction in our quota share reinsurance in 2025. Our fee income was $2.3 million compared to $0.4 million a year ago, reflecting standard policy fees implemented in 2025. Our underwriting income for the quarter was $15.5 million, up 160% year-over-year. That translates into a combined ratio of 84.9% compared to 92.3% last year due to reductions in both our loss and expense ratios. The loss ratio came in at 57.1%, down 1.2 points year-over-year driven by strong underlying results in our property business. We again had no prior year development. Catastrophe losses were 3.2% of net earned premium, down from 3.7% last year due to very few catastrophe events in the fourth quarter. On expenses, the overall expense ratio improved 6.1 points to 27.8%. Operating expense was 10.5% of net earned premiums, down 2.4 points year-over-year and lower than Q2 and Q3 of 2025. That improvement was driven by earned premiums growing faster than operating expenses, along with the benefit of higher fee income. Policy acquisition costs as a percent of net earned premiums declined to 17.3% from 21%. The improvement was primarily mix driven as growth has been concentrated in lines of business carrying lower acquisition costs and higher ceding commissions. Moving on to investment results. Net investment income was $11.6 million, up from $6.3 million last year, reflecting a larger investment portfolio. Realized and unrealized gains were $6.7 million, supported by strong results in our utility and infrastructure portfolio. Our effective tax rate was 20.2%, bringing net income to $25.3 million. Adjusted net income was $25.4 million or $0.51 per diluted share. Turning to the balance sheet. Cash and investments increased by $45 million from the third quarter to $1.1 billion, reflecting strong operating cash flow. Book value increased by $26 million, driven by retained earnings. Our book value per share ended the quarter at $12.78, up 21% since the IPO. Overall, the quarter reflects strong growth, underwriting discipline and operating leverage. With that, I'll turn it over to Chris to discuss underwriting and operating performance. Chris Schenk: Thanks, Neelam. With 30% growth and an 84.9% combined ratio, this was another record quarter for Ategrity. Core operating metrics, including retention, hit ratios, submissions and rate change were in line with or above our plan. And our cost of product indicators, including frequency and severity signals, continue to track favorably. These results reflect the strength of our productionized underwriting model, which is built on vertical specialization, deep expertise and structured underwriting. I want to highlight 3 drivers behind our results. First, we have capitalized on growth opportunities that have been overlooked by peers. These are differentiated pathways for growth that we can uniquely identify because we specialize in specific verticals and micro segments. Approximately half of our growth this quarter came from strategic initiatives like Project Heartland, retail trade and our multifamily developer product. In Property, we exited 2025 with premium growth and renewal rate increases. We grew 18%, while many peers contracted. This growth came from states that are often overlooked like North Dakota, Ohio and Nebraska. In property, we also achieved full year rate change in the high single digits. Turning to Casualty. There, we grew 38% and achieved low teens full year rate increases. Our management and professional liability lines were strong contributor with premium more than tripling despite broader softening conditions. Second, we achieved greater wallet share with our partners. Notably, our 2023 and 2024 distribution cohorts delivered over 100% same-store growth. These partners had strong renewals and increased new business placement with Ategrity. Meanwhile, our 2025 cohort added 25% more new partners to our distribution network, and we are seeing strong early signs of engagement. Our submissions increased roughly 90% year-over-year. We achieved premium growth by quoting more business from a larger opportunity set while maintaining pricing discipline. Third, our underwriting platform is driving speed and operating leverage. We are delivering fast, predictable and market-ready quotes without diluting technical rigor. In our brokerage channel, policy count increased 3.5x along record high transaction volumes. Our underwriting efficiency more than doubled. We produced record high quotes while reducing turnaround times. Process standardization and tech automation allowed us to absorb that growth while driving operating leverage. This contributed to a 2.4-point reduction in our operating expense ratio year-over-year. Looking ahead to 2026, we are executing on initiatives for the next wave of growth. This includes intensifying our regional strategies. In Florida, we launched a brokerage package product supported by a dedicated underwriting team. It is one of the few products of its kind in the market. In New England, we are stepping up to fill a market gap with a playbook for older buildings and dense mixed-use exposures. And in the Midwest, we are doubling down on Project Heartland with a comprehensive branded product. These growth pathways are unique and should allow us to continue to outpace the market. Finally, I want to build on Justin's earlier comments on AI. We have been executing on a distinct road map for over 2 years now. AI has already been deployed in our back office, improving risk qualification, data preparation and parameter optimization. In 2026, we are now embedding AI capabilities directly into underwriting workflows with solutions that were built by our in-house innovation lab. Our underwriting model is perfect for implementing AI because it is structured and built on technical pricing with clear risk selection criteria. And the way we select risk and deviate from technical rates is very prescriptive. And as such, we can integrate AI with disciplined guardrails and extract real economic value. We see this as a step change for the company. Much of the heavy lifting has been done, but we are taking a responsible approach and we'll be testing and ramping deployment over the course of this year. We expect this to drive our expense ratio lower once it is fully deployed this year. With that, I'll turn it back to Justin for closing comments. Justin Cohen: Thanks, Chris. This was a strong quarter by any measure. We grew top line, expanded margins and continued to deepen distribution relationships, all while maintaining underwriting discipline in a moderating market. Our performance reflects a purpose-built model that is being executed with rigor. With that context, let me turn to our outlook. Our guidance for Q1 '26, consistent with last quarter's guidance is for a growth rate that is 20 percentage points above E&S market growth, reflecting more market share gains and the strength of our approach. Further, we are anticipating a combined ratio just below 90%. One last item to cover. Today, we filed an 8-K announcing a share repurchase program, and we are happy to address any questions on that in the Q&A. With that, we thank you for your time listening. And operator, can you please open it up for questions? Operator: [Operator Instructions] All right. It looks like our first question today comes from the line of Hristian Getsov with Wells Fargo. Hristian Getsov: My first question is, can you parse out the rate environment you're seeing, particularly in casualty and property separately relative to loss trends? And is it safe to assume just given the current rate environment, we should see your mix continue to shift towards casualty in 2026? Justin Cohen: Chris? Chris Schenk: Yes. So I'll start with casualty. The rating environment there is still strong in our verticals. There's a good deal of demand. We're seeing that come through in submission flow, and we're holding firm on pricing. Our technical rates are on a prospective basis. So we have achieved rates above trend, and we don't see that slowing down in the short term. However, given market dynamics and given where we're competing, we have left the flexibility to protect our renewals if there's a shift in the market on all of our lines. So there should -- if there's anything that will -- if there's any slowdown in rates, that will be from that source. On property, we are playing in a very -- on a very differentiated play field -- playing field in the Midwest. We're not seeing a lot of competition going after the type of business we're winning. So we are able to get the rates that we require for that. We have priced in for tariffs and other factors that are affecting severity. So we are rate adequate on property also. And we have achieved rates above trend. Justin Cohen: And on mix, to your question on mix, we said in the past that 60% to 70% casualty is the target range for where we expect to be on casualty. We were at 67% this quarter, and we will continue to be within the range, and we wouldn't -- shouldn't expect us to deviate from there. So around where we are is a strong expectation for mix. Hristian Getsov: Got it. And then on Project Heartland, I guess, can you guys quantify how much runway there is in expanding distribution? And any quantification of how much this initiative has added to premium growth in the year? Chris Schenk: Yes. So there's 2 parts to Project Heartland. It is -- there's an appointment component, adding more partners, and we are nearing the end of that phase. It's more about getting more wallet share from partners. So we're just at the beginning of that phase. That is a -- we feel like the investments we have made in the Midwest along -- not just in distribution, but in terms of developing products and really making a unique play for -- in our verticals is really what's allowing us to stand out. So we see a huge runway for growth. As I mentioned in the comments, we are launching a Heartland product that will allow us to stand out in the market. It's really a marketing tactic, but it's also a way for our coverage and our offering to be instantly recognized. That's going to be the next phase of our efforts there. It does present to us much more -- a longer runway for growth. Operator: And our next question comes from the line of Pablo Singzon with JPMorgan. Pablo Singzon: So many other insurance companies, some of them are quite large with well-established platforms have shown a strong interest in small commercial E&S and have publicly disclosed growth metrics that are quite impressive. So the question is, do you see any evidence of them showing up in the markets where you compete in? Justin Cohen: You're asking it, have there been new players coming in? Pablo Singzon: Right. And I'm thinking specifically without naming names, like large companies that have an intense interest in small commercial E&S. Justin Cohen: We have not experienced any pressure from that and have not seen that. You saw some of our metrics as they emerge from this quarter, and I think it demonstrates that we are gaining traction ourselves, and we have not experienced that type of competition. Pablo Singzon: Okay. And then second question, just on the guidance. Last I checked, I think E&S market is running high single digits. So your 20-plus-percent guidance suggests a high-20s growth rate for 1Q, Justin? Is that a [indiscernible] Justin Cohen: Yes. We've been very deliberate about shifting our guidance to a growth rate above the market. That's because we don't forecast the market. That's not how we spend our efforts, and we don't think that's -- that would be productive for us to describe our guesses on that. But I think, if you think about where we -- based on what we've heard and seen in the market, we think that maybe mid- to high single digits would be an appropriate place to benchmark that. Operator: And our next question comes from the line of Andrew Kligerman with TD Securities. Andrew Kligerman: 84.9%, you mentioned that it was your record combined ratio. And I'm wondering, you've put up some pretty good numbers for the last few years. Could you -- and you had no prior year development as well, I think Neelam said on the call. Could you talk a little bit about your reserving methodology? How much, if any, conservatism you're putting in those numbers? Are there -- maybe talk a little bit about that. Justin Cohen: Andrew, our reserves are in a very strong position overall, both in property and casualty. You heard Chris mention in the prepared remarks that the early indicators for the recent years are coming in very strong. And so we are highly confident in our reserves there. And then in addition, we really had a low quarter of losses and frequency and severity in property, but we have booked losses -- we have booked reserves in anticipation of maybe late reporting. So we think that both property and casualty are in strong position. Andrew Kligerman: That's very helpful. And I want to talk a little bit -- I'm on the road, so I did not see the 8-K. It's great to hear about a buyback authorization. Could you talk about the amount and the -- the want to administer it to really utilize it? And then just in general, could you size up redeployable capital? I know you have de minimis leverage. Do you have the capital on balance sheet to meet this really robust growth of 30% a quarter? Justin Cohen: Yes. So Andrew, the size of it is $50 million. And the rationale is that we have a -- we're a company that has increased its book value per share since the IPO of about 21%. We trade at 9x consensus forward, and we've generated excess capital in just the quarters that we've been talking about -- in the last 3 quarters that we've been reporting to you. So we believe we're supposed to buy the stock here. I will say we are committed to increasing the float over time. It will just be at a different price. So in terms of excess capital, if you look back to the amounts that we have generated in just the past 3 quarters, that's actually a fairly sizable number, and it positions us well for deploying the capital in a buyback as well as continuing to grow. So the capital outlook and the growth trajectory with respect to deploying capital has not changed. Operator: And our next question comes from the line of Matthew Heimermann with Citi. Matthew Heimermann: A couple of questions. One would be just with the AI in the back office already implemented. I'd be curious with respect to the claims organization, if that has been helping at all -- excuse me, LAE costs, whether allocated or unallocated? Justin Cohen: With respect to AI, we have seen the opportunity set, first and foremost, for us on the underwriting side. So we have not deployed it in a meaningful way yet in the claims side, if you're referring to that. Did you have a follow-up there? Matthew Heimermann: Yes. So well, let's -- I have 2 follow-ups to that. One would be just on the -- what are, do you think, the use cases for your company on the claims side? And I'd be curious about that. And just part of that is just maybe my own confusion around what's more back office versus front-of-the house function. So maybe you could actually roll through what you consider to be in back office just so we can maybe level set with that as well? Justin Cohen: Just on claims, one of the things that's clear is there is a processing component to incoming claims. And so deploying it there as we do on our intake process in submissions that is -- that will ultimately be an easy win. But we're not, on this call, going to describe how we're going to be deploying claims in AI. Chris, do you want to talk a little bit about where you're at? Chris Schenk: Yes. Just on what's back office in the context of my comments, we consider that to be everything that happens before an account gets to an underwriter's desk. So intake to data prep to prequalification. So we have been using AI for prequalification. That allows us to screen out accounts that are not in appetite. The next phase is with risk assessment once the account is on the underwriter's desk. So there, there's a spectrum of utilization. It could range from everything from full automation for simple accounts to partial automation of the risk assessment. So this is an individual account level underwriting, where we assess for a specific criteria. Because our model is structured, we are able to identify use cases that are very value-added in multiple ways, one, in making a clearer assessment, a more quantitative assessment; and two, in driving a better quality decision if it's not a purely quantitative automated assessment. If it goes to the underwriter's judgment, [ sort of ] guiding that judgment is the second and third use case there. Operator: All right. Thank you so much for the question, Matt. And that does conclude our Q&A session for today. So I will now turn the call back over to Justin for closing remarks. Justin? Justin Cohen: Well, we thank you all very much for listening and for those questions, and we look forward to seeing you in the weeks and months ahead. Thank you very much.
Operator: Good evening. This is the conference operator. Welcome, and thank you for joining the Louis Hachette Group and Lagardère 2025 Full Year Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Rapin, Head of Investor Relations. Please go ahead, sir. Emmanuel Rapin: Yes. Thank you. Good evening, everyone. This conference call will be hosted by Jean-Christophe Thiery, Chairman and CEO of Louis Hachette Group; Gregoire Castaing, Deputy CEO of Louis Hachette Group and Deputy CEO in charge of Finance for Lagardère. And joining us for this presentation, we have Pauline Hauwel, our Group Secretary General; Mr. Dag Rasmussen, Chairman and CEO of Lagardère Travel Retail; Frédéric Chevalier, CEO of Lagardère Travel Retail. All these participants will share their insights and key highlights. This presentation will be followed by a Q&A session. I now leave the floor to Jean-Christophe Thiery. Jean-Christophe Thiery: Thank you, Emmanuel. Good evening, everyone. I am delighted to present the results of Louis Hachette Group. Driven by the strength and complementarity of all our businesses, our international footprint and the commitment of our teams, we delivered revenue of EUR 9.6 billion and a record adjusted EBIT of EUR 551 million. This strong momentum also allowed us to continue reducing our debt at a rapid pace. Gregoire will tell you more about the figures in a moment. Lagardère Publishing delivered strong performances in 2025, both in France and in English-speaking markets. A few highlights include, in the United States, Hachette Group became the #3 publisher in the market. Along with a strong release scheduled, our efforts to enhance the value of our catalog paid off with the successful release of Twilight, for example. In Europe, the new Asterix Adventure was a tremendous success across several markets. In 2026, we will celebrate the 200th anniversary of Hachette, the world's third largest publisher. The Bicentennial is an opportunity to reaffirm our mission, making reading and culture accessible to as many people as possible. To mark the occasion, we will host a free literary festival in Paris next month. Lagardère Travel Retail also had a very strong year in 2025, driven by profitable growth as air traffic normalized. A key milestone was the seamless takeover of one of the largest travel retail contracts in history at Schiphol Amsterdam Airport. Within Lagardère Live, 2025 saw the best audience performance in 6 years for Europe, now reaching 2.9 million daily listeners and record attendance at our Arkéa Arena in Bordeaux. Finally, for Prisma Media, 2026 will be a year focused on strengthening our core activities in a rapidly evolving market. In summary, 1 year after the creation of our new company, we have demonstrated the solidity of our strategy as a diversified leader in Publishing, Travel Retail and Media. We are confident in our future and our development prospects. Thank you very much all. I will now hand over to Gregoire. Gregoire Castaing: Thank you, Jean-Christophe, and good evening, everyone. I'm also very pleased to share with you the strong results delivered by Louis Hachette Group this year, the first full year as a listed company. Let me start with the key figures on the Slide 4. And as you can see, Louis Hachette Group's revenues reached EUR 9.6 billion compared to EUR 9.2 billion last year. This confirms the continuation of a solid growth trend in a rather challenging economic environment with an increase of 4% on a reported basis and 3% on a like-for-like basis. Our operating performance was equally robust. Adjusted EBIT rose 8% to more than EUR 550 million. This reflects the quality of our businesses and the disciplined execution of our operational strategy. Cash flow generation was also very strong. You know that this was our priority for this year. I will come back to this point later, but you can already see its positive impact on the balance sheet. In '25, we significantly reduced our net debt by EUR 236 million, and this brings the net debt just below EUR 1.6 billion with a leverage ratio now under 2x, a level that the group has not reached in a long time. Let us now take a closer look at the performance of our different businesses. Starting with the Slide 7 with the Lagardère Publishing activity, which delivered another year of very solid results. Despite a market environment that has generally been trending downward this year, Lagardère Publishing continues to deliver solid growth, supported by its diversified portfolio of activities and geographies. Revenues was up 3% like-for-like basis this year and crossed the EUR 3 billion threshold. The division delivered solid growth across all markets, as you can see, more specifically in France, revenue was up 2% in a market down by 1.5%. The illustrated segment benefited from continued demand for coloring books as well as from the strong performance of the new Asterix Album, Asterix in Lusitania, which sold over 2 million copies as of today. In General Literature, sales were driven by strong new releases, including Dan Brown's, The Secret of Secrets at Lattès, the third part of Pierre Lemaitre's [ series ] and Un avenir radieux at Calmann-Lévy, the Adélaïde de Clermont-Tonnerre's Je voulais vivre, winner of the Renaudot prize published by Grasset, and Nicolas Sarkozy's Le Journal d'un prisonnier at Fayard. The Education segment also benefited from the reform of the sixth-grade curriculum as well as the primary level titles. And regarding the U.S., we are seeing revenue up 3% in a market that was actually down by close to 0.5%. The business benefited from a very strong slate of new releases. Among the top sellers in '25, we had Callie Hart's Quicksilver and Brimstone, Gone Before Goodbye by Reese Witherspoon and Harlan Coben as well as the anniversary editions of Twilight. In the U.K., growth reached a solid 3% in a slightly declining market, supported by the strong performance of several fiction titles, including Onyx Storm by Rebecca Yarros, The Hallmarked Man by Robert Galbraith and Circle of the Days by Ken Follett as well as the continued momentum from Freida McFadden, The Housemade series. The business also benefited from the new distribution partnership with Bloomsbury initiated in '24. In Spanish-speaking countries, Spain and Mexico, revenue was down 6%, mainly due to the curriculum reform in Spain that has started in '22 and that end at the end of '24. Revenue in Partworks was up 6%, a remarkable performance given the trend of this market. This was driven in particular by the successful launches of Warhammer Combat Patrol And Disney Novels. Finally, board games continue to support our other revenue segment and our diversification with a strong 10% growth on a like-for-like basis, supported by the carryover sales of Skyjo with 2 million units sold in '25, along with the successful launch of the new game Flip 7. Now let's have a look to the operating margin of the Publishing brands. On Slide 8, EBITA reached EUR 308 million compared to EUR 289 million in '24, maintaining Publishing's operating margin at a very high level. The high level of margin was driven by the top line growth, of course, and by the favorable sales mix and improvements for the SG&A cost. EBITA also includes the contribution from equity accounted companies, which came to EUR 6 million in '25 compared to EUR 1 million in '24. These favorable effects were partially offset by restructuring costs of EUR 14 million, mainly in the U.S. and in Mexico. Next slide on cash flow. Our strong operating performance translates into steady cash generation. What we show here is the CFFO, the cash generated from the operation, including CapEx before interest and taxes. CFFO came in at a very high level of EUR 361 million compared to EUR 330 million at the end of '24, a solid increase of 9%, considering that '24 was already a record year for the cash generation at Publishing level. This year, this amount included EUR 44 million related to the proceeds from the sale of the real estate asset in Paris rue d'Assas and the sale of a domain name [indiscernible] in the U.S. Let's now move on to Travel Retail on the Slide 11. '25 marks another record-breaking year for Lagardère Travel Retail. First revenue reached EUR 6.1 billion. On a like-for-like basis, revenue increased by 4.4%, driven by a significant number of openings and concession wins across Europe, Africa and the Pacific region. In France, revenue grew 3%, supported by higher air traffic, new concession and strong commercial initiatives in duty-free businesses. In the EMEA, excluding France, revenue was up 7% with solid growth in the U.K., Spain, Poland, Italy and Albania, driven by traffic growth and network expansion. Africa posted strong momentum as well, up 25%, thanks to recent opening in Benin, Cameroon and Rwanda. In the Americas, revenue was up 3%. In North America, activity was supported by network expansion and strong commercial performance in Travel Essentials and Dining, despite stable air traffic. South America delivered a strong growth of 28%, driven by the rebound in tourism and the opening of the new Lima Airport in Peru. Last but not least, in Asia Pacific, revenue declined by 12%, mainly due to North America, which turnaround, by the way, is well on track. This turnaround impacted the group revenue by close to 2% of growth. So long story short, excluding North Asia, Travel Retail revenue grew by 6.5% on a like-for-like basis. Let's now turn to profitability on the next slide. We are also pleased to share this record EBITA of EUR 312 million in '25, up 17% year-on-year. As a result, our operating margin reached 5.1% of revenues compared to 4.6% in '24. Travel Retail achieved a strong performance supported by the top line growth in Americas and EMEA and also with the China restructuring benefits and of course, a strict discipline regarding the costs. EBITA in '25 also includes EUR 23 million in restructuring charges and EUR 18 million in asset impairments, mainly in Asia and Iceland related to closure operation in order to preserve the profitability going forward. Going to the cash flow generation on the next slide. The CFFO of our Travel Retail business stood at EUR 224 million, again, a record level. This amount -- in this amount, we had an unfavorable impact on working capital from the numerous new duty-free concession openings in Amsterdam, Auckland and Cambodia this year that -- and from the -- an increase in inventories in France linked to the opening of a new warehouse. It's also worth noting that CapEx were slightly lower in '25, EUR 35 million lower this year compared to last year. This is not because we intended to slow down our investments, quite the opposite actually. It's rather linked to the very high level reached in '24 and derives from the project phasing from the new concessions. Let's now move on to Lagardère Live on Slide 15. As you know, this [indiscernible] brings together our radio channels, news magazine, ELLE licenses, live venues and artists production business. In '25, Lagardère Live generated EUR 219 million in revenue. Excluding the impact of Paris Match disposal in November '24, revenues continue to grow, up 1% year-on-year. The News and Radio segment delivered a slight increase, 0.3% compared to last year. The continued expansion of European's audience helped offset softer trends in music radio and regarding the advertising market. The Press business also performed well, supported by the launch of Le JDNews and by strong contribution from ELLE International licensing and by the ongoing momentum of our diversification strategy. Our live entertainment activities had a particularly strong year, posting 6% growth, driven by successful concert tours organized by L Productions and a record year at the Arkéa Arena in Bordeaux. Going to Slide 16. Lagardère Live, as you can see, strongly had its operating losses in '25, delivering a EUR 37 million year-on-year improvement, supported, of course, by significant cost-saving measures. The year '25 was still impacted by around EUR 10 million in restructuring costs. These costs relate to reduction of staffing costs as well as efforts to streamline the real estate portfolio inherited from a time when Lagardère Media perimeter was significantly larger than it is today. So as you can see, we remain fully committed to continuously reducing operating costs within this new division. And excluding these restructuring charges, EBITA would, therefore, be closer to a loss of around EUR 10 million. We are not yet breakeven, but as you can see, we are getting closer. The cash flow also improved sharply with cash burn reduced threshold. CFFO came in at minus EUR 11 million compared to minus EUR 43 million the previous year. And before wrapping up our review of the group performance, let me share a few comments on Prisma Media. For the full year '25, Prisma Media delivered revenue of EUR 266 million, down 9% on a reported basis. This reflects both the ongoing contraction of the print press market, the consumption patterns and the shift in digital advertising market. To respond and adapt to these challenging market conditions, we launched 2 restructuring plans, one in June and another one in December '25, covering around 300 employees, more than 1/3 of the total workforce. The aim of this is to, of course, safeguard profitability, Prisma is still profitable. I will come back to this later in '25 besides the restructuring cost. These certain changes in governance were also put in place and the new leadership team initiated several other strategic actions. First, we strengthened our people magazine portfolio with the acquisition of Ici Paris and France Dimanche in December '25, 2 magazines, which are profitable today and less impacted by the market changes that I just mentioned. Second, we decided to refocus on our core businesses and flagship brands with the planned divestment of our luxury magazines. And third, at the same time, Vivendi is expected to take 14% minority stake with a cash consideration. These last 2 transactions are currently under review by the staff representative bodies and are expected to be finalized by the end of this semester. Let's now move to the next slide with a focus on Prisma Media profitability. As you can see, Prisma's EBITA stood at minus EUR 43 million in '25, a decrease mainly reflected the decline in the top line and the impact of the restructuring cost of EUR 49 million. Let me point out again that excluding this cost, this restructuring cost, EBITA remained positive at EUR 6 million for '25. And of course, our aim is definitely to keep Prisma EBITA in this positive territory. Now that we covered the group -- the performance for each division, let me walk you through the financials at group level, starting with revenues on Slide 21. The total group revenue reached again EUR 9.6 billion in '25. As you can see, reported revenue growth was 4%, as I already mentioned it, representing almost EUR 400 million additional revenue in absolute terms. This year, again, organic growth remain the main driver, contributing EUR 310 million across all our businesses. The main scope effects came from the start of the duty-free operation at Amsterdam Schiphol Airport in May '25 as well as the acquisition of Sterling Publishing at the end of '24 and 999 Games at the beginning of '25, offsetting the sale of Paris Match in November '24. Regarding Amsterdam Duty Free, the tender we won in December '24 led to the acquisition of a 70% stake in the new joint venture with Amsterdam Airport, retaining the remaining 30%. So to be clear, this new concession has been accounted for as an acquisition and therefore, is not included in our like-for-like growth. On the negative side, foreign exchange had an adverse impact this year, quite a strong impact with the U.S. dollar being the main currency affecting our revenue, reflecting our strong presence in the U.S., both for Travel Retail and Publishing. Despite this FX impact -- adverse impact, as you can see, the growth is still very strong. Let's move on to EBITA on the next slide, Slide 22. As shown on this slide, we had a solid and steady improvement in '24 and '25. EBITA rose from EUR 490 million in '23 to EUR 551 million in '25, representing more than EUR 60 million increase. We are particularly pleased to see that this high level of EBITA continues to be almost evenly supported by our 2 core activities with, again, EUR 312 million contributed by Travel Retail and EUR 308 million by Publishing. Overall, this reflects a strong and balanced performance across the group's key businesses. Let's have a look now at the rest of the P&L below EBITA after deducting amortization of intangible assets related to M&A and the positive adjustment linked to the IFRS 16, profit before interest and tax reached EUR 429 million, representing a 7% increase year-on-year. Below this line, the finance costs improved by EUR 21 million in '25, driven by a reduction of the gross debt and a lower average cost of debt. Interest expense on lease liability increased by 8%, reflecting new, renewed and amended lease contracts, particularly in the United States, Auckland, Warsaw or Prague. Income tax decreased to EUR 73 million compared to EUR 93 million in '24, mainly due to exceptional items recorded last year. And as a result, net profit rose to EUR 112 million, an improvement of EUR 50 million, supported by lower finance costs and reduced tax burden. The level of minority interest is explained by the increase of Lagardère earnings, of which, as you know, Louis Hachette captures only 66%, also impacted by the decrease of the loss in Asia that are shared with minorities and the fact that Prisma's losses significant this year due to restructuring are fully burned by Louis Hachette Group. Despite that, as you can see, net results group share significantly increased from EUR 13 million to EUR 22 million. On the next slide, you can see the improvement again in terms of cash flow generation. Our CFFO increased from EUR 357 million in '23 to EUR 558 million in '25, a sharp uplift of EUR 155 million in 2 years. This reflects, again, the solid operational momentum across the group. This section on cash flow naturally leads us to the balance sheet and more specifically to the evolution of our net debt on the Slide 25. On this slide, you can see our usual net debt bridge over the last 12 months. And beyond the CFFO that I mentioned, our outflows includes EUR 100 million of tax paid and EUR 96 million in financial interest. Altogether, our CFAIT, that is the cash flow after tax and interest, amounted to EUR 363 million. On the M&A front, the group remained active but reasonable this year in line with our strategy with the acquisition, as I already mentioned, of 999 Game, Sterling Union Square Publishing, [indiscernible] in France by Lagardère Publishing, the first installment payment for the acquisition of the 70% stake in the joint venture operating the Schiphol Travel Retail concession that I already mentioned and also the acquisition of Ici Paris and France Dimanche for Prisma. In the opposite direction, we received also around EUR 40 million from the repayment of a vendor loan granted to Sportfive following the disposal of Lagardère Sport in 2020. In May, we also paid a EUR 0.06 dividend per share, representing a total of EUR 59 million. We also distributed EUR 85 million to minority shareholders, including EUR 32 million to minority shareholders of Lagardère itself and EUR 53 million to minorities at Publishing and Travel Retail level. All in all, these movements bring net debt just below EUR 1.6 billion at the end of this year. At this point, I would like to make a brief remark for those monitoring net debt at Lagardère level. Just like Louis Hachette Group, Lagardère's net debt also improved ending this year at exactly EUR 1.6 billion, which represents a EUR 255 million reduction year-on-year. As a result, Lagardère's net debt ratio fell also below 2x, 1.96x to be accurate at the end of '25 compared to 2.4x a year earlier. We are currently on track and even a little bit in advance with our deleveraging strategy. But of course, we remain fully focused on continuing this effort. And to continue on this topic, let's move on the next slide. As you know, in '25, the Lagardère Group successfully issued a EUR 500 million 5-year bond. The transaction was more than 3x oversubscribed by the market, demonstrating investors' confidence in the group's solid performance. Lagardère also raised EUR 300 million through a private placement structure in euro with a mix of maturity up to 5 years and fixed and floating rates. After these 2 refinancing operations for EUR 800 million, our net debt, as you can see, is now well diversified and well balanced between bank loans, private holders and bonds. And the maturities are also well spread until 2030, as you can see on this slide, and the weighted average maturity is 2.9 years. Let's now move to the conclusion and to sum up the key message for '26. So first, I would tend to say that we will continue to consolidate our leading position by staying fully focused on the solid execution of our strategy across all the businesses. This includes promising release schedule for Lagardère Publishing. Lagardère Travel Retail will also capitalize on major openings completed in '25 and growing air traffic, which all -- which will support growth momentum going forward. Our aim is still to deliver growth to increase margin with a strict cost discipline. And second, we also want to continue to deleverage the group, but we will invest to fuel the future growth. And we will remain attentive to bolt-on acquisition opportunities when they could make strategic sense. Third, regarding the dividend fiscal year '25, we will propose an ordinary dividend of EUR 0.06 per share to be submitted to the AGM in May. The ex-dividend date will be May 7 with payment starting on May 11. So '26 priorities reflect, again, a balanced approach, reinforcing our strategic position, continuing to reduce debt and maintaining a disciplined and predictable shareholder returns supported by strong operational momentum in both Publishing and Travel Retail. Thanks a lot for your attention, and we are now available to answer the questions that you may have. Operator: [Operator Instructions] First question is from Eric Ravary, CIC Market Solutions. Eric Ravary: First question on, could we have a comment on the outlook for full year '26 for both Publishing and Travel Retail, especially at the margin levels? Do you consider especially for Travel Retail that there is still room for margin improvement following the restructuring in China? And also a brief comment on the operating trends for the 2 businesses since the beginning of the year? Second question on Prisma. Do you expect further restructuring costs in 2026? And do you expect that the Prisma could post positive EBIT, excluding restructuring in 2026 following the staff reduction? And last question is on the debt structure. So you deleveraged the company in 2025. Is it a priority for you to continue to reduce leverage in '26? And could you give us an indication of the kind of leverage that you could target at end 2026? Emmanuel Rapin: Thank you, Eric. I think I will hand over the answers to first Jean-Christophe. Jean-Christophe Thiery: Okay, for Hachette. So as Gregoire explained, we had a very strong year in 2025 for Hachette. And for '26 we expect stable revenue despite ForEx potential headwinds with a weak U.S. dollar. Concerning France, we will not benefit from an Asterix release in an even year. And we will face a risk of erosion in coloring sales after outstanding sales in 2025. But on the other hand, we have a very promising publishing program, including new novels by Pierre Lemaitre and Guillaume Musso. For Guillaume Musso including new novel Le Crime du paradis and the trade paperback release of his previous title. We will have to the second year of middle school reform with mass, French LV1, LV2. In the U.K. and in the U.S., activity should remain relatively high after a record year in 2025. driven by a strong publishing program among which a new title by Kali Hart in the U.S. and in the U.K. or [indiscernible] in both countries? We will have Heartstopper #6 by Alice Oseman in the U.K. released by Jung Chang in the U.K., a new novel by Abby Jimenez in the U.S. The results should also benefit from the full impact of the synergies realized by Union Square acquired at the end of 2024. Concerning the EBITDA, we hope to be able to deliver EBITDA roughly in line with 2025 and to maintain a high level of margin ratio. Unknown Executive: Regarding, Lagardere Travel Retail we believe the year 2026, we hope the year 2026 will be materially in the continuity of the last quarter of last year. What we see is a continuous slight increase on the traffic side. And we hope and we believe it will remain like that over the next 10 months. We will continue to benefit of a positive effect in comparison to last year of the Amsterdam integration that Gregoire highlighted started in May 1 last year. This will help us. counterpart of that, we continue the restructuring of China that should continue on the same -- at the same speed along the year, and most of the restructuring should be done by the end of '26 by the end of this year. This is in the context of a very challenging macroeconomic environment and, in particular, FX environment. the evolution of the dollar and the dollar pegged currency is something we take -- we look at very carefully. But for the time being, we're in the range of, let's say, mid-single-digit sales evolution. And regarding margin, EBITDA, we expect in absolute value should grow relatively substantially. In terms of percentage we believe there's still a little bit of room for a slight improvement in the rate marginal one, a result of slowing -- reduction of the losses in China as alluded in the question, but also all the efficiency efforts we're going throughout the world. We're delivering to the world to improve the overall profitability. Gregoire Castaing: Maybe I can take the question regarding the live branch and Prisma for the Q4 and Q1 trend. Regarding the Q4, supported by the European strong audience performance, Lagardere News Advertising revenues held up well with a challenging advertising environment, as you know, declining only by 6%. For Prisma, the decline in digital advertising revenue for this last quarter is broadly in line with the market trends close to 10% in Q4. And regarding the beginning of this year for January, quite soon to say, but January trends are correct at this stage. For Radio, still driven by the European audience. However, the trend for Prisma is unfortunately aligned with what we saw in Q4 '25. Then you had a question regarding the restructuring at Prisma. I can also take this question. As I already mentioned, our target is to keep Prisma EBITDA in the positive territory. It's the case about the restructuring cost in '25. This is clearly a challenge for '26 but this is our target. The restructuring initiated at the end of '25 will, of course, generate savings as early as '26 on personnel costs. As well as in support and marketing functions. For a global amount estimated at this stage between EUR 15 million and EUR 20 million full year effect. But take -- let's be cautious with that number because are to be very accurate for '26 impact since, again, it's still under the review of the staff representative, and we are not completely sure about the timing. These two restructuring plans are already very large, as I mentioned it, more than 1/3 of the workforce. We saw -- at this stage, we don't contemplate other strong restructuring costs for '26, but we could have other costs in lower magnitude. But again, today, we are focusing on the last restructuring launch in December. So this is for Prisma. And then you had a question about the debt and the potential target regarding leverage. As you know, since '24, we have been executing a very disciplined deleveraging strategy. You saw the results. Our leverage ratio improved very strongly from 3x at the end of '23 to less than 2x at year end '25. And again, '26 deleveraging will remain a key strategic priority for the group. We'll continue to apply the same disciplined financial approach with a strong focus on EBITDA, working cap control prioritized investment that supports future growth. And at the same time, we also want to continue our policy of investments of disciplined bolt-on M&A and a reasonable level of dividend. So long story short too soon to give you a precise target for '26. But again, we want to considered the cash generation as a key priority for the group for the next year. Operator: Next question is from Jerome Bodin of ODDO BHF. Jérôme Bodin: A few questions on my side. First one, it's on China restructuring for Lagardere Travel Retail. Where are you exactly in the -- from the starting point? Is it 1/3, 2/3, half of the efforts? And when do you plan to be breakeven for this business, if you plan to be breakeven? That's my first question. My second one is on the Vivendi deal regarding Prisma. So if I have understood well, you are selling some title to Vivendi. Does that mean a cash in for you? And then Vivendi is buying a stake in Prisma. So if you could detail a bit the cash impact? And what's the valuation of Prisma that has been used? And last question on free cash flow. So the CapEx are down this year. Should we consider this level based on the revenues as the new normal? And also second question, so based on the EUR 90 million of restructuring in '25, what has been included in the free cash flow for '25, especially for the Prisma. Unknown Executive: I'll take the Chinese one. First, maybe one point to highlight or to remember to all of you. The situation in China is a very typical situation because what we operate in China is mostly fashion, predominantly, 90% of the business is fashion in domestic airport. So it's a very somehow a typical market in which we operate. Despite all the efforts we did in the recent past, we do not see a clear turnaround of market trends. So we are in the process of restructuring. Depending on the way you measure it. I would say, if you count in terms of number of store closing, we are more than halfway if you count in terms of reduction of the losses, it's higher than the number of store shrink or decline. As I said earlier, most of the restructuring should be achieved by the end of this year. We're still in the red this year. But next year, we can consider we are in the range of 0 of everything, including bottom line. Gregoire Castaing: Thank you, Fabrice. Coming back to the Vivendi deal regarding Prisma, again, this is under the review of all the bodies. So hand December '25, Prisma finalized, as you know, the acquisition of the magazine Ici Paris & France Dimanche and then we launched the 2 restructuring. The transaction again enable Prisma to refocus on its core businesses in a more challenging economic environment. The impacts are not very strong regarding the business of Prisma since the luxury branch represents close to EUR 20 million in terms of revenue and is close to breakeven in '25. Regarding the cash consideration and the cash impact, the consideration is regarding the sale of the Luxury division around EUR 10 million used in cash. And regarding the other part of the transaction since concurrently with the transaction regarding the luxury brands then will acquire a minority stake of around 14% in Prisma Group share capital. The transaction will contribute to EUR 30 million in cash for LSA coming from Vivendi. So this is for Prisma, Vivendi deal. Then you also had a question regarding the CapEx for '26 and is the '25 level. The new normal, actually hard to say. Again, the CapEx in '25 was, we were a little bit lower than expected, so I will tend to say that the target is between '24 and '25. I think it's better to consider the level of CapEx compared to the turnover and particularly regarding Travel Retail, I think that we should have level between, let's say, 3.5% and 4% of the total revenue. I think this is roughly in the long term, what we should target. And then you had a question about the cash impact what was exactly the question. The impact for the restructuring regarding Prisma, and during '25, we had roughly EUR 7 million already cash out for the restructuring plan launch for Prisma, mainly the one launched at the beginning of the year. So the main part of the restructuring costs in terms of cash will impact year '26 and maybe a little bit in year '27 depending again on the timing linked to the review, which is under process. Operator: Next question is from Julien Roch, Barclays. Julien Roch: Yes. The first one is, can you give us some colors on Q1 trends by division? That's number one. Number two, is there any assets in the Live division that you consider noncore? I know for instance, pricing is profitable, but maybe you could give a good price and deliver some more or the venues. So anything in there potentially could be noncore. And then last question is, could you give us some indication on cash flow, either cash flow conversion from EBITDA or some indication, whatever you can say on cash flow generation in 2026. Emmanuel Rapin: So we start again, I think, a little bit summarize what is the trend for publishing with Jean-Christophe? Jean-Christophe Thiery: Thank you, Emmanuel. So the Q1 of '26 should be roughly in line with 2025. despite the unfavorable comparison base effect with the first quarter of 2025, which had benefited from the huge success of Onyx Storm in the U.K. We will have a solid publishing program for the first quarter of 2026. Additionally, we will publish Judge Stone in the U.S. in March, which is a collaboration between James Patterson and the actress Viola Davis. And the activity for the first quarter in France will be driven by the success of Pierre Luminet which is the fourth titled in the series. He began in 2022, and we will have the return of Guillaume Musso who will publish a new novel Le Crime du paradis I mentioned earlier at the beginning of March, along with the simultaneous release of [indiscernible] in trade paper back. Unknown Executive: I guess this is my term. So for regulatory Trade Retail, the month of January was somehow in the continuity of the last quarter of last year. that we find a pretty good result, especially in the context of very adverse weather conditions in Northern Europe, I have in mind Brussels and Amsterdam Airport in particular that were badly impacted by the snow wave. And also in North America, it was an extreme weather event. That affected traffic and therefore, our sales. Having said that, despite this very adverse effect, we maintain a good momentum in the continuity of last quarter, so mid-single-digit sales growth. We continue to be supported by the same effect because I said earlier, until end of April, this will be helping our growth. And this is despite quite painful in January painful FX effect. And that's why I said earlier for the full year, it's something we're going to monitor. But all in all, we're on track with what we were expecting mid-single digit in Jan. Well, that being careful extrapolating January is the lowest smallest months of the year. We believe the first quarter should be equal or slightly better than the month of January. Gregoire Castaing: And I think that I already answered regarding the Prisma and Live trend for the beginning of this year. Coming back to the question that you had, Julien, regarding the assets that you named noncore assets or the Live branch as you know, these assets are definitely not for sale. It's not our plan. We clearly love these assets. It's a very strong portfolio of brand. They are all profitable apart the new activities. And as I mentioned we're targeting to be close to 0 for this news branch. And is clearly the priority for us. I prefer to focus on generation cash through operational improvements instead of planning any sale for good assets of the groups. Regarding the cash flow conversion for '26, of course, we will try to increase again, the cash flow generation for '26 for the next year. I think, of course, the main driver will be the profit and the EBITDA generated next year and the increase of the EBITDA. But just keep in mind that for '25, as I mentioned it, we have a few exceptional items that positively impacted the CFFO. The first one is the sale again, of our real estate asset in rue d'Assas and the sale of the Domain Name both represent together close to EUR 40 million. And we also as I mentioned it, the credit loan for reimbursement for sports for Lagardere Sports for also EUR 40 million. So all in all, we had close to EUR 80 million exceptional impact this year, it was not so easy to deliver these exceptional items to again sell particularly the rue d'Assas at this level. But this is down. And I'm not sure that we will have big exceptional items in '26. So the main driver, again, for the cash generation should be the operating result for '26. Operator: Next question is from Christophe Cherblanc, Bernstein. Christophe Cherblanc: Yes. I had the 3 questions. The first one was on minority interest. I think in the release, you mentioned that the improvement is coming from the lower level of losses in Asia. So it seems to be essentially due to lower losses in Asia. is that the right way to look at it. And if that is the case, EUR 20 million, EUR 19 million increase suggest a very, very strong improvement of the net contribution of Travel Retail Asia. Is that a fair assumption? The second question is just a confirmation, I had in mind that the share of operating profit generated in dollar was about 40%. Just wanted to have an update on that order of magnitude? And finally, on Live, I think, Gregoire, you just said that you were targeting for News to be at 0. Is that an assumption we should -- we can take for all of '26 for the whole of the division Live plus News. Gregoire Castaing: Regarding the minority interest, I just mentioned that this has a positive impact regarding the minority interest at the group level since we share the loss with minorities. And since the loss are lower this year, we have, let's say, lower negative impact for the minority shareholders in the results. As you know, it's always quite difficult to explain in details all the impact for the earning group per share, particularly if you are at the Louis Hachette level. But if you have detailed question about this. We do not hesitate to outside this call, I have a discussion with the AR. They have all the sheets and the figures that help you to go from the net results from Lagardere to the net result from LHE with this clear speed between the group level and the minority level. Then you also have a question regarding the results coming from the U.S. and with the assumption of 40% I think it's quite a good assumption for this year. Again, the U.S. is clearly today our first market. So if you beside your question, the question is could we be also impacted by any change, of course, we could. We already mentioned it. But keep in mind also that we have a part of our debt, which is in dollar. So if we could have a negative impact regarding the FX for the revenue and the operating results, we could also have a positive impact balancing this for the net debt. And then you mentioned the target regarding Live. As I mentioned it, we are close to breakeven, not yet there. I think it's feasible to be breakeven in '26, it of course, depends a lot on the market in the advertising market. So I again prefer to be cautious, but I already mentioned this target 1 year ago, and we clearly want to achieve this level I hope this is feasible in '26, but if it's not the case, this will be for '27, we want to reduce the cost and the and the loss at this level. We are completely focused on this target. Christophe Cherblanc: It was at Lagardere level where you've got that EUR 19 million increase. So you have 23% share of minorities. So if you do the math, that's massive improvement of the net profit of Asia. So I do know that last year, you had... Gregoire Castaing: If you just have a look to the net result at Lagardere level, you have a very significant improvement regarding the net result, group share at Lagardere level. Then we have just to walk you through the net results from Lagardere to Louis Hachette. And again, this is something that we can do outside is no problem to give you all the details. You're right. The net result at Lagardere level improved a lot in '25. Operator: Gentlemen, there are no more questions registered at this time. Emmanuel Rapin: Thank you. Thank you all, and we conclude this conference call, and we hope to hear from you for the Q1 2026 in April. Thank you. Gregoire Castaing: Thank you very much. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler Group Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Elena Mariani, Group Strategic Planning and Investor Relations Director. Please go ahead, madam. Elena Mariani: Good evening, everyone, and thank you for joining our call today on Moncler's Full Year 2025 Financial Results. Let me introduce you to the speakers of today's call, Mr. Remo Ruffini, Moncler Group's Chairman and CEO; Luciano Santel, Chief Corporate and Supply Officer; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Chief Brand Officer; and Robert Triefus, Stone Island's CEO. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. I also remind you that the press has been invited to participate to this conference in a listen only mode. Finally, I kindly ask you during the Q&A session to speak to a maximum of 2 questions per person to give all participants the opportunity to ask questions. Let me now hand it over to our Chairman and CEO, Mr. Remo Ruffini. Mr. Ruffini, over to you. Remo Ruffini: Good evening, everyone. In 2025, even in a difficult environment, our group delivered a solid performance, EUR 3.13 billion of revenues, a strong acceleration in Q4 at both brands with Moncler DTC up 7%, Stone Island DTC up 16%, an EBIT margin of 29.2%. Net cash, EUR 1.5 billion, and our sustainability effort valued by key ranking globally. Strong results that demonstrate the quality of our operating execution and the resilience of our business model. But as usual, as always, what I'm mostly proud of is how we reached this result, investing in creativity, preserving our identity and moving forward with clarity in our long-term strategic direction. At Moncler, we are working to make the brand stronger across all seasons and all geographies, focusing on where we have room to improve our brand awareness. We also continue to build unique brand experiences and moments. After the strong success of Warmer Together, which become way more than a simple campaign, we opened 2026 with an emotional Grenoble event in Aspen. And we are back to Winter Olympics by sponsored the team Brazil and its athlete, as Lucas Pinheiro Braathen, in a relevant, unique and meaningful way. This moment are only the beginning of a year of full initiative. As Stone Island, we keep moving with focus and discipline. We are working hard to reinforce the brand in the areas that matter most, improving our collections, elevating the customer experience and making operation more solid and relevant, growing with intention rather than just scale. As we grow, we decide to make our organization even stronger. The arrival of Leo Rongone as the Group CEO in April is a natural next step in our evolution, which will bring new energy to our already solid structure. Something my leadership team and I have been considering for a while. But let me be clear, I'm not stepping down. And I'm stepping back. I will be Executive Chairman, continue to lead our creative direction and set the strategic direction of the group. I will be fully involved every day with the same passion and the same commitment. Let me close with something that feels very important to me. We grow only when we stay true to who we are, to our curiosity, to our uniqueness and to our courage to evolve because I believe that only companies that understand when and how to embrace change are able to succeed. Thank you. I leave the floor to Gino. Gino Fisanotti: Okay. Hello to everyone. Good afternoon. I hope everyone is having a good day. I just want to take the opportunity on the back of the message of Mr. Ruffini to share how happy we are with the strength of the Moncler brand right now. I think we are not just happy because of the good and the great results we've seen and the opportunities we have, but equally excited and happy about the opportunities and the potential of this brand towards the future. I think 2025 was not only a special year, was a year where we've seen our biggest year yet in terms of -- not only in terms of brand awareness and reach, but especially in terms of the brand engagement we have seen all around the globe, proving again that we are just way more than just big events and sometimes the seasonality or just a specific product. If we go to the next page, when we talk about Warmer Together, I think this was -- I want to start here. This was a quarter of records. A lot of records have been broken and we are happy to share some of them. I think the first one is Warmer Together, Mr. Ruffini just mentioned that it was more than just a campaign. In that sense, became the biggest campaign in the history of Moncler. This campaign wasn't just about product or wasn't just about celebrities, was about sharing the values about who we are and where we stand for. And I think nobody better than representing that than Al?Pacino and De?Niro, who are, for the very first time doing something together as a marketing campaign. I just want to say that this is the first time we even have issues to count the amount of coverage we're having and the amount of reactions we're having around the globe for this campaign, including markets like in Asia, like in China, where not necessarily the 2 celebrities were as known as the rest of the globe. Again, last but not least, on this campaign and the incredible results we were able to get, I think, as Mr. Ruffini said when we started this campaign, Moncler never been just about buffers and winter. We've always been about want and love since the very beginning. If we go to the next page, we will talk about Grenoble. And again, in December, we were able to launch the campaign on the back of the collection we presented at the beginning of 2025 in Courchevel with a pretty spectacular event. And again, another record breaking. This has been our biggest campaign in terms of Grenoble ever and especially since that we said that we started 3 years ago. This was a special campaign that was featuring our incredible Lucas Pinheiro Braathen, Vincent Cassel, model Amber Valletta, and of course, the most awarded snowboarder Chloe Kim. So again, incredible results there. And then on the back of that, I think we just mentioned, I think, was an opportunity for us to go back and celebrate our roots. We were not back into the Winter Olympics season since 1968. And in December, we announced the partnership with the Brazilian Federation, something that I'm sure we will cover in the next call, but I'm sure you've seen already regarding the opening ceremony and the incredible trajectory of Lucas during this Winter Olympics just a few days ago. So again, another great season not only for the brand, but specifically for this very important dimension of the brand, Moncler Grenoble. Last but not least, as we always talk about our 3 brand dimensions, Moncler Collection covered by Warmer Together, Moncler Grenoble with this campaign and the work done around the announcement for the Olympics. We have Moncler Genius, 3 very important drops during Q4 for us. The first one was an anticipated drop of Moncler Genius and Jil Sander. The second one was the reissue of a product that came a few years ago with JW Anderson, a very small capsule collection that we reissued with drop and was immediately sold out. And then last but not least, our partnership with ASAP Rocky, something that went way beyond the product collection we launched it. We were part of the partnership of his anticipated new music track after multiple years. And at the same time, we launched a very special Maya 70 jacket in December just for few destinations around the globe in DTC, and we were happy to see that product perform extremely well despite the limited units and the high price on that. So with that, I want to pass to Robert to share some of the great news from the Stone Island side as well. Robert Triefus: Thank you, Gino. Good day to everyone. I'm pleased to give you some highlights for this quarter. It's been a quarter, as Mr. Ruffini said, that we can be pleased about. It is a quarter that demonstrates the commitment we're making to focus on the values of Stone Island, the principles of Stone Island. And the campaign on the left featuring [indiscernible] is a continuation of a campaign that we've been investing in now globally for 2 years. It's a campaign that brings members of the Stone Island community to life to underline our commitment to product, the lab, the commitment to research, innovation and materiality, but also the life of our community. And this campaign, I think now, as I say, in its second year, is showing the consistency and the coherence of our brand positioning strategy. In the second column, you see Dave, a musician from the United Kingdom, who has also appeared in our lab and life campaign. We celebrated an album that he released. Dave reaches a very active part of our community. We call them the explorers, those customers who are accessing the brand for the first time, and he is a great representation. In the third column, you see a collaboration with Porter, the Japanese brand well known for accessories. We have a long-standing relationship with Porter. Accessories is not a large category for Stone Island, but it is a category of future potential. And both Porter and Stone Island stand for a commitment to research in our respective categories. And last but not least, Stone Island has a long association with soccer. Of course, this year with the World Cup, soccer will come under a particular spotlight. And in the fourth quarter, we continued our important strategic collaboration with New Balance, celebrating the sport of soccer. Thank you. Roberto Eggs: Thank you, Robert. Roberto speaking. Happy to share the positive results of both Moncler and Stone Island for Q4. As anticipated by Mr. Ruffini, we closed the quarter very positively for our business in Moncler with a plus 6%. The growth was on both channels regarding the Americas, both for wholesale and our D2C business. In Europe, the result of the third quarter was slightly negative, but locals were positive. So we were impacted by negative trend on tourism, especially with American, Korean and Japanese. Regarding Asia, all the regions grew positively during the last quarter of the year with a total result at plus 11%. I will be able to illustrate more in details in case you will be interested later on. If you move to the next chart with the results per channel, we were -- we have positive results or reverting trend on the wholesale. This was mainly due with this plus 2% on reorders for the fall/winter, strong reorders. So we're happy about the end of the year results. And regarding the D2C business, it was a strong growth at plus 7%, especially thinking that, as you know, Q4 has always been a strong role for Moncler. So we had a base of comparison over the past 3 years that was very strong. So the plus 7% is even more meaningful in that sense. If we move to Stone Island, there are also positive double-digit results in all the regions, Q4 at plus 16%. We had the Americas growing at plus 26%, also growing on both channels. The results on Europe were strong with a plus 12%. Both channels were positive. And similarly, also, we grew plus 22% with Asia. So strong performance also in all the regions in Asia. Regarding the results by channel, we had a plus 17% on wholesale. This was also due to the fact that there were some shipments that were due to be sent in Q3 that were postponed into Q4. So this was why we had a negative result in Q3, but we recovered in Q4 with this plus 17%. And you see the positive results with a strong retail KPIs that we had with this plus 16% for Q4 in our D2C channels. Regarding the opening, as you know, we tried with Moncler to open most of our stores with the start of the fall/winter season. So usually during Q3, we still had one opening in Korea in Galleria, Gwanggyo. We had for Stone Island, 3 openings. One was a conversion in Paris with [indiscernible] and we have 2 openings in the U.S. with Costa Mesa and Yorkdale. If we want to go quickly and swap through the picture, you see the opening of Gwanggyo that we illustrated here in Seoul. We put also a picture of our most important store on the Hainan Island that was where we doubled the surface at the end of the year. The opening took place in December and with very positive results for the year-end and for the Chinese New Year. And you see also one of the latest openings that we have had with Stone Island with South Coast Plaza with our OMA concept that we are now deploying in all the network. Pass the word to Luciano. Luciano Santel: Thank you, Roberto. Hello, everybody, and thank you again for attending our call today. We are now at Page 23, where we report our profit and loss for the fiscal year 2025 with an operating profitability of 29.2%, slightly, slightly, behind last year, but substantially in line with last year when we reported 29.5% with selling expenses slightly higher than last year due to the negative minus 1% comp as Roberto mentioned before, with a good control of G&A and with the usual 7% in marketing expenses as last year. So quite a good EBIT margin. Let me make one comment below EBIT on financial expenses that show an increase from EUR 6.5 million to EUR 26.2 million due to higher interest expenses on lease liabilities by the IFRS and the lower level of interest income this year as compared with last year. Let's move now to Page 24, where we report CapEx. CapEx totally in line with our plan with what we anticipated to the market in July of last year, 6.9% higher than the 6% we reported the year before due to a couple of important projects. One is about the new corporate headquarter and the other one on the distribution network, the big, very important new project in New York Fifth Avenue store. For the 2026, just to let you know, we expect to go back to a 6% incidence of CapEx on revenue. Page 25, net working capital, 9.7% against the 8.2% we reported last year, higher due to a higher level of inventory. But let me say, a healthy inventory, a result of a strategic decision we made about 7, 8 months ago to invest in one of our most important strategic raw material, which is down due to the volatility we faced last year in that sector. And so in order to be safe, we decided to buy more down than what we normally do. So everything still totally under control as well as credit and of course, payable. Page 26 now net financial position, close to EUR 1.5 billion against the EUR 1.3 billion we reported last year after a distribution of dividends last year for about EUR 350 million. Important to remind you as we report in the notes on this page, we expect actually the Board will propose to the shareholder meeting a distribution of EUR 1.4 per share in May of this year on the earnings of fiscal year 2025 with a payout ratio of over 60%. Page 27 balance sheet, nothing important to comment. Page 28, cash flow statement that reports a free cash flow of EUR 529 million behind the EUR 587 million last year. But of course, there is an FX translation impact of about EUR 20 million. And on the top of that, important to reiterate the higher change in net working capital due to the inventory level I mentioned before and higher -- significantly higher CapEx than last year with a total financial position again of EUR 1.5 billion and the cash generation of about EUR 150 million. Page 29, we report, as usual, our strong commitment on sustainability. And let me say, the strong results we have achieved this year. Okay. We are done with the presentation and ready now for your questions. Thank you. Elena Mariani: Thank you, Luciano. We will hold for a few seconds to gather questions from the audience. [Operator Instructions]. Operator over to you. Operator: [Operator Instructions] So the first question is from Melania Grippo, BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got two questions. The first one is on the current trends. If you could comment on what are you seeing year-to-date in retail compared to what you delivered in Q4? And my second question is on product diversification. I would like to understand if you're happy on how this is proceeding. And if you could please give any granularity on some of the categories, for example, shoes, knitwear and also on spring/summer. Roberto Eggs: Melania, thank you for your question. Happy to answer it. I will give some highlights on Q4 first before answering to the question regarding the current trading. We had, as it was presented, a strong Q4 with an acceleration towards the very end of December. We had a good month of October, November, a month of December that started a little bit more flattish, but then an acceleration from mid of December that we have continued to see in January and also in February. To be more specific on the different regions, they are all going positively with a strong performance on our Asian countries, but also on the U.S. for both channels, both retail and wholesale. I must say that Korea, especially had a very good rebound after Q3 that was a little bit less good, and we continue to see this growing trend, also thanks to the return of the Chinese on the Korean market. Chinese that have been missing a little bit on the Japanese market, but we have seen them back both in APAC and in China, and they are consuming both in China Mainland and outside in other region in Asia. So very happy about the start of the year with an acceleration that we have seen in these last few weeks. Gino Fisanotti: Melania, Gino here. Thank you for the second question. So a few things here. I think we already discussed this probably for the last 12 months. I think -- regarding product classification, I think there's a few things just to highlight. The first one is, of course, beyond outerwear, something I will come back later, we have been doing specific efforts regarding everything that is knitwear and cut and sound, something that we are really happy to see the progression of this business, especially on the knitwear side, we're seeing a really strong consumer reaction for the past 12 to 18 months. And then, of course, we're seeing good positive as well results regarding the efforts that we're starting to put around footwear, specifically in the last quarter with the new launch of the new Altive Mid boot as well as some of the work that we are doing on soft accessories. I think as we always mentioned, of course, we -- I think the other aspect that is important to keep in mind is when we talk about outerwear, we're talking about the evolution of a business that now has a strong impact, especially in everything that is more about lightweight and something that we call seasonless. It's more like lightweight solutions and lighter versions of our product as well, which is performing very well as well. So I will say we will continue on the diversification of the weight of outerwear as have been growing over the past 2, 3 years, and we will see that continue as we go into the next seasons. Regarding spring/summer, I think if you ask us, we are happy with the results of Spring/Summer '25 despite all the, I would say, the macro environment of the industry as a whole. That said, I think what you will see as we discuss is spring/summer specifically more on the back of spring and summer per se. We always said over the past probably 2 years that we were working relently in terms of improving the product offering before we were moving to do any type of a specific even bolder communication. The only thing I will just probably slightly anticipate before we discuss not to share much is that you will see an evolution in terms of the efforts that we'll be putting specifically from 2026 onwards. We are very proud of the effort that the team have been doing over the past 2 years, especially from design and product development, and we believe that we are ready to go to the next level when we talk about spring/summer. So more to come in the next probably few months, but this is an important aspect as well that we wanted to highlight to your question. Roberto Eggs: Melania, just maybe one last point on my side regarding the current trend and the current trading. I've commented on Moncler, but just to confirm that we are seeing a continuous momentum as the one we have seen on Stone Island in Q4, also at the start of Q1. Operator: The next question is from Ed Aubin, Morgan Stanley. Edouard Aubin: Okay. So I will stick to two questions from [indiscernible]. But before I do so, ask my question, if you can allow me to wish good luck to Roberto in his new adventures. So Roberto, it was very enjoyable to hear and you share your views on Moncler. So you're living on a high. Congratulations, and I'm sure we are going to hear from you soon. So moving on to the questions. I guess the first one is for Gino, and apology because it's a bit of a big picture question, so it might be difficult to answer in a short time frame. But Gino, what makes you confident that the brand desirability will continue to increase? I guess it's multidimensional in terms of advertising campaign events, shows, collaboration and retail excellence and all of that. So I know you don't have much time, but if you could comment on that, I'd be curious to have your views. So that would be question number one. And then question number two on to Luciano, I guess, is on the margin sensitivity. So I guess Moncler retail was up 4% for the full year at constant FX, and you had a 30 basis point kind of EBIT margin dilution. Is that a good rule of thumb to keep in mind for the future? And then what would make you translate to kind of a neutral margin trajectory going forward? And just related to that the Luciano, if you could update us on the FX impact you have in mind, assuming, obviously, FX would not change up until the end of the year for 2026. Gino Fisanotti: Ed, thank you so much for the question. I think, again, as you mentioned, probably, it's a longer answer that we can potentially, hopefully, we see each other and take it. But I think there's a lot of aspects for us to think why we believe that we have almost -- we always say this about this idea that this is a brand that has unlimited potential with always as every company specific resources. So we are always trying to be very focused on the few things we really want to be really good at as next steps. If we think about this, I think the things that make us super confident is not only seeing the results we're getting -- we are sharing with you today and more importantly, the reaction from customers around the brand is, first of all, is we have opportunities when we think about Grenoble. I think we strongly believe that there is a big opportunity for the brand to go further and deeper on that. We believe that there is -- as we always discuss and I just mentioned the answer before, an incredible opportunity for us awaiting us to become a more all year-round brand with spring/summer. We believe, as you know, and you start seeing the efforts in '25, and Luciano mentioned some of the investments we're doing in the U.S., specifically as we go into this mid-to long-term approach into this market. And that make us believe on all this. On the back of that, again, I think the opportunity regarding product is real, right? I think when we talk about there's 2 aspects on product that is working in a way for us, which is in one way, we keep elevating the proposition we have in terms of product offering, while we are protecting the core as well. And I think these two things make us relevant at the very mid-high-end part of the luxury industry while we are able to connect with the aspirational customer as well. So again, and this allow us what I believe is the other big part for us is we still have a lot of opportunity for acquisition, for customer acquisition that they are at the very end, the ones who allow us to keep investing and keep growing as a brand. So of course, we can elaborate a way more, but hopefully give you 5 to 6 answers to that question. And some of those, especially the ones I mentioned around renewables, Spring/Summer, the U.S. and the opportunity to keep better on Park and the way we connect emotionally with customers are the things that we are obsessing every single day as we keep moving forward and allowing us to showcase today the results that we're showcasing with you. Luciano Santel: Ed, thank you for your question. About the margins, in 2025, we reported, let me say, better than what our rule of thumb, as you said, would expect of 29.2%. This was because Q4 after Q2 and Q3 that was -- were both quite disappointing. Q4 was very good for both brands, as Roberto said. And also because in the mid of last year, when the business trend was not particularly strong, as you may remember, we decided, of course, we needed to react to that business trend, implementing some cost saving initiatives that allowed us to control and to report quite good G&A and also selling expenses without touching, of course, marketing that is, let me say, the blood for our brand and for our business. Talking about FX for this year, for 2026 based on what we know today that may be different from what may happen tomorrow based on the current FX, we expect a 4% impact on the top line, a decline of the top line due to FX. Talking about the margins, of course, we try to do whatever we can to protect our margins, reacting to the FX trend, negative trend right now with a pricing policy that is expected to offset the FX trend. So for margin-wise, the impact of FX on margin is expected to be, let me say, negligible. And this is what I can tell you right now. Of course, there are many other impacts, but your question was about FX. Elena Mariani: And Ed, let me allow you to add one small thing. When he talks about the impact of FX on top line, he said 4 percentage points for the full year. Keep in mind that for the first quarter, it will be bigger than that. It will be around 6 percentage points of impact on the top line. So it will be bigger in the first half of the year and a little bit less starting from Q2. Operator: The next question is from Erwan Rambourg, HSBC. Erwan Rambourg: I hope you can hear me. Congratulations on a very impressive 2025. And yes, specifically for Roberto, congrats on a great track record over the past 11 years and all the best for what's next. So the two questions. First of all, on China, I think you're one of the first companies to report during this Chinese New Year. So I was wondering if you had any initial faith on this Chinese New Year and possibly if you can share the split of sales to Chinese citizens onshore versus offshore and how you see this evolve this year and in the future? And then secondly, just wondering if you could give us a few metrics. I'm thinking about the average selling space, sales per square meter, UPT, anything worth looking at in terms of '25 versus '24? Roberto Eggs: Erwan, thank you for your comments. It was a pleasure working with you over the past 11 years. Regarding your question on China and Chinese New Year, I think we are still in the middle of the Chinese New Year. So we'd rather prefer to comment on the general trend with Chinese inside and outside China. And what I can comment is that we have been growing double digit, both inside and outside China. Maybe, you usually don't report data on -- and I see our team getting a little bit nervous now. But on the like-for-like, we usually don't comment per quarter, but I wanted to restate that Q4 was positive for us. So we start seeing again like-for-like growth towards the end of the year, and this is confirmed for the time being for the start of Q1. So Chinese positive inside and outside double digit. The rate of -- the share of consumption of Chinese inside and outside China is roughly the same that what we have seen in the second half of 2025. So a 70% internal consumption and 30% outside of China. I think that this trend, it could vary. It could become 1/3, 2/3, but we are not going to get back, as you can imagine to the 50-50 that we had pre-COVID because for a very simple reason, there is a repatriation of consumption in China. And on top of that, a lot of brands, Moncler included and Stone Island included, have been doing dramatic efforts to increase the footprint on the China market, even if we see still potential to have better-looking location, larger stores, and we are working already for this year on some relocation and expansion on the market. But there is this willingness also of the Chinese government to repatriate part of the consumption. So we have been working on both. We take advantage of the Chinese traveling. Japan is probably the country that has been suffering the most, but this is more linked to political tension than anything else. We have seen Hainan performing well. We have seen Korea performing extremely well. Hong Kong has been performing well also. And we have seen positive results in Europe, even if we are not at all at the same level of Chinese consumption in Europe compared to the pre-COVID. So this is something that has been confirmed. Regarding the metrics and also what we have in the plan for 2026, we have a similar number of openings than back in 2025. So you can expect similar impact this what we usually say mid-single-digit impact in terms of additional square meters that are going to drive additional sales on the market. And the other metrics on, let's say, retail excellence, they have been positive. So we have seen some traffic back in the stores, good conversion. UPT is not the name of the game usually towards the end of the year because we tend to push more on the high price value item, especially with Grenoble and UPT is more the battle that we are having in Q2 and Q3, especially for men, but the metrics have been good at the start of the year. Operator: The next question is from Chung Huang, UBS. Chris Huang: Congratulations on the results. The first one, maybe just a clarification on the cluster. So I think, Roberto, you commented that European locals in the quarter were positive. I'm just wondering if you can give a little bit more color in terms of is it more low single digit, mid-single digit and also other nationalities. I think you said that American tourism is a bit softer in Europe. But if we take the whole American cluster, how is the performance in Q4? And on Chinese, I think last quarter, you already had a very positive trend with the Chinese consumer. So just looking at the quarterly trends in Asia, it does seem like Chinese is growing around mid-teens, if you can confirm my calculation. Secondly, on the moving parts of 2026, I mean, if you can give us an update on the pricing plan for both brands. I think space already commented, but also if you can provide a refreshed wholesale guidance. I know there's some timing impact for Stone Island, for example, but just wanted to hear your latest thoughts on those metrics. Roberto Eggs: Okay. Let me clarify on Europe, and thank you for your question, Chris. Regarding the European nationalities, they have been flattish. We have had a positive impact of Chinese tourism, but on the low single-digit part for Europe. And we have been negatively impacted in Europe by Americans that were down, by Korean that were down and Japanese that were down. So this is for the global context, then we have seen also positive growth with -- even if it's not as important as from some other brands, but we have the Middle East that has been growing. So our client in Middle East and our business is developing well there and also when they are traveling to Europe. Regarding the other nationalities, you were asking regarding the Americans, they have been in the high single-digit positive cluster overall, but their performance has been mainly a local performance. So the result that we have seen in, let's say, in Q4, they are confirmed also at the start of the year, so positive performance locally, less when they are traveling outside. And regarding the other nationalities, we have seen at the end of the year, Korean going back to positive single-digit result after a negative Q3. So this was something that was very positive for us. And Japanese locally have been positive also. So the performance that we see on Japan is mostly driven by the good performance of the locals to a lesser extent on the Chinese because we have seen a decrease in the Chinese. What we have seen is, if I may say, the Chinese that are coming to Japan are there. They're spending more than before, but they are much less than before. So you have seen probably the trends that have been published also by duty-free data that are showing a minus 40% on flights, but we see an impact on the business that is much lower than that because the ones that are coming are really wanting to spend. So it has been, in a way, counterbalanced. Maybe something on the wholesale, you were asking on some of the trends that we are seeing for the wholesale. I think most of the cleaning for both brands have been done in the past couple of years. So we see a business for Moncler that is going to stay flattish for 2026. And we see an improvement on the results for the wholesale with Stone Island. I'm not saying positive, but clearly an improvement compared to what we have had in 2025. Chris Huang: Sorry, I just wanted to come back to the Chinese comment in Q4, if that's possible. Roberto Eggs: No, the performance on the Chinese, as I mentioned, was positive double digits, both in China and outside of China. So this is, generally speaking, the way we have seen the results. The cluster has been growing double digit, both in and outside China. Luciano Santel: Chris, about your last question on pricing for 2026, we expect a price increase for both brands in the region of low single digit, let me say, 3% more or less for both brands, Moncler and Stone Island. Operator: The next question is from Daria Nasledysheva from Bank of America. Daria Nasledysheva: Congratulations on very strong results. This is Daria from Bank of America. I have two. Can I please ask about your thinking on the cost base into next year? You exhibited very careful cost control in the second half, as you already elaborated on. But how are you thinking about your marketing spend next year as a percentage of sales? And if you can share with us the pipeline of activations for the coming year, that would be very helpful. And the second one is on Stone Island. Really a nice progressive improvement has continued that started realistically in Q3. How are you thinking about growth opportunities from here, given it feels like efforts on product and communication are really having an impact? What is the focus for you at the brand now? Luciano Santel: Okay. Daria, let me start and then I will let Gino to elaborate better. The answer about overall our cost base. Of course, we try and we tend as much as we can to be more and more efficient year after year. And this has allowed us, and I hope we will allow us to be flexible, reactive and to develop a lean organization, of course, with the head of the technology, automation, artificial intelligence and whatever. Talking about marketing, of course, our effort on marketing budget is totally unchanged. You saw that in 2025, we spent exactly what we have spent in the past and what is, let me say, our golden rule, that is 7%. And so for this year, for sure, we don't expect to spend less, no more, but not less than the 7%. And which -- I'll let Gino to elaborate better how we will spend this money. Gino Fisanotti: A little bit -- no less from Luciano. Daria, thank you for the question. Again, I think if we follow history of the past, 3,4 years, I think we have been evolving very much the way we're approaching. I would say our marketing team and our brand organization in terms of not only depending on big moments once or twice a year, but being the continued orchestration of a calendar that allow us to have real impact on both the brand and the business, right? And I think within that, of course, we are the ones who became extremely famous, not only for the creativity we bring to the market, but even for these big experiences or events, as you call them. I think 2025 for us was a very important year to prove ourselves that we are not only dependent on that, but sometimes like think about this. I just mentioned the incredible results we got this year in terms of reach engagement, et cetera. And we were coming from comping a year where we were doing 2 big events that we did in San Moisè and in China with Genius. Therefore, I think the campaign we did with Warmer Together was as big or more impactful than some of those moments. So in a nutshell without giving much of the details because I can't right now, I think, trust us that we will keep evolving the way we work, that we are focusing on incredible orchestration that allow us to, not only have big moments, but have the in-between moments powerful as well to make sure that we keep building this brand. And I think now I can say that we are a lead testament that we are able to do that and to push things forward as we did in the past few years and especially in 2025 as well. Robert Triefus: Daria, this is Robert Triefus. Thank you for the question. As you correctly highlighted, the momentum that we're beginning to see for Stone Island first emerged in Q3 has obviously picked up more steam in Q4. But this is really the result of a long-term strategy. A couple of years ago this month, I presented the key pillars of the Stone Island strategy, which are focused on product, the architecture of our collection to make sure not only that Stone Island is recognized for what it has always been recognized for product innovation, material research, particularly in the categories of outerwear and knitwear, and I'm very happy to say that, that is being recognized by our customers as we see in our retail KPIs. In addition, we want to make sure that, that product architecture is reaching a broad community. Stone Island has always been known for a broad community, both in terms of generations, but also geographies. So again, I'm very happy to see that we're seeing dynamism across customer segments and across geographies which showed that Stone Island continues to have this broad appeal. In terms of the second pillar, which is distribution, we said that we would focus on DTC, not in terms of a dramatic expansion of our footprint, but instead a focus on the organic growth of the existing footprint. I'm happy to say that the results are beginning to be seen. That focus has been manifested in relocations of key stores in what we consider to be our lighthouse cities, for example, in New York, in Paris, but also in improving the way that we've seen in wholesale. We've done this through the selective distribution approach that Roberto referred to that obviously Moncler has followed. And in terms of that selective distribution approach, I'm happy to say that we have developed very strong partnerships with key wholesale partners. Of course, it goes without saying that wholesale has played a very important part in the history of Stone Island, particularly in European markets, but it is through those partnerships that we're now able to show up also with the OMA store concept that we're rolling out in our own stores, but also strategically in partner stores. You made a reference to marketing having an impact. I'm a great believer in building brands over time. Rome wasn't built in a day and great brands weren't built in a day either. What we're beginning to see are the fruits of all the efforts that have been made in terms of building greater awareness of Stone Island, but awareness that is also built on deepening the engagement with our customers. That comes from an implementation of retail excellence where our client advisers are doing a better job, a storytelling around the brand. And again, that is being seen to have impact across regions. And of course, the metrics you might ask, how do we measure the impact of our marketing activities. We are seeing greater traction in terms of search. We're seeing greater traction in terms of engagement on social media. We have just been recognized in the last 2 quarters within the Lyst Index, which I think underlines how that traction is building momentum. Of course, we are very pragmatic. These are the early signs of brand momentum, business momentum, gaining traction, and we are very committed to carry that forward into 2026 and beyond. Operator: The next question is from Luca Solca, Bernstein. Luca Solca: One question about your strategic vision on retail. If we look back, we see that the retail development of Moncler and now Moncler and Stone Island, has changed quite significantly in the early days. You had relatively small stores. The size of the average store has continued to go up, you will probably reach a peak with your new store in New York. I wonder -- and at the same time, the retail network has been continuing to expand. I wonder how productivity has been playing out on a per square meter sense? And how do you see the future of this retail growth driver? If you feel that from a number of stores you point, you're more or less where you should be and if the average size can continue to go up productively. A similar question, which is on dynamics of how you see volume, price and mix going forward, we've seen quite a significant improvement in mix and like-for-like pricing, we've seen the wonders of Grenoble. But I wonder, going forward, if you feel that there's going to be a continuing push on mix and price? Or if you believe instead, that there's a need and focus to recapture some of the volume and grow through volume as well as the other 2 elements and how you see the interplay of these 3? Roberto Eggs: Luca, thank you for the first question on the strategic vision on the retail side. I think Robert just clearly mentioned the current focus on Stone Island that is very much on improving the productivity and fixing the model. And we have seen that this has been starting to really play positively on our results. Regarding Moncler, we are clearly compared to Stone Island in a phase that is a different one. When we see our project, the one we are managing, we have something that is very much balanced today between relocation, expansion and new openings. We have, this year, a focus on the U.S. We start this focus on U.S. already a couple of years ago. We have seen events in Aspen. There will be the big event of the opening of Fifth Avenue. You mentioned this would be the peak in terms of size, most probably, yes, our intention has never been to start building big stores everywhere. I think there are a few capital cities in the world where having a larger space allows you to show and showcase the brand and the experience we want to convey in our store in a much richer way. So I'm thinking about cities like Paris, like London, Milano, Beijing, Shanghai, Hong Kong, I think those cities, they deserve -- Tokyo, they deserve to have this type of flagship. But the, let's say, the format that is fitting the best the performance and the retail KPIs of Moncler, they are more around 300 square meter, which is not huge compared to what you see with the other player on the market. And I believe that with this type of format, and we don't have yet all our stores on that format, because our average size worldwide is roughly around a little bit more than 200 square meters. So we still have some stores that are smaller, but we would like to, let's say, elevate in terms of in-store experience for our clients, in terms of retention and so on. And we have seen that this format around 300 square meter is working well. So the ambition that we mentioned a few years ago on where we want to drive the sales density is still there. We said at the time that we would like to see due to the importance of Europe, China is back at the same level of 2019 so pre-COVID, which is not yet the case. So we are balancing out, but the metrics that we are currently seeing, they are there and they are improving. This year, we are going to have a similar number of projects that in the past. Clearly, in the future, we'll have much more relocation and expansion rather than new openings. But this is going to be seen year after year. Luciano Santel: Luca, this is Luciano. About your question, volume price -- volume price mix in 2025 and needless to say, volume somewhere down. But let me say that in Q4, they been getting closer and closer to flattish, so quite encouraging quarter also from the volume point of view, talking about the future price mix. I mean our strategy will still be what we said in the past, and I am sure you know very well, I mean, to keep elevating the brand, increasing our collection, increasing the high end of the collection, exploring higher prices. Right now let me say that our top prices are in the region of EUR 2,500. We see opportunities with our current customer base to increase the offer over that level. But we also believe that we can generate more volume by expanding the base of our collection, introducing a larger offer in the enterprise. Of course, enterprise for our outerwear category is expected to be in the region of EUR 1,200 more or less. So of course, it's a rich price, consistent with our pricing position. But this is the strategy. Of course, for 2026, it's still too early to anticipate what the volumes may be even at the beginning of the year, as Roberto said before, was quite -- and it is still quite encouraging. Luca Solca: Roberto, I look forward to seeing you here in Switzerland and learn about your next step in the meantime. Congratulations on a great chapter at Moncler. Operator: The next question is from Oriana Cardani, Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 2 questions. The first one is on the evolution of the gross margin. Do you expect it to stabilize at the level of last year? Or do you see room for expansion? And my second question is on the price gap level between Europe, America and China, if you can give us an update? Luciano Santel: Thank you, Oriana. About your first question, talking about gross margin expansion. I hope there will be an expansion. But seriously, I mean our gross margin and our gross margin expansion has been driven since the beginning, mostly by the channel mix. Of course, right now, I mean, our DTC business is way higher than they were saying. So any expansion of the DTC business is not expected to be so important as it was in the past. But since we expect for 2026, let me say, solid wholesale business, but not in expansion and an expansion of our DTC business, for sure, from the space point of view, but hopefully also from an organic point of view, we do expect, based on this mathematics, the gross margin to expand a little bit. Please consider that we are now over 78%. And let me say that the maximum gross margin, I can expect right now, not for this year, but should we go 100% DTC, is about 80%. So at this level of development of our gross margin is becoming, let me say, more difficult to keep expanding the gross margin as much as we did in the past. Roberto Eggs: Regarding the price gap between the region, as you know, we are working on a bi-monthly basis to channel on our pricing committee, and we have been working together for the past 11 years to reduce the price gap between Europe and the other region. I must say that currently, it's probably the lowest price gap we have ever had between the region, not completely where we would like to be, but getting very close to that. So we have our American the price gap with the Americas that is below 30%. We have China around 30%, depending on the fluctuation of the currency between 28% and 30%. And we have today, China, Korea, that are more around 26%, 27%. So there is a small price gap between China and Korea to favor also the travelers inside of Asia also regarding Hong Kong, it's the same. We try to favor this 5%, 6% price gap between China and the neighboring countries, so just to favor and push sales for travelers, Chinese travelers. Operator: The next question is from Thomas Chauvet, Citi. Thomas Chauvet: I have 2 questions. The first one on categories. Could you comment on the performance of Moncler brand down jacket business relative to other category last year? What was its share of total business now. And maybe could you take this opportunity to give your thoughts on the broader down jacket market dynamics. We've seen a fair amount of competition at the entry level, at the high end, great progress on technology, sustainability-led products. Any color on that would be useful. And secondly, on inventories, and the 15% increase or EUR 70 million, if I understand correctly, that's largely due to advanced purchase of raw material of down. Are you seeing any kind of unusual inflation in the sourcing of top quality down and what is down typically as a percentage of cost of goods? And just finally congrats to Roberto for a great career for a decade at Moncler and all the best in your future projects in Switzerland or abroad. Gino Fisanotti: I will take it. I think Normally, we don't share again, the performance of the different segments. I think I will go back and repeat a few things we shared before. I think, of course, outerwear is part, of course, of the core of our offering in our business. I think what you will see specifically there, just to give a bit more context is the diversification we have been doing, especially in the past 3 years in terms of the offering, right? It's like not just the traditional outerwear, but all the different segments between seasonless, lightweight versions for travel retail, et cetera, and the demand we're seeing, especially on over shirts and that kind of style. So -- the outerwear business is way larger than it was before. And I think we are seeing specific traction in certain markets. We always talk about the Sunbelt of the U.S. where average temperature is around 18 to 22 degrees. We're seeing some markets in Asia where these performed extremely well. So I would say when we think about outerwear and the size of it, despite that we're growing other segments and other classifications within the business, this -- there was an expansion over the past few years. I think the other aspect that you are discussing is on one hand, outerwear as the same of the different product proposition is going through this process of elevation on one side in terms of how much value we can put in design and in the fabrics we use for certain products. On the other side, there is an innovation place that, of course, we know will take central place for this. I think I don't know, but we can look at what just happened in Aspen literally 15 days ago. In the latest collection we presented for winter 2026 or we can go into for winter '25 or the now 2-year spring/summer evolution of Grenoble, and you will see a lot of different innovation apply to ski work, to no work, to upper ski and even to some of our summer propositions regarding shirts or 3 layering systems. So I think there is a real evolution, I would say, especially on materials, applications on Grenoble, but we will keep fostering this idea of high style and high performance as we keep doing this segment of the business. But again, just to round this answer, outerwear is bigger as a classification than just a traditional view on a winter jacket only, and this is something that have been helping us to not only grow that part of the business at the same time as we keep growing other classifications within. Luciano Santel: Okay, Thomas. About your question about inventory, first of all, let me say it again because it's very important and nothing unusual on our inventory level. Nothing unusual means that our inventory is all good inventory, current season inventory and everything that is to be considered also it has already been written off. So what you see in our net working capital is only good inventory. It is higher this year because we decided to invest more than usual in down last year due to the volatility of the price in that moment. And of course, I mean, when we perceive price increase trend in the market, we decided to anticipate and to buy more down than what was needed normally. Of course, let me say something obvious, and I'm sure that is very clear for you. But we only buy top quality down, we never may decide to buy lower quality down in order to save money, so just to make it clear for everyone. And so the top quality down last year saw a peak in price opportunity. We bought down when the prices were still lower. But of course, this was not at all for speculative reasons, but simply because down is the essence of our DNA. So we needed and we wanted to be safe and to have even more down than needed then to run the risk to have a shortage of down. About the contribution of down, I don't have a number. Honestly, it's not meaningful in quantity, not meaningful in percent of our cost of goods sold. But again, is the essence of our DNA. Gino Fisanotti: Thomas, I forgot -- I think one thing, Thomas, I forgot to -- I think you mentioned about competition. I just want to give one second of an answer because I realize I didn't answer about that. Again, regarding competition, I think we always -- every year or every 2, 3 years, we talk about different aspects of competitors and things like that. We are, of course, in a segment where there's different players. I think the only thing I will tell you is, of course, we always remain very humble enough to look at what competition is there, what competition is doing, what the customers are doing and what's working, what's not working. I think at the same time, we do that. And we see, of course, when you talk about outerwear and you talk about different innovation solutions, there's a lot of different players, even a lot of luxury brands trying to play there. We always observe and try to learn, but more importantly, become better. I think on the other side, we always -- and I think Mr. Ruffini mentioned this at the opening speech, remaining true to who we are and our DNA and more importantly, to deliver strong product solutions for customers that look for a very authentic and meaningful brand. I think Grenoble, again, is a perfect example on top of what we can say about Moncler collection, about a segment of the brand that is delivering incredible product. And we strongly believe that despite competition as well, there's no other luxury brand as authentic as we are in terms of coming from the outdoors and delivering incredible innovative solutions for customers. Operator: The next question is from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the U.S., where you are still relatively underpenetrated. Have the Warmer Together campaign and the Aspen event increased your confidence in the brand's growth potential in the U.S.? And today, Moncler generate EUR 1.5 billion in APAC, nearly EUR 1 billion in EMEA. Do you see a similar EUR 1 billion revenue opportunity in the U.S. over time? Second question, could you please comment on the recent trends in the e-commerce channel and remind us your exposure to online across both brands? And some of your peers have pointed to an improvement recently, suggesting for them a gradual return of the aspirational customers. Do you see similar trends in your business? Gino Fisanotti: Thank you for the question. I think regarding the first one in terms of the U.S., I mentioned this before. This is one of the areas where we strongly believe we have an opportunity to do better. I think -- I will -- of course, I will mention in a second about Warmer Together or Aspen, but this is just singular aspects of a bigger plan, right? I think we strongly believe in this idea of an end-to-end approach towards the market. I think Moncler proven case from Europe to China in the past few years about -- it's not about just retail, it's not about just marketing, it's not about just CRM. It's about everything we are trying to do together and the orchestration of those efforts. I think what you started to see in 2025 between some specific launches we did with Genius, with Mercedes-Benz and legal campaigns regarding Moncler Collection with Penn Badgley, U.S. ambassadors in Grenoble campaign, going to the Met Gala for the first time, Aspen, Warmer Together, all these things are the beginning of something that we believe is a journey, right? I think this will not -- I think Robert just talked about building brands, right? And this is not about something that will have a silver bullet that will work overnight. We believe that, that journey already started in 2025. '26 is a major year for us to keep building towards that potential we have in the U.S. We not only have just did Aspen. I think we are going to open Fifth Avenue later in the year and many other things that will come that will help us to start bringing that potential we see. I think you mentioned something regarding revenues. I will not comment on the size of our revenue. The only thing I will always comment is on the philosophy we have where we always say that revenue is a consequence of what we do. So we strongly believe that we're able to do the efforts that we believe we're putting in place for the U.S. and we drive this end-to-end offense. We strongly believe that the revenue as a consequence will come and we will build long-lasting growth in that market as we are able to do in other geographies as well. Roberto Eggs: Just to complement the answer of Gino on the U.S., we never set targets that are -- we are never driven by purely on turnover and additional business. We always believe that if we do the right things for the brand, results will be a consequence of it. So clearly, now in terms of attention, we are fully focused on the U.S. I think the elements that we just mentioned that were mentioned by Gino, the Fifth Avenue is going to be one of the key elements, the campaign Warner Together has. The fact that we had an event on Aspen. Also, we opened also a very successful -- already very successful store in -- second store in Aspen dedicated to Moncler Grenoble. We had a fantastic receive with clients before -- just before and after the show. So we believe that we are currently doing the right things. We need to elevate also the level of operational excellence and the Fifth Avenue will be a catalyst of this new energy we want to bring also in our team locally. So I think you need to give us a little bit of time. It's going to be a journey that already started, but we are confident. Remo Ruffini: Charles, I think your second question was regarding the online business. Again, I think here, again, regarding online, I strongly -- we believe in this idea that the online experience have been evolving, at least for us in the past 2 years. And this is why one of the reasons that we set our .com in terms of the experience and the look and feel on the second half of 2025. I think we are leveraging more and more .com to attract customers and to more importantly, educate as a more product-centric experience. This is something that took us a bit of time to evolve, but we are happy to see that evolution and see how we can engage product to that front. I think clearly, the online channel have been underperforming through the physical part of the DTC in Q4. I will say within that, EMEA was the one that we were struggling a bit the most compared to the rest of the markets. But again, we believe that there is a kind of an evolution, not to use the word revolution in terms of how customers today are searching, how the searching engines that they're using and how they interact and they leverage platforms not only to just to purchase but to interact with brands, and this is something that we will keep evolving as we just did in September this year. Robert Triefus: Just a couple of words in answer to the e-commerce question for Stone Island. You may recall that around 18 months ago, we internalized the site from YNAP. We took advantage of that moment to launch a new front end and equally to be able to launch omnichannel services through localized warehouses. All in all, these actions have been very productive for the brand in terms of visibility, storytelling, product, narration. And we've seen and we are seeing a very strong trend in organic traffic to the website. So the e-commerce channel is a channel that we see with great potential. Operator: The next question is from Andrea Randone, Intermonte. Andrea Randone: The first one is about the recent interview held by Mr. Ruffini. He talked about the increasing attention of Chinese people towards outdoor activities as a possible tailwind for Moncler. Can you elaborate on the level of maturity of this trend? And the second question is about the internal production. I mean, what is the contribution of internal production on your current business? Is this a possible driver to make your products even more unique in the future or it is not? Gino Fisanotti: Andrea, Gino here. Thank you for the first question. I will take that one. Again, regarding the attention specifically from the Chinese people, as you said, on market regarding other activities, I think we have been saying over the past probably 2 years that we are seeing kind of a momentum towards outdoor activities, especially in Asia after COVID, especially '22, '23 and especially the buildup of first resorts for the outdoors, both summer and winter. This is something that is always happening in the U.S. but got reinforced, especially in the past 3 years as well. Reality is that what we are seeing is definitely the opportunity. We believe that opportunity is being started to being captured by Moncler Grenoble. Moncler Grenoble is performing pretty well across markets, but I would say has a really strong reception in the Asian markets or in China, but not only just in Fall/Winter, especially with the Spring/Summer collection. So this is something that is a testament a bit of what you were saying, and I think what you were alluding when Mr. Ruffini was mentioning about the more avid potential participation or activities of Asian markets, specifically in China regarding the outdoor. So this is something, as you can imagine, that we are monitoring as we go. We are looking forward not only in terms of the winter results, but the activities that are happening to our customer during summer. And we are trying to, of course, make sure that Grenoble is at the center of this conversation. Remo Ruffini: Yes, Andrea, about your second question on our internal production. Internal production for this year is expected to be in the region of 30%, 3-0 percent of our total production. Of course, most of this production is made in Romania, in our big industrial hub in Bacau, where we have 2 big buildings to produce outerwear. But we also produce outerwear ourselves in Italy in 2 different buildings in the region of Trebaseleghe where we have our headquarter. Furthermore, as you probably know, I'm sure you do, last year, actually end of the year before, we opened a brand new building for the production of knit only, quite a big building that allows us to make the weaving of all our knit production or more than 50% of our knit. And why we did that? Why? In 2015, we made a decision to open our own production in Romania because we realized and of course, it was extremely important that we needed to own our technology. And by owning our technology is the most important and essential way to develop and improve the quality of our product and not only improving the quality of the existing product because in Romania as much as in Italy, in Trebaseleghe. But I didn't mention Milan, but also here in Milan, we have a small industrial laboratory, not for production, but to develop prototypes, thanks to the proximity with our design team. This is the only way to improve, not only the quality, but to keep developing and researching new technologies for our product. So again, this is strategically very important. It was strategic in the past, and it is becoming more and more important also as a way to emerge in the market. Operator: The next question is from Chris Gao, CLSA. Chris Gao: Congrats on the great results. This is Chris Gao from CLSA. I have 2. So the first question is regarding Chinese consumers, especially the aspirational consumer spending trends. So basically, in the past few quarters, we're very happy to see queues coming back for Moncler and also for some other luxury peers, though we reckon that the general middle class may still take some time to recover, right? We are also very happy to see that you are both exploring higher price segmentation and also introducing more entry-level products at the same time together. So my question is, in the past few quarters, from a number perspective, do you see aspirational customers of Chinese have been sequentially contributing more to your growth than before? And how would you see the outlook of Chinese aspirational customer spending to Moncler brand? Do you expect it to gradually come back a little bit more as a growth driver? The second question from me is a follow-up on e-commerce. So basically, right now, we see some luxury peers introduce the AI-empowered e-commerce platform. And just wondering how would AI impact your omnichannel consumer experience in the future? Do you have any plans on that front? Roberto Eggs: Thank you for the question. We'll answer on the first one regarding our Chinese consumer. We haven't seen big differences between -- in terms of recruitment and percentage of younger, more aspirational customer or the top end of the pyramid for Moncler. Basically, in China, we have been growing with both and I believe that this is very much linked to the strong momentum that the brand is experiencing on the market since a lot of quarters or a lot of years because it's 3 years in a row that we have been performing well. You remember, we had also a Genius event a couple of years ago in Shanghai, and this was back in 2024, and we were afraid that the year after not having these events, we will see a slowdown in the momentum in China, which has not at all been the case. And I know it's a little bit abnormal because some of the peers are suffering on the market, but we haven't seen a slowdown, both on the aspiration and the top of the pyramid. Clearly, Grenoble is helping us also to grow on that part and what we call the Edit collection. So the more -- the one with less logo. So we are both growing on the very technical part of Grenoble, but at the same time, also with products that are less logo-driven and that are more, let's say, sophisticated. At the same time, our bestsellers, the one that we usually don't have on display, the Maya and so on continue to perform extremely well. And the difference transitional -- seasonal product like the knitwear, it's also a category that has been driving a lot of new customers into the brand. And as you know, those clients that are entering through this category, they usually upgrade themselves into outerwear later on. Remo Ruffini: Chris, thank you. Again, just last comment on what Roberto was saying. I think you mentioned this. I think it's important, and we said it before. I think for us, it's important that as we keep elevating our product proposition, we keep protecting the core. So while we acquire new customers on the more high end, we keep protecting and providing access to our customers. So this is a very important part of our product strategy. Regarding -- you mentioned about online and AI, I will give you a short answer there because this is something we communicated when we launched the new .com in early September. When we launched the new .com we announced our partnership with Google that we have been used as a partner that using the Veo AI platform with them. And what we are trying to leverage there is on the .com experience on part of the recommendation we do with customers based on their journey, we have been leveraging, of course, part of content. And then the last part is we're leveraging that as part of the service in terms of leveraging product as a system address. So there are certain areas today that if you go, for example, into Moncler Grenoble part of .com you can see and understand how the different parts of the product connect to each other for a better performance from mid-layers to under layers to top layers. So again, all the things are trying to be more effective and more efficient in the usage of our partnership with Google and their AI platform. Operator: [Operator Instructions] Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Elena Mariani: Thank you very much for participating in this call. Let me just give you a quick reminder of the next release. Our Q1 2025 interim management statement will be released on April 21, post market close, and our quiet period will start on March 23. Thank you again. For any follow-ups, feel free to contact me or the IR team any time. And of course, I will see many of you on Monday. Thank you again. Have a great evening. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Hello, and welcome to the Klépierre 2025 Full Year Results Presentation, hosted by Jean-Marc Jestin, Chairman of the Executive Board; and Stephane Tortajada, CFO. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jean-Marc Jestin, to begin today's conference. Please go ahead, sir. Jean-Marc Jestin: Good evening, everyone, and thank you for joining us. I'm pleased to present Klépierre's full year results together with Stephane Tortajada, our Group CFO. And once again, 2025 has proven to be a remarkable year for your company. Before presenting our detailed full year results, I would like to stress in the first few slides that our strong 2025 earnings build on our sustained track record. Over the past 3 years, Klépierre has delivered unmatched growth across the board. Our net rental income has risen by 21%, underscoring the exceptionally strong demand from omnichannel retailers, while our EBITDA has increased by 23%, reflecting the significant operational leverage inherent to our business model. In addition, our disciplined balance sheet management, combined with our operational excellence, has enabled us to grow our net current cash flow per share by 21%. This outstanding track record reflects the unique quality of platform of leading shopping centers located in the most dynamic and affluent catchment area of Continental Europe. In recent years, we have undertaken a profound transformation of our portfolio to further align with new consumer behaviors and the continuous expansion needs of major international brands. Since 2020, we have completed over EUR 2 billion of noncore asset disposals, allowing us to refocus the portfolio on malls with the strongest fundamentals while also completing three accretive acquisitions. This reshaping of the portfolio has resulted in net current cash flow per share growth well ahead of retail peers. Over the past 3 years, not only have we significantly outperformed the European property sector, but also the wider European equity market in terms of earnings growth. Specifically, we generated earnings growth 4x higher than that of the top 20 companies of the EPRA Developed Europe Index and up to 20x that of the broad Euro STOXX 600 index. Since the valuation through, we have benefited from continued appreciation of our assets that have already delivered 20% NTA growth. Today, our top 70 malls account for 95% of the value of our portfolio. Combining these solid capital-driven returns with consistent and uninterrupted dividend growth, we delivered a total accounting return of more than 31% over the last 2 years. Such a performance is 50% above the second-best performer, and twice that of #3. Now delving into our 2025 performance. Retailer sales across our malls rose by 3.4% on a like-for-like basis, underpinned by solid consumer spending and our ability to attract leading retail brands, while enhancing the shopping experience. This strong performance, once again, translated into market share gains with retailer sales growth running at twice the pace of national retail indices. Over the years, this momentum delivered a 4.6% rental uplift on renewals and relettings and pushed occupancy up by 60 basis points to 97.1%. At the same time, occupancy cost ratios improved further to 12.5%, providing us clear headroom for additional rental uplift. More income posted a strong 12.1% increase, supported by the continued expansion of specialty leasing and retail media across the portfolio, and once again, our results beat guidance. In 2025, we have delivered a net current cash flow per share of EUR 2.72, marking a 5% jump year-on-year. This result was well above the initial guidance of EUR 2.60, EUR 2.65 per share. The group has achieved a 5.1% increase in net rental income to EUR 1.120 billion, outperforming indexation by 330 basis points. This performance was underpinned by a 4.5% like-for-like growth and fueled a 5.5% EBITDA growth. This was supported by controlled payroll and G&A, which enabled a 50 basis points improvement to our EBITDA margin to 87.3%. For the second consecutive year, our NAV grew 9% again. This increase has brought our NAV per share to EUR 35.9, compared to EUR 32.8 in 2024. Overall, this marks a 19% growth over the last 2 years. Such an increase is driven on the one hand by a positive cash flow effect triggered by an increase in net rental income and, on the other hand, by a positive market effect fueled by slight decrease in discount rates during the past year. Over 2025, as was the case the prior year, Klépierre generated a remarkable total accounting return of 15% or 31% over the last 2 years. Following our strong operational and financial results, we will propose to shareholders at the forthcoming Annual General Meeting on May 7, the distribution of a cash dividend of EUR 1.9 per share for 2025, representing a 6% spot dividend yield. Obviously, our achievements are the fruit of a clear strategy that allows us to confidently continue growing in the years to come. We strongly believe in our capacity to deliver further growth through organic means, extensions as well as value-creative acquisitions. First, let me turn to our organic growth drivers. We have consistently delivered rental uplift over the past years, and our ability to continue doing so in the coming years remains fully intact. At the same time, mall income represents a major opportunity to monetize our EUR 720 million annual footfall. Second, our ability to reshape our shopping centers is unrivaled. At Klépierre, we have the expertise to adjust the scale of our malls and fulfill our retailers' constant demand. To accommodate such demand, we are launching extensions when necessary. Every single project we carry out delivers a minimum 8% hurdle rate, strengthening our shopping centers with increased footfall and retailer sales allowing further market share gains in the catchment area. In parallel, we pursue an active external growth strategy. We acquire assets, for which we are certain we can create value, assets that both strong fundamentals that are endorsed by leading international retailers and for which we see operating efficiency and significant incremental rental growth potential. But make no mistake, the best portfolio is the one that delivers the highest returns for shareholders. So why do our malls remain so highly regarded? Because our malls are rightsized for their catchment areas and deliver high sales density per square meter, enabling a gradual rental uplift over time. Additionally, investments to create streaming shopping experiences for our visitors remain core to our strategy. These investments are carried in a highly disciplined manner in order to maximize our cash flow generation and shareholders return. In addition, new supply in prime shopping centers is extremely limited, which increases further scarcity in the quality space. The A asset category is the one and only that benefits from this setup. As a consequence, our occupancy rate has steadily increased over the past years, reaching 97.1% at the end of 2025, and this is 130 basis points higher than 3 years ago. In the meantime, category killers continue to expand their store size to support their omnichannel strategy and better meet the needs of their customers. And to keep up with the evolving needs of our retailers, we strive to make continuous portfolio optimizations. By actively rotating our tenant mix, we bring in higher productivity retailers, we elevate our offer and seamlessly replace slower-performing retailers. This ongoing rebalancing enabled us to dramatically increase sales density while clearly enhancing the customer experience through the introduction of innovative brands and the expansion of our leisure and experiential offer. Consequently, we have seen our overall retail mix shift steadily over the past 5 years, moving towards health-oriented wellness and entertainment categories. Our Health & Beauty and Dining segments, for example, have been the fastest growing over the past 2 years. To name a few brands, Rituals, Normal and Aroma-Zone, a fast-growing pioneer in DIY cosmetics, continue to boom. Our Dining options and retailer mix are once again being refreshed to attract and retain a diverse and evolving demographic as the number of households continue to grow and ongoing urbanization brings more visitors to our malls. Klépierre continued to maintain a very healthy OCR of 12.5%, compared with 15.9% for listed destination peers. This performance is a direct consequence of our retenanting campaigns that focus on introducing the best retail concepts, delivering exceptionally high sales density. In 2025, sustained leasing tension and continued low OCR drove a solid rental uplift of 4.6% after annual increases of at least 4% every single year since 2022. Let me now stress the other key source of incremental organic growth, mall income. This encompasses our specialty leasing and retail media activities as well as parking and EV charging stations. These levels have been reactivated recently since 2022 and have been growing at an annual average of 12% ever since. We expect further sustained growth going forward. Specialty Leasing through [indiscernible] pop-ups and Retail Media enables our business partner to engage more directly, more deeply with shopping center visitors. The core premise of Klépierre's offering to retailers and business partners is at annual 720 million qualified audience, I just mentioned earlier. Such a large cohort provides immediate brand visibility, allowing large-scale promotions, whether through pop-up stores during festive season, major promotional campaigns in our malls or even full mall domination by omnichannel on national brands. Our nascent retail media business model is clearly shifting from a previously outsourced advertising agency type to a hybrid model. We are actively pursuing to regain full control of our mall ecosystem and better leverage our long-standing relationships with brands and business partner. Practically, by accelerating the deployment of digital screens, including the latest giant led screen technology, we are highly confident in our ability to generate significantly higher average media revenue per footfall than currently. Overall, Specialty Leasing and Retail Media are two highly complementary and synergistic activities, that let me remind you, require very little CapEx. Regarding parkings, we have taken several initiatives in order to introduce paid parking in a number of countries, in particular, in Southern Europe. Now turning to our other growth pillar, namely accretive capital allocation. We have the means to achieve our ambition as we have a rock-solid balance sheet, historically low leverage ratio and top credit ratings among our Continental European peer group. Our value creative capital allocation consists of critical extension as we continue to accompany and fulfill anchor omnichannel and iconic international retailers demand in their pursuit of ever larger flagship stores. Beyond the incremental rental income generated by each extension, such projects unlock substantial value, creating a halo effect across the entire center by driving stronger footfall, lifting total retailer turnover and strengthening leasing extension. Ultimately, such extensions allow us to gain further market share in the best catchment areas. And to be specific, over the past few years, we have launched very successful extension projects. In the Paris region, for instance, we extended our [indiscernible] mall Créteil Soleil. We subsequently initiated a similar transformative operation in Bologna at Gran Reno, and the results speak for themselves. Rents increased by double digit, if not triple digit since the extensions. Both shopping centers recorded a strong double-digit growth in sales density. If we take the Créteil Soleil example, rents were up close to 30%, and average sales density per square meter for the whole center increased by 20% since the completion of our extension. This demonstrates again our unique expertise to transform our shopping malls into unrivaled shopping and entertainment venues. In the same spirit, we have recently launched 3 additional major projects that we are confident, will create further value for our portfolio and for our shareholders. Following the completion of the latest French extension at Odysseum, Montpellier, we have initiated two major transformative projects in Italy, at Le Gru in Turin and Romagna in Rimini. And once completed, this extension will raise both assets into the super prime mall category and will boost our rental growth momentum in 2027. In parallel, we continue to have appetite for external growth. Any prospective acquisition must not only meet our financial criteria, but most critically, allows us to enhance operational performance through reversion, retenanting and the ability to rolling out our mall income solutions. O'Parinor and Romaest acquisition in 2024 strongly illustrate our strategy and clinical execution with significant value creation of 71% and 64%, respectively. Our most recent acquisition of Casamassima, the leading mall in the Mari metropolitan area in Italy, meets exactly our requirements, and we will be applying the same recipe, and we are looking forward to generating a high single-digit return as early as in 2026. In summary, we are confident about 2026 as our organic rental uplift and more income drivers are well positioned in addition to our capacity to carry out high-value extensions and selective acquisition come on top. Moving to 2026. The resilient macroeconomic and consumption environment, coupled with healthy retail sales backdrop underpin a continuous recovery of the European transaction market. According to European retail investment volumes are to reach over EUR 35.5 billion in 2025, i.e., a 5% increase year-on-year. Shopping centers, in particular, have continued to regain favor with investments accounting for close to 1/3 of total volumes since the start of 2025. This improved investment environment was illustrated by multiple prime mall landmark transactions in 2025. As a consequence, the strong operating performance of our malls continue to feed the expansionary valuation cycle of our portfolio. Over the last 12 months, our total portfolio valuation increased by 4.9% on a like-for-like basis. Our well-anchored growth profile was reflected into a slight risk premium compression in 2025, though remaining well above those of other asset classes. We believe this compression represents the early innings of a durable ongoing trend. Building on the positive momentum, we disposed EUR 205 million of small-scale assets, 8% above appraisal value and at a 5.6% blended net initial yield. While we enjoy high visibility on long-term rental growth in a more conducive capital environment, our sound financial structure also provides us great comfort in terms of refinancing and remains a key competitive advantage. We secured more than EUR 1 billion of long-term financing in the past year with an average 8.5-year maturity at a highly competitive blended yield of 3.3%. The proceeds were notably used for repaying a EUR 500 million bond maturing in February 2026, significantly limiting the impact of refinancing activities on our expected net current cash flow generation for the coming year. Looking ahead to 2026, as we believe a firmer market is set to provide tailwind for capital appreciation, and as we benefit from visibility on the cost of debt, we expect to achieve a minimum of EUR 1.13 billion of EBITDA and at least EUR 2.75 net current cash flow per share. Thank you for your attention, and I will now open the floor to questions with Stephane. Operator: [Operator Instructions] The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: So my first question would be on the guidance, I know that, I don't know, Jean-Marc and Stephane, you never itemized the guidance, but it seems a bit cautious in my view. So it would be nice if you can give us, let's say, the main building blocks of the guidance, especially on the NII like-for-like rental growth that you are expecting in 2026, in light of the deceleration of indexation, especially in France, and maybe also the expected cost of debt increase that we might expect in 2026. Stephane Tortajada: Okay. Thank you, Pierre-Emmanuel. So I will say first that the guidance is bang in line with the Bloomberg consensus. So I'm not sure it's cautious, I would say it's in line with the market expectation. And second point, I will mention also that this is a usual pattern of guidance at Klépierre because you follow Klépierre for a very long time now that, I think, it's a usual pattern of giving guidance at the beginning of the year. I would not say cautious, I would say, just as usual. So indexation, you're right, will be lower in 2026 compared to 2025. We may expect indexation around 0.8%, we had 1.8% in 2025. But as Jean-Marc just explained, we feel that we have a lot of levers internal growth first, but also extension plus the acquisition we have just completed end of December in Bari that obviously will be positive for 2026. And for the, you mentioned also the cost of debt, as we have said, we have already covered all the financing for 2026. So you should not expect a big jump in the cost of debt in 2026 for sure. Pierre-Emmanuel Clouard: Okay. And my second question is on obviously your firepower. So if you can give us a view on your current firepower today, in order to keep your A minus rating? And what's your minimum yield requirement, when you are ready to buy assets, I would say, I'll take my chances, but if you have anything to say about the [indiscernible] portfolio, it would be interesting. And also on disposals, what's left in the noncore bucket in 2026 in your view? Jean-Marc Jestin: Okay. Thank you, Pierre Emmanuel. You have exceeding the 2 questions, but... Pierre-Emmanuel Clouard: It's a blended one. Jean-Marc Jestin: Yes, and I will answer with pleasure. I think the -- and I will add on the guidance. When we elaborate a budget, we do it very carefully, and we do that at the end of the year in September, October. And what we have also -- and we take what we know for certain, and we have done some disposals also that will have a full year impact, and we have integrated, as usual, no acquisition in 2026 and development project that we have launched, even though they are not very long in terms of construction, they will deliver in 2027. When it comes to acquisition, we have been quite successful over the recent past to seize some very interesting opportunities where we can really create value. So to the question of what can we do, we look at different type of opportunities. We are extremely selective in terms of pricing. Pricing, it's a combination of, obviously, accretion day 1, compared to our financial metrics, but also the reversionary potential that we can deliver in, I would say, in the next 3 to 4 years. So it's difficult to indicate kind of a threshold that will apply from Scandinavia to Portugal or Italy or France. I would say we have -- we think we still have some opportunities to look at, but for the time being, there is nothing ready to go. And we don't really comment on rumors. So on the portfolio, you mentioned it's market knowledge that this is for sale. We suspect there is a lot of competition on it. And as you know, we don't really like competition. So we cannot comment. It's a very slow process, we will see. For disposals, we are still doing it one by one. So just as a reminder, the top 70 assets, that's 95%. So by telling it, we said that there is 5% that are noncore, 5%, it's EUR 1 billion, and EUR 1 billion, when you sell it at EUR 200 million every year, it will take quite a distance to finish it, but we have no pressure to do that. We do it at a good net initial yield above appraisal value. We don't like the impact of dilution. So we tried to combine it with acquisition. So we do it steadily and try to protect the shareholders' return. So yes, we will continue, and it will take some couple of years to finish. Operator: The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: Actually, I would have a first question, a follow-up question on the guidance for 2026. So I agree with Pierre-Emmanuel that it seems to be very first. And actually, I just looked at what you published last year at the same day, and it was actually quite more the same type of guidance, and we can see that today you deliver plus 5%. So maybe, could you please tell us how you beat your guidance, so we understand that you just put things for which you are maybe sure at 100%. But how can we take into account, for example, some growth, I don't know, in more income or some growth due to revisions, maybe that would be very useful. Jean-Marc Jestin: No. Thank you, Florent, and happy to see you are in line with Pierre-Emmanuel, but -- the -- on the guidance, as I said, we build and we take what is certain, okay? So most of the time, if we do better than the guidance is because we are delivering what we have at work. So in this presentation, we have remind, I think, the main cylinders for the growth. But this is under construction and needs to be done and to be delivered. So there is a very high visibility on our rental, on our occupancy, on our rent collection. But on mall income, retail media, retailer sales, also we always assume that retailer sales will be flat because we can't do better than that. And most of the time, we are delivering more than expected, but as this is under construction, we take it as it comes. So we update the market on our performance on those cylinders. So what we can say that the beginning of the year in terms of sales is very good. We have a good sales for January which allow us also to be more optimistic, even though it's only 1 month. So the sale-based rent, the appetite from retailers is also quite linked to the sales environment. So -- and that's where most of our overall performance come from. Florent Laroche-Joubert: Okay. That's very useful. And maybe a second question on the valuation of assets. So we can see that you have a significant increase this year. You tell us that maybe this is the beginning of cycle. Could you maybe give us maybe more color on your discussion with appraisals on that? Stephane Tortajada: Yes. The first building block for valuation is the cash flow. As you have just said, in 2025, we had better cash flow than expected 1 year before. So just because when you have a better cash flow, it directly translates into a better valuation. This is the first point. So it plays. Second point, it's obviously the fact that we have seen more and more transactions for very prime mature assets in various geography, France, Eastern Europe, Spain, at a very compressed yield starting by 5. So for the appraisers, it gives really them the comfort to decrease the risk premium they add on the discount rate because obviously, a few years ago, 3, 4 years ago, they were quite cautious because they did not see any significant transaction. Now we see more and more transaction coming. So it gives them the comfort just to decrease the risk premium. So I think when you add these 2 building blocks, it gives us a lot of confidence in the path of decreasing the net initial yield and increasing the valuation going forward. Operator: [Operator Instructions] The next question comes from Frederic Renard from Kepler Cheuvreux. Frederic Renard: First, maybe, can you comment on the performance of your mall by geography, which area currently the best and, which are doing worst? Jean-Marc Jestin: Thank you, Frederic, for your question. It's a very wide question. So are you talking about retailer sales or organic performance or? Frederic Renard: Yes. Jean-Marc Jestin: Yes, retailer sales, I think the pattern is for the last 3 years, I would say, and 2025 is just a confirmation of this pattern. Sales have been increasing everywhere in all geographies, but in Germany. We have a very small exposure in Germany, but the only exception where our sales have been slightly declining, it's Germany. All the rest is positive. The second pattern is that it's more dynamic in South Europe. So clearly, the Italy, Spain, Portugal are doing more than the average. And together with the Netherlands, it's not really country-specific, it's more asset-specific than country-specific, but that's to answered your question. And there are some variances in Scandinavia. It's below the average, but it's positive. And France has been a bit more lukewarm, I would say, in 2025 and also beginning of 2026. This is not only in our malls, I think it's something you have been able to see with other release. But overall, I think this is a remarkable year. And when it comes to the segments, they have been all positive, all positive. There is only from time to time, I would say, an accident in some segments like electronics or home equipment on decoration, but even fashion has been positive. And the beginning of 2026, it's everywhere, it's positive, but Germany, every segment is positive, including fashion. Southern Europe is doing above the average, and for January, the sales that we have just connected is above 2025 numbers, so for 2025 was at 3.8% and January, it's above. So it's quite interesting. What has maybe sometimes when we look at the month to month. So sometimes, months can be a bit slow and the other one, much stronger. So there is quite a bit of volatility from a month to another, but overall, October has been very strong. November has been very strong. December have been weaker, January is very strong. So that's -- there is -- so the geographies are not really meaningful to us because they are all positive. Frederic Renard: Okay. Understood. And maybe a second one, I'd like to come back on the capital allocation, if I may. I mean, the stock price has been clearly on fire over the last 3 years on the back of very good assets and liability management, still liability management that put you in a very good shape. But today, it seems to me the capital structure is inadequate and the net debt to EBITDA will continue to go down. And actually, as you mentioned, that you have a good lever from an organic point of view and that will continue like this. So you mentioned that we didn't like competition or you don't like competition. But actually, competition is increasing a bit everywhere for retail. So are you afraid of missing the right opportunities in this market? Jean-Marc Jestin: Never. Never. No, I think we take it easy, I think, okay? We are in a long-term business, okay? And if we look at the capital allocation, I think there is one strategy, which is very clear. 2025 was the 10th anniversary of the big transformation at Klépierre. You remember, we did the disposal of convenience shopping centers in '15, we acquired Corio. We had, at that time, 300 assets we acquired 57 from Corio. We are left with 70% for 95% of the portfolio. So the capital allocation that's something you build step by step, okay? And you have to make it carefully. There are so many examples of people going big time, okay? So we do it carefully. So our net debt to EBITDA -- our balance sheet -- and that was -- is, I think, a good achievement is that even though we continue to grow the EBITDA, grow the earnings, grow the dividend, uninterrupted, we deleverage the company, okay? So this is not an objective to deleverage the company. It's just a consequence of managing very well the capital allocation. So the -- we have a lot of room for maneuver. We have done a very good acquisition, as you have seen in my presentation, where we have created 71% value in O'Parinor, 50-something percent in RomaEst, Casamassima will be there. So we are very -- I don't know if we are selective. We do it a try. Timing is always an issue. It's going to be this year, going to be next year, we'll see, okay? So we invest for the long term. We invest for our shareholders, and we want to find the right product where we can build the rents up quite quickly. So I hope it answered your question. So we are in a strong position, so we cannot regret that, but we will not rush. Operator: The next question comes from Alexandre Xerri from All Invest. Alexandre Xerri: Just one question on my side, also on the capital allocation. With current very limited discount on net asset value. Does this advantage could influence your M&A strategy? And could you consider, in other words, acquisition using equity markets? Thanks to this advantage. Jean-Marc Jestin: Thank you for the question. That's a question for which I don't have an answer because there is nothing on the radar. There is nothing to build on that. I think the performance of share prices, the testament to the quality of the portfolio, the testament to our capacity never to disappoint to continue to grow, to pay dividend, to have a very strong balance sheet. And as you said, we have ample opportunities to raise capital. So we have easy access to debt, low cost of debt. So unfortunately, your question is too broad, and I can't really answer to that. Stephane Tortajada: But maybe what I could add is that the most accretive way to make acquisition is to be financed by debt. And we have a lot of room of maneuver of firepower is huge today, really huge, because when we increase our EBITDA, we increase our firepower, because -- to keep the same rating. So I think what we will first do is to look at our internal resources to make it very accretive if we make acquisitions. And then if we have really some very large acquisition, we may think about equity capital market, but the first stage will really be from internal resources. Alexandre Xerri: Okay. Understood. So maybe have you fixed an LTV level, you will not go beyond? Stephane Tortajada: No. We do not really think about LTV. We are more focused on ratings and net debt-to-EBITDA. Net debt-to-EBITDA today is 6.7x, which is the historic low at Klépierre. The rating is the best ever at Klépierre. It's A range, for sure. So basically, we want to keep a high level of rating and have net debt-to-EBITDA, which is in the right range to be A-rated. So basically, we target net debt-to-EBITDA 7.5 around, which is the right place to be for the rating. Operator: Now let me hand the conference back to the management for any written questions. Jean-Marc Jestin: We have an incoming question regarding taxation on dividends for 2025. So if management could provide us some answers as to whether or not it includes an emission premium. Stephane Tortajada: Yes. So for 2025, we have a SIIC dividend from Klépierre French tax-exempt activities of EUR 0.87 per share and non-SIIC dividend of EUR 1.03 per share. So we do not use the premium in 2025 to answer your question. And the SIIC dividend from French tax exempt obviously, is not eligible for the 40% tax rebate in the tax -- French tax code. . Jean-Marc Jestin: So thank you, Michael, for your question. . Operator: The next question comes from Tom Berry from Green Street. Tom Berry: A couple of questions really. I guess how many on a capital allocation front, how many more Casamassima style opportunities do you think are out there in the future? Do you think your focus is more tilted towards the value-add side of things? Or do you think maybe more on a stabilized portfolio basis? And then a second question just on the French operating market is obviously a little bit weaker than the others, such as Italy and Spain. How much does that sort of poor macro weigh on your '26 forecast and reversionary potential? Jean-Marc Jestin: Okay. Thank you for your question. I will try to be specific. So for the I think for the acquisition, if we will only look in countries where we already have a very strong footprint, we think we have a very strong underwriting expertise in France, in Italy and Iberia, probably better than the rest of Europe. So that's probably where we have done a lot very recently. And if we come look 5 years ago, we bought 2 malls in Spain. I think we -- the criteria for us to invest are very simple. It's a big city, regional malls, lifestyle malls, a good set of retailers, strong leasing demand and high sales per square meter. And from there, what can we build? Can we add value? So we try to find something which is not really value add. It's more very strong performance, very good fundamentals where we can roll over our expertise. And so we will never compromise too much on the fundamentals, okay, and the sales per square meter. And if the OCRs are too elevated or there is not so much a reversion, probably, we are not a good buyer for that. So this is what I would say on the capital allocation profile we are looking for. And I missed the second one, that's for disposals or? Stephane Tortajada: But what I could say maybe on the French environment because you say it looks tough. But when you look at 2025 and if you look at the NRI like-for-like geography. In France, we had plus 4.6%, which is really strong. And in Southern Europe, which is the strongest true, 5.1%. So in terms of NII growth, France was just slightly below Southern Europe, but at a very strong pace. So what I would say is that the French market, there is a lot of buzz about politics, macro, blah, blah, blah, but at the end of the day, consumption is fine. And what we see is that we gain market share in our catchment area. So, so far, we say the French market is more an impression and a feeling of being weak, but on the ground, in the number, it's fine. Operator: The next question comes from Celine Huynh from Barclays. Celine Huynh: Mark, I do apologize in advance for this question. I know you're not going to like it. Simon Properties, the management of Simon recently mentioned on the earnings call, having issued EUR 1.5 million of Klépierre shares. So I was just wondering if you could comment on that? And what are your conversations like with Simon currently regarding the stake? Jean-Marc Jestin: Thank you for the question. And obviously, I will not be upset, why should I? So I know, I think, if the -- as you know, Simon, is a shareholder of Klépierre and if you have any question regarding their shareholding, I can only recommend you to ask the question directly to them. So when it comes to the Simon implication in the company, it has been of great support so far, including yesterday where we had our Board meeting to close 2025. So they are still on Board. So on this question, I'm neither upset or surprised, but if you want answers, you should ask them. Operator: There are no more questions, so I hand the conference back to the management for any closing comments. Jean-Marc Jestin: So thank you very much, all of you, for attending, listening and understanding our fantastic 2025 results and our guidance for 2026. Thank you for your questions. And we will take the road and meet our investors in London and in Paris, and looking forward to do so. Thank you very much.
Operator: Hello, and thank you for standing by. Welcome to Materialise Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Harriet Fried of Alliance Advisors. You may begin. Harriet Fried: Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Brigitte de Vet, Chief Executive Officer; and Koen Berges, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's strategic, financial and operational performance for the fourth quarter of 2025 as well as the year 2025 as a whole. To access the slides, if you have not done so already, please go to the Investor Relations section of the company's website at www.materialise.com. The earnings press release issued earlier today can also be found on that page. Before we get started, I'd like to remind you that management may make forward-looking statements regarding the company's plans, expectations and growth prospects, among other things. These forward-looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed, including competitive dynamics and industry change. Any forward-looking statements, including those related to the company's future results and activities, represent management's estimates as of today and should not be relied upon as representing their estimates as of any subsequent date. Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes in expectations. A more detailed description of the risks and uncertainties and other factors that may impact the company's future business or financial results can be found in the company's most recent annual report on Form 20-F filed with the SEC. Finally, management will discuss certain non-IFRS measures on today's conference call. A reconciliation table is contained in the earnings release and at the end of the slide presentation. And with that, I'd like to turn the call over to Brigitte de Vet. Brigitte, can you go ahead, please? Brigitte de Vet-Veithen: Good morning, and good afternoon. Thank you for joining us today. We're very pleased to present our fourth quarter and full year 2025 results to you today. You can find the agenda for our call on Slide 3. First, I will summarize the business highlights for the fourth quarter of 2025. Then I will pass the floor to Koen, who will take you through the fourth quarter financials. And finally, I will come back and explain what we expect 2026 to bring. When we've completed our prepared remarks, we'll be happy to respond to questions. On November 20, 2025, we rang the bell at Euronext Brussels. With this step, we completed our -- we complement our existing listing on NASDAQ with an additional European listing. The dual listing provides us with access to broader investor audience in Europe and increases the company's operational flexibility, including the option to initiate ADS and/or share buyback programs. Our NASDAQ listing remains integral to our global strategy. As a reminder, no shares were offered and no capital was raised in connection with the listing of shares on Euronext Brussels. We will trade under the same ticker symbol, MTLS as on NASDAQ. We have also announced a share buyback program of up to EUR 30 million. This program has started from January 26, 2026. And to date, we have acquired a total of 187,500 shares for a total amount just below USD 1 million. Looking at other business highlights of the fourth quarter. In Medical, as you know, our aim is to bring personalized solutions to as many patients as possible. In the fourth quarter, we surpassed the historical milestone of 700,000 patients treated with Materialise personalized solutions. More than 17,000 patients have been treated in 2025 alone. This represents a significant milestone in our journey towards mass personalization. Also, we released the new version of Mimics Flow, our Mimics platform that is a work of software solution for companies that want to develop their own personalized solution. With this new release, users benefit from enhanced functionality, a new licensing system and the new pricing structure. Let me briefly elaborate on all 3. First, as far as functionality is concerned, the users will now be able to fast track their work for high-volume applications, thanks to additional AI algorithms on the platform. They will also benefit from improvements that will make 3D planning easier and that will make case discussions with colleagues efficient in one unified platform. Second, the new licensing system gives the users more control and will reduce licensing overhead, thanks to the new end user portal where users can easily rehost, activate and deactivate licenses as needed and get uninterrupted access with little administrative burden. Third, this Mimics release enables true subscription pricing models, more closely aligning our success with that of our customers. We will gradually introduce the new models in specific markets and applications. We're convinced that the new functionality, the future-proof licensing model and the new pricing models will enable our customers to achieve our common goal, giving more patients access to personalized approaches. In Software, we have taken the next step in our open and secure software strategy, introducing 3 tailored CO-AM solutions and new enabling technologies to address the industry's growing need for workflow automation and interoperability. As you know, we have been investing in additional software capabilities beyond preprint to cover the end-to-end additive manufacturing workflows of our customers. The 3 new CO-AM offerings will address specific market segments. CO-AM Professional will deliver workflow automation and building traceability for high mix, low-volume additive manufacturing. CO-AM NPI accelerates new product introductions and qualification for series additive manufacturing parts. CO-AM Enterprise combines CO-AM Professional's expert AM preparation with full production execution and order management, also called manufacturing execution systems, delivering end-to-end workflow management for advanced users. As discussed in our Q3 earnings call, we also introduced CO-AM Brix at Formnext. CO-AM Brix is a new low-code node-based automation technology, integrating over 1,000 proven algorithms from Materialise and SDK suite and providing the possibility to incorporate external tools and libraries. Brix is part of the CO-AM platform and puts our extensive software expertise in the hands of every user. It makes it easy to automate complex recurring processes and eliminate repetitive manual work without requiring advanced programming skills. By combining real-time visualization with powerful automation, even nonprogrammers can easily build custom workloads, instantly see the impact of the design and production decisions and act on them immediately. The result is higher productivity, faster response times and ultimately, broader adoption of AM technologies. We've seen the impact of CO-AM Brix firsthand in our own production of fixed insoles, our custom 3D printed robotics. In producing these insoles, CO-AM Brix enabled us to automate almost the entire process from order to print. Nesting time dropped from 45 minutes to just 1 minute. Bill processing became 20x faster. Total build time fell by 15% and error rates fell from 10% to under 0.1%. CO-AM Brix was referred to by US build, the [ 3Dprint.com editor ] as its favorite thing at Formnext 2025. Turning to manufacturing. We continue to face headwinds in Q4. At the same time, we made progress in expanding our position in high-growth certified industries. We merged our 2 online platforms, iMaterialise and Materialise Onsite and consolidated both into a single streamlined platform. This step reflects our strategic focus on the professional 3D printing market. iMaterialise has been an important part of our history, helping to democratize 3D printing and empower designers, makers and small businesses. But as the market evolves, consolidating under Materialise on site is a natural next step to focus on our core segments and to align with the needs of professionals in the industry driving additive manufacturing forward. We have also made progress in key strategic verticals such as aerospace and defense. Today, I want to highlight 2 key projects we have been awarded in the fourth quarter. First, Materialise has been invited to join the SONRISA project as a key enabler of this funded aviation initiative led by Liebherr-Aerospace. The project aims to make quality assurance with metal 3D printed aircraft parts more reliable, repeatable and easier to certify. The consortium brings together leading aerospace and technology players, including Boeing, alongside industrial and research partners. Materialise's role is to develop data-driven quality assessment concepts that merge production and inspection data, such as images, temperature data and CT scans to support automated acceptance decisions as well as virtual testing tools that help assess manufacturability early in the design phase. Second, the Defense and Space division of Airbus awarded us the production of the Environmental Control Systems for the Eurodrone project. The Eurodrone is the first remotely piloted aircraft system natively designed for safe and reliable flights in nonsegregated airspace, giving Europe its own sovereign capability in this field. Production of the first aircraft will be in 2027 with a go-live of the parts requested from Materialise end of 2026. This order represents a significant step forward for us in this key vertical. I will now hand over to Koen for an overview of the financial results. Koen Berges: Thank you, Brigitte. Good morning or good afternoon to all of you on this call. I'll begin with a brief overview of our key financial results as shown on Slide 6. I'm pleased to share that in the fourth quarter, our consolidated revenue grew by 6.8% year-on-year, reaching EUR 70.2 million. Our gross profit margin increased further to EUR 40.8 million, representing 58.1% of our revenue. At the same time, we delivered an adjusted EBIT of EUR 4 million, representing a high margin of 5.7% of revenue, demonstrating our ability to convert top line into strong operational results. Net profit came in at EUR 6.2 million for the quarter. Thanks to a positive free cash flow, we also strengthened our balance sheet, improving our net cash position to EUR 70.8 million, an increase of more than EUR 3 million compared to the prior quarter and EUR 10 million above the level at the end of 2024. In the following slides, I will elaborate further on these results. As a reminder, please note that unless stated otherwise, all comparisons in this call are against our results for the fourth quarter and full year of 2024. Now moving on to the consolidated revenue on Slide 7. In the final quarter of the year, our revenue reached a EUR 70.2 million, up nearly 7% compared to the same period in 2024. Materialise Medical continued its strong double-digit growth trajectory, increasing revenue by more than 16% and setting once again a new quarterly revenue record. Revenues in Software and Manufacturing stabilized with a slight decline of respectively, 1% and 2% compared to prior year. At the same time, unfavorable foreign exchange effects, primarily from a weaker U.S. dollar continued to weigh on our top line. As shown in the graph on the right, Materialise Medical accounted for 53% of our consolidated revenue in Q4, with manufacturing contributing 31% and software 16%. This further shift towards medical reflects the different growth rates across our segments. For the full year 2025, revenue totaled EUR 268 million, essentially flat compared to 2024. Medical represented 50% of total annual revenue, manufacturing 35% and software 15%. Our deferred revenue balance for software maintenance and license fees coming both from medical and software increased by EUR 3.5 million in Q4, consistent with the seasonal pattern, ending the quarter at EUR 48.8 million. Over the full year, deferred revenue related to Software license and maintenance rose by EUR 1.9 million with the total deferred revenue reported on our balance sheet at EUR 60.9 million at year-end. Let me now move on to profitability, where our disciplined cost measures and operational efficiencies have delivered notable improvements. On Slide 8, you can see that our consolidated adjusted EBITDA and adjusted EBIT results for both the fourth quarter and the full year 2025. In Q4, consolidated adjusted EBITDA reached EUR 9.5 million, more than double the EUR 4.3 million recorded in the same period of last year, with an adjusted EBITDA margin now of 13.6%. Adjusted EBIT improved sharply to EUR 4 million compared to a loss of minus EUR 1.2 million in Q4 of 2024, delivering now a strong adjusted EBIT margin of 5.6% -- sorry, 5.7%. These improvements were driven by higher revenue, increased gross margin percentage and lower operating expenses when adjusted for nonrecurring costs. For the full year, adjusted EBITDA rose to EUR 32.4 million, representing a margin of 12.1%, while adjusted EBIT increased to EUR 10.6 million with a margin of 4%. With revenue stable year-on-year, this enhanced operational profitability reflects the shift in focus towards key markets, disciplined cost control and the impact of targeted cost reduction measures implemented throughout the year. These results demonstrate our ability to strengthen profitability even in challenging macroeconomic environment. Let's now review the performance of our individual business segments, starting with Materialise Medical. As shown on Slide 9, you will notice that revenue grew by 16% in the fourth quarter to EUR 37 million, another quarterly revenue record. The strong performance was driven by a 23% increase in Medical Devices and Services revenue, supported by growth in both our direct and partner channels. Medical Software revenue remained stable compared to a strong Q4 in 2024 and is further up from prior quarters of 2025. In line with the top line growth, adjusted EBITDA rose to EUR 13 million from EUR 9.5 million of last year, delivering a robust margin of 35%, fueled primarily by scaling effects. For the full year, Medical segment revenue increased by 15% to EUR 134 million, with adjusted EBITDA reaching EUR 43 million and an annual margin of 32%. Throughout 2025, we further intensified our R&D investments to support future growth of this business unit. Slide 10 summarizes the results of our Materialise Software segment. In the fourth quarter, software revenue held steady at around EUR 11 million despite the impact of unfavorable ForEx effects and our ongoing transition to a cloud and subscription-based business model. Compared to earlier quarters, the segment continued its steady upward momentum, delivering successive quarterly revenue increases. Recurring revenue from software maintenance and license sales, including CO-AM, grew by 4% year-on-year in Q4, while nonrecurring revenue declined by 19%. Even with a stable top line, disciplined cost management enabled us to significantly improve adjusted EBITDA to EUR 1.7 million, resulting in an adjusted EBITDA margin of 15.5%. For the full year, the Software segment revenue totaled EUR 41 million, down 7% from 2024 with adjusted EBITDA at EUR 5.5 million and a margin of 13.4%. Recurring revenue accounted for approximately 82% of total software revenue in 2025, up from 74% the year before, demonstrating the progress in our business model transformation, which we anticipate to complete in 2026. Lastly, for our segments, let's look at manufacturing on Slide 11, where macroeconomic headwinds continue to pose challenges, but strategic wins are paving the way for future growth. In the fourth quarter of 2025, the performance of our Manufacturing segment remained soft, with revenue declining 2% year-on-year to EUR 22.2 million. Persistent macroeconomic headwinds continue to weigh on demand, particularly in prototyping. We also experienced further growth in our strategic markets and in series manufacturing. Notably, the successful closure of several major commercial contracts in aerospace and defense at year-end, as also mentioned already by Brigitte, will support our ongoing transition and will contribute to the results in coming periods. Given the lower top line, adjusted EBITDA for the quarter ended negatively at minus EUR 2.2 million. For the full year, manufacturing revenue declined by 13% to EUR 92.5 million with adjusted EBITDA of minus EUR 4.2 million, representing a negative margin of 4.6%. With the segment results covered, Slide 12 outlines our consolidated income statement, showing the drivers behind our improved quarterly profitability. In Q4, gross profit reached EUR 40.8 million, representing a strong gross profit margin of 58.1%. For the full year, the gross margin was 57.1%, up from 56.5% in 2024. Operating expenses in the quarter were stable at around EUR 39 million, while 2025 included significant nonrecurring items, which were primarily related to our Euronext listing. These one-off costs amounted to around EUR 750,000 in Q4. For the full year, operating expenses increased by just 1.5% compared to 2024, with the main increase driven by higher R&D investments. Net operating income was with EUR 1.3 million in the quarter, consistent with EUR 1.4 million of last year. For the full year, this figure was EUR 3.8 million versus EUR 4.2 million in 2024. As a result of these factors, our operating result in Q4 was also positive at EUR 3.1 million compared to a loss of minus EUR 1.3 million in the same period of last year. Full year operating results came in at EUR 8.9 million versus EUR 9.4 million in 2024. In Q4, our net financial income was EUR 2.4 million, reflecting currency exchange results, interest income from our cash reserves, offset by interest expenses on our debt. Income tax was also positive at EUR 0.7 million, in line with last year. Altogether, the net profit for the quarter was EUR 6.2 million or EUR 0.11 per share, more than double last year's EUR 2.9 million or EUR 0.05 per share. For the full year, net profit totaled EUR 7.7 million or EUR 0.13 per share. Finally, let's review our balance sheet and cash flow position, which remains a key strength for Materialise. In Q4 of 2025, our balance sheet remains solid. Cash reserves at year-end increased to EUR 134 million, while gross debt amounted to EUR 63.1 million. This resulted in a net cash position of EUR 17.8 million, an improvement of nearly EUR 10 million since the start of the year, driven primarily by strong free cash flow. Compared to the balance sheet at year-end 2024, net working capital components increased by EUR 3 million. Total deferred revenue income stood at EUR 60.9 million, of which EUR 48.8 million was related to deferred revenue from Software license and maintenance contracts, as mentioned earlier. In Q4, cash flow from operating activities was positive at EUR 5.3 million, slightly below the prior year's quarter as higher P&L contributions were offset by negative working capital movements. Capital expenditures totaled EUR 4.4 million, including EUR 2.1 million in nonrecurring investments. Repayment of a convertible loan by Fluidda, together with received government grants for investments contributed further to a positive free cash flow of EUR 4.5 million in the quarter. For the full year, our operational cash flow was more than EUR 25 million with the variance versus last year mainly driven by working capital movements. Lower investment levels improved free cash flow significantly to over EUR 15 million in 2025. Over that same year, CapEx totaled EUR 16 million, around 6% of our revenue, split between recurring and nonrecurring investments. Nonrecurring CapEx fell to EUR 9 million in 2025 and included investments in ACTech's new facility and additional solar panel installations at various production sites. The recurring CapEx of EUR 7 million was primarily focused on machinery, printers and upgrades of our IT landscape. And with that, I'd like to hand the call back to Brigitte. Brigitte de Vet-Veithen: Thank you, Koen. Let's turn to Page 14 for a quick review of our financial guidance. Looking forward at 2026, we see our 3 segments evolving at a different pace. We remain confident that our Materialise Medical segment will continue growing at a double-digit pace. Our Materialise Software segment will complete the transition towards a cloud-based subscription business model in 2026 and will continue its investments in a broader AM software ecosystem. Our Materialise Manufacturing segment will intensify its ongoing shift towards series manufacturing and dedicated focus sectors. But we expect macroeconomic headwinds in the industrial market segment to persist throughout 2026. As a result, we expect revenue for 2026 to land in the range of EUR 273 million to EUR 283 million. We will continue investing in our Materialise Medical and Software segment while maintaining disciplined cost control and optimization, in particular in our Materialise Manufacturing segment and in our overhead. As a result, we expect our adjusted EBIT to reach EUR 10 million to EUR 12 million for fiscal year 2026. At the same time, we will continue to actively pursue strategic M&A opportunities with EUR 134 million of cash and cash equivalents on our balance sheet, an improved net cash position and consistently positive operating and free cash flow, we are financially strong and well positioned to further drive innovation and capture emerging market opportunities. This concludes our prepared remarks. Operator, we're now ready to open the call to questions. Operator: [Operator Instructions] Our first question comes from the line of Troy Jensen with Cantor Fitzgerald. Troy Jensen: Congrats on the nice results. I guess I want to focus on the Manufacturing business. I think the math implies this, but are you assuming that Manufacturing is going to be down this year on a year-over-year basis? Brigitte de Vet-Veithen: Can you repeat the question because the line was not very clear. Troy Jensen: Yes. I guess the math kind of implies if Medical is growing double digits, that Manufacturing is going to be flat to down, would you confirm that? Brigitte de Vet-Veithen: Yes, that's a correct assumption. So we assume that the current trends that we see driven by the weaker industrial climate, in particular in Europe, will continue to weigh on the manufacturing results, in particular on the prototyping segment. Troy Jensen: Okay. Brigitte de Vet-Veithen: At the same time, we do expect the opportunities in those focus segments that we have been developing not only in the last quarter of 2025, but throughout the year, will continue to show growth. So aerospace and defense, in particular, are segments, as you know, that we're focusing on. Now 2026, we will not see full results of those investments in those focus segments yet because those sectors take a little bit of time to develop. So that's also why we remain a little cautious in our outlook for manufacturing in 2026. Troy Jensen: Yes, that's fair. Any estimate on what percentage of manufacturing is for prototyping applications for you guys? Koen Berges: That's a percentage, Troy, that we haven't disclosed yet. We're looking into that if we can do that at some point. Nevertheless, I think numbers and the decline we show in prototyping indicate that it's still material part or a significant part of our business. It is going down quarter after quarter. We're picking that up in our new segments and strategic segments, but that transition is taking time. And for now, it still represents a fair share of our manufacturing business. Troy Jensen: Okay. Understood. I guess then my question underneath all this is, I guess I know a lot of other 3D printing and CNC machine shops that are nicely EBITDA profitable at lower revenue levels. Is there more you guys can do to like take out costs and that EUR 90 million in annual sales, can you get to an EBITDA breakeven in the Manufacturing business? Brigitte de Vet-Veithen: So the strategy that we have is to focus on those segments where we see not only growth in the longer term in terms of additive. But at the same time, those are sectors where we believe we can differentiate and we have unique capabilities to offer. Now why do I mention this to your question? Well, that implies that we believe a stronger margin will be generated in those segments because we are just more uniquely positioned. So that's one. At the same time, undoubtedly, we will continue to work on cost optimization, I would call it, in our manufacturing segment and overhead across the company. Troy Jensen: Okay. And then my last question is for Koen here. The OpEx, I want to ask about. In Q4, if you add all the 3 line items for OpEx, it was about EUR 39 million. In Q3, it was EUR 36 million. So we had like a EUR 3 million sequential increase in OpEx. Was there anything onetime-ish in Q4? Or is that the type of OpEx? Should we be modeling about EUR 39 million in OpEx in Q1? Koen Berges: No. Q4 is distorted to a certain effect with the -- mainly the nonrecurring costs related to the Euronext listing, and that is an amount of around EUR 750,000. So that is certainly an amount that you should take out of the baseline. And I think for the rest in general, we see typically our general operating costs a bit higher in the fourth quarter. So if you make a full year projection, I should not base entirely only on the fourth quarter, but level it out a bit across the multiple quarters of the year. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Brigitte for closing remarks. Brigitte de Vet-Veithen: Thank you, and thank you all for joining us today. We look forward to continuing our dialogue with you through investor conferences or in one-on-one meetings or calls. And I'm also looking forward to meeting some of you in person at the upcoming AMS conference and the AOS event in the U.S. In the meantime, please reach out if you have any questions. Thank you, and goodbye for now. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon. My name is Sherry, I will be your conference operator today. At this time, I would like to welcome everyone to Southern Company Fourth Quarter 2025 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Greg MacLeod, Director of Investor Relations. Please go ahead, sir. Greg MacLeod: Thanks, Sherry. Good afternoon, and welcome to Southern Company's Fourth Quarter 2025 Earnings Call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and David Poroch, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, which are both available on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Chris. Christopher Womack: Thank you, Greg. Good afternoon, and thank you for joining us today. 2025 was an outstanding year for Southern Company, and the operational and financial results we delivered are a testament to the dedication of our nearly 30,000 teammates across this company. We achieved adjusted earnings at the very top of our EPS guidance range in 2025, and it is clear that our commitment to putting customers and communities first, while leading the way to a stronger, more resilient energy future is delivering exceptional value to our customers and investors. And this terrific execution across all aspects of our plan over the last year has substantially strengthened our outlook for 2026 and beyond, ultimately driving higher long-term earnings expectations. David, I'll now turn the call over to you for more details on our financial performance for 2025. David Poroch: Thanks, Chris, and good afternoon, everyone. As you can see from the materials we released this morning, our reported strong adjusted earnings per share of $4.30 for 2025, which, as Chris mentioned earlier, was the very top of our 2025 guidance range and represents 6% growth from adjusted earnings the prior year and 9% average annual growth from 2023. This also represents adjusted earnings results at the top of or above our annual guidance range for the 11th year in a row, combined with delivering improving credit metrics and a remarkable dividend track record over the last 78 years, including dividend increases every year for the past 24 years, we are delivering on our objectives of regular, predictable and sustainable financial results and superior risk-adjusted long-term returns for investors. The primary drivers for our performance compared to 2024 were continued investment in our state-regulated utilities, customer growth and increased usage in our electric businesses and growth from wholesale, electric and other revenue sources. These positive drivers were partially offset by higher operations and maintenance expenses, depreciation and amortization and interest costs. A complete reconciliation of our quarterly and annual adjusted earnings is included in the materials we released this morning. Turning now to electricity sales. Weather-normalized total retail electricity sales for the year were up 1.7% compared to 2024. The electric sales growth in 2025 is substantially higher than the growth we've seen in recent history. To put this in perspective, 1.7% year-over-year retail sales growth in 2025 is more than double the cumulative growth we saw over the last decade. Each of our electric operating companies saw positive weather-normal sales growth for the year with Georgia Power growing 2.5% from 2024. In fact, all 3 customer classes were up for the year, demonstrating a strong and resilient economy in our Southeast service territories. Commercial sales were particularly strong, led by increased usage from existing and new large load data center customers, which were up 17% year-over-year for the second year in a row. 2025 was another strong year for residential customer growth with the addition of 39,000 new electric -- new residential electric customers and 25,000 new customers across our natural gas distribution businesses. Electricity sales to industrial customers also demonstrated continued strength, growing 1.4% in 2025 over the prior year with 4 of our largest industrial customer segments showing gains, including the primary metals, lumber, paper and transportation segments. These trends across all 3 customer classes highlight the broad strength we continue to observe across our electric service territories. Chris, I'll now turn the call back over to you to kick off our long-term business update. Christopher Womack: Thank you, David. Looking back, I'm convinced that 2025 will stand out as a transformative year for Southern Company, one in which we achieved milestones that will propel the future of our business and customers for generations to come. We're in the midst of a watershed moment for the energy industry and our nation, and Southern Company is extraordinarily positioned to capture and serve growth in a way that delivers value for both customers and investors. Economic development activity at our utilities is robust and provides a tremendous foundation for sustainable growth. Over the past year, more than 120 companies either made the decision to locate new facilities or announced expanded operations in our electric and gas service territories. These projects are expected to support over 21,000 new jobs, further highlighting the economic strengths of the regions we proudly serve. Our companies have proven to be attractive partners for a diverse mix of new customers, including the large technology companies known as hyperscalers, who have made significant investments in our service territories. In addition to data centers, some of the larger announcements over the past year were in the manufacturing, automotive, aerospace and metals industry, with familiar names that include General Electric, US Steel, Duracell and Mercedes-Benz. Our model is continuing to prove well suited to serve customers' growing needs while also enabling our local communities to thrive. Recall, our 3 electric utilities, Alabama Power, Georgia Power and Mississippi Power operate in vertically integrated markets where we provide a one-stop shop for customers because we own the generation, transmission and distribution networks to reliably serve their needs, even at significant scale for large load customers. The orderly, transparent and constructive regulatory processes in which our utilities operate are designed to reliably and sustainably serve growth while helping to ensure that all customers benefit from that growth. And this design is proving effective. We are demonstrating the value of this approach through approvals for a significant investment in energy infrastructure while also providing rate stability over the next several years and into the next decade. Our scale, balance sheet strength and wherewithal in large construction projects further bolstered the necessary execution that would be critical for this ongoing expansion. Our 4 gas utilities, also known as local distribution companies, or LDCs, proudly serve over 4 million customers across Illinois, Georgia, Virginia and Tennessee. This summer will mark the 10-year anniversary of the acquisition of what is now called Southern Company Gas. Since that acquisition, Southern Company Gas has exceeded all of our expectations, and we're extremely proud to have added these growing businesses. These 4 state-regulated LDCs have continued to work constructively to make significant investments in safety-related pipeline replacements and other modernization efforts, which have combined to triple their authorized rate base since the acquisition while increasing customer value. As we look to future growth opportunities, it's important to recognize that our LDCs operate in 3 of the top data center markets in the country and are active in discussions with several large customers on solutions to directly or indirectly serve this potential growth. Southern Power, our competitive power business has an industry-leading portfolio of assets with both technology and geographic diversity. Substantially all its assets are under long-term contracts with creditworthy counterparties, and we don't take meaningful commodity risk in these contracts. In total, Southern Power's portfolio has over 13 gigawatts of capacity across 55 generating facilities in 15 states, including over 7 gigawatts of natural gas generation in the Southeast. The burgeoning need for reliable, dispatchable energy provides significant opportunities for Southern Power. First, as contracts on our existing natural gas fleet come up for renewal beginning in the early 2030s and becoming more meaningful in the mid-2030s, there are significant opportunities for improved upside pricing. The market demand for capacity has increased pricing roughly 2 to 3x higher than where many of these assets are currently contracted. And by 2030, Southern Power has an opportunity to remarket approximately 1,000 megawatts of natural gas generation capacity. Second, we're in late-stage discussions to move forward with up rates of up to an additional 700 megawatts of capacity for Southern Power's legacy natural gas fleet to meet future projected market demands. And lastly, Southern Power is exploring opportunities to add new natural gas generation at its existing plant sites in the Southeast as well as options for new generation resources in other markets to serve data centers and other large load customers. We are very pleased to have successfully developed this incredibly valued business as it represents a tremendous opportunity to support sustainable growth well into the next decade. We are also excited about the growth opportunities we're seeing at some of our smaller subsidiaries, including PowerSecure and Southern Telecom. PowerSecure specializes in providing utility and energy solutions, including bridge power to commercial, industrial and load-serving customers, and it is uniquely positioned to grow as demand for customer-sided solutions increases, including in response to extreme weather events, utility distributed energy resource programs and bring your own generation mandates. Southern Telecom in partnership with our electric utilities, deploys fiber optic infrastructure that serves as an important and attractive additional product offering, enhancing the appeal to data-intensive customers to locate in our Southeastern service territory. David, I'll now turn the call back over to you to discuss our strategy and incredible portfolio support the durability of our further strengthened financial outlook. David Poroch: Thanks, Chris. Starting with our sales forecast, we project retail electric sales to grow at least 3% across our 3 electric operating companies in 2026. On average, from 2026 through 2030, we project annual electricity sales growth of 10%, an increase of 2 percentage points from our prior long-term sales projections. Georgia Power's total retail electric sales growth is projected to be approximately 13% over the same period. Our long-term sales forecast is supported by robust interest from a wide range of large load customers, including hyperscalers. And as we continue to see momentum grow in Alabama and Mississippi, our total large load pipeline has increased to over 75 gigawatts. This tangible interest and growing momentum have materialized into 26 signed contracts representing 10 gigawatts of fully contracted electric service agreements today, which is 2 gigawatts higher than what we reported last quarter and 4 gigawatts higher than a year ago. These 26 customer projects, nearly all of which are currently under construction include load ramps totaling 8 gigawatts by the end of our 5-year planning horizon, ultimately ramping up to 10 gigawatts beyond 2030. Importantly, in addition to these signed contracts, we are in late-stage discussions for another 10 gigawatts of load, 3 gigawatts of which are working through final reviews and are highly likely to progress to an executed contract in the near term. Based on the timing of the associated load ramps for the projects in our risk-adjusted forecast, including the contracts we have signed, we project sales growth and the associated revenues to accelerate into 2027 with an even more pronounced expansion in 2028. Considering the composition and strength of our large load pipeline, we project commercial sales, which currently comprise roughly 1/3 of our total retail sales to more than double, growing roughly 20% annually through the end of the decade. The framework and methodology under which we approach contracting with large load customers are, we believe, one of the best in the industry and are uniquely designed to benefit and protect existing customers and investors. Across all our electric jurisdictions, our regulatory frameworks allow for bilaterally negotiated contracts for large load customers rather than the use of a standard tariff. This provides each utility with the necessary flexibility to appropriately price large load customers in a manner designed to more than cover the incremental cost to serve them, helping to ensure this growth can immediately benefit existing customers. Our contracts include a robust set of terms and conditions. Contracts carry minimum terms of at least 15 years for data centers with some going out even further. Over the term of the contract, there are fixed or minimum build provisions similar to take-or-pay structures that factor in the customers' requested load ramps and are designed to cover at least 100% of the annual incremental cost to serve, including the necessary generation and transmission investments, incremental O&M and our cost of capital. These contracts also include strong protections in the form of termination payments tied to the incremental cost to serve over the life of the remaining contract with significant collateral requirements tied to the termination payments to provide additional layer of security and protection for our retail customers and investors. Our disciplined approach to pricing these large load contracts is already translating into significant benefits and tangible savings for existing customers. Largely as a result of their ability to sustainably capture growth, Georgia Power and Alabama Power, our 2 largest subsidiaries, worked constructively last year with each of their public service commissions to implement multiyear rate stabilization agreements. As we deploy significant capital to serve this extraordinary projected growth, we're working with our public service commissions to help ensure existing customers benefit as this growth serves to support rate stability. In December, as a part of its certification process for new generation, Georgia Power was able to quantify at least approximately $1.7 billion of benefits that will help to lower cost to serve existing customers from 2029 through 2031. This customer benefit is directly attributable to the value created by our approach to contracting and serving new large load customers. Recall, our approach to large load contracts includes minimum bill provisions designed to offset other costs throughout our business, ultimately providing savings to customers while helping to ensure that we deliver on our financial commitments. Combined with continued constructive regulatory outcomes in our states, our unique approach to serving projected growth from large load and data center customers is delivering mutual benefits to all stakeholders. In addition to our recent large load customer outcomes, earlier this week, Georgia Power made filings for its storm and fuel cost recoveries that, if approved, would collectively lower rates for customers starting this summer. Turning to our capital plan. Our base capital investment forecast is $81 billion over the next 5 years, 95% of which is at our state-regulated utilities. This represents an $18 billion or approximately 30% increase from our forecast just 1 year ago. The main drivers of this capital plans increase are related to new generation facilities, most of which were announced or approved in 2025 and the approved Integrated Resource Plan, or IRP, in Georgia, which included incremental investments in existing infrastructure. These investments include up rates for more capacity at existing natural gas and nuclear facilities as well as modernization of hydroelectric dams. Through 2030, we expect to invest roughly $42 billion or over half of our total 5-year capital plan to reliably serve projected growth through the combination of new generation, enhancements to existing generation assets and expansions of our transmission and interstate pipeline systems. Our capital investment plan supports projected long-term state-regulated average annual rate base growth of approximately 9%, a 2% increase from our forecast 1 year ago. Our base capital investment forecast reflects an approach to capital planning that is consistent with our approach in the past. We do not include capital placeholders nor do we include potential capital investments, which remain subject to regulatory processes. Beyond our base forecast, there are several opportunities for our capital plan to continue to grow. For example, Alabama Power and Georgia Power have either begun or expected to begin request for proposal or RFP processes to procure generation resource needs forecasted in the early to mid-2030s. These RFPs could represent several gigawatts of additional new generation. In addition, as we've highlighted before, there are also potential natural gas pipeline investments either through our FERC-regulated interstate pipelines or through midstream-like investments at our LDCs to directly or indirectly serve projected growing energy needs. Similarly, we have not included the opportunities Chris mentioned earlier for Southern Power in our base capital plan. Ultimately, based on our traditional disciplined planning methodologies, combined with the additional opportunities we see to serve projected growth as we get more line of sight on specific projects, it is reasonable to expect that our capital forecast could continue to increase. The updated financing and equity plan we provided supports our base capital plan and continues to fund the business in a credit supportive manner. Preserving our long -- preserving our strong investment-grade credit ratings continues to be a priority. As we believe that to be a premium equity investment, a company must also be a high-quality credit. There is no greater evidence of our commitment to credit quality than our actions in 2025 to proactively address $9 billion of equity needs. In addition to our internal equity plans and issuances of junior subordinated notes, which received 50% equity treatment from the rating agencies, our recent actions included pricing $4 billion of equity through our at-the-market or ATM program with forward contracts that settle through 2026. Additionally, in November, we issued $2 billion of equity units through a mandatory convertible, which will settle in shares in 2028. Importantly, in our forecast, nearly all $9 billion of the equity we have already addressed is expected to be issued or settled by 2028. Consistent with our increased capital investment plan, we project a remaining need for equity or equity equivalents of approximately $2 billion through 2030 to continue supporting our long-term credit objectives. We plan to remain proactive in our approach as we seek to sustain or improve upon current credit metric profile of roughly 15% FFO to debt through 2027 as we continue to deploy significant capital investment to serve our forecasted growth. Beyond 2027, improved projected cash flows from large load customers and the broad growth we project across our businesses, along with the completion of several large capital projects in our base plan, credit metrics are projected to improve and ultimately position us to achieve credit metrics consistent with our continued objective of approximately 17% FFO to debt by 2029. To the extent incremental capital opportunities materialize, our credit quality objectives will remain consistent. Accordingly, we would expect to finance incremental capital investment above our current plan with approximately 40% equity or equity equivalents. We expect to continue to be flexible and to use the same shareholder-focused discipline we have demonstrated historically when it comes to sourcing incremental equity or equity equivalents. As I mentioned earlier, we have a remarkable dividend track record as Southern Company has paid a dividend that is greater than or equal to the previous year for 78 consecutive years with consecutive increases over each of the last 24 years. For decades, our dividend has been an integral part of our value proposition for shareholders. While future dividend increases are subject to approval by our Board of Directors, we project continued modest increases in the dividend over the next several years. This should serve to lower our dividend payout ratio into the low to mid-60% range in the latter portion of our forecast horizon. As we balance our equity needs, we fund the growth we are projecting. At that point, subject to Board approval, we will be in a position to reevaluate the pace of dividend growth, potentially increasing the rate at which we grow annual dividends to shareholders. Turning now to our earnings guidance for 2026 and beyond. Our adjusted earnings per share guidance range for 2026 is $4.50 to $4.60 per share. Our adjusted guidance range represents 7% growth from the top and bottom of our 2025 adjusted EPS guidance range. The estimate for adjusted EPS for the first quarter is $1.20. As we've highlighted today, execution and the achievements across our businesses over the prior year have meaningfully strengthened our outlook, and we are positioned for exceptional growth. Over the next 3 years, we expect to grow adjusted earnings per share 8% to 9% from 2026 through 2028. In recognition of the timing, visibility and confidence associated with projected growth during this period, we are establishing initial guidance ranges for each of these years. In addition to the 2026 range I provided, our initial guidance range for 2027 is adjusted earnings per share of $4.85 to $4.95, which represents approximately 8% growth from 2026. For 2028, we project adjusted earnings per share to grow approximately 9% from 2027, resulting in an initial guidance range of $5.25 and $5.45. Longer term, we expect adjusted earnings to grow approximately 7% to 8% from our 2028 guidance range. This projected earnings growth trajectory provides for an average annual adjusted earnings growth profile of 8% from the 2026 guidance midpoint to 2030. We expect this outlook to be durable, supported by a large and growing portfolio of large load contracts, a robust capital investment plan and visibility on an efficient equity and debt financing plan that is designed to support credit quality and customer rate stability. With the potential for continued momentum on growth above our base plan and the incremental capital deployment opportunities that would be required to serve it as well as the success we expect in repricing portions of Southern Power's capacity through the next decade, we believe there could ultimately be upside to our long-term outlook beyond what we laid out today. With that, I'll now turn it back over to Chris for closing remarks. Christopher Womack: Thank you, David. We are clearly in a phase of execution. The planned large-scale build-out across our electric system in the Southeast over the next several years is tremendous and Southern Company's experience, expertise and scale support the necessary execution. We secured the labor and equipment for these projects through early EPC agreements and reservation payments well in advance and are leveraging relationships across our vast supply chain. We have unique experience with large construction projects, recently completing the only 2 new nuclear units in 3 decades, showing we can do hard things. The lessons learned from completing Plant Vogtle Units 3 and 4, along with other recent generation projects have helped inform our robust set of project controls and tools to assist our team's efforts and help ensure we are well positioned for timely execution. Our focus on operational excellence extends into every facet of how we serve customers, including through even the most extreme weather conditions. Over the last 2 months, the daily lives of millions across the Eastern United States, including those in the territories we are privileged to serve, have been impacted by extreme cold weather temperatures and severe weather conditions. I'm incredibly proud of the way Southern Company's electric and gas teams safely performed under these harsh conditions for our 9 million customers. Events such as Winter Storm Fern in January, where our system served the second highest winter peak electric load of over 39,000 megawatts demonstrate the value that our vertically integrated system brings to our customers and the importance of continued strategic investments in resilience and expansion of energy infrastructure. Our team's exceptional performance, providing reliable energy and quick response to service interruptions throughout these events also speaks to the thorough preparation and commitment of our employees. Innovations such as recently deployed AI tools that helped our leaders preposition crews to be ready to safely and quickly respond and self-healing networks that allow transmission and distribution lines to isolate outages and reroute power highlight the value that our continued infrastructure investments provide to accelerate restoration efforts and support delivery of the energy on which our customers depend. Our energy-leading innovation, our focus on resilience and our deep commitment to the people and communities we are privileged to serve are but a few key drivers of why Southern Company was recently recognized as the #1 electric and gas utility in Fortune Magazine's list of -- most Admired Companies for 2026, an honor we are proud to receive and a standard we endeavor to earn each and every day. As we conclude our discussion today, I want to emphasize how excited we are about the future here at Southern Company. We are experiencing incredible growth, and we are making investments in all parts of our business to recognize the value of the extraordinary opportunities in front of us while ensuring that rate stability and reliability and value to customers remains our top priorities. Southern Company was built to serve growing economies and to foster economic prosperity in the territories we serve. I am proud of how we are leading the way with this mission and working to ensure that enduring impact from this extraordinary growth opportunity is unquestionably positive for all stakeholders. While the size and velocity of this growth is arguably unprecedented, the discipline and customer-focused approaches investors expect from our company remain evident in both our outlook and our execution, whether it's the long-term stability of our customer rates, the economic benefits we're capturing for existing customers, our measured risk-adjusted approach to load forecasting, the high priority we place on balance sheet strength and credit quality or our focus on the long-term durability of EPS guidance. We endeavor every day to be the premier must-own utility and to deliver regular, predictable and sustainable results and superior risk-adjusted returns to investors over the long term. Thank you for joining us this afternoon, and thank you for your continued interest in Southern Company. Operator, we are now ready to take questions. Operator: [Operator Instructions]. Our first question is from Nick Campanella with Barclays. Nicholas Campanella: So I guess you've always been a pretty conservative company, and you've taken 5% to 7% to 7% to 8%. I know it takes a lot to go there. I appreciate the new outlook. Maybe just wondering how you're kind of trending in the beyond '28 time frame at the base level, just acknowledging your comments that you kind of said that the Southern Power repricing might put you higher maybe at the top end. So is this plan really built for the midpoint in '29 and 2030? And what would kind of put you lower or higher in the range based on the range of outcomes? Christopher Womack: Nick, I mean, I think you got to go back to your initial comment. I mean you know us. I mean you know how disciplined we are, you know how thoughtful we are in terms of setting expectations. And so as we look forward in terms of the execution around these 10 gigawatts of projects and what we see, the 3 gigawatts in final stages of 7 gigawatts in late stages and looking at the pipeline of some 75 gigawatts. I mean, that gave us confidence to make the changes and the adjustments that we've announced today. And not only here through '26, but as we speak to additional growth in '27 and '28, I mean, this work -- this activity we see supports what we've outlined. I mean we've also announced the economic expansion that we see all across the company, 120 companies locating in our territory, 21,000 jobs, the 17% year-over-year data center growth, sales growth this year of 1.7% and what we've spoken to going into the latter part of the decade. So we see the strength we see -- as we talked about, the potential upside from Southern Power. So yes, I mean, we're very confident. And we -- as we talked about earlier in years past, it was important for us to see that the durability, the long-term focus for us that we thought was necessary to make this adjustment. David Poroch: And I might add on to that, that we put guidance expectations out there, and they're a target for us to go get. And we'd be pretty disappointed if we didn't achieve near the top end of that. Now 2028 is a long way out, but we do see opportunities out there that provide upside and there's potential to be higher. Nicholas Campanella: And then maybe just as we think about the 3 gigawatts that you highlighted on the load side, which seem to be much more near term, just would that be served entirely with gas and -- can we do the math on what that CapEx would be if it's all new build? Or how are you kind of thinking about sourcing the generation for that? Christopher Womack: It continues to support our all-of-the-above strategy. Clearly, I mean, I think there's -- as we talked about in our plan, there's a lot of gas in the plan, but you're going to continue to see battery energy storage, I mean some of the opportunities that we have. I mean, we'll look at all the resources in terms of how we meet this growth opportunity going forward from an all-in above approach. Operator: Our next question is from Steve Fleishman with Wolfe Research. Steven Fleishman: Thanks for the very extensive update. And a couple of questions. So first on the -- you mentioned the 3 gigawatts that are in late stage, highly likely. Just would those impact the current plan? Or would they come on afterward? Just how do we think about the timing of the investment for that? Is that part of your kind of potential upside comment? David Poroch: Yes, Steve, those contracts, I mean, they're very near term, and they're working through our counterparties' approval process, Board approvals, all that. So we see those contracts being signed imminently, and they are baked into our forecast today. Keep in mind, these have ramp rates that move out beyond our planning horizon right now. But they are baked in. And keep in mind, we also have a very conservative risk-adjusted approach to modeling our loads and those load models then drive into our revenue expectations and projections, which bake into our plan. So they're in there, but they do go beyond. They do extend beyond our planning horizon, and they just help us with the confidence in what we're trying to achieve. Steven Fleishman: Okay. So just maybe I didn't understand this. So the current plan that you laid out for 2030 includes the 10 gigawatts that are signed plus this 3 gigawatts that are highly likely? David Poroch: Correct. Steven Fleishman: Okay. And -- but that's it. The stuff beyond that is not included. David Poroch: Correct. Yes. Steven Fleishman: All right. Good. And then when you talk about the upside to the growth rate, is that within the plan to 2030? Or is it thinking like beyond 2030 or both? Because you kind of talked about Southern Power and a lot of those drivers, I think you talked about are kind of 2030 and beyond. David Poroch: Yes, Steve, great observation. It really is kind of both. I mean we see the opportunity to grow at that 7% to 8% trajectory beyond 2030. I can't necessarily commit that, that's indefinite, but it certainly goes beyond our planning horizon right now. And everything we see in front of us with the contracts that are near term, the contracts that we've signed, what we've been able to accomplish on the regulatory front, just give us a lot of confidence in where we're looking. Steven Fleishman: Okay. Two other quick questions. First, just on the data center growth in Georgia. Just there's been, I think, generally more noise in a lot of states, but also in Georgia on data center siting and zoning. Just how do you feel about the 13 gigawatts, I guess, in your plan on that? Are they all pretty much zoned and the like? And how are you thinking about that issue? Christopher Womack: Those 13 -- I think the 10 gigs are under construction. So we feel very confident about the projects that -- the numbers we're talking about across Georgia, Alabama and Mississippi, we feel good about those projects. And yes, there's a lot of conversation, but these projects continue to advance and progress across our states. Operator: Our next question is from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: I'll pick it up where Steve left off, honestly. As you said, it's reasonable to expect CapEx increases, right? And you've alluded to this Alabama Power RFP for 31 and 32, Georgia Power's own further RFP for 32 and 33. Can you speak to what you're seeing at the leading edge on those? Rather than talking about the demand side, let's talk about the procurement side and try to feather that against how you would think about that increase in CapEx even through 2030. What's the total scope? And then also, maybe in light of the latest quarterly large load update, I think that increased by 15 gigawatts in the latest update, I think, from last week. How does that impact the scope of that RFP when you think about what could credibly get done here? David Poroch: Yes, Julien, great question. The portfolio grows across all 3 of our electric -- the opportunities grow across all 3 of our electric companies. And last couple of quarters, we talked about growing momentum, conversations, spreading to the west, and we're really seeing that. What you noticed in the Georgia Power large load update is just normal churn coming in and out of the pipeline. And we actually look at that being really healthy in terms of getting the highest opportunities to contract to the top of the list. And as we get closer in terms of contracting in these negotiations, our counterparties really start to refine and sharpen their pencils about what their needs really are. And so I think you pointed out a good observation that, that kind of short end of that pipeline has contracted a little bit, but that really brings more precision to us, and we're really pretty excited about getting those better opportunities to the front of the line. In terms of opportunities beyond what we have in the capital plan, if you think about a rough rule of thumb, I would think you could probably maybe estimate $2 billion for a gig of incremental generation. I think that's kind of what we're seeing in the marketplace and what our expectations might be. Julien Dumoulin-Smith: Yes. That's pretty sizable in turn then. And then maybe if I can, right, the release last week flagged the potential pivot in the near term, right, the energization ramp, if you will, for '28, '29, slight downtick in that period of time. What exactly are customers doing? Are they deferring initial energization dates? Are they starting at lower utilization? Are they restructuring the ramp profiles? And then maybe in terms of earnings impact, you guys provided this latest update. How do like the minimum bill protections in your contracts potentially insulate earnings from these -- what seemed like every quarter, some slight fluctuations in the near years of this ramp? David Poroch: There's a lot in there, Julien. Let's start to unpack some of that. So in terms of the way we design the contracts, we talked about the minimum bills and what that looks like. And so we have the opportunity to negotiate exactly what our counterparties ask of us. And like I mentioned before, as you make your way through the pipeline and we start having conversations about your needs and have those negotiations, counterparties are really sharpening their pencils about what they need. Keep in mind, as we have those conversations, counterparties are also posting collateral. So they're really having to put up some assets backing up their asks. And so that kind of motivates people to sharpen their pencils as well. And so in terms of what we see out in the future, we look through these things moving through our pipeline and are really excited about the ability to close on these contracts. Christopher Womack: And Julien, one thing I'd add, I mean one of the things we're experiencing as we see these existing data centers come online, we're learning about their profiles, their ramp rates. And so like the past 2 years, we've seen 17% year-over-year. I mean, so we're learning how this is playing out and that factors into the plan, but we know it will be -- it may be variable to some extent, but it's a great learning that we're experiencing through these existing data centers that we already have online. David Poroch: Yes. And those learnings really drive into how we shape the outlook and how we formulate the load forecast and that translates into how we drive our revenue expectations. Operator: Our next question is from Carly Davenport with Goldman Sachs. Carly Davenport: Maybe just on the data center outlook in Georgia and just some of the noise around affordability. There's been some legislation introduced on moratoriums or other regulations around data centers. So could you just provide your views on how much [ do ] you think some of those pieces of legislation have and if it's kind of coming up in any of your conversations with prospective customers? Christopher Womack: Yes. I mean there's a lot of conversations and activity around data centers all across the country, as you know very well. The thing that we're excited about here is that the projects continue to advance. The pipeline continues to grow. We continue to bring these data centers online, continue to reach agreements, with projects that we've talked about with projects that are in final stages and late stages. The momentum here will continue. Yes, I think there will be continued conversations around what will be the impact on pricing. I think we have to continue to tell the story about the benefits to all existing customers because of these projects. And also, the thing that I also get excited about is some of the data center partners that we have, their involvement in the communities across the state, making charitable investments in these communities to show the benefits that they bring to those communities. So I think support for communities, also how we price these projects in terms of support for lower cost and also the value they bring. I mean those are stories we got to tell. And I think we'll continue to see strong support across our territories for these projects. Carly Davenport: Got it. Great. And then I think you had mentioned in your prepared just some opportunities on on-site or sort of bridge power solutions at PowerSecure. Could you talk just a little bit about demand for those types of solutions that you're seeing in your conversations and maybe what you think the duration of that opportunity set could be? Christopher Womack: Carly, a couple of things there. I mean I think it's a combination of the conversations that we're in the midst of, but I also think as you look across the entire sector across the country, where there may be a need for temporary power. And so these bridge solutions, I think, will provide great value for these customers, but also these resources can provide some degree of resiliency in latter stages as well. So we think in the near term, there will be continued opportunities for bridge solutions in the market as we see it today. Operator: Our next question is from Stephen D’'Ambrisi with RBC Capital Markets. Stephen D’Ambrisi: Just had a couple of quick ones. Just on the Southern Power opportunity, can you give a little -- it sounded like you said that you have a potential to recontract a gigawatt and capacity prices have moved up 2 to 3x. Can you just give us a little flavor on like what the all like energy plus capacity or how impactful that could be? Because it looks like on the slide, in 2035, you open up a pretty significant amount, almost 4 gigs. And so I just want to understand kind of what that opportunity could be? And then I had a follow-up on the gas expansion and what the hurdle is there. David Poroch: Sure. Steve, it's David here. I'll take a crack at that. Yes, as we look into the next decade, we do see opportunities rising up through the portfolio as these contracts come up for renewal. We're seeing data points and examples in the marketplace that similar capacity is being recontracted at 2 to 3x the rate at which we're in right now. And we're seeing examples in the marketplace of around $20, maybe $25 a kilowatt month. So I think that might be a good rule of thumb to think about what that opportunity can look like out in the future for us. Stephen D’Ambrisi: Okay. That's really helpful. Sorry, is that 2025 incremental? Or is that -- that's the... David Poroch: That's the price. Stephen D’Ambrisi: Yes. Okay. Perfect. David Poroch: And that's what we're seeing. Stephen D’Ambrisi: Yes. And then just on the evaluating new gas expansion at 6 brownfield sites. Just can you talk to, I guess, how big that could be and then what effectively you'd be looking for and your ability to potentially marry those expansions with some of your data center offtakers or provide [ UOG ] solutions? Or just what that opportunity set looks like for you guys? Christopher Womack: I mean we're not going to change the risk profile of Southern Power. We're going to have a long-term contract agreement with a creditworthy counterparty. And right now, we're looking at evaluating some 6 brownfield sites in the Southeast for potential new gas development. And so that's kind of -- in kind of a very disciplined way how we will approach this as we always do. Once again, you guys know us. You know how we work, how we run this company. And so that risk profile will not change. So we'll be evaluating the market, working with customers, understanding their needs, and we will make decisions accordingly. Operator: Our next question is from Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to come back, if I could, towards the guidance and what are some of the parameters that drive the high and the low end? And specifically here, just ROE and equity ratio assumptions. Any color, I guess, what drives the low end there? Or just how we should think about some of those factors? David Poroch: Yes. No, good question. In building these expectations that we've communicated today, our disciplined approach, we run through exhaustive scenarios, all kinds of different expectations and outcomes to try to create bounding exercises, if you will, that we feel good about achieving. And so we've got some durability in there to be able to get to certainly the 7% range. And again, like I said earlier, it's a long ways out, but we do feel good about what we see in terms of the contracts that we're signing in terms of the in-migration of population into our service territories, customer growth and expansion, some of the things that Chris mentioned in the prepared remarks around investment coming into the state, whether it be businesses expanding or relocating into our service territories. All those aspects give us good visibility and durability into those projections. And then some of the things we talked about create upside to achieve top end or perhaps even expand that band in the future. Jeremy Tonet: Got it. That's very helpful. And just want to follow up maybe a little bit more with the affordability questions there. It seems like there's so much growth in front of you. Just wondering how that could impact build trajectory going forward, possible downward pressure there? And any other thoughts you could share on the '29 and '30 period for how build trajectory might look? Christopher Womack: And you've heard a lot from us our focus on rate stability in both Georgia and Alabama in terms of rate stability through '27 and through '28. And then once again, I think as you look at how we price these projects, how we do our large load projects, the opportunities we have for downward pressure on rates for existing customers is a real opportunity that we'll take advantage of. And so we see the opportunity to continue rate stability as we move into the future. And so that's our focus, making sure we continue to provide value to our customers from a service standpoint, but also making sure we have this real disciplined focus on rate stability now and into the future. Operator: Our next question is from Andrew Weisel with Scotiabank. Andrew Weisel: Just a quick one from me. I think you mentioned the potential to accelerate the dividend growth. Could you elaborate? I think that's new commentary from you. I don't remember hearing you talk about that before. Maybe just a little bit more detail on why you talk about that and what you'd be looking for out of it and when? David Poroch: Sure, sure. Thanks, Andrew. As we mentioned before, just historically, we believe that the dividend is a very important part of our value proposition. And obviously, in conjunction with our Board, who obviously has to approve every dividend that we offer, we would look to kind of grow -- our earnings would grow into that rate. And at some point, we want to be able to revisit that and maybe look around the 60%-ish window of dividend payout ratios. But again, that's out on the horizon and just something to think about. But again, like I mentioned before, it's integral to the long-term value proposition that we see in our stock. Operator: Our next question is from Shahriar Purreza with Wells Fargo. Unknown Analyst: It's actually Alex on for Shar. I just want to touch on the 13 gigs that you mentioned that you have in the plan. Can you just remind us what the minimum take is for those contracts? And is that assumed in your current plan? So I guess if you look at it, if customers were to ramp quicker and take on more power over time, would that be accretive to the current plan? David Poroch: Sure. Good question. Yes, keep in mind, these -- all these contracts have minimum bills associated with them that are designed to recover 100% of the cost that we incur to serve. But you're absolutely right. To the extent that ramps are achieved sooner and maybe go beyond the contract, there is upside to that. That pricing is sort of at the marginal cost, once we get beyond the minimum take. But we do feel really good about the way we structure these contracts to protect everybody. Christopher Womack: And Andrew, (sic) [ Alex ] just adding on, I mean, you hear us talk a lot about durability. What you mentioned provides greater durability to our plan going forward. And so those are real upside opportunities as we look into the future. Unknown Analyst: Got it. That's very helpful. I guess just shifting gears here, just look at the regulatory side, obviously, given the growth that you're seeing in Georgia, the rate freeze is in place until at least 2029. So did you see any opportunity where you can extend that rate freeze beyond 2028? And if you could just remind us, do you have to file something with the commission prior to the end of the current terms? Just want to get a sense on what that could potentially look like. Christopher Womack: Yes, Georgia has to file in '28, and we're not going to get ahead of that process. But as we continue to look at the opportunity with the growth that's in front of us, how we price these large load contracts to make sure it provides benefits to existing customers. We think there are real opportunities to continue to have this deep focus on rate stability. And that's something that we're going to continue to be focused on and continue to make sure we pay attention to in terms of providing value to our customers. So yes, that's a major principal focus of us as we look into the future. Operator: Our next question is from Nick Amicucci with Evercore ISI. Nicholas Amicucci: A couple of quick ones for me. So I'm just -- I just wanted to look -- I was kind of drilling down on Slide 39. So it seems like the vast majority of kind of the increased capital investment plan is associated with new generation. And just kind of in the context of Carly's question before when we're thinking about the bridge solution, should we be considering some potential upside just on the transmission side as we kind of think of these new generation assets, maybe kind of being a stand-alone asset currently just to get -- meet the ramp rate and then kind of connecting it at a later term into the broader grid? David Poroch: There's a lot of options at play in that business. And we stand ready to really take care of whatever the needs are of the customer. And that's kind of part of the beauty that our 3 electric companies are operating in, is not necessarily being bound by a static tariff that they have the ability to bilateral negotiations to get exactly what the customer needs when they need it and probably have the ability to partner with -- to bring that -- those services to bear. So yes, your question is dead on, and we want to go and explore those opportunities all over the country. Christopher Womack: Yes. And as we said, I mean, the bridge solutions are very complementary. And yes, I mean, they also -- I mean, as we said, I mean, they're at Southern Power and PowerSecure, those are potential upsides to the plan. Nicholas Amicucci: Okay. Great. That makes sense. And then just as we kind of think about -- we've talked -- we've spoken kind of ad nauseam here about kind of the minimum take on the contracts and kind of the pricing surrounding these large load contracts. Any kind of insight as to -- because I know those last through the duration of the contract. Just any kind of insight into the typical time frame that you guys are seeing on the duration? Is there a minimum there that you guys are seeking? Or is there some type of appetite for -- from kind of the counterparties just on longer duration versus shorter duration? David Poroch: Yes. Great question. And as we're negotiating these things, we're pretty much pegging to a 15-year window or longer. We want to make sure that we've got durability and lasting relationship as we sign these contracts. Operator: Our next question is from Paul Fremont with Ladenburg Thalmann. Paul Fremont: Congratulations on a good showing here. First question, I think it is just a point of clarification. The gas plants on Slide 21, those are all for your regulated utilities, right? So those -- none of that is -- includes Southern Power? Christopher Womack: Correct. David Poroch: You are correct, Paul. Yes. Paul Fremont: Okay. So I guess you talked about 700 megawatts of upgrades and incremental construction. Would that take place in the '31 through '35 time frame? Or when would that take place? Christopher Womack: As soon as '29. David Poroch: Yes. Yes, those are where the opportunities are that we're considering right now, and they'll stretch out over a little bit of a period of time. And those are -- keep in mind, those were some of the upside opportunities that Chris had mentioned related to Southern Power, and they're not included in our plan at the moment. Paul Fremont: Okay. So that would be incremental and it could come in as early as '29. And if you did it, it would be fully contracted when it was completed, right? Unknown Executive: Absolutely. David Poroch: Consistent with the -- yes, business models not changing in Southern Power. Paul Fremont: And then is it safe to say that those contracts would most likely be with like co-ops and other power companies versus, let's say, selling directly to data centers? David Poroch: Yes, that's a very safe bet. Christopher Womack: It would definitely be a creditworthy counterparty. Paul Fremont: Okay. Great. And then do you need regulatory approval if you get some of the additional contracts that you're talking about and you need, let's say, that incremental 3 gigawatts of generation, does that need to go through commission approval? David Poroch: Well, we mentioned that there's -- that all of that would be subject to review. Keep in mind, we just closed in December on 10 gigawatts at Georgia Power. And then we kind of referred to 2 proceedings that just are beginning and then we expect to start between Alabama and Georgia that will probably take us through 2026 and likely see conclusion in 2027. Paul Fremont: Okay. And then last question for me. Any sense on who's going to -- which Republican is going to run for [ Pridemore ] seat on the commission? Christopher Womack: We're not political prognosticators. We have no idea. What we do is we work with whoever is there, and we look forward to you. Operator: Our final question is from Travis Miller with Morningstar. Travis Miller: This is a follow-up, you answered most of my questions. So the '28 and '29 projects, in particular, generation project you outlined, what's the status of the gas supply and then for the battery ones, battery components. And then in addition, anything beyond 2030, what -- are those going to be constraints potentially? Christopher Womack: It's all secured. Travis Miller: Even the physical is secured or just financially? Christopher Womack: It is physically secured. Operator: And that will conclude today's question-and-answer session. Sir, are there any closing remarks? Christopher Womack: Again, let me say thank you very much for your continued interest in Southern Company. Have a great day. Operator: Thank you. Ladies and gentlemen, this concludes the Southern Company's Fourth Quarter 2025 Earnings Call. You may now disconnect.
Operator: Welcome to IDACORP's Fourth Quarter and Year-end 2025 Earnings Call. Today's call is being recorded, and our website is live. A replay will be available later today and for the next 12 months on the IDACORP website. [Operator Instructions] I will now turn the call over to Amy Shaw, Vice President of Finance and Compliance and Risk. Amy Shaw: Thank you. Good afternoon, everyone. We appreciate you joining our call. The slides we'll reference during today's call are available on IDACORP's website. As noted on Slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecast, financing plans, regulatory plans and actions and estimates and assumptions that reflect our current views on what the future holds, all of which are subject to risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from statements made today, and we caution against placing undue reliance on any forward-looking statements. We've included our cautionary note on forward-looking statements and various risk factors in more detail for your review in our filings with the Securities and Exchange Commission. As shown on Slide 3, also presenting today, we have Lisa Grow, President and CEO; Brian Buckham, EVP, CFO and Treasurer; and John Wonderlich, Investor Relations Manager. Slide 4 shows a summary of our full year financial results. IDACORP's diluted earnings per share were $5.90 compared with $5.50 last year. This made 2025 our 18th consecutive year of EPS growth, as noted on Slide 5. We ended up $0.15 per share above the midpoint of our original EPS guidance for 2025. These results include additional tax credit amortization of about $40 million for 2025 compared to almost $30 million of additional tax credit amortization in 2024. Today, we initiated our full year 2026 IDACORP earnings guidance estimate in the range of $6.25 to $6.45 diluted earnings per share, which includes our expectation that Idaho Power will use less than $30 million of additional tax credit amortization to support earnings. These estimates assume historically normal weather conditions throughout the year and normal power supply expenses. Now I'll turn the call over to Lisa. Lisa Grow: Thank you, Amy, and thanks to everyone for joining us today. As we look back on 2025, it was a particularly busy and exciting year for IDACORP. Our employees continue to shine, achieving strong results for our customers and owners. Our company produced its 18th year of consecutive earnings per share growth, as Amy mentioned. We sold a record amount of energy to our retail customers, broke ground on the B2H transmission project and recorded among the best reliability scores in company history. And we did it all while staying true to our core values of safety first, integrity always and respect for all. We also settled our general rate case proceeding in Idaho with a constructive outcome for our company and our customers. I want to again thank -- extend my thanks to our outstanding employees for their hard work and commitment to helping us build a secure energy future that powers our customers' lives and businesses. As you can see on Slide 6, growth remains robust across Idaho Power's service area, outperforming national trends and highlighting our region's economic vitality. In 2025, our customer base grew 2.3%, including 2.5% for residential customers, bringing the number of metered customers we serve to more than 660,000. This growth is happening across most customer classes with extensive residential, commercial and industrial construction continuing throughout our service area. In 2025, Micron's new semiconductor facility continued to advance towards completion. The size is impressive, as you can see on Slide 7. Meta also made significant progress on construction of its data center, which you can see on Slide 8, and that project began taking power last year. Additionally, Idaho Power helped bring several other major industrial projects online, including a Tractor Supply distribution warehouse and a major expansion of Chobani's yogurt production facility. Along with steady interest from our core industries of food processing, manufacturing, distribution and warehousing, we're also seeing increased inquiries from other energy-intensive customers looking to operate within our service area. We work closely with prospective large customers to set realistic and thoughtful time lines to meet their energy needs while ensuring they are not imposing costs on our other customers. The solution to serving load growth from new large customers in our mind has several important elements. We first have to comply with the laws of physics in delivering power. It has to be at a price the customer will pay. We need to procure reliable resources and have them available on the time line we agreed to with the customer. It has to be appropriately derisked operationally and on the credit side through special contracts with the customer, and it cannot be subsidized by other customers. As far as we've been able to find, we're serving the fastest load growth rate in the nation, and we're doing it with a thoughtful and measured approach to ensure there are benefits to our company and its owner, at the same time, mitigate what might otherwise be a risk of cost shifting to our other customers were it not for our growth pace for growth regulatory model in Idaho. Notably, last year, Micron announced it would build a second semiconductor facility in Boise. The load and CapEx projections we're providing today don't yet include this expansion, but we're working through the details with Micron. As we've noted previously and continues to be our practice, Idaho Power's public growth projections only include projects that have signed contracts or large financial commitments for customer-funded infrastructure. With this approach, our growth forecast for large load customers is based only on committed projects. We also have a significant pipeline that includes a diverse mix of prospective large load customers, and that pipeline exceeds our current 4,000-megawatt peak load. But we don't have -- we don't include any of them in our load projections as speculation and hope are not how we like to forecast. Turning to Slides 9 and 10. Affordability continues to be one of Idaho Power's key focus areas. We work hard to keep our costs down and provide exceptional value for our customers, and our rates have increased at a much slower pace than national averages. We believe that even after implementing our 2025 Idaho general rate case outcome, our prices remain well below the national average. We're proud of our low rates and despite considerable infrastructure investment and expansion of our customer base, we expect rates to remain in check with our regulatory methodology in Idaho. Case in point for affordability based on current projections, we're not planning to file a general rate case in Idaho on June 1 of this year. While we anticipate higher depreciation and interest expense associated with growth and infrastructure build-out as well as wildfire mitigation costs, we expect revenues from new large load contracts will help offset those additional costs. And we continue to benefit from our culture of careful and thoughtful spending. We'll watch revenues and cash flow during the year as part of our continuing assessment of the need and timing of a rate case. As seen on Slide 7 -- or Slide 11, we continue to be full speed ahead on our major infrastructure projects. Work is progressing quickly on our B2H project with 80 towers already completed and many more under construction. We expect B2H to be in service by late 2027. Permitting is nearly complete on the SWIP-North transmission project, and we expect construction to begin this year as well. We anticipate the project will be completed as early as 2028. We also continue to work with the PacifiCorp on the Gateway West transmission project. We anticipate a critical section of the line between our Hemingway and Midpoint substations will come online as early as 2028. With those expectations, we should have several new large transmission projects added to our system in '27 and '28. Transmission takes a great deal of time to permit, so we're glad we got started early. Moving to resource planning. We recently received acknowledgment of our 2025 IRP from our Idaho and Oregon Commission. Turning to Slide 12. Idaho Power is adding generation and storage resources that will help it maintain excellent reliability as demand grows. In 2025, the 200-megawatt Pleasant Valley Solar project came online as part of our Clean Energy Your Way program, and we added 230 megawatts of battery storage to the resource portfolio. Additional projects are underway to help us continue meeting growing customer demand, including 250 megawatts of batteries and 125 megawatts of solar, which are both set to be in service later this spring. Idaho Power has announced plans to construct 167 megawatts of natural gas fuel generating capacity next to the existing Bennett Mountain Power Plant in 2028. We're proud that this company-owned project was the most cost-effective resource in the RFP. As we've mentioned on prior calls, we're working hard to solve the generation needs in '29 and '30, which is a deficit of around 200 megawatts of incremental firm capacity needed each year. We expect to procure additional resources to solve for those deficits. The additional gas plant near Bennett Mountain as well as other resources we expect to construct are included in our CapEx forecast that Brian will discuss. We filed a request for a CPCN for the capacity addition next to the Bennett Mountain plant, and we plan to file requests for CPCNs for other new resources in the relative near term. You'll see those requests on the Idaho Commission website when we file them. In other news on generation resources, in 2025, Unit 1 of the Valmy coal-fired power plant was converted to natural gas, and we also burned the last of our coal at our other Valmy unit, which is currently being converted to natural gas. We expect that conversion to be completed this summer. I'll end by discussing this morning's announcement regarding our Oregon service area. We've entered into a definitive asset purchase agreement with the Oregon Trail Electric Cooperative for the sale of our distribution system and some transmission assets in Oregon. After the transaction, we'd have no regulated retail operations in Oregon, so we provide power to OTEC for some period of time under a power purchase agreement. The base purchase price for the transaction is $154 million, which is subject to various adjustments. Completion of the transaction is subject to a number of conditions, including approval by the Idaho and Oregon Public Utility Commission and from FERC. Oregon represents a small portion of our overall service area, projected to be less than 3% of our total sales by 2030. We're confident OTEC will provide a strong local focus and dedicated service for Eastern Oregon, while Idaho Power concentrates on supporting rapidly growing Idaho communities. If the sale is approved, Idaho Power's 20,000 customers in Oregon will transfer to OTEC service. While Idaho Power would no longer directly serve Oregon electric customers, it would retain ownership of its Oregon generation facilities and a large majority of its Oregon transmission assets, including B2H, which will help serve Oregon residents and businesses. We're working closely with OTEC to prepare for a smooth transition and make the appropriate regulatory filings to support the sale. It's too early to determine, but we expect regulatory approval could take 10 months or longer. And with that, I will turn the time over to Brian. Brian Buckham: Thanks, Lisa. I'm going to start on Slide 13, which has our usual reconciliation of year-end results. And just running through the table, IDACORP's net income increased over $34 million compared to 2024 and higher operating income at Idaho Power from the January rate increase and from customer growth combined for a roughly $75 million benefit. Usage on a per customer basis decreased operating income by $6.5 million, and that was because temperatures were milder in 2025 versus the prior year, though both years did have above-average cooling free days. O&M was another offset, albeit smaller than we originally anticipated. Total other O&M expenses increased less than $10 million, mostly from increased labor-related costs. We ended up the low end of our O&M guidance range for the year. So good outcome there. Depreciation and amortization expense increased nearly $28 million for the year, which was expected with the increase in system investments we've made and the assets that have gone into service. In the second quarter last year, a new leased battery storage facility began operations, and that modestly increased expense due to amortization of our related right-of-use asset. So something new on our financial statements for last year. Other changes in operating revenues and expenses decreased operating income by a net $3.8 million, and this was because of the year-over-year impact of the conclusion of property tax litigation in 2024 that resulted in refunds that year. Also, the timing of recording and adjusting regulatory accruals and deferrals positively impacted 2024 results, but those items didn't recur at that level last year. Those items were partially offset by recovery of costs of the new battery finance lease through the power cost adjustment mechanism. The expense for the new battery financing lease hit interest expense and amortization, but they're offset in the power cost adjustment mechanism. So ultimately, it's a near zero impact to operating income. The decrease in power supply expenses that weren't deferred also provided a benefit when compared to 2024. Nonoperating expense increased by about $23 million. That was mainly driven by an increase in interest expense because our long-term debt balances increased. Interest on the new finance lease also contributed to the increase, though, as I noted before, this is offset in the power cost adjustment mechanism. Partially offsetting those items was increased AFUDC from higher construction work in progress balance, which we predict will be sustained for the next several years. Idaho Power amortized $40.3 million of additional tax credits under the Idaho mechanism to reach the 9.12% floor level of Idaho return on year-end equity. That was only an increase of $10.5 million compared to the prior year. And also related to taxes, the $20.4 million relative decrease in income tax expense, excluding the additional ADITC amortization was primarily driven by income tax return adjustments for state taxes and then standard plant-related flow-through items. That's it for the recon table. And moving to Slide 14, we've updated our 5-year CapEx forecast as promised. You can see that it increased considerably. We're currently forecasting spending $1.4 billion per year on average over the 2026 to 2030 forecast period with a total 5-year CapEx amount of around $7 billion, and that's a doubling of our average annual actual spend of around $700 million for the past 5 years and near our current market cap. And to give you some perspective on our update, our 2026 to 2030 forecast is a 26% increase in CapEx compared to the 2025 to 2029 forecasted CapEx that we shared at this time last year. If you look at the CapEx graph, the bars are shaped a lot like they were at this time last year, but the difference is in the scale on the left side of the chart, it's much different in terms of magnitude. And as usual, the last 2 years in the chart probably have some upside that might materialize as we refine our plans and projects for that later time span. And some of that upside to our forecast results from the fact it doesn't yet include the resources that are needed to serve Micron's second fab or some of the other expected load growth. Amidst all of this investment, I think it's important that we reiterate the importance of affordability for all of our customers. We're fortunate that our regulatory processes and rules ensure that the new large load customers Lisa discussed, they have fair share of system costs and aren't subsidized by existing customers. As we look at the possibility of not filing a rate case this year and also the estimated potential magnitude of cases in the future, we see a future where affordability remains achievable, notwithstanding the significant magnitude of our investments. We also need to keep the utility financially healthy, meaning we need to convert our capital investments into rate base and provide returns to our debt and equity holders funding our growth. On Slide 15, we roll forward our rate base forecast for the 2026 to 2030 period. Our total system rate base coming out of our 2025 Idaho general rate case was $5.3 billion. It was $4.6 billion coming out of the 2024 Idaho limited scope rate case. So a big upward reset for our base year. We forecast that by 2030 rate base could reach over $11 billion, which is more than double our 2025 rate base. That's an incredible amount of growth in rate base. And case in point, we project it to be a 16.7% rate base growth CAGR for the 5-year period from 2026 to 2030. Last time this year, our forecasted rate base CAGR was 16.1% for 2025 to 2029. And today's higher CAGR is even after rolling forward to the considerably higher base year that I mentioned. If you look at the cash flow statement, you'll see additions to PP&E in 2025 were nearly $1.2 billion. And QIP on the balance sheet is over $1.7 billion. And I think that illustrates how busy we've been over the past few years as a company. And amidst this increasingly long growth cycle, it's obviously important that IDACORP and Idaho Power keep their balance sheet strong. As part of that, we continue to target an average 50-50 debt equity capital ratio and a simple balance sheet. We don't have any holding company debt or any particularly sizable maturities coming up, and our capital structure has just medium-term notes and common stock in it right now. And I'd say there's great elegance in that simplicity. Moving to Slide 16. You can see the net cash flow from operations is funding over half of our CapEx needs in the 2026 to 2030 window. We'll still need growth capital, which we estimated at $2 billion in equity and $2.9 billion in debt to stay at our target 50-50 capital ratio. But we need to dig a little deeper on that. We've already executed on over $600 million of equity through forward sales agreements that will settle in 2026, which leaves a lesser net amount of $1.4 billion of net equity sales to occur through 2030. That equates to our future capital markets transactions being comprised of about 2/3 debt, 1/3 equity. And it's an average of less than $300 million of equity per year for the full 5-year forecast period if you exclude equity already sold on forwards, which is within a reasonable ATM issuance range for us, and that gives us a lot of optionality on how we raise our equity growth capital. Cash flows from operations are expected to increase as we move through the forecast window, particularly with large load revenues coming in with greater volumes over time. And it's important to note that any additional CapEx needed to serve additional load would require additional financing. If that were the case, additional funding would likely be more heavily weighted to the back end of our forecast. Lisa already mentioned the execution of a definitive agreement to sell Idaho Power's Oregon distribution assets. I'll just add that from a financing perspective, we look to offset some of the equity needs I talked about with the net after-tax proceeds of the transaction. That transaction would give us business simplification, as Lisa noted, but also another source of capital to fund our rapid growth-related investment in Idaho. In the financing table, we haven't applied any proceeds from the prospective sale. We estimate the onetime gain from the asset sale would be immaterial, and that's not the thesis for it. We expect the asset sale to be only slightly accretive -- earnings accretive in the year it closes, but also provide an ongoing benefit to EPS from lower dilution. On Slide 17, cash flows from operations eclipsed $600 million for the first time in company history. Customer growth, the benefits of the general rate case outcomes and moderate power supply costs all helped to achieve that milestone. The strong cash flows also helped moderate our financing needs and leaves IDACORP with a strong cash position as of today. What I'll end with today is to reiterate something I noted at this time last year because it still rings true. Over the forecast window we talked about today, we expect to see what we believe to be among the leading actual earnings growth and earnings quality profiles in the industry. I think it's important to note that when you do your analysis, our expectations are on a GAAP basis and basing off a long string of 18 years of consecutive GAAP earnings growth. So we baseline our growth expectations off of a very strong year with no non-GAAP exclusions or exceptions. Again, elegance and simplicity. We're mindful of those providing the debt and equity capital for our growth and recognize the importance of generating returns for them. We're focused on the things that matter to them. Strong risk mitigated execution and already in-process infrastructure build-out, sustained affordability for customers, actual rate base growth from permitted and in-flight projects, real near-term earnings accretion, customer revenue diversity and long-term durability of our earnings growth and returns. That's the paradigm we've been working under and what I know you've all come to expect from us. And with that, I'll turn it over to John. John Wonderlich: Thanks, Brian. This marks my 1-year anniversary of conference calls in my IR role. So Brian asked me to give a new fun fact about myself. Last year, I noted that I was an assistant coach for a third grade basketball team, and I'm happy to let you know that I was promoted from the role of assistant to the head coach to a full assistant coach this year. And I moved up the ladder to fourth grade basketball. Turning to Slide 18, you can see our 2026 full year earnings guidance and key operating metrics. This guidance assumes normal weather throughout 2026 and normal power supply expenses. We expect IDACORP's diluted earnings per share this year to be in the range of $6.25 to $6.45. The midpoint of this range reflects an 8% EPS growth rate over 2025 actual results, premised on what we would consider a conservative set of assumptions. We expect that Idaho Power will use less than $30 million of additional investment tax credit amortization in 2026, so less than the amount in 2025. We expect full year O&M expense to be in the range of $525 million to $535 million. And I'd like to provide some context on that range. The largest driver of the increase over the prior year is wildfire mitigation costs, which are offset by revenues from the general rate case. So it's not apples-to-apples comparison between 2025 actuals and the 2026 estimate. As we continue to expand our system to accommodate growth, we do expect to also see higher O&M expense. We also continue to experience inflationary pressure on labor and professional services, but our culture of spending wisely to help ensure affordability for our customers is very much intact. We continue to focus on keeping costs as low as possible while keeping the system safe and reliable. We anticipate spending between $1.3 billion and $1.5 billion on CapEx in 2026. As the 5-year forecast showed, we continue to expect higher CapEx numbers as we respond to strong growth in our service area. Finally, given our current forecast of hydropower operating conditions, we expect hydropower generation to be within the range of 5.5 million to 7.5 million megawatt hours for the year. With that, we're happy to address any questions you might have. Operator: [Operator Instructions] Your first question comes from the line of David Arcaro of Morgan Stanley. David Arcaro: Look, I was wondering if you could give an update on maybe your customer load pipeline. What are the latest discussions you're having in terms of either expansions of current large load customers? And how is the pipeline shaping up for new companies coming into your service territory? Lisa Grow: Well, I'll get it started. We certainly -- it just continues to -- we get a lot of inquiries, a lot of folks that are very interested, some big than others and really from across many industries. So it isn't focused on just one. I'll let Adam give a little more color. And it's true, too, that we have NDAs, so there's some things that we can't talk about. Adam Richins: Yes, I feel like a little bit of a broken record -- this is Adam, saying the same thing. The inquiries continue to be strong. it's kind of a diverse amount of inquiries, everything from data centers to manufacturing. For example, we have a data center that's looking at a service territory that has a conditional use permit called Diode, it's the Gemstone Technology Park. We have Idaho National Lab that's growing. We obviously have Perpetua that is a mine up north that's looking at starting operations there, too. So it's pretty robust. Again, a lot of them are under confidentiality. So I can't get into the details, but feel like the growth is strong. Brian Buckham: And David, just one thing I'll add is the last time you've seen a formal load growth update from us was associated with the 2025 IRP. So that was from quite some time ago. We do plan to update that the load growth at some point during the year, usually towards the end. But there's a lot of customers that we've talked about that just aren't in that 8.3% load growth update or load growth number that we have out there as of right now. We should see an update later this year. Adam Richins: And maybe I'll add that of those customers, a lot of them aren't just inquiries. They're actually doing construction studies, generation studies. We have energy service agreements that we're looking at for a fair amount of megawatts. So when we talk about inquiries, a lot of times it goes beyond just people kind of touching and feeling and actually going to the next stage of looking at what it looks like to come to our service territory. David Arcaro: Got it. I appreciate that color. That's helpful. I wanted to also just ask about on the equity needs side of things with the refresh here. Maybe there are a couple of moving pieces, but I was wondering if you could just give a sense for what the rule of thumb would be, Brian, maybe just on -- for incremental CapEx, how do you think about the funding split in terms of external equity from where we stand now, given your latest operating cash flow kind of outlook here? And maybe in the context there, I was curious, any repairs tax impact from the guidance there. Brian Buckham: Yes, David, sure. On the repairs tax side, the assumptions that we use in our forecast tend to stay relatively stable. It does adjust from time to time each year, but not a major update in our repairs tax deduction. On the equity needs side, any incremental CapEx that we add to the forecast is probably financed 50-50 debt equity, at least beyond what we have now and the update that we provided this morning. What I will say, though, is in a lot of instances, these large load customers come with large load cash flow, and that can certainly impact ultimately what our need is. And if you look at the equity number that we put in our estimate right now, it does have some conservative assumptions about what cash flow will look like. If you look at the incremental increase in cash flow in the bar chart for our financing waterfall February of last year versus February of this year, you can really see -- you can see some movement there. And that's to fund a significant incremental amount of CapEx that we have in the forecast. So some of the adjustment that you see in that waterfall is a result of what cash was on the balance sheet and where forward drawdowns were on our equity programs at any given time. So that gives you a little bit of a skewed view of not apples-to-apples comparison year-over-year on equity needs. So the number does move around, certainly with cash flows. It could be impacted, like I noted, by the sale of the Oregon territory. So there's a lot that can move the equity number. I'd say it's pretty conservative at this point. And so even the 50-50 debt equity split could be somewhat of a conservative approach on how we would look at our equity needs over time. Operator: Your next question comes from the line of Michael Lonegan of Barclays. Michael Lonegan: So obviously, you mentioned your current capital plan does not include Micron Fab 2. Would you be able to help us understand the size of that investment opportunity in the latter part of your plan? Lisa Grow: We're just working with Micron to determine that. So we don't have anything to share in terms of size today. So more to come as we work our way through the path. Adam Richins: Yes, Michael, this is Adam. They haven't given publicly a load ramp. The size of their first fab is public, but they haven't come out with the second fab yet. So when we are able to share that, we will. Michael Lonegan: Okay. Great. And then secondly for me, obviously, a sizable CapEx increase with today's update, modest increase in equity content needs. You're on track for significant cash flow generation increases, like you said, with the large customer ramp-ups. Just wondering, where did you end 2025 on FFO to debt? And where do you anticipate being over the course of your plan? And do you think there's an opportunity for Moody's to take your rating off negative watch? Adam Richins: Yes, Michael, thank you for the question. I think the answer to that is yes, I think there is an opportunity for that, though we do have a pretty substantial capital investment. And so we are maintaining a very strong simple balance sheet, as I mentioned, of 50-50. And I think that's been a good factor from a rating agency perspective. We have -- at the end of 2025, I'd say on Moody's, I think we were at about 14.3% at Idaho Power. And on S&P, we were just barely sub-14%, if I remember correctly, on FFO to debt. Our threshold at Moody's is 13% and S&P is 14%. So as of right now, we're somewhat navigating that floor level. We expect to come out of that with large load revenues, as you mentioned, and the cash flows to support it. But again, we're maintaining a really strong balance sheet. The outcomes of our rate cases helped the rate case that we did in 2025 had a result that will help credit metrics in 2026. So I could see us being at or near those levels again in 2026 before we make a gradual move up off of those numbers. But again, we usually do better than what our internal forecast suggests. And so I think Moody's and S&P both understand that. And we'll be meeting with them in March actually to have a conversation about where things are headed. So we don't have, as I mentioned, holding company debt that helps. We don't have anything on our balance sheet that all call an exotic for lack of a better term. And we don't have any upcoming maturities through 2030 other than $160 million pollution control revenue bond this year to refinance. So from a balance sheet perspective, we're sitting very strong, and I think the rating agencies will recognize that. Operator: Your next question comes from the line of Shar Pourreza of Wells Fargo. Whitney Mutalemwa: This is Whitney Mutalemwa on for Shar. So you currently have precedent for large load arrangements, including a certain tariff that's tied to -- I think it's tariff Schedule 33 tied to a special contract. Do you expect to move towards a standardized large load tariff rather than negotiating special contracts case by case? And if so, what would drive that decision? Lisa Grow: At this point, we don't have plans for that. Each customer really comes with their own unique needs. And so we really try to make sure that we understand them and meet them. So they really are tariffs of one, if you will, that are very catered to the customer. Whitney Mutalemwa: Okay. So nothing in the near term? Adam Richins: That's correct. Yes. Nothing in the near term from our perspective. Operator: Your next question comes from the line of Julien Dumoulin-Smith of Jefferies. Brian Russo: Yes, Brian Russo on for Julien. You mentioned the downward slope in CapEx in the outer years and you take a conservative approach to what you include. What could be upside there? Is there anything left on the '28 and '29 RFPs that would be additive? Or is this, say, another RFP that would be needed for the post 2030 time frame? Adam Richins: Yes, Brian, this is Adam. Yes, we are looking at an RFP in the post 2031, '32 time frame. As you know, we had one for 2028. We had one for 2029. The 2029 and later RFP really only provided natural gas project. That was the project that -- [ Bennett ] that you've heard us speak about that's getting built right now. We're actually moving that project into 2028. And so as we look at 2029 and 2030, we're going to have to evaluate some options to increase power production there, and we hope to give you an update on that here relatively soon. I think Lisa mentioned it in her opening comments that we do have some options there, and they will go public here in the near future. Brian Russo: Right. Is one of those options brownfield development, I think it's Peregrine... Adam Richins: Yes, Peregrine 1, yes, absolutely. We have an energy site there. And just as a quick reminder, too, we don't have any generation resources for Micron Fab 2. Fab 2 is not in the load resource balance nor is Diode. So you would see additional CapEx there as long as well as additional generation resources to meet that growth. Brian Russo: Okay. Great. And then the less than $30 million ADITC usage in '26, notable, as you mentioned earlier. Would that be like the inflection? Or with the likely stay out this year of filing a rate case, how should we look at post 2026 support for earnings? Lisa Grow: Well, certainly, that -- as the large loads start to come online, we start to see those revenues help push out the need for rate cases and hopefully lower the need for the use of ADITCs. And so far, we're keeping on schedule, and we're optimistic. And so we -- I don't know that I would call it an inflection point necessarily, but certainly, we are starting to see some of that revenue come in. Adam Richins: And Brian, what I would add is I think one way to look at this is take a look at the rate base growth slide that we talked about today on the call. And you can see that 2026 and '27 have significant rate base growth. But when you look to '28, there's a very large amount of growth. So there's still -- the company still will earn based on rate base over time in addition to large load customers. We are at a point though where we have to look more closely every year as to which one is the better outcome. Brian Russo: Okay. And then just lastly, obviously, not surprising the assumption on the hydropower forecast. But could you just talk more or just share some thoughts on what the current hydro conditions are and drought conditions, understanding that you've got very strong mechanisms, but I'm just curious with the dynamic with irrigation sales as we move into the spring. I mean is there a high probability of a dry and hot irrigation season? Lisa Grow: Yes. It's really interesting. If you're a skier out west, it's been kind of a bummer of a winter. But what our hydrologists are telling us is that we actually in the -- on the east side of our system, we're actually really at normal levels. And that's where we get the most generation from because it flows through all of our hydro resources. And then certainly at lower levels, there is less snow than we historically see, but it's been actually quite wet this winter, so it didn't necessarily become snow at the lower levels, but that also helps keep those soils wet so that the runoff from the higher elevations make it to the river. So overall, we're actually pretty optimistic. I will also tell you that yesterday, it looked like Christmas here. So we're starting to see some storms. So ain't over till it's over, I guess. So we aren't necessarily done with the snowpack accumulation. But of course, we live out west, so we're pretty used to having fluctuations. There are drought cycles that happen. And yes, we have mechanisms. And then we also work very carefully as we prepare for summer operations, knowing what we're -- with the conditions as we go into those operating seasons. And Adam, I don't know what you would add. Adam Richins: No, I agree. You covered it. I think the range reflects that. We've been much lower than that 5.5 over the last 5 years. I think in 2021 and 2022, we were below that 5.5 number. So we're actually feeling somewhat optimistic that it's higher than what you would think, and that's why the range is what it is. Operator: Your next question comes from the line of Chris Ellinghaus of Siebert Williams Shank. Christopher Ellinghaus: So if you're going to forgo the middle year rate case for this year, would you expect to stay on a similar midyear cadence going forward? Lisa Grow: Well, that's sort of been our cadence historically, but we are constantly looking at our financial situation and make a determination then. So if something changed and we needed to do it sooner or later, we would do it at that time. We do have a requirement that we have to give notice when we're going to file. So we can -- we tell people before we do it. Anything you would add, Tim? Tim Tatum: Yes. Chris, this is Tim Tatum. The only thing I would add is, in the past, we have filed general rate cases in the fall, targeting a June 1 effective date. So we would have the opportunity there. We look at June 1 because that coincides with our annual power cost adjustment updates and our fixed cost adjustment update. So that's another time that we could look at to file. We'll keep monitoring and certainly only file if we absolutely have to, but that's a potential option as well. Christopher Ellinghaus: Okay. The customer growth continued sort of a little more moderate in the back half of the year. Do you have any better sense today what's affecting residential growth that -- is it the interest rate environment or whatever you might know about? Lisa Grow: I mean those are always the key drivers. It does seem like there's been a little bit more activity, if you will, of buying and selling. It kind of was frozen up as people were kind of stuck in their homes and interest rates, and that seems to have been relieved a little bit. I don't know if people just got used to it or needed to do something for other reasons. But I don't think it is necessarily -- I mean we still have good growth. And so whether it sort of ebbs and flows with the seasons or what drives it, we don't necessarily know. But overall, we still think it's pretty strong, and there's lots of subdivisions that are getting flatted and getting ready to be built, if not already under construction. So some really massive subdivisions sort of to the East and to the West. So we're excited about that. And certainly, with some of these big employers like Micron, they're going to need places for their employees to live. So that's really driving a lot of this growth as well. Christopher Ellinghaus: Yes. I wanted to say, given the large new employers, is there going to be some lumpiness to what the residential customer growth looks like for the next 5 years? Lisa Grow: It very well could. You know, it's never perfectly matched. So it looks like people are gearing up to provide housing for sure. Christopher Ellinghaus: Okay. Brian, do you have any estimate for what the weather impact was for the year? Brian Buckham: I don't have a specific number. I can show you the way I would look at it from a sales volume perspective. If you look at a 1.5% year-over-year sales growth on a weather-adjusted basis, it's 2.3%. So weather did certainly have its impact on the year. We had a great third quarter as a result of some of the, say, drier conditions and very hot conditions. But again, cooling degree days in both of the last 2 years were high and that impacted our sales. If you look at, say, November, December, they were very warm months. What I would note, though, is the FCA does have some impact on the outcome of that or the impact of weather on our results. But again, no, I would say there are parts of the year that were more moderate conditions that had an impact on those sales numbers. Christopher Ellinghaus: Okay. Do you have an estimate for your large load growth for 2027 that mitigates the large CapEx and equity dilution and whatnot. Have you got an estimate for what 2027 looks like? Lisa Grow: In terms of financing? Christopher Ellinghaus: No, in terms of large load growth. Adam Richins: But we can tell you, Chris, that that's when a lot of that growth is going to start to ramp up when you're going to see a lot of these in-service dates for Micron and others. But I don't think we have an exact number unless you guys do. Brian Buckham: No, we don't. We just have the 5-year CAGR out there as of now. And I think as we've mentioned, that number has been there for a while, somewhat more back-end loaded, but I would include 2027 as one of those larger ramp years '25 or '26, '28, '29 and out into the 2030s actually being pretty significant ramp years for us. Christopher Ellinghaus: Okay. I'm just checking because 2027 looks like a big year by my calculation. So with acceleration in the CapEx and AFUDC and the rate case, does that -- should that lead us to believe that 2025 was peak ADITC usage? Adam Richins: I would say not necessarily. I wouldn't assume that. There's a few different factors that influence ADITC usage. One of them is just a book equity number at the end of the year is what the calculation is based on. So that's impactful. Other things can be what's the amount of depreciation and interest expense that's unrecovered that's not offset fully by AFUDC and whether or not we file rate cases is another aspect of that. So it's not linear in any given sense that ADITC usage would go down. What we're seeing this year, though, if you think about even into 2027, you could see something similar. It's a little too far out to know for now. But in the further out years, when you look at some of that rate base growth we've talked about, that does have to be financed. And with our hybrid test year or our historic test year, depending on how you want to look at it, there is lag that sometimes has to be covered by ADITCs. And that's really why in the rate case, it was important to us to have that as an element of the settlement is to smooth out some of those years where ADITCs may be a little higher. Christopher Ellinghaus: Sure. I just don't see the big sag in the ROE that would require it to be much bigger than last year thus far. So also, you sort of reduced the dividend payout target with the dividend increase in September. Can you give us any thoughts about what do you see as a minimum that's -- can you -- do you feel like you can dip below 50%? Is there really a range that you're wanting to maintain at a minimum or a minimum growth rate, if you got any insights there? Lisa Grow: We're always looking at that certainly. We're just trying to make sure that we're not issuing equity to pay dividends and rather it's been sort of the consensus that it's better to invest in the company and get the returns there. But I don't really know that we have -- we do have that stated range, but we sort of take it as we go through this time period and try to make recommendations to our Board that makes sense. Operator: Your next question comes from the line of David Arcaro of Morgan Stanley. David Arcaro: Just one more that I wanted to check in with you on. I was wondering, just any thoughts on the prospect here for depreciation and interest expense tracker just going forward from a regulatory standpoint, whether that's something you might seek again in the future? Lisa Grow: Well, certainly something that we have looked at and talked about. And when we looked at our forecast for this year and sort of determined that we don't need to go in for a rate case immediately, we didn't see that we -- there was a need this year, but it's definitely something that we will keep a close eye on because as you know, with this big capital program that those are significant impacts to our financials. So we are interested in that. We'll continue the dialogue on that. It's just not something that we're working on right this minute. Operator: [Operator Instructions] With no further questions, that concludes the question-and-answer session for today. Ms. Grow, I will turn the conference back to you. Lisa Grow: Thank you again to all of you for joining us today and your continued interest in IDACORP and John's basketball career -- coaching career, and we hope you all have a great evening. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Operator: Thank you for attending the Guardant Health Q4 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Zarak Khurshid, VP of Investor Relations. You may proceed. Zarak Khurshid: Thank you. Earlier today, Guardant Health released financial results for the quarter and year ended December 31, 2025. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties as well as the non-GAAP financial reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy. Helmy Eltoukhy: Thanks, Zarak. Good afternoon, and thank you for joining our fourth quarter and full year 2025 earnings call. Starting on Slide 3. 2025 was a breakout year for Guardant, where years of investment continues to fuel breakthrough innovation and best-in-class execution across our portfolio. In oncology, we introduced groundbreaking applications for Guardant360 Liquid, upgraded Guardant360 tissue onto our smart platform and expanded Reveal to support therapy monitoring. In screening, we expanded Shield to include a multi-cancer detection results report. At the same time, we made significant progress driving adoption across the portfolio. We have seen exceptional growth in our oncology business, primarily due to the new capabilities and insights enabled by our smart apps that are increasing both the breadth and depth of ordering of Guardant360 more than a decade after its launch. In MRD, we received Medicare coverage for CRC surveillance in early 2025 and growing clinical data generation for Reveal positions us well for additional reimbursement coverage this year. And 2025 represents the first full year for Shield IVD where very meaningful volume and revenue generation exceeds our expectations. We have significantly expanded the commercial team and established impactful strategic partnerships to meet the growing demand for a high-performing blood-based screening option. These advancements reflect our growing execution at scale as we deliver actionable insights to physicians and patients across the care continuum. Importantly, this execution has directly driven strong financial performance, both accelerating our top line growth and strengthening our path to profitability. Now I'd like to share a story that illustrates the real-world impact of our tests. A 60-year-old man had gone his entire life without being screened for colorectal cancer despite repeated recommendations from his physician each year to undergo a colonoscopy. Although he agreed to stool-based testing on several occasions, the kits were never completed once they arrived at his home. During a routine office visit, the patient was offered a Shield blood test, which he agreed to and the test was completed that same day in the office. The Shield result was positive, which motivated the patient to undergo his very first colonoscopy following his physician's recommendation. The colonoscopy identified Stage 1 colon cancer and the patient was quickly scheduled for surgery. Because the cancer was caught early, he has been informed that his treatment is likely curative. The patient expressed deep gratitude for the accessibility and ease of use of the Shield blood-based test, which removed a long-standing barrier to screening and ultimately delivered a life-changing result. Turning to top line performance on Slide 4. We delivered $281 million of revenue in the fourth quarter, representing 39% year-over-year growth and $982 million of revenue or 33% year-over-year growth for the full year. This exceptional performance reflects continued broad-based growth across our oncology screening and biopharma and data businesses. Taking a closer look at our oncology business on Slide 5. Oncology revenue increased 30% to $190 million and oncology volumes grew 38% to approximately 79,000 tests in the fourth quarter. Turning to Slide 6. Our Smart Platform is driving a clear step change in oncology volumes. Guardant360 continues to benefit from a consistent rollout of new Smart Platform applications which drive deeper clinical adoption. Guardant360 tissue gained traction following the major product upgrade release in the second quarter of 2025 and Reveal volumes have benefited from Medicare reimbursement for CRC surveillance in the first quarter of 2025. Together, these drivers will continue to catalyze very strong growth in our oncology business. Moving on to Slide 7. With each patient tested, our data repository continues to deepen and diversify, bringing together rapidly growing smart epigenetic profiles, multimodal longitudinal data sets and an expanding set of earlier-stage and asymptomatic [Audio Gap] Infinity AI learning engine to this expanding data treasury, we can accelerate therapeutic discovery and biomarker development for our biopharma partners while uncovering new biological insights that reinforce our clinical franchise. The result is a compounding flywheel that steadily increases the clinical utility of our portfolio and expands the impact of what we can deliver to physicians and their patients. We have already applied Infinity AI to develop 15 smart applications on Guardant360 liquid, and we believe these applications meaningfully expand the clinical utility of Guardant360 liquid while further extending our leadership in the liquid CGP market. Looking more closely at some of the recent highlights within our oncology business on Slide 8. All of our oncology products contributed meaningfully to our fourth quarter 38% year-over-year growth in volumes with Guardant360 delivering remarkable volume growth of nearly 30% year-over-year. Reveal continues to be our fastest-growing product, reflecting growing demand for tissue-free MRD. We are particularly encouraged by the early uptake of Reveal for late-stage therapy response monitoring launched in the fourth quarter, which is broadening its clinical use. We are advancing the clinical evidence supporting Reveal and recently submitted our chemo monitoring data package to MolDx for Medicare reimbursement and data from our CDK4/6 monitoring study for publication. We continued expanding global access in Q4 with the launch of our Guardant360 CDx technology with Policlinico Gamelli, a leading oncology center in Rome, Italy. With approximately 400,000 new malignant tumor cases diagnosed annually across Italy, we are excited to empower oncologists to make more informed treatment decisions for patients with solid tumor cancers. Turning to Slide 9 to take a closer look at our Reveal data pipeline. We continue to make strong progress in generating and publishing compelling data across multiple cancer types. Based on the Medicare coverage we gained for CRC surveillance, we have now submitted additional data packages to support coverage in breast cancer surveillance, immuno-oncology monitoring and chemo monitoring. As I just mentioned, we also plan to submit the package for CDK4/6 inhibitor monitoring following the publication. We were encouraged to see data from the largest study of MRD in Stage II colon cancer published in the Journal of Clinical Oncology, which shows that detecting ctDNA with Reveal better predicts recurrence and overall survival than standard imaging. Looking ahead, we have ongoing studies across more than 5 additional tumor types in both the adjuvant and surveillance settings. Together, the growing body of evidence will continue to strengthen the clinical utility of Reveal and support broader adoption in MRD. Moving on to Slide 10. Building on our leadership in tissue-free MRD, we launched Guardant Reveal for therapy monitoring in the fourth quarter, expanding the franchise into a significant new opportunity in late-stage cancer. Physicians can now use a simple blood test to gain a real-time molecular view of treatment response and detect disease progression earlier. While still early in the launch, we have been very encouraged by the initial traction we are seeing. We believe we are building a meaningful competitive moat in our oncology business through the combined strength of Guardant360 and Reveal. Guardant is uniquely positioned with scaled offerings spanning both treatment selection and monitoring, enabling a more comprehensive view of the patient journey. This differentiation is driving deeper clinical adoption, supporting more integrated ordering patterns and creating a natural synergistic dynamic across the oncology franchise. When used together, Guardant360 and Reveal enable a seamless approach to therapy selection, monitoring and retreatment across the continuum of care. We are also excited about the potential for therapy monitoring with Guardant360, highlighted by the results from the AstraZeneca-sponsored SERENA-6 trial. This study demonstrated a progression-free survival benefit when late-stage breast cancer patients were switched to camizestrant following the detection of ESR1 mutations in blood. Upon companion diagnostic approval of Guardant360, we believe this practice-changing protocol could represent a meaningful driver of test volume. Together, these advances reflect the growing role of blood-based monitoring in cancer care. Shifting gears to our biopharma and data business on Slide 11. We delivered another year of strong performance with revenue growing 18% year-over-year to $210 million in 2025. We are a leader in companion diagnostics with 25 approvals to date across the U.S., Japan and Europe and a robust pipeline of ongoing CDx programs. In the last 6 months alone, we have announced 5 new CDx approvals for Guardant360, including the U.S. approval last month for the encorafenib combination therapy in patients with BRAF V600E mutant metastatic colorectal cancer, representing the first FDA approval for Guardant360 in CRC. Our biopharma partner base now includes more than 200 companies. And in January, we announced a multiyear agreement with Merck to develop companion diagnostics and commercialize novel therapies. This partnership reflects the growing role of our Smart Platform across both liquid and tissue and drug development and the strategic value of our platform to biopharma customers. We also made significant progress expanding both the scale and utility of our data set through a series of high-impact partnerships. These collaborations integrate comprehensive EMR records for genomic and epigenomic tumor profiling to accelerate cancer therapy research and development, advanced drug response prediction and biomarker insights using multimodal AI and enable biopharma partners to access EHR and clinical genomic data to support more efficient clinical development of new cancer therapies. With that, I will now turn the call over to AmirAli for an update on screening. AmirAli Talasaz: Thanks, Helmy. Moving on to Slide 12. Shield has delivered extraordinary growth since launch. We delivered $35 million of Shield testing revenue in Q4, driven by approximately 38,000 tests, which was a meaningful step-up compared to 24,000 tests in Q3. Revenue growth has closely tracked volume growth, reflecting ADLT pricing, favorable collections and a disciplined focus on reimbursable lives. Based on performance to date, we believe Shield is the most successful diagnostic launch in history outside of COVID testing and is positioned to be a significant multiyear growth driver for Guardant. Now turning to Slide 13 to take a closer look at screening highlights for the fourth quarter of 2025. Shield had strong sequential growth in Q4, driven by growing demand from both patients and physicians. Adherence rates remained high, reinforcing the accessibility and convenience of blood-based screening. To support the growing demand, we continue to scale our commercial organization throughout 2025, exiting the year with approximately 300 sales reps. Last month, we received coverage from TRICARE for active duty service members and their families with no co-pay. TRICARE will cover Shield for all eligible average-risk individuals aged 45 and older. In Q4, we launched a dedicated health systems team, and we are excited to report that we have successfully deployed our first enterprise scale integrations with large health systems in West Virginia and Georgia. We are excited by the early progress demonstrating the market demand and our ability to operationalize Shield within complex health systems, including full EMR integration and workflow deployment. Beyond CRC, we are excited to expand Shield to include multi-cancer detection results reported in October. Although still early days, we are encouraged with physicians' enthusiasm to get access to MCD findings and strong interest by patients to be part of the MCD data collection initiative. Turning to Slide 14. We are very encouraged by Shield's real-world adherence, which reached 93% across the first 100,000 Shield test ordered. In other words, when physicians order Shield for CRC screening, 93% of patients completed the test. This represents a meaningful improvement compared to other screening modalities where adherence typically ranges from 25% to 71%. As we illustrated in the patient story earlier, the ability to complete the Shield test during an office visit removes key barriers and enables far more patients to complete their CRC screening. Taking a closer look at our recent strategic collaborations to scale our commercial infrastructure on Slide 15. We are excited to announce collaborations with Quest Diagnostics and PA Group, which will broaden our national reach in 2026. Our collaboration with Quest enables access to their national sales organization and allows providers to order Shield and receive results directly through the Quest connectivity system, which was used by approximately 650,000 clinicians and hospital accounts last year. We remain on track to launch this collaboration later this quarter. The PathGroup collaboration went live in the fourth quarter and expands Shield's reach to more than 250 health systems across 25 states. We look forward to seeing the positive impact of our growing commercial infrastructure in 2026 and years to come. Moving on to Slide 16. Our goal has always been to detect many cancer types early when they are most treatable. With that in mind, we developed Shield as a multi-cancer detection platform. Turning to Slide 17. In fourth quarter, we expanded Shield to include a multi-cancer results report, which includes findings for 9 of the most common cancers in addition to CRC. With each positive MCD finding, the report includes a cancer site of origin or CSO color, which provides tumor-specific information, giving more clear guidance to physicians for subsequent diagnostic workup. The Shield MCD report is available to Shield CRC patients who opt in and authorized the release of their medical data to Guardant. As a result of this initiative, we expect our Shield data repository to grow exponentially, and we look forward to leveraging this high-quality data to support reimbursement and regulatory approvals, drive a deeper understanding of clinical utility and support future technology improvements. We are encouraged to see the recent passage of legislation establishing a Medicare coverage pathway for multi-cancer detection tests. While this is not expected to be a meaningful driver of our business in the near term, we view this as a positive step forward for the field. Turning to Slide 18. Our outstanding commercial performance in 2025 reflected in rapidly growing revenue was driven by several factors. We achieved ADLT status for Shield, securing a $1,495 reimbursement rate that supports healthy ASP and gross profit, enabling us to reinvest in commercial expansion. We also benefited from meaningful first-mover advantage and clear product market fit, which drove broad provider adoption. Our best-in-class commercial execution, continued progress with EMR integration, inclusion in NCCN guidelines were additional key contributors to our growth trajectory in 2025. We believe these foundational achievements position Shield for continued strong growth ahead. Looking more closely at our 2026 setup, the ADLT rate of $1,495 has now been incorporated into the clinical lab fee schedule and is secured through December 2027. We also expect to see benefits from our collaboration with Quest and PathGroup alongside the continued expansion of our field force throughout the year. Additional growth drivers include ACS guideline inclusion, targeted direct-to-consumer campaign launches and the expansion of sales phase Shield into select markets outside the U.S. Turning to Slide 19. We continue to invest aggressively in R&D to improve our product performance. As part of that process, we have rigorously evaluated dozens of external technologies over the years. We recently completed the acquisition of MetaSight Diagnostics, which brings a new technology in-house that is complementary to the Smart Platform and also brings on an impressive team, further strengthening our world-class R&D organization. We are excited for the technology's potential to enhance our CRC screening, [Audio Gap] multi-cancer detection and ultimately, the entirety of our oncology product portfolio. It also has the potential to accelerate our multi-disease detection pipeline. With that, I will now turn the call over to Mike for more detail on our financials. Michael Bell: Thanks, AmirAli. Turning to Slide 20. I'll review select financial highlights for the quarter and full year ended December 31, 2025. Unless otherwise noted, all growth rates are year-over-year. Total revenue in the fourth quarter increased 39% to $281.3 million, reflecting strong execution across oncology, biopharma and data and screening. Oncology revenue increased 30% to $189.9 million, driven by continued strong volume growth. We reported approximately 79,000 oncology tests in Q4, up 38%, demonstrating sustained momentum across the portfolio. Guardant360 liquid volumes increased nearly 30%, supported by expanding clinical utility from Smart apps launched over the past year, and Guardant360 tissue remains strong following the major upgrade introduced in Q2. Reveal continued to be our fastest-growing oncology product, benefiting from CRC surveillance reimbursement and ongoing strength in breast and lung cancer. We were also encouraged by the early uptake of Reveal for late-stage therapy response monitoring launched in Q4. Average selling prices were stable sequentially with Guardant360 liquid in the range of $3,000 to $3,100, Guardant360 Tissue approximately $2,000 and Reveal between $600 and $700. As a reminder, we've submitted data packages to MolDx for Medicare reimbursement covering breast MRD and both immunotherapy and chemotherapy response monitoring. Successful outcomes will provide upside to Reveal ASP. Biopharma and data revenue was $54.0 million, up 9%, which was in line with our expectations. Screening revenue totaled $35.1 million from approximately 38,000 Shield tests. Shield ASP was approximately $850, consistent with expectations and reflecting our focus on Medicare covered patients. Out-of-period revenue totaled approximately $18 million for the fourth quarter of 2025, including approximately $3 million related to screening. This was in line with prior periods compared to approximately $17 million in both the third quarter of 2025 and the fourth quarter of 2024. For the full year, total revenue grew 33% to $982.0 million. Oncology revenue increased 26% to $683.6 million. We reported approximately 276,000 oncology tests, representing 34% growth. Guardant360 volume growth accelerated to 25% for the year, driven by continued smart app adoption. Guardant360 tissue volumes strengthened in the second half following the Smart Platform upgrade and Reveal remained our fastest-growing oncology product throughout the year. Biopharma and data revenue grew 18% to $210.1 million. Finally, screening revenue totaled $79.7 million in our first full calendar year since launch, generated from approximately 87,000 Shield tests. Turning to Slide 21. Non-GAAP gross margin improved to 66% in Q4 compared to 63% in the prior year. For the full year, non-GAAP gross margin increased to 66%, up from 62% in 2024. This improvement was primarily driven by a significant reduction in Reveal cost per test, which improved from over $1,000 in Q3 2024 to under $500 throughout 2025. We also made meaningful progress improving Shield gross margins. Shield's non-GAAP gross margin improved from negative levels at launch to 52% in Q4 2025. This reflects strong ASPs under the Medicare ADLT rate, disciplined focus on reimbursable testing and continued volume-driven cost reduction. Shield cost per test declined sequentially and exited the year at approximately $450, in line with our operational plan. Non-GAAP operating expenses were $260.0 million in Q4, up 21% and $903.7 million for the full year, up 19%. Full year operating expense was modestly above guidance due to 2 Q4 items. Firstly, an increase in accrual for the 2025 company bonus plan, which reflects the strong performance in the year across financial, regulatory and commercial milestones. Secondly, the continued reinvestment of incremental screening gross profit into sales and marketing to accelerate our commercial build-out. Adjusted EBITDA loss improved to $64.9 million in Q4 compared to $78.4 million in the prior year quarter. For the full year, adjusted EBITDA loss improved to $220.9 million versus $257.5 million in 2024. Turning to Slide 22. We continue to improve cash performance in 2025. Free cash flow burn was $233 million for the year, an improvement of $42 million and in line with our guidance. Importantly, excluding screening, the core business generated positive free cash flow in both Q3 and Q4. We expect the core business to be free cash flow positive for the full year 2026 and remain committed to achieving company-wide cash flow breakeven by the end of 2027. As AmirAli mentioned, in December, we acquired MetaSight for $59 million in upfront cash plus up to $90 million in contingent consideration tied to future commercial and regulatory milestones. We believe this technology enhances our existing product portfolio and accelerates our multi-disease detection pipeline. Following the MetaSight acquisition and our November equity and convertible debt financing, we ended the year with approximately $1.3 billion in cash, providing sufficient runway to fund our growth initiatives and reach company-wide cash flow breakeven. Turning to Slide 23. We entered 2026 with solid momentum across the business and increasing visibility into our growth drivers. For full year 2026, we expect revenue to be in the range of $1.25 billion to $1.28 billion, representing growth of 27% to 30%. This outlook reflects sustained strength in oncology and accelerating expansion in screening, firmly positioning us to achieve our 2028 long-range revenue target of $2.2 billion. We expect oncology revenue growth of 25% to 27% in 2026, supported by volume growth of approximately 30%. We believe demand fundamentals remain strong across the portfolio. Guardant360 Liquid should continue to benefit from adoption of Smart apps and Guardant360 tissue growth should continue to build on the Smart Platform upgrade and continued strong commercial execution. Reveal is expected to remain our fastest-growing oncology product, driven by MRD and therapy monitoring. Note that our oncology guidance does not include potential upsides during the year from SERENA-6 ESR1 monitoring, FDA approval of Guardant360 Liquid CDx and the launch of Reveal Ultra. For biopharma and data, we're encouraged by recent strategic partnerships and the strength of our CDx pipeline. For 2026, we're forecasting low double-digit revenue growth, supported by both ongoing collaborations and new program starts. We expect screening revenue to be in the range of $162 million to $174 million, driven by 210,000 to 225,000 tests, a meaningful growth from approximately $80 million revenue and 87,000 tests in 2025. As in 2025, we expect sequential increase in Shield volumes every quarter with the increases expected to be greater towards the back half of the year. This reflects early year seasonality at PCP offices, the ramping productivity of our growing number of sales reps and the expansion of EMR capability through our Quest and PathGroup collaborations. Note that our screening guidance does not include potential upside from Quest co-promotion activities as well as ACS guideline inclusion, which we continue to expect in the near future. We continue to make steady progress improving gross margins across our products through ASP optimization, workflow efficiencies, transition to NovaSeq X and disciplined cost management. For 2026, we expect non-GAAP gross margin to be in the range of 64% to 65%, reflecting ongoing operational improvements, volume growth and expected product mix. We expect non-GAAP operating expenses of $1.03 billion to $1.05 billion, representing 14% to 16% growth year-over-year. We anticipate continued operating leverage as revenue growth outpaces expense growth. R&D and G&A are expected again to remain relatively stable with incremental investment primarily directed towards screening sales and marketing. Finally, we remain focused on reducing cash burn each year. For 2026, we expect free cash flow burn of $185 million to $195 million, an improvement from 2025. Excluding screening, we expect the remainder of the business to be free cash flow positive for the full year. Finally, turning to Slide 24. Looking ahead, we have a rich set of catalysts across our business that will drive continued growth. In oncology, we expect to launch several new products, including Guardant360 Liquid CDx following FDA approval, our ESR 1 monitoring test and Reveal Ultra. In addition, we expect to release additional apps driven by our Smart Platform and advanced reimbursement across multiple indications for Reveal. In biopharma and data, we expect new CDx approvals as well as additional strategic biopharma and Infinity AI data partnerships. In screening, we look forward to inclusion in ACS guidelines in the near future, driving commercial expansion with Quest and expanding self-pay Shield outside the U.S. With that, we'll now open the call for questions. Operator: [Operator Instructions] The first question comes from the line of Dan Leonard with UBS. Daniel Leonard: I'd like to talk a little bit about Reveal therapeutic monitoring. Helmy, both you and Mike commented on that in your prepared remarks. Could you elaborate further on how you're framing that opportunity, both for Reveal volumes as well as for Guardant360 volumes as well. Helmy Eltoukhy: Yes. We're very excited about Reveal for therapy monitoring. We think it's an important opportunity to really solidify and work synergistically with Guardant360. If you think about it, all the volume we have with 360 patients are being tested in terms of therapy selection. And then this idea of coupling that with Reveal for essentially monitoring how those patients are doing on therapy is really exciting. And then the nice thing about that is, unfortunately, as some of those patients progress, they're going to need a new therapeutic decision in terms of hopefully a next-generation drug or a next-line therapy that can be applied to them. And so Reveal for therapy monitoring really bridges to that next Guardant360 test. And we have a very unique platform and portfolio that allows these tests to work together. And so I would say that when we get some of the reimbursement wins for IO monitoring and chemo monitoring, this could be a very important driver for growth over the next few years for the oncology business. Operator: The next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: The first one, Helmy, for you. When you look at the strong growth that you've seen in oncology, maybe could you elaborate how should we think about that throughout the year and both in G360 versus Reveal? How should we think about the growth of those products? Because important drivers like the camizestrant launch and other things that you mentioned are actually still not in the guide. So just trying to think about sort of how should we think about both of these products volume growth throughout the year. Helmy Eltoukhy: Yes. Maybe I'll start and I'll let Mike sort of jump in. We're very bullish about '26 in terms of the progress we've made in '25 and what we're seeing at the beginning of the year here. So I would say that we think it's going to be another strong year for 360, something around at least 20% growth in terms of volumes. And then obviously, another very strong year for Reveal. It will continue to be our fastest-growing product. We think we'll see some acceleration, obviously, with Reveal for therapy monitoring as well on top of that. So I think we're well underway for sort of LRP Investor Day projections in 2028. Michael Bell: Yes. Well, maybe just to add because we didn't talk about tissue. I think in the back half of '25, we saw a nice acceleration with Guardant360 tissue following the smart upgrades that we did back in May of last year. And so I think that also as we look forward in 2026, we continue to expect tissue to accelerate. We think there's getting the FDA approval for Guardant360 during the year also could potentially have a pull-through impact on Guardant360 tissue as well. So yes, we're feeling bullish about all of the products across oncology. Operator: The next question comes from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: Both on Shield and they're related. It's really great to hear that you are expecting to be free cash flow positive in 2026, excluding Shield. I'm curious what you're thinking in terms of Shield specific burn. I think you've provided color on that in the past. And I guess kind of building off of that, I believe you exited 2025 with approximately 300 Shield-focused reps. How should we be thinking about the pacing of rep hiring throughout 2026? And where do you think the sales force should be at year-end? Helmy Eltoukhy: Do you want to start with that? Michael Bell: Yes. Yes, I can start on the question on -- on screening burn, Doug. Yes. No, for '25, again, our overall burn for the company was $233 million. Of that, roughly around $220 million was screening. We sort of set a target of $220 million. Actually, we pushed quite hard on that, particularly towards the end of the year. We're really wanting to take advantage of our first-mover position. And we mentioned again on the call that excluding screening, the rest of the business was actually cash flow -- free cash flow positive for Q3 and Q4. For '26, we think a similar level of burn on screening as '25. So around that sort of $220 million mark. Again, we're going to be making heavy investments on the commercial side, really building out that infrastructure. And we still expect '26 to be a year of investment for screening and then '27 to be a year of inflection where we start to get a lot of operating leverage on that commercial infrastructure that we build. And maybe just to point out one other thing. Again, we set our full company free cash flow guidance of $185 million to $195 million burn. So that's implying that the rest of the business now is strongly cash flow positive in 2026. And the sort of midpoint of that guide is around $30 million positive cash flow. So yes, we're feeling really good about how we're sort of managing the burn. AmirAli Talasaz: In terms of commercial infrastructure and field force, we are very excited with a very powerful commercial platform that we built in 2025. And we are going to continue to build out that commercial organization in 2026. I'm not going to get into the specifics of maybe exact headcount of the field force, but maybe just to give you some direction and color the way that we can think about it, we will continue to invest our incremental gross profit that we are going to generate this year into further build-out of our commercial infrastructure on both sales and marketing and majority would go still in building sales force and hiring more people. Operator: The next question comes from the line of Tycho Peterson with Jefferies. Tycho Peterson: I want to start off on one of the bigger topics on ADLT pricing. What is your latest thinking? And what have you baked into the guide, if anything, for G360? And then overall, you are guiding for a decel in volumes and revenue in oncology, presumably some conservatism there. There's a lot you didn't bake in, but where do you think kind of the most conservatism is in the outlook on oncology? Helmy Eltoukhy: Yes. In terms of ADLT, I think we're still on track in terms of FDA submission, making very good progress there. We think that hopefully gets through the finish line in the second half of this year and then potentially sets up second sort of next ADLT pricing rate for 360 at the beginning of '27. So nothing is baked in, in terms of ADLT pricing for 360 for 2026. In terms of the second part of your question, I'll let... Michael Bell: Yes. I mean maybe on the volumes, '25 was an incredibly strong year, particularly with Guardant360 and just with the Smart apps driving the volume. But I think we look at 2026 as just continuing that trend. Our guide is 30% oncology volume growth. And so we think that's incredibly strong. And again, that's coming across all of the portfolio. Helmy mentioned it earlier, but we still expect strong traction with Guardant360, Reveal being the fastest-growing product and tissue continuing to accelerate. So yes, I think we're feeling really positive about the guide that we put out for oncology growth next year -- or this year, should... Tycho Peterson: Okay, Mike. And then just a follow-up on speak of conservatism, you're also guiding for Shield ASPs to be down relative to where you exited '25. What's the thought process there? And also, what are you baking in for international? I know you flagged that as incremental. Michael Bell: Yes. On Shield ASP, we've seen this trend over the past few quarters. We've really focused on the Medicare population and reimbursable tests. And I think we've done a really great job there. But there is -- we are seeing a lot of demand from the under 65. And so I think our assumption going into '26 is that, that demand will continue to grow and that sort of mix of commercial versus Medicare is just going to increase. So that's really the fundamentals of how we see the ASP moving. we still will maintain the ADLT rate at $14.95. That's now going to be in place for '26 and '27. And we're seeing great reimbursement from Medicare Advantage payers saying that's been leading to some out-of-period true-ups as well. And our ASP for Medicare Advantage is getting stronger and stronger. But yes, it's just really going to be -- it's a mix impact between Medicare and non-Medicare. And on the international side, if the question was focused on Shield, we've seen small contribution from Abu Dhabi in '25. I think we expect, again, the international contribution to be relatively small in '26 and really the driver of the vast majority of the volume and the volume growth is going to come from the U.S. in '26. Operator: The next question comes from the line of Daniel Markowitz with Evercore ISI. Daniel Markowitz: I wanted to ask on Reveal Ultra. It sounds like that's an area where there's a lot of excitement internally. Can you talk a bit about what will be differentiated about the offering, how you see the tumor-informed competitive landscape evolving and when we can expect to see some data or a more substantial update on that asset? Helmy Eltoukhy: Yes. We're excited about Reveal Ultra, making good progress there. We're on track for launching it this year. And it's something where we believe that the true clinical sensitivity of that test will be best-in-class. I think there's a lot of I would say, contrived messaging in the space in terms of different bars that people are using, but we believe that this will, I think, redefine sensitivity in the tumor-informed space. There are other features of the test. It's going to do more than, I think, other tumor-informed offerings. We always have a special sauce at Guardant with all our tests in terms of when we launch them. And so I think I would just say stay tuned as we share more details later this year about that test. Operator: The next question comes from the line of Andrew Brackmann with William Blair. Andrew Brackmann: AmirAli, you sort of talked about the recent MCED legislation and sort of the longer-term impact there. Can you maybe just sort of broaden out that commentary, talk to us sort of about the importance there for Shield in particular? And as you sort of think about the necessary steps for Guardant to sort of take advantage of that, can you just remind us on sort of the data generation and sort of path to FDA approval here? AmirAli Talasaz: Yes. So I think we're talking about this MCED deal that just passed. So we are -- as I mentioned in the prepared remarks, we are encouraged to see the passage of the legislation. It's moving the whole field forward, but it's not going to be a meaningful driver of our business based on the business plan that we have in near term. Again, it's good for the field. Maybe as we go through midterm and talking about more than triannual testing with Shield, maybe there would be opportunities enable with this MCED deal for us. But again, in near term, we don't look at it as a meaningful driver of our business. Operator: The next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: A follow-up to Andrew's question, AmirAli. What has the opt-in rate for MCED Shield been so far? And if you were to accumulate significant data by year-end, would you be able to submit something to the FDA for RSE approval? I know it doesn't matter to the core story, but just trying to figure out as we think about upside. AmirAli Talasaz: Yes. Thanks for this important question. When we are thinking about the data that now we are generating with this MCD offering for Shield when the physician and patients are opting in. On one side, we are really encouraged by the enthusiasm that we are seeing on the provider side and participation by patients to opt in to release their medical record to us. On the other side, on the data side, I think in hopefully, in near future, we would be the company that has access to the widest, broadest clinical data in terms of clinical utility of MCD testing in U.S. patient population. So we are seeing good adoption rate. I don't want to get to the exact number of it. It's trending up, but so far, so good. So far, so good, and we are very excited with it. Operator: The next question comes from the line of Michael Ryskin with Bank of America. Unknown Analyst: This is Aaron on for Mike. Can you talk a little bit more about the puts and takes of the Shield guide? Obviously, 4Q saw the 14,000 sequential volume growth. But should we thinking about that as more of an anomaly and just kind of thinking about how much conservatism is embedded within the guide? And I guess the second part of that is thinking about Quest and PathGroup, those look like upsides to the guidance. And so how should we be thinking about the timing of those impacts of those tailwinds as we head through the year? AmirAli Talasaz: Yes, sure. Look, obviously, we are very excited with this guide of like 87,000 volume going to midpoint of 217,000 and a very huge revenue growth and contribution. On the other side, when we are thinking about the guide, we are, again, just in the -- still very early inning of this launch. This is just the second year of launch, and we want to be thoughtful with our guidance. We typically don't want to get too excited and get ahead of our skis just based on 1 quarter performance. But the trends are very positive. We are, again, very excited of how 2026 is going to shape out for us. In the prepared remarks, we talked about some of the 1Q seasonality in PCP offices is kind of normal. for us, again, in terms of year-over-year growth for us, I think we are very excited with the guide that we put out there. And there are some upside. We'll see like we are very optimistic about ACS guideline, and we believe it should be near. It's not part of our guide right now until they update their guideline. Quest, PathGroup, very minor contribution. We are counting on some benefit of the EMR connectivity enabled through this Quest and PathGroup integration, but we are not counting any kind of contribution in terms of the volume contribution of the co-promotion and volume that comes from Quest salespeople. We are going to monitor it. It should be positive, but since we don't know exactly how positive it would be, we want to monitor for the first few months of the launch and see how it goes. And then if appropriate, we would adjust our guidance accordingly. But we just want to be thoughtful about that matter as well. Operator: The next question comes from the line of Mark Massaro with BTIG. Mark Massaro: I wanted to also ask about Shield. So for AmirAli, one of the success stories of -- one of the drivers of the success of Cologuard was their direct-to-consumer TV launch. How are you thinking about spending in 2026? Is it more Select digital? Or do you anticipate some spend on TV? And then I also wanted to ask about Quest. There is access for the, I believe, the Quest salespeople to promote Shield. I just want to double check that these reps are incentivized. And then can you just maybe give us a sense for where the Shield test might sit in their bag relative to the other products they're selling? AmirAli Talasaz: Yes. So some DTC pilot has actually happened for us in 2025 in select markets. And in 2026, we are excited that hopefully, consumers and even physicians would see even more of that. So we have some active campaigns that they are about to get finalized, and we are excited to put it out there and see what the impact would be. So we are very excited about it. The rest, stay tuned after we launch it in very near future. In terms of Quest, yes, actually, the salespeople are incentivized. It's part of their commission plan. And what we do know is actually it was very important and interesting for the Quest management team to get access to Shield as a very differentiated brand that gives them opportunity to talk about something new and something exciting with the accounts. So again, we are going to monitor how the launch goes with Quest in terms of co-promotion part of it. It should be again positive, but we'll see how positive it would be. Operator: The next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: On the MetaSight acquisition, interesting to see that. Most of the consideration is tied to future commercial performance and the regulatory approval of the technology. So first one, wondering what the path is to noncancer launch is? And then second, it seems like they use mass spec, how does that factor into your NGS heavy platform? AmirAli Talasaz: Yes. So we are very actually excited about this acquisition to bring a very high-quality world experts on some specific complementary technologies to our Smart Platform. So we are very excited to go to work and see what we can do. It's a small technology talking again. So let us make more progress, and we will talk about it at the right time. Operator: The next question comes from the line of Casey Woodring with JPMorgan. Casey Woodring: Just a couple more on Shield maybe. So you mentioned that the guide is back half weighted. What does that guide imply for Shield in 1Q? I think that, that comment would imply a sizable step down sequentially. And then I guess, on the ACS commentary you made, if that hits in the first half of 2026, can you help us think about the upside to volumes in the back half of the year and what that could look like? AmirAli Talasaz: Yes. Maybe I'll start with the ACS part. Let us actually see when it would happen. It should be in the near future. But I think when you think about there are about a dozen states that they have state-level mandates that even younger patient population should get access to the test. And the whole screening market is maybe about 40% this 65 year and above and more are, in fact, on the younger patient side. That could be an interesting upside and growth driver for us once we start really going much deeper on the commercial testing within those states. But let's first see actually when they update their guideline, and we go from there. In terms of Q1, yes, that's true that there is some Q1 seasonality in PCP offices, which in terms of screening and so forth. But our team has done a very good job to reschedule appointments that have been kind of impacted or the events that have been impacted. And we are on track to screen more patients in Q1 than in any other previous quarters. post launch. So let's see how the rest of the quarter goes, but -- and we will talk about this in our next earnings call. Operator: The next question comes from the line of Dan Arias with Stifel. Paul Stewardson: This is Paul on for Dan. I guess I just want to follow up on Subbu's question about kind of regulatory strategy for multi-cancer Shield. One of your competitors had some data out this afternoon with not meeting the primary endpoint with a very, very large MCED trial in terms of looking for stage shift. And then one other piece was this week in the New England Journal, there was some FDA willingness to be a little more flexible on what evidence generation might look like. I'm just wondering if any of these developments kind of influence what you would look to do for your evidence generation strategy and for your regulatory strategy with Shield MCD? AmirAli Talasaz: Actually, this news just came out. So I don't know all the details of it. We've been on this call with you guys. But I think when I think about it, really, what is important in the field of multi-cancer detection is the performance of detecting early stages. And we believe with the technology that we have for Shield, the performance of early-stage detection as it's shown in CRC could be very interesting, and that could have a meaningful impact. On the other side, I think it really highlights what we are doing to capture all the clinical evidence, medical record of the patients who are going through MCD testing in U.S. and really establish the utility of this MCD testing at very large scale. We are going to benefit from this commercial scale of Shield, and we can put that evidence together in a very OpEx friendly and in a very quick way. So I think it's kind of -- we are getting more bullish with the pathway that we went after screening business and what we are doing with our MCED offering. Operator: The next question comes from the line of Luke Sergott with Barclays. Luke Sergott: So on the Shield demand and after you guys have had this for 1.5 years now, but this is like the first full year of launch has been great. You're going to trend even further for next year. Can you kind of give us a sense of where the demand is coming from? Like how much of this is from the care gap closure versus winning share from colonoscopy or FIT or Cologuard or any of the other tests? AmirAli Talasaz: Yes. So demand is coming from PCP physician in terms of patient type. Still, we are really focused on unscreened patient population. I think some of the latest data that I've seen about still 90% of the patients who are getting screened by Shield have not been screened before, at least during the last 5 years. when we got access to their medical record and claims. So really, our messaging is working, and we are increasing the rate of overall screening. Care gap and those kind of opportunities still is ahead of us. We need to get into -- we need to qualify for quality scores and Shield still is not. Once we get to the HEDIS, that would be a huge additional growth driver for us. So care gap program is not part of our growth right now. Operator: The next question comes from the line of Jack Meehan with Nephron Research. Jack Meehan: Appreciate all the color on the screening investments you're making. I was wondering if you could share color on the oncology side, specifically, just the mark-to-market, how large the sales force is there now and planned investments? And then second, you've talked about the NovaSeq X transition. When in the year is that taking place? And any way you can quantify level of savings you expect? Helmy Eltoukhy: Yes. So I think obviously, as Mike said, we reached cash flow positivity on the oncology side last year. And obviously, we'll be generating cash this year. We're in a really good spot in terms of where we are with oncology. We've been essentially reinvesting in the business as a matter of course, as we see opportunities for growth on the sales side, as we see revenue per rep sort of grow, we saw tooth around a healthy number in terms of a matter of course, expansion of the team. And so we're in a healthy spot, and we'll continue to sort of invest where we see return on investment in terms of potential volume growth. In terms of the NovaSeq transition, maybe I'll let Mike take that one. Michael Bell: Yes. We -- I mean, first of all, we successfully transitioned Reveal over to NovaSeq X just over a year ago as well as workflow efficiencies. We saw a nice reduction in the cost per test for Reveal. And with Guardant360, we started that transition. It will take time to fully be implemented. probably around about the middle of the year, I would expect all Guardant360 liquid tests to be on NovaSeq X. And yes, we expect to see a nice improvement in our cost per test. I think just put in to quantify it a little bit, our gross margin currently for Guardant360 is in the high 60s. And probably once we've gone through the full move to NovaSeq X and things are working properly, I expect to see maybe 200 basis point improvement and sort of pushing that Guardant360 gross margins into the low 70% level. So yes, no, we're feeling very positive about the switch, and it's going to have a nice impact on our P&L. Helmy Eltoukhy: Operator, one more question please. Operator: Our last question comes from the line of Bill Bonello with Craig-Hallum. William Bonello: So this one, I guess, is probably for Helmy. I think the -- if I understand it right, that the FDA approval would open the door to physicians being able to order both tissue and blood from Guardant concurrently. I'm just curious what your sense of is for the appetite for using both tests upfront and then also touch on maybe any reimbursement challenges that you might anticipate if that becomes more common. Helmy Eltoukhy: Yes. As you know, guidelines, I think, are increasingly recommending that for patients upfront, especially in lung cancer and breast cancer, which are some of our 2 largest indications for 360. And one of the challenges is the way that LDT is reimbursed, it really is not possible to order them concurrently. And so that's obviously been a little bit of a headwind that sort of will become a tailwind once we get FDA approval for Guardant360. So we do see that as a potential driver. Obviously, we want to make sure it's done in the cases where it's -- there's clinical utility for the patients and value for treatment selection. But we're very confident that I think will be, I think, important catalyst for our tissue business going forward. Operator: Due to the interest of time, that was our last question. That will conclude today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Thank you for standing by, and welcome to the Ramelius Resources Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mark Zeptner, CEO and Managing Director. Please go ahead. Mark Zeptner: Thank you, Travis. Good morning, everyone. Thank you for joining us to discuss our half year results to December 2025. Alongside me is our CFO, Darren Millman. Today, I'll start with a brief overview of the operating performance and some recent updates at Dalgaranga before Darren goes through the underlying earnings and financials in more detail. We have uploaded to the ASX this morning along with our website shortly, a number of documents, including our half year '26 financial summary, the half year accounts, interim dividend and a presentation that will largely be speaking to this morning. So we start on Slide 3. Here, we set out our gold production for the last 2.5 years. Operationally, performance was in line with our expectations highlighted in the 5-year growth pathway released last October. As you can see in the graph, this period is our lowest production level with 101,000 ounces produced with Edna May being placed into care and maintenance in FY '25 and the Cue mine performance returning closer to geological model predictions. Production is on track to deliver FY '26 guidance, which is a touch below 200,000 ounces for this year. Moving on to Slide 4. We announced yesterday that first ore from the Never Never deposit at Dalgaranga has been hauled to the Mt Magnet processing plant. This is a key milestone in realizing our vision to become a 500,000-ounce producer by FY '30. Thanks to the dedication of our team for this achievement and it's an important milestone just over 200 days over the closure of the combination with Spartan. And at the end of January, we had a healthy 31,000 tonne stockpile of Never Never ore at a grade of 3.6 grams per tonne at Mt Magnet. Now whilst this grade is below the reserve grade of 7.3, it should be noted that this ore is all development ore and from the top part of the ore body. From March, we are planning to blend this initial lower grade ore with other Mt Magnet ore sources. Higher grade parts of the stockpile will be introduced in the June 2026 quarter once fine-tuning has occurred at the Mt Magnet plant. On to Slide 5, you will see the Never Never mining schedule. We are on track, both in terms of tonnes and grade. And from FY '28 onwards, these metrics significantly increase as the main section of the ore body is accessed. Turning to Slide 6. Key mining and production highlights. Pleasingly, tonnes mined were up 64%, with the introduction of a third fleet excavation fleet at the Cue pits and mining also taking place at a lower strip ratio. The mine grade was down 46% to 2.66 grams per tonne, but we are comparing this to a period which included mining from the Break of Day pit at a grade of 7.9 grams, which is quite remarkable for an open pit. At the group level, milled tons were down due to Edna May now being placed into care and maintenance. However, at Mt Magnet, throughput improved some 18% with a new line of design that we had discussed previously being an optimized material blend and very high mechanical availability. As expected and planned, mill grade and production was down as we await the introduction of Dalgaranga high-grade ore. The half year financial performance benefited from strong [ $8 ] gold price with reducing hedge book commitments, resulting in a 36% increase in the realized gold price. Without stealing too much of Darren's thunder, I would highlight that we delivered a very strong all-in sustaining cost margin of $2,921 for every ounce sold. And I think you agree this is a very impressive return and one that we see is only increasing with our reduced hedge book commitments going forward. With that, I'll hand over to Darren. Darren Millman: Thank you, Mark. For those following on the presentation, I'll be initially speaking to Slide 7 and our underlying earnings. It's important to talk about our underlying earnings as there were significant one-off and noncash adjustments between the statutory and underlying earnings in the half, primarily relating to the Spartan acquisition. We have previously highlighted these 2 significant adjustments that were recorded in the period. These included $133.2 million of nonrecurring acquisition costs, which with estimated stamp duty payable of $131 million of this. The other adjustment of note is the $46.6 million noncash fair value adjustment to Spartan's pre-existing royalty obligation. This reflects 2 things: firstly, high consensus gold price forecast since acquisition; and secondly, a high level of confidence of the ore body with the release of the maiden ore reserve for Never Never deposit. While this is a cost to earnings, it is reflective of higher expected future revenue. This will be a recurring adjustment every reporting period, whether it is at a level or not seen today, but will be largely attributable to gold price and changes in oil reserves across the Dalgaranga mineral properties. Moving on to Slide 8. Earnings were generated from revenue of $485.6 million, which is down 4% from the prior period with lower gold production being the offset almost in full by the improved Aussie gold price and reducing hedge book commitments at a higher realized gold price. The resulting underlying EBITDA of $347 million at a margin of 42% is a H1 record for the company and up 13% on the prior period. Again, the driver behind this is the improved realized gold price. The reported underlying net profit after tax of $160 million was comparable to the prior period of $170 million despite lower production. On Slide 9, we have provided more detail on the Mt Magnet earnings and operations, Mt Magnet which generated a gross profit of $244 million, which is comparable to the prior period, albeit at a slightly lower margin. The lower margin was driven by higher cost per tonne and a lower milled grade. The operating cost per tonne was in line with expectations, was higher than the prior period due to increased tonnes from Cue, which was of a higher grade, was higher strip ratio, incurs a higher haulage charge to Mt Magnet and attracts a higher amortization charge relating to the purchase price initially. Also contributing to the higher operating costs in the reporting period was an increase in underlying tonnes in the ore blend. The resulting gross margin increased to $2,413 per ounce sold. The Mt Magnet hub will only be benefited with future introduction of the Dalgaranga ore feed. Moving on to what really matters, cash, which is being detailed on Slide 10. Operating cash flow of $311.6 million was largely in line with the prior period. However, the free cash flow, which is cash flow from operations less the cash used in investing was an outflow of $40 million. This was not unexpected given the acquisition of Spartan and an increased exploration budget and the final FY '25 income tax payment. The closing cash and gold balance was $694.3 million. Secondly, we invested $211 million back into the business. This includes $73.4 million for the acquisition of Spartan, net of $199 million cash acquired, investing in the development of the Never Never and Dalgaranga infrastructure and our exploration focus. Last, we paid $148 million in income taxes in the period with $130 million of this relating to the final FY '25 payments. The last of these large one-off income tax payments have now -- were more regular payers in advance of income tax. Looking forward for the remainder of FY '26, do keep in mind the stamp duty, which is payable on the acquisition of Spartan of approximately $131 million. The timing of payment -- the timing of this payment is out of our hands, but it could be reasonably expected at back end of FY '26. Moving forward to Slide 12. I would just want to touch on the acquisition relating to Spartan. As you will see on this slide, the total acquisition of fair value was $2.8 billion, which includes our initial $19.9 million investment. What is worth highlighting is the cost of the asset to Ramelius is $2.3 billion, which takes into account the cash we acquired and the cost of initial investment as proposed -- as opposed to the fair value. As noted, there are tax synergies available to the group from the acquisition. First, the use of Spartan tax losses, which we have now concluded our analysis of the tax losses and obtained the external tax advice. The analysis shows that tax losses with a net cash benefit of $105 million can be transferred to the group, the use of which compares favorably to the $90 million we initially flagged in a growth pathway presentation back in October. This is a real and immediate benefit to the group with a net amount of just under $20 million losses being used in the December half year. And moving on to the balance sheet on Slide 13. Ramelius remains in a very strong financial position with just under $600 million in working capital and net assets of $4 billion. Subsequent to the end of this period, we have further enhanced our balance sheet flexibility and funding optionality for replacing our existing $175 million credit facility with a $500 million credit facility. We later put this new facility in place in recognition of the company's significant change in capital structure post the acquisition of Spartan and pleasingly, we've been able to improve our overall commercial terms and increase the tenure. Before handing back to Mark for closing remarks, I just want to highlight our recent activity with our hedge book on Slide 14. We have closed out our FY '27 hedge book at a cost of $28.4 million, and we have committed to, in fact, they've already started predelivering the June quarter forward contracts in the March quarter. The outcome being from the end of March, we'll have no forward contract hedges in place, and we'll have more exposure to the Australian gold price. The chart on the left of the slide shows the historical cost of the hedge book. That is what is being eliminated by the actions we have taken on our forward contract positions. We do still have a level of cover in FY '27 and FY '28 with [ collars ] in place for FY '27 of 22,500 ounces of a floor of $4,200 and a ceiling of $5,906 and put options in place for FY '27 guaranteeing a minimum price for 40,000 ounces at $5,750 per ounce. With that, I'll now hand back to Mark. Mark Zeptner: Thanks, Darren. Slide 15 shows our capital allocation and priorities and one that you perhaps are familiar with. The phase that we are in now is in the middle section, reinvestment in the business. And as we have highlighted previously, we have committed to a $0.02 per share minimum dividend for FY '26. And as such, it is pleasing that $0.03 per share fully franked interim dividend has been declared this morning, exceeding the minimum annual amount. This interim dividend is discussed on Slide 16. So if we turn to Slide 16. This is the second consecutive interim dividend paid by Ramelius and this equates to a total amount of $57.7 million or $574 per ounce produced. It takes the total shareholder returns over the past 5 years to almost $320 million at an average of 18.8% per annum. In summary, this was a solid half year result delivered during a transition phase for the business. We entered the second half with a strong balance sheet, significant liquidity and improving production outlook and leverage to a strong gold price environment. That concludes the presentation. I'll now hand back to Travis to open the phone line for questions firstly. Operator: [Operator Instructions] The first phone question today comes from Richard Knights from Barrenjoey. Richard Knights: Just one on the dividend. I mean it's certainly a beat versus consensus in my numbers. Just wondering how you're thinking about dividend policy over the next couple of years with the relatively high sort of CapEx burden we've got in terms of development. Mark Zeptner: I'll take that one. Thanks, Richard. Yes, look, we had a look at our dividend. Obviously, the gold price has run very strongly while I've been on holidays, I was tempted to extend in fact. But looking at the dividend, we look at the dividend and the buyback sort of together. The fact of the matter is and whether we're a little more conservative than others than we actually haven't been able to access the buyback much since we announced it in December. So a very small number of shares buy back will be freed up going forward more so. But the whole period through January and February pre these results has really limited our ability to buy back. So we thought a slightly stronger dividend was warranted in this case. In terms of moving forward, we'll look to reassess our dividend policy as we ramp up production as cash flows increase. Richard Knights: Yes. Okay. Maybe just one more just on the ramp-up at Dalgaranga. Can you give us an indication when you're going to be mining stope ore as opposed to development ore? Mark Zeptner: In the June quarter, very early in the June quarter, if not before. We're obviously getting back this week coming up to [ speed ] with what's going on. The mine is progressing very well. We're drilling paste fill holes, we -- as you see, we've got a decent stockpile of development ore. So it means we've put in a number of ore drives. The paste plant foundations are in place. And so we'll be ready to be stoping March, April at this stage, which is on schedule, if not slightly ahead. Operator: [Operator Instructions] At this time, we're showing no further questions via the phone. I'll hand the conference back to Mark. Mark Zeptner: Just checking on the webcast. It doesn't like there's any questions there either. This has got to be some sort of record for one question. It must be the time of day or the comprehensive nature of the presentation. As there's no further questions, we'll wrap up. Have a good day, everyone. Thanks for tuning in.
Operator: Thank you for standing by, and welcome to World Kinect Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Braulio Medrano, Senior Director of FP&A and Investor Relations. Please go ahead. Braulio Medrano: Good evening, everyone, and welcome to World Kinect's Fourth Quarter 2025 Earnings Conference Call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our Investor Relations website. I'm Braulio Medrano, Senior Director of FP&A and Investor Relations. With me on the call today is Ira Birns, Chief Executive Officer; Mike Tejada, Executive Vice President and Chief Financial Officer; and John Rau, President. And now I'd like to review our safe harbor statement. Certain statements made today including comments about our expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information. This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. At this time, I would like to introduce our Chief Executive Officer, Ira Birns. Ira Birns: Thank you, Braulio, and good afternoon, everyone. As I begin my first earnings call as CEO, I'd like to say how honored I am to step into this role at a defining moment for our company. We entered 2026 with a strong foundation in place and clear opportunities ahead. I'm truly energized and excited by the opportunity to lead the company into its next chapter, one grounded in accountability, aligned leadership and a commitment to consistent execution and long-term value creation. As we previewed last quarter, we welcomed Mike Tejada to the role of Chief Financial Officer, shortly before my appointment to CEO. I am joined today by Mike whose deep expertise in financial management and operational transformation has already proven instrumental as we sharpen our portfolio, enhance efficiency and create additional value for our shareholders. I'm also joined by John Rau, recently appointed President and the commercial leader of our Aviation, Marine and Land segments. John is an experienced leader with a deep understanding of our business. His focus on operational excellence and disciplined commercial execution continues to strengthen our platform and better positions World Kinect to deliver sustainable growth. And over the past several weeks, I've had the opportunity to engage deeply with our leaders and many of our employees across the company. Those conversations have been energizing and have reinforced the shared commitment to simplicity, clarity and increased transparency. Our team understands the changes we're making. They believe in where we're headed, and they are excited about contributing to the next chapter of World Kinect. That level of alignment and engagement gives me tremendous confidence in our ability to execute and deliver on our commitments. Beyond our internal audience, I've also met with external stakeholders to pressure test our thinking and better understand where we can optimize our business and drive additional value for our shareholders. While these discussions are ongoing, they have already reinforced that a unified performance mindset, a disciplined approach to capital allocation and most importantly, a sharpened focus on portfolio management are critical to driving strong results. As a result, we've been deliberately reshaping World Kinect, simplifying our business model, concentrating our portfolio on businesses that deliver more attractive and predictable returns, allocating capital with a clear ROI mindset and strengthening our financial discipline to create a clearer path to sustainable success in a dynamic and evolving industry. These actions are building a more resilient, future-ready company that serves customers with excellence and is positioned to deliver sustainable value for our shareholders. With a renewed focus on our core business and meaningful momentum underway, we are confident that 2026 will mark the start of a new era for World Kinect. With this clarity, the fourth quarter marked several pivotal milestones in our transformation and portfolio repositioning. In Aviation, we successfully closed the acquisition of Universal Weather and Aviation's Trip Support Services business, expanding our capabilities in flight support and strengthening our role in global aviation services. This business fits squarely within our core strengths and complements our global fuel distribution network. Integration is underway following our proven M&A playbook in aviation focused on operational excellence and disciplined execution. I just returned from Europe where I witnessed firsthand the enthusiasm for the opportunities we see to expand our on-airport footprint, which we believe will unlock further growth potential in this region. In land, we have taken action to meaningfully reshape the portfolio and narrow our focus to better align with our long-term return objectives. I will share related details with you in a moment. Meanwhile, as we look ahead, our land business will focus on our North American operations anchored around higher margin and more ratable cardlock and retail activities as well as natural gas. When combined, these businesses create the foundation on which we will continue to build and enable us to successfully drive longer-term land-based growth. To put this in context, for many years, our role in the C-store fuel distribution space has been focused on supplying fuel to site operators under long-term agreements, many of which are locked in for as long as 15 years, driving solid ratable profitability. While opportunities for growth here remain, we now see meaningful room for additional growth through a new pathway in which we own or lease the site and manage the fuel operations ourselves, while partnering with an independent operator who runs the convenience store. This approach increases our margin, reduces upfront capital incentives and credit risk and opens a much larger growth opportunity in the C-store fuel distribution space. In turn, we expect to drive synergies over time as we leverage this new model that more closely aligns our cardlock and retail business activities. Ultimately, we expect the targeted changes we are making and the broader strategic shift across our land segment to enhance returns and significantly improve profitability in 2026, while also providing increased transparency regarding the business' long-term growth potential. Summarizing the actions we have taken to reshape the land portfolio. In Europe, we made the decision to exit our power, energy management and related sustainability service businesses, steps that now shift our focus almost entirely to North America and our core businesses that have proven to deliver more consistent profitability and returns. In North America, as part of our ongoing efforts to streamline our portfolio and further sharpen our strategic focus, we have also recently entered into an agreement to sell our tank wagon delivery and lubricants businesses to Diesel Direct, a national mobile fueling business based in Stoughton, Massachusetts. We expect to close this transaction during the second quarter of '26. In terms of the transportation model for our remaining core land business in the U.S., we have also made the decision to fully outsource our transportation requirements to drive additional operating efficiencies. We expect this transition to also reduce capital requirements going forward, ultimately allowing us to redeploy resources towards higher-value opportunities. It's also very important to recognize that as a result of the strategic changes we've made, we plan to redeploy associated capital into core areas of our business that deliver stronger and more consistent returns. Mike will share additional details on the proceeds from the exits as well as related onetime charges. Overall, we are making meaningful progress in optimizing our portfolio. The actions we've taken have simplified our business, reduced complexity and positioned our land segment for more consistent and predictable performance. Our strategy is now very clear, build a more focused and efficient company that delivers stronger longer-term returns as we continue strengthening our core businesses through 2026 and beyond. Let me now quickly turn to a summary of our fourth quarter results. Overall, our performance fell short of where we expected it to be for a couple of reasons. While aviation results were up year-over-year, benefiting from the Universal acquisition, margins in our core fuels business were impacted by a somewhat more competitive market environment during the quarter. In addition, weaker land performance was driven principally by underperformance in the lower return lines of business we are in the process of exiting as part of our broader portfolio repositioning. The good news is that our core business in land, cardlock, retail and natural gas performed generally as expected during the fourth quarter. Mike will provide additional details during his prepared remarks. While our fourth quarter and full year '25 results fell a bit short of expectations, the strategic actions we are taking, particularly within our land business, represent a meaningful operational transformation and an inflection point for our business. It is important to note that a portfolio transformation like this doesn't happen overnight. While much of our attention in 2025 is focused on our strategic repositioning, the majority of the work is now largely behind us. Our 2026 outlook reflects our strong conviction that the structural changes in place reduce competing priorities, thereby simplifying the business, enabling greater focus on growth in our core businesses and positioning us for more consistent performance as we move through the year. With that, I'll now pass the call over to Mike for his first inaugural review of our financial results. Mike? Jose-Miguel Tejada: Thank you, Ira, and good afternoon, everyone. Before I begin, I want to say how grateful I am to be joining you today for my first earnings call as CFO during a period of meaningful transition for the company. As many of you know, I've worked close with Ira and our leadership team for many years. And stepping into this role, my focus is clear: provide greater transparency around our underlying performance and a clear line of sight into long-term value creation. Before reviewing our results, I want to briefly address our use of non-GAAP measures. As Ira discussed, 2025 was a year of meaningful transition for World Kinect. Over the course of the year, we took deliberate actions to reshape our portfolio, exiting noncore and underperforming activities and refocusing the company on businesses that deliver improved operating leverage, stronger cash flow and returns on capital. As a result, our GAAP results this quarter reflect additional actions we have taken to further improve the quality and durability of our future earnings. Reconciliations are available on our Investor Relations website and in today's webcast materials. Total non-GAAP adjustments in the fourth quarter were $325 million or $296 million after tax. The most significant of which was $247 million of noncash intangible and other asset impairments, primarily within our land segment. These impairments were driven in large part by our decision to exit additional lines of businesses -- a business that did not meet our return thresholds or align with our long-term strategy. We also recorded an additional $77 million of restructuring and exit-related charges in the quarter, also largely tied to these land exits as well as broader transformation initiatives we have previously discussed. While the majority of the financial impact from our portfolio repositioning is now behind us, we anticipate some residual nonrecurring exit-related costs into the first half of 2026 as the remaining transactions close and activities wind down. Importantly, these actions substantially complete the land portfolio repositioning we began in late 2024 and position us in 2026 with a stronger earnings base and improved visibility. With that context, let's turn to our operating results, which exclude these non-GAAP adjustments. On a consolidated basis, fourth quarter volume was 4.2 billion gallons, down 5% year-over-year. For the full year, volume totaled 16.9 billion gallons, down approximately 4%. Fourth quarter gross profit was $235 million, down 9% year-over-year and slightly below guidance, driven primarily by lower profit contribution in our land business. For the full year, consolidated gross profit was $948 million, down 8% from 2024. This reflects year-over-year declines in marine and land gross profits of 21% and 22%, respectively, partially offset by strong growth in aviation. I'll now walk through each segment to provide more details on the quarter and the full year. Starting with Aviation. In the fourth quarter, aviation volumes were 1.8 billion gallons, down 5% year-over-year as a result of more disciplined focus on maintaining appropriate return levels. Full year aviation volume was 7.1 billion gallons, modestly lower than the prior year. Despite lower volumes, fourth quarter aviation gross profit increased approximately 8% year-over-year to $130 million, driven principally by incremental profit contribution from the Universal Trip Support acquisition completed in November. Overall, however, results in our core fuel business were slightly weaker than anticipated, driven by increased competitive pressure impacting our margin versus what we have been experiencing for much of the year, which have been running above our historical average. For the full year, aviation gross profit totaled $526 million, up 8% year-over-year. As we look ahead to 2026, we expect first quarter aviation gross profit to be up year-over-year, driven by the benefits of our Trip Support acquisition and continued organic growth internationally, which we expect to more than offset continued competitive pressure. Aviation remains the cornerstone of our portfolio, supported by a strong global network, expanding service capabilities and attractive long-term demand fundamentals. Shifting to Land. In the fourth quarter, land volumes declined 9% year-over-year. And for the full year, land volumes totaled 5.6 billion gallons, down 8%. These declines were primarily driven by our exit activities as we deliberately reduced exposure and have been exiting underperforming and noncore businesses. Fourth quarter land gross profit was $71 million, down 32% year-over-year and slightly below our expectations, driven principally by unfavorable market conditions impacting certain noncore businesses, some near-term impacts of our strategic exit from these activities as well as the impacts from businesses we have already exited, including Brazil, certain operations in North America at the end of 2024 as well as our U.K. land business in the second quarter of 2025. For the full year, land gross profit was $298 million, down 22%, largely driven by unfavorable market conditions in our European power business and parts of our North America liquid fuels business, noncore activities we are in the process of exiting as well as the impact of businesses we had exited at the end of 2024 and earlier in 2025. Additionally, as Ira mentioned, as part of our exit activities, we recently entered into an agreement to sell our North American tank wagon delivery and lubricants businesses. While we recorded associated noncash impairment charges of $85 million in the fourth quarter, we expect the transaction upon closing to return approximately $100 million of capital to the business through sales proceeds and the recovery of working capital. While near-term results were below our target levels, the actions we have taken meaningfully improved the quality of expected returns of the land business. Going forward, land will be focused primarily in North America across 3 core areas: cardlock, retail and natural gas. This business model currently represents 5 billion gallon equivalents with $2 billion coming from natural gas, which is a high volume but lower unit margin business. As I mentioned before, we expect some residual nonrecurring exit-related activity to continue into the first half of 2026 as we focus on completing the remaining exits and supporting our customers through this transition. As we look ahead to 2026, while we expect full year volumes and gross profit in our refocused land business to be meaningfully lower year-over-year, we expect adjusted operating income to nearly double as a result of exiting these underperforming land businesses, resulting in a materially improved and simplified cost structure. It's important to note that our operating margin in the land business should increase substantially and get much closer to our target level of 30%. In Marine, volumes were approximately 4.1 million metric tons in the fourth quarter, flat year-over-year, while full year volumes declined 5%. Fourth quarter marine gross profit increased 2% year-over-year to $35 million, driven by strong performance in certain physical locations. However, full year gross profit declined 21%, reflecting the continued low fuel price and volatility environment. Despite these conditions, Marine continues to generate attractive returns while requiring minimal capital investment. The business remains well positioned to benefit when the market volatility improves, providing meaningful upside optionality over time. For Marine, we expect first quarter gross profit to be generally in line with prior year. On a consolidated basis, as we look toward the first quarter and with the backdrop of the related segment gross profit comments shared a moment ago, we expect consolidated gross profit to be down versus prior year and sequentially, driven principally by the exit activity in land. Moving on to operating expenses. Adjusted operating expenses in the fourth quarter were $186 million, down 6% year-over-year, primarily due to lower incentive compensation as well as the exit of certain businesses in our Land segment, which we have previously discussed. For the full year, adjusted operating expenses declined approximately 7% to $718 million. This reflects not only performance-related compensation impacts, but also our continued focus on operating efficiency. As we move forward, we expect further benefits from the strategic repositioning of the Land segment alongside continued investment in our platforms to ensure we enhance the customer experience while creating greater efficiencies. Additionally, we are also focused on improving our operating leverage through the use of advanced analytics and AI-enabled tools. For the first quarter of 2026, we expect operating expenses to be down versus prior year and sequentially when adjusted for residual land exit-related activity, driven primarily by the improved cost base in land as well as the additional focused efforts we've been making to restructure the organization. These benefits are partially offset by the incremental operating expenses associated with our Universal Trip Support acquisition. Net interest expense in the fourth quarter was $26 million, in line with expectations. During the quarter, we amended and extended our $2 billion senior unsecured credit facility to November 2030 with a 1-year extension option. The amended facility improves pricing and flexibility and reinforces our strong liquidity position as we continue to execute on our strategy. Our adjusted effective tax rate was 29% for the quarter, resulting in a full year adjusted effective tax rate of 20%, in line with the guidance we provided. Before turning to cash flow, I want to spend a moment on an important change to how we will provide financial guidance this year. For 2026, while we will continue to share insight into anticipated quarterly segment performance, we are transitioning to provide full year adjusted EPS guidance. We believe this approach better reflects how we manage the business, accounts for seasonality and market volatility and provides investors with a clearer and more consistent framework for evaluating our performance. With the backdrop of everything we have covered and driven by the market conditions and business changes referenced in the fourth quarter, we expect the first quarter EPS to be down versus prior year and relatively flat sequentially. For the full year, however, we expect 2026 adjusted EPS to be in the range of $2.20 to $2.40, representing solid year-over-year growth and reflecting the benefits of our portfolio actions and disciplined execution. Looking next at our cash flow and capital allocation. In the fourth quarter, we generated $34 million of operating cash flow and $13 million of free cash flow. For the full year, operating cash flow totaled $293 million, slightly ahead of our expectations, while free cash flow came in at $227 million, exceeding our targets for the year. Combined with 2024, we have generated $419 million of free cash flow, also ahead of our long-term objectives. Strong cash generation enabled us to continue to return capital to our shareholders. In the fourth quarter, we repurchased $40 million of shares, bringing full year repurchases to $85 million. Total capital return through dividends and buybacks in 2025 was $126 million. Additionally, our Board recently approved an incremental $150 million share repurchase authorization. And subsequent to year-end, we completed an additional $75 million in share repurchases, underscoring our confidence in the business and our disciplined approach to capital allocation. As we look ahead, I'll leave you with a few key points. Aviation remains the foundation of our portfolio, delivering strong results in 2025 while expanding our international presence and global service offerings. While we expect some increased competitive pressure versus 2025, the core business is strong and remains positioned for sustainable growth. Land reached a turning point in 2025. We simplified the portfolio, reset the earnings base and improved long-term return potential. We expect continued improvement as we move through 2026 with stronger operating margins and a significant increase in operating income. Marine continues to demonstrate resilience, generating attractive baseline returns and offering significant upside when market conditions improve. Financial discipline remains central to how we operate from cost management to capital allocation. Most importantly, however, we enter 2026 with a simpler and more focused World Kinect with clear priorities and improved visibility into earnings growth. Looking ahead, our focus is on disciplined execution, strong cash flow generation and continued progress toward our long-term margin and return objectives. Additionally, as we operate a simpler and more focused portfolio, we will strive to increase the transparency of our business model and our expectations of the business at the segment as well as at the consolidated level. With that, I'll turn the call to Latif for the Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Ken Hoexter of Bank of America. Ken Hoexter: Ira, Mike and John, welcome to everybody to new positions and great to hear the move to simplify the business and provide the clarity. So Ira, maybe just start off with -- you've made an acquisition here on Universal Trip. Maybe talk about scale of revenues, op income volumes for that. And then also on the sale of the tank wagon business, maybe talk to us about the impact we should expect on volumes, revenues or what have you as we move into the second half? Just to kick that off. Ira Birns: Good to hear your voice, Ken. Thanks for the questions, and thanks for being here. So starting on Universal, remember, that's a service business. So there's no volume and the approximate gross profit number for that business, which I think we shared at the time we closed the deal is about $70 million. So we had a couple -- remember, we had a couple of months under our wings in 2025 because we closed at the beginning of November. So we'll see -- so the year-over-year won't necessarily be the full $70 million, but the actual impact on 2026 will be somewhere around $70 million. In terms of the exits, I'll let Mike give you a high level on that. Jose-Miguel Tejada: Yes. I mean we're shedding about 1 billion gallons worth of volume between all our exits. Related to the Diesel Direct transaction, that we're receiving about $100 million between cash proceeds and return of working capital. So we should be in a pretty good position. We did take some noncash impairment-related charges in the fourth quarter. but much better positioned for the go forward. In terms of profit contribution, everything, I think these exits in totality are positioning us much better going forward, and we will obviously kind of exceed expectations as we go forward. Our expectations are to exceed that as we move forward. Ira Birns: Yes. So Ken, just to follow up. So the exits in totality, right, power, energy management and sustainability services in Europe and then the piece that Mike just talked about, unfortunately, they weren't really delivering much of anything in terms of operating profit, they were tying up capital. They involve more capital investment if we really wanted to have a chance to grow those businesses in a meaningful way. And we were just dedicating a lot of attention to those areas, which I would generally define as noncore. So it made a lot of sense to make the move. As Mike mentioned, it's got a bigger impact on volume than it does on profitability. It will bring back capital, increase our returns and most importantly, allow us to focus on the parts of that business that we've talked to you the most about over the years, right, retail and then more recently, cardlock after the Flyers acquisition. That -- those 2 pieces of the pie will become the cornerstone of that business, and that's where we think we have some real growth opportunities. We're already delivering solid margins and returns. And as I mentioned in my prepared remarks, there are some new fangled opportunities in that space to enable us to pursue growth that we really hadn't thought about several years ago. It will be easier for us to explain that business to you. I know if you go back a few years, there were 15 different pieces of the pie. And now it will principally be 3. There's a couple of smaller inconsequential pieces. But almost the entire business, once we're out of these activities that we're exiting will be cardlock, retail and natural gas. Ken Hoexter: So Mike, in your presentation, you talked about changing to just annual guidance, staying away from quarterly. But before when you had the European business, there was always the big move of European land, right, the U.K. land, right? There was seasonality in first quarter and fourth quarter. How should we think about it now as you exit these businesses? Is it going to be more ratable, more balanced? Is it something we won't see through 1Q, 2Q because of the pending sales and we'll see it in the back half? Maybe just as an initial thought, as you just give that annual guidance, how we should lay that out? Jose-Miguel Tejada: Yes, Ken. For land, I think the seasonality story kind of falls away a little bit with the U.K. land sale that we had. And a lot of these exits and activity we're doing as well kind of further -- while it wasn't as big of an impact, it kind of further kind of decreased that ratability. Now it will take a little bit of time to kind of get into the go-forward run rate, I would say, in land. But overall, the seasonality picture is much improved in land. I think the main seasonality story for the company now is really related to aviation, and that's with demand in flights. And yes, that should cover for land. Ira Birns: Yes. I'll add to what Mike said, Ken. So one of the things you were alluding to reading your mind is we always -- well, for many years, we talked about heating oil in the U.K. And if it wasn't cold, we'd have swing. If it was, that would be a seasonal pickup for land. That's gone. We do have natural gas, which does have some seasonality associated with it. Obviously, you're selling more natural gas in the winter months than the summer months. It's not necessarily as pronounced as the heating oil story was. And then aviation always has its seasonally strongest quarters in Q2 and Q3. So we still have meaningful enough seasonality where we start with our weakest quarter of the year. We build up in Q2. Q3 has generally been our strongest quarter in aviation, which is obviously the biggest piece of the pie and then we tail off a bit in Q4. That should still be the case, even though we've eliminated some of the pieces of the pie that had some levels of seasonality as well. Ken Hoexter: Great. And sorry, I do have another 1 or 2, if I can. Can you expand on the impact of -- you talked about owning and managing the fuel yourself, but partnering with independent operators who run the convenience stores. Can you maybe detail that? And then the competitive pressure in aviation sounds like you expect more. Is this a new normal or a change in business that you're seeing that increase? Ira Birns: So I'll start with the first question. That model is growing in popularity in the C-store space in the U.S., call it a hybrid model. We're still focused on growing the model that we've talked about for many years. But there are scenarios where we find opportunities to grow the business that weren't as simple with the simple distribution model that we had in the past. If we're willing to take an ownership or -- we don't have to own the site, we can lease the site, position ourselves. Interestingly enough, it's actually a somewhat better cash flow model. Because when we enter into those long-term arrangements, we generally have incentive type payments that go out upfront that we earn back over the life of the 7-, 10-, 15-year deal, which no longer would be the case in this newer model. And we own the fuel. Therefore, we're reaping a higher margin on the fuel. It's actually a good cash flow model. So it won't necessarily increase our working capital position because we've got extremely solid credit terms in that part of our business. So it just opens up doors for us to find more growth in that part of the market that we hadn't really focused on historically. We're looking at it very carefully. We're understanding that we own the asset. We have to make sure that the economics make sense and we generate the returns that we want. But we're finding opportunity. We've actually launched several locations already under that model and so far, so good. In terms of aviation, I wouldn't use the words new normal, but it may be the temporarily new normal, right? I think we're still seeing -- or I know we're still seeing some of that as we speak, quarter-to-date, we'll take a quarter at a time. The margins are still strong. And then there's also growing opportunities to find opportunities to -- I said that word twice, sorry -- to expand to new locations that could offset some of the margin pressure from that competition word, if you will. So the team is out there looking for opportunities to add airport locations to the portfolio, which will drive additional volume. So I think we still have a lot of opportunities there, but I can't tell you whether what we saw in the fourth quarter is exactly what's going to happen in Q1 and Q2. But at the moment, we're seeing a bit of the same, and we'll see what happens as the year progresses. Typically, in aviation, a big chunk of the -- as you may remember, of the contracts roll in about the middle of the year. So as we're going through those -- what's akin to an RFP process for the contracts that go from mid-'26 into '27, we'll know a little bit more about where we come out from a margin standpoint as we finalize those negotiations. So plenty of opportunity, but we just wanted to conservatively provide some caution on the fact that, that competitive pressure is out there. Ken Hoexter: All right. And if you'll indulge me, I'll toss one more and just to wrap it up. But the marine business, I think you talked about waiting for a rebound. Is that incumbent upon shipping volumes? Is it trade lanes? Given the dynamic and changes in the container market right now, what are you looking for on a rebound there? Ira Birns: Thanks for all the questions, Ken. Appreciate it. Look, in Marine, it's the same story. Certainly, there are macro factors that could always help. The biggest macro factor that has historically helped if you look at our P&L over the years in the Marine business is price and volatility. And we remain in a relatively low price environment, a low -- relatively low volatility environment. So the business, I would describe that business as stable that always has opportunity to pounce on when things move in the right direction. It could be trade lanes could help out a bit. There's all sorts of things that could drive opportunities there. But the most significant have always been price and volatility, and we're still, again, in the lower end of historical price range. And therefore, we don't expect anything materially to change in '26. If it does, that would be upside to our guidance. Operator: I would now like to turn the conference back to Ira Birns for closing remarks. Sir? Ira Birns: Well, thanks to Ken for all the questions. And thanks to all of you -- the rest of you for joining us today. I know we've been on a bit of a bumpy road these past few years, but I'm very excited about and have great confidence in the current trajectory of our company, supported by the strategic changes we've made across our organization. As we've discussed today, we now have a simpler, more focused business model that allows us to concentrate on what we do best, leveraging our global best-in-class platform to reliably deliver fuel and related services across the transportation and broader energy distribution markets. This industry continues to evolve and so do the needs of our customers. World Kinect has always been at the forefront of helping customers navigate risk, volatility and operational complexity with consistency and insight. With a streamlined portfolio and a renewed focus on disciplined execution and with a much tighter portfolio of business activities, we are better positioned than ever to meet those demands. Before we close, I want to thank all of our employees around the world for their commitment and support, particularly during a year of significant change. Their focus, professionalism and dedication are foundational to our success. We look forward to updating you on our journey as this critical year progresses. Thanks again for joining us, and we'll see you in April. Have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning everybody. Welcome to Vector Limited Conference Call and Webcast to discuss the company's financial and operational results for the half year ended 31st December 2025. [Operator Instructions] I must advise you that this conference call is being recorded. I would now like to turn -- hand over to you Vector's Chair Douglas McKay who will take you through the call. Douglas McKay: [Foreign Language] Hello everyone, and welcome to this presentation. I'm Doug McKay, Vector's Chair. Today, we're going through Vector's results briefing for the half year ended 31 December 2025. Joining me on the call for the first time as our group Chief Executive is Chris Blenkiron. Pleased to have you here, Chris. And we have Chief Financial Officer, Jason Hollingworth. We'll start the presentation with comments from Chris on overall financial performance. Then Jason will look at the detail. Chris will then talk about the outlook for the next 6 months, and then I will come back to talk about the dividend. After that, we'll be happy to take your questions. And I'll now hand over to Chris to start the presentation. Chris Blenkiron: Thank you, Doug. Hello, everyone, and thank you for joining the call. It's great to be speaking with you for my first market update since joining Vector in December. I'll start off by setting the context for these results. The new regulatory period, known as DPP4, began on the 1st of April 2025. At this time, the Commerce Commission increased allowable revenue for all electricity distribution businesses in New Zealand. The changes support the investment that's needed for the country's energy transition. Also, keep in mind that the gray bars on the slides show the impact of businesses that have now been sold and continuing operations are shown in blue. This is to allow for easy year-on-year comparison. With that background in mind, I'll talk through some of the top line results. Vector's group financial performance for this half year has been strong and in line with our expectations. Revenue for Vector Group is up 14%, driven by higher electricity revenue. Higher revenue has flowed through to an increase in adjusted EBITDA to $240 million. This is up 19% over the same period in 2024. Adjusted EBITDA excludes capital contributions, which are paid by new customers for their connections to the network and is how we currently ensure that growth pays for growth rather than cost of growth being spread across all Auckland electricity consumers. Net profit after tax was $113 million, down 4% with the higher adjusted EBITDA offset by lower capital contributions. Gross capital expenditure was $223 million, down 15% on the prior period. However, we do expect capital expenditure to be higher in the second half of the year than it was in the first. In terms of regulatory quality measures, we include SAIDI minutes in our quarterly operating statistics, which were released last month. SAIDI is how electricity distribution businesses are measured by the Commerce Commission for the duration of power outages on their networks over a year. At this stage in the regulatory year, which finishes at the end of March, we are within the regulatory limit. Our focus is on making sure every dollar we spend produces the best value possible and keeping our charges, which are around 1/4 of the total power bill as affordable as we can. I'll now hand over to Jason to go over the detail behind these top line results. Jason Hollingworth: Thank you, Chris. This slide shows the segment contributions towards the adjusted EBITDA figure. Adjusted EBITDA from the Electricity segment was up $48 million, reflecting that HY '26 was under DPP4 and HY '25 was under DPP3. Earnings for Gas were flat on the prior period. Other includes VTS, Vector Fibre, Equalise, which offers cyber services to other lines companies and our group eliminations. It also includes a $9.3 million loss on sale from HRV effective on 1st of August '25. Next slide. Net profit after tax was down $5 million or 4%. This is down on the prior period with the higher adjusted EBITDA being offset by the factors shown on the slide, including lower capital contributions, fair value movements on financial instruments and tax. Gross capital expenditure has decreased from a comparable 2024 period to $223 million, and you can see here some of the detail. Net CapEx after deducting capital contributions was down at $126 million. Capital contributions were down at $97 million. The slide on group debt shows that our debt levels have remained flat with gearing at 37%. The next slide, we'll now look at the segment performance, starting with electricity. Adjusted EBITDA for electricity was higher, as previously mentioned. The higher impact from pass-through costs is the transmission charges we collect on behalf of Transpower. These have increased because of Transpower's own revenue reset that reprice transmission at the same time as distribution. We passed transmission costs on and recover them via our revenues. There are also higher OpEx costs in the period linked to increased maintenance activity and also higher digital costs. Total electricity connection numbers grew by 1.3%. Looking at gas. Adjusted EBITDA for gas distribution was flat at $24 million, with slightly higher revenue in the period, offset by slightly higher costs. Gas distribution volume was down 4.5% compared to the prior period due to lower demand from the residential, industrial and commercial sectors. There has been a 0.4% in total gas connections over the period. These results are consistent with our most recent forecast for the Gas network, which were published last year in our gas asset management plan. We have recently submitted on the Commerce Commission's DPP4 draft Gas decision. This is the 5-year reset for gas distribution networks with the commission's final decision due in May 2026. We welcome the commission's intention to continue to accelerate depreciation given the heightened uncertainty over the long-term nature of gas in New Zealand. And given the difficulty in accurately forecasting gas volumes for the next 5 years, which is fundamental -- which is a fundamental input into setting a price cap, our submission advocates for a move away from a price cap for approach that would share volume forecast risk between both the network owners and consumers. The Commerce Commission is still considering its final decision, so we don't yet know what this will mean for consumer prices. Pipeline costs are just one component of the gas bill; however, most forecasts show that over the long term, these will rise. That's why we're advocating for a managed transition and making sure we recover costs fairly now. This also means keeping the gas network safe and reliable while it's still in use and planning for decommissioning when these pipes reach the end of their life. Next slide looks at Bluecurrent. Our investment in Bluecurrent continues to perform in line with our expectations. Year-on-year, Bluecurrent has increased its revenue, resulting in higher EBITDA, and this is flowing through to higher distributions. In this period, we received $26.6 million of distributions in relation to our 50% shareholding. And I'll now hand back to Chris. Chris Blenkiron: Thanks, Jason. For the 2026 full year results, we are forecasting adjusted EBITDA to be within our guidance range of $470 million to $490 million. We are now forecasting gross capital expenditure within the range of $500 million to $540 million. This forecast represents an increase over our full year 2025 capital investment and at around $0.5 billion shows our commitment to significant investment in Auckland's critical energy infrastructure. We're forecasting capital contributions within the range of $180 million to $215 million for the full year. We've tightened the ranges for gross capital expenditure and capital contributions because we now have greater visibility of project time lines through to the end of the reporting period. Thank you to all of the Vector people, our field partners and suppliers who work incredibly hard for our customers and who delivered these results. We know that for our energy system to be at its best and most affordable, the whole sector needs to coordinate well and work in concert with each other. We're committed to doing this to support the region's role in our national economy and to help our country meet our energy aspirations. I'll now hand back to Doug. Douglas McKay: Thank you, Chris and Jason. The board has determined an interim dividend of $0.125 per share with no imputation. Now that brings us to the end of our presentation. But just before we move to questions, I'd like to thank Chris and his executive team and everyone else at Vector, plus our field service providers and call center for their hard work over the period to deliver for Vector customers and shareholders. Chris, Jason and I are now happy to take any questions. Operator: [Operator Instructions] Your first question comes from Grant Lowe with Jarden. Grant Lowe: Tim, can you hear me okay? Unknown Executive: We can. Grant, Yes. Grant Lowe: Thanks for the presentation. And welcome, Chris. Just around a few for me. The electricity business was a beat on my numbers at both revenue and EBITDA. So I think the revenue was up circa 28%, which is a touch higher than my uplift that I was expecting. Were there any sort of one-offs in that result in terms of inflation catch-up and the like that we've seen in the past? Jason Hollingworth: Yes, Grant, there is still a wash-up balance that we were able to recover in this period. So that is in there as well. That's coming to an end because it has a 2-year lag. Grant Lowe: Yes. Okay. And do you have that number to hand as to roughly how much that was? Jason Hollingworth: I don't have it to hand that I can look it up and get it to you, yes. Grant Lowe: Okay. Yes, great. Thank you. Okay. No, that's good. And then just the -- so the guidance has been held, and we've also got that $9.3 million loss in there. With guidance being held, was that guidance already factoring in the $9.3 million loss and the washup balance that going into that number when you set the guidance at the full year? Jason Hollingworth: I think, to be honest, probably not Grant. So I think we're at the probably higher end of that number. That loss turned up after we set that guidance. So yes. Grant Lowe: Yes. So the washup balance was probably $9 million, that's calculable. But -- so effectively, is this effectively a $9.3 million upgrade to the guidance range. Jason Hollingworth: I think it puts us at the top end of that guidance. We're now saying it would have been at the top end of the guidance. We've held the range. But I think if we haven't had the HRV situation, we would have probably been guiding to the top end of the range rather than sort of leaving the range as it is. Grant Lowe: Yes. Okay. I guess, that's useful. And then just around the dividend payout, it was a touch lower than I had in my forecast, I was forecasting 13% versus your 12.5%. I appreciate it's a free cash flow measure. But obviously, the -- if we just think about the EBITDA for a second, that's up quite materially. How did the Board go about -- think about setting the 1H dividend? And then what are the sort of swing factors around for the full year dividend, what we might expect to see there? Douglas McKay: Yes, it's a good question. To be honest, we didn't pay any attention to -- and we haven't with the interim in terms of its percentage relative to the 70% of the policy. And I understand from Jason this morning, it's lower than that. Jason Hollingworth: For the half result. Douglas McKay: For the half year results. Yes. We don't look at the half in that respect. It's the full year that we will pay consideration to the 70% minimum. So we don't have any reason to think we won't be well within the range at the year-end. Look, part of the decision-making was what was it last year in the interim and what should it be this year, given EBITDA is strong, as you say. And so we uplifted it by 0.5%, and we sort of thought, well, that's a good indication of how confident we feel about the way things are tracking. But if you looked at it strictly versus the policy, but we don't think about the half year in that respect, we could have gone a bit higher. But no, we haven't. Grant Lowe: Okay. So I guess -- I mean, my full year is $27 million versus the $25 million last year based on the free cash flow calculation. I guess what I'm hearing is that there was a touch low on the free cash flow side of things. If everything sort of plays out with respect to guidance and everything else, would it be reasonable to assume that there is a slightly stronger uplift in the second half if everything plays out according to plan? Douglas McKay: If everything plays out, yes, it will, Yes. I wouldn't necessarily agree with the $27 million, but you're at the top end of what I'm thinking of as Chairman anyway. I'm not speaking for the Board at the moment, but we'll see. Grant Lowe: Okay. Yes, indeed. And then last one for me. Just I think last year, you provided guidance on Bluecurrent distributions. Do you have any thoughts on that? I see we've got the half year figure of $26.6 million. Do you have a full year figure in mind? Jason Hollingworth: We do have a number. I don't have it to hand, but you can see the year-on-year sort of increase for Bluecurrent period-on-period. So I think that we expect that to continue into the second half. So I think last period, we got $23.4 million. This period, we're getting $26.6 million, so an uplift. So I expect that to continue as they continue to deploy meters. Operator: Your next question comes from Andrew Harvey-Green with Forsyth Barr. Andrew Harvey-Green: Doug, Chris and Jason. Just a couple of questions from me. First one, just looking at the electricity OpEx line, there was a reasonable increase, I guess, relative to first half last year, but even relative to the second half last year. Is that -- should we be thinking as that the sort of the normal half year run rate for OpEx on electricity going forward? Or are there some sort of one-offs in there that might pull it back for the second half and other periods? Jason Hollingworth: I think there are some one-offs in that, Andrew. I don't think it's actually coming down, but I don't think it's going to keep lifting at that rate. There has been, I guess, an increase in our maintenance spend in this half that's probably going to continue with some change in standards and just some extra activity that we've been doing. We also have a couple of large projects underway that are -- have to be under these new accounting rules now have to actually be expensed rather than capitalized. So our digital costs are sort of running at a higher rate, which I think is probably going to continue while these projects are occurring. So yes, it's mainly those 2 areas that are causing that increase, maintenance spend, which is going to continue and this lumpy digital spend around a couple of key projects that are cloud-based and therefore, have to be expensed. Andrew Harvey-Green: Just a follow-on question around the metering. I noticed, I think that it's been refinanced. So you've got -- expecting lower interest costs going forward. All other things being equal, we should expect that to help increase distributions back to Vector from the metering? Jason Hollingworth: They've refinanced at lower interest rates. Their NPAT number is lower because they've had to write off their arrangement fees from the original facility, but sort of that's noncash, if you like. So the actual underlying cash flow is better because they've got lower interest rates, I think, by circa 30 basis points from memory. So it's a reasonable reduction. Andrew Harvey-Green: Yes. Okay. Cool. And last question for me was just whether we've got a little bit of an update on the strategic review of the fiber business. Chris Blenkiron: Yes, Andrew. No real update, that process continues. And just a reminder that there's no guarantee that the outcome of that strategic review would result in a sale, but the process does continue. Operator: Your next question comes from Phil Campbell with UBS. Philip Campbell: Just a couple from me as well. I just noticed in the half year cash flow statement, it looked as though there was some kind of positive working capital movement. So that was one of the reasons why if you did do a dividend payout ratio calculation, it was a little bit lower. I'm assuming there's just timing issues around that, Jason, and that will probably reverse in the second half? Jason Hollingworth: Yes, that's right. There's nothing there that I'm aware of -- yes that's structural. I think it's timing, yes. Philip Campbell: And then just on the dividend coming back to this kind of $0.27, I think we've got that in our model as well, and we're assuming that the payout ratio declines from last year. I think from last year, from memory, it was 85%. So we've got that coming down. I just wanted to see if that was still the thinking. I think the rationale at the last result was just some uncertainty around what EA is doing in terms of those capital contributions. I just wanted to check if that was still the thinking from the Board? Douglas McKay: 0Yes, it will be lower than 85% this time around. Jason Hollingworth: I think last year,, don't lock that in because that was a sort of one-off to do with sort of transitioning from DPP3 to DPP4 and the fact we only had a quarter in our results. So I think we said, look, we're paying up at this level, but it's not a -- don't bake that into your future numbers. Philip Campbell: And maybe just a question on CapEx. Obviously, like it was a bit weaker in the first half. And obviously, you've tightened the range up in the full year, still a large number. What's the kind of reason for the CapEx number kind of coming down? Chris Blenkiron: Yes, Phil, there's a couple of reasons. I mean 1 is some customer projects were sort of pushed out. It's always difficult with these lumpy capital projects, as you know, to get the timing right. So a few of those have been pushed further out. And that's probably the primary reason. So we do have some confidence going in the second half that, that run rate will certainly pick up. Philip Campbell: Is that data centers or you can't really comment? Chris Blenkiron: We can't comment on the specific projects, but there's a number of them. Philip Campbell: And then maybe just last question for me on metering. I noticed that Neil Williams has left a CEO. I'm just wondering if there's any reason for that and whether you've recruited a new CEO for Bluecurrent? Chris Blenkiron: Not yet. We haven't recruited yet. The Bluecurrent Board is managing that process, and we have 2 representatives on that Board, looking after our interests, Dame Paula Rebstock and Simon MacKenzie. And they're in the process of working with the headhunter now to find the right replacement. Philip Campbell: Great. Awesome. And I just noticed you may not know the answer to this question, but I just noticed in the AFR, there was, obviously, one of the Bluecurrent competitors, I think, potentially a transaction happening there. Just wondering if there's any valuation read-through that you might want to comment on? Douglas McKay: Are you talking plus ES? Philip Campbell: Yes. Yes. Douglas McKay: Well, look, I can't quote the numbers, but I did remember thinking the expectations on value looked very, very high. But I didn't do an earnings multiple or anything. It just -- I think it was $3 billion or something. It was a massive number. So obviously, we're trying to be involved in that process. We are interested strategically in increasing our participation in that market, increasing our number of meters but we'll just have to see how that plays out. If people are at that sort of number, that's a very big number. Philip Campbell: Right. And then maybe just very last one, just on the fiber process. Is there any kind of timetable there? When you say we're no guarantee of sales. Is there any time when bids are due or where about are we in that process? Jason Hollingworth: There is a timetable, Phil. And yes, I think we'll know by year-end, whether we've got a transaction or not. And I guess we won't quite know when it completes. It will depend on what the terms and conditions are. But we'll certainly, I think, have landed a decision by 30 June, one way or the other. Operator: Your next question comes from Stephen Hudson with Macquarie Equities. Stephen Hudson: Morning, everybody, and welcome, Chris. All of my questions have actually been posed, but perhaps just a general one for you, Chris. I know it's early days, but I guess I just -- and I know we'll be meeting with you, I believe, the 1st of March as a community. But any sort of initial observations on the state of Vector in terms of assets, people and strategic direction and where you may, I suppose, differ from sort of the prior thinking, I guess? Chris Blenkiron: Yes, sure. I mean, Simon's left a very strong and good business operating here, Stephen. We've got some very strong people in the right roles, doing some really good work. In fact, I think some of the credit that we will get to keeping the lights on and the infrastructure going in Auckland is probably something that we should get. It's in a strong state. In terms of the strategic direction, I've not contemplated any change in strategic direction. The Symphony strategy remains as focused as it has. I think what we'll continue to do is an ongoing test against the external environment, whether that's the customer side, the regulatory settings, decarbonization pace, technical, we'll continue to test those settings. But my focus at the moment is absolutely on sort of disciplined execution on the work that we're doing as we go into the second half. But it's great to join a great business in really strong shape. Stephen Hudson: Very good. Thanks, Chris. And I look forward to catching up. Chris Blenkiron: Yes, Looking forward to it. Thanks Stephen. Operator: Your next question comes from the line of Grant Lowe with Jarden. Grant Lowe: Another one from me. Just around the meters rollout in Australia. Obviously, the regulatory bodies over there have -- I'm not sure exactly what the terminology is, but effectively mandated 100% penetration by 2030. Is there any sort of commentary you can give around Bluecurrent in terms of either contracts signed or thoughts around the level of participation in that rollout at this stage? Douglas McKay: I don't have any updates, Grant, other than we had a Board meeting here yesterday, and Paul was telling me that things are tracking as they had indicated they would be the Bluecurrent Board. So there's no surprises there. There's incremental increases in our metering network. We don't -- we haven't had any acquisitions of packages of meters or anything like that in this period. So it's all organic at this point in time, and it's steady. Grant Lowe: Yes. Okay. How do you -- just generally, like for the market as a whole, how do you see that rollout playing out? Like obviously, there was a big contract signed here for the rollout in New Zealand. Is it a similar sort of a process? Is that what you're expecting over the next well and you're sort of actively participating in those discussions? Douglas McKay: Those contracts tend to be quite long term. So once you settle into them, you've got a good tenure there mostly. You're not sort of every year or 2 into another process on those same contracts. They require a lot of capital investment. They require a lot of systems and process changes and interactions. So it doesn't move around a lot. Once you land them, it's a reasonably settled market. Grant Lowe: Yes. I guess the question I'm sort of asking is, I think rough guess there were sort of 5 million meters to go or something, you might tell me that's wrong. But are we -- do you expect to see sort of like 1 million meters contract or a rollout of 1 million meters signed in big chunks like that? Is that kind of how you expect this to play out? Jason Hollingworth: The retailers typically bundle them up into reasonably large blocks, Grant, and then sort of tender them out. And we have contracts in place with the existing retailers, and there are still some contracts being let, but we have a number already under contract. It's competitive though, as you imagine, [ Telehub, Plus ES ] are the other 2 big players. And these retailers are sort of good at getting the sharp price out of the market. And yes, so that's it. So we've got a number of already under contract that we're executing on. New Zealand is deployed, so there's not so much going on here. It's really an Australian growth sort of situation. And once you've won those contracts, you still have to execute on them, right? So there's always a risk that if you don't deliver because there's a lot of competition for field service people to install all these meters. So it's not -- one thing to win the contract, you actually got to execute on it. And we're very sort of mindful of that because the opportunity potentially to pick up some extra work if you're the party that's executing well. And we're seeing a bit of that going on at the moment as well over there where some others potentially aren't quite performing. Douglas McKay: And these contract package sizes are often in the order of 200,000 to 300,000 meters. Grant Lowe: Yes. That is useful. Operator: There are no further questions. I would now like to hand it over back to Doug for closing remarks. Douglas McKay: Okay. Thank you. If there aren't any further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, please feel free to contact Jason. For the media, please contact Matt Britton or call our usual media phone number. Thank you, everyone, for joining us.
Operator: Good afternoon, everyone. Welcome to the JAKKS Pacific Fourth Quarter and Full Year 2025 Earnings Conference Call with management, who will review financial results for the quarter ended December 31, 2025. JAKKS issued its earnings press release earlier today. The earnings release and presentation slides related to today's call are available on the company's website in the Investors section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimble, Chief Financial Officer. Stephen will first provide an overview of the quarter and full fiscal year, along with highlights of recent performance and current business trends. Then John will provide some additional comments around JAKKS Pacific's financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to opening up the call for questions. [Operator Instructions] Before we begin, the company would like to point out that any comments made about JAKKS Pacific's future performance, events or circumstances, including the estimates of sales, margins, earnings and/or adjusted EBITDA in 2026 as well as any other forward-looking statements concerning 2026 and beyond are subject to safe harbor protection under federal securities laws. These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS' most recent 10-K and 10-Q filings with the SEC as well as the company's other reports subsequently filed with the SEC from time to time. In addition, today's comments by management will refer to non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Unless stated otherwise, the most directly comparable GAAP financial metrics has been reconciled to the associated non-GAAP financial measure within the company's earnings press release issued today or previously. As a reminder, this call is being recorded. With that, I would now like to turn the call over to Stephen Berman. Stephen Berman: Good afternoon, and thank you for joining us. As 2025 draws to a close, we were proud of what the organization has accomplished and what we ultimately viewed as a defining year in our company's history. While tariff policy created visible pressure on near-term financial performance, we remain disciplined and focused on long-term value creation. Beneath the surface volatility, we made meaningful progress across the areas that matter most, deepening and broadening our relationships with the key factories, licensors and retail partners through a truly global lens while also expanding our strategic relationship portfolio in preparation for a significant new initiatives launching in 2027. Importantly, we maintain transparency with our shareholders regarding market dynamics and the challenges we faced, and we delivered on our commitments, refusing to pursue short-term top line growth at the expense of bottom line margin integrity. At the same time, we completed our first full year as a cash dividend payer returning $1 per share back to shareholders while preserving our debt-free balance sheet. We exit 2025 stronger, more resilient and better positioned than we entered it, and we are energized by the opportunities ahead in 2026 and beyond. Globally, our Toys/Consumer Products net sales were roughly flat in fourth quarter and $118 million, down 0.2% from the prior year and down 0.7% from 2023. Costumes were down, although in one of its smaller quarters of the year, but enough to bring the total company sales down 2.8% from prior year to $127.1 million or roughly flat to our 2023 fourth quarter sales of $127.4 million. Our fourth quarter U.S. business in total was down 7.8% to $86.2 million. Our domestic sales were down, which we attribute to higher tariff burden retail prices resulted in slower second half sell-throughs and by extension, lower fourth quarter replenishment. Fourth quarter FOB sales to the U.S. were positive versus prior year to somewhat offset the downside. In the Rest of World, our fourth quarter sales were up 9.9% to $41 million. Europe was roughly flat in the quarter, and Latin America was up significantly making up the lost ground from Q3. On a full year basis, our total Rest of World business was $154.1 million, up 5.5% from prior year and slightly ahead of 2023, led by a 14% increase in Europe to $81.4 million. For the full year, our Toys/Consumer Products business was down 19% as our Evergreen, Action Play, Dolls and Role Play business, in particular, suffered from tariff impacts on customer order patterns and higher consumer prices. All 3 of our Toys/Consumer Products division were down ranging 9% to 23% on a full year basis. Our Costume business was down 10% for the full year with a slight increase in international offsetting the U.S. results. Syndicated data suggests both retail dollars and units were down compared to the prior year, while average prices increased for both children's and adult costumes. Although Halloween is always a holiday with a surge of the last-minute shoppers, we felt that the surge was even later this year to the benefit of brick-and-mortar customers more than online. We did maintain and, in fact, extended our market leadership position for the season. This past month, we proudly debuted our first fully integrated JAKKS and Disguise showroom at the Nuremberg Toy Fair, marked a significant milestone in how we present our global portfolio to the marketplace. The response from customers and partners was overwhelmingly positive as they experience firsthand the full breadth, depth and quality of our offerings, powered by best-in-class licensing relationships from around the world. This successful debut reinforces our confidence in the strength of our strategy and our ability to win across multiple categories and regions. We see a substantial runway for integrated growth across Europe with particularly strong momentum as we expand further into Eastern Europe and the Middle East. With a unified go-to-market approach, deep retail partnerships and a world-class product pipeline, we are well positioned to build sustained leadership and capture meaningful share in these high-growth markets throughout the season and beyond. 2025 has certainly been a disappointing year when we think of what could have been but I remain pleased by how we adapted, evaluated and reacted without overreacting to a volatile operating environment. We executed in a year and perhaps more importantly, at the same time, remain focused on creating new growth opportunities for the company. We protected our core business by not chasing top line at the expense of margin, while prudently controlling discretionary spending. We finished the full fiscal year with a gross margin of 32.4%, our highest full year level in over 15 years. Our gross margin dollars were up in fourth quarter year-over-year through a combination of better costing from our factories and improved inventory management. On a full year basis, our SG&A expenses were down 1%. This is a business where upfront investments are made over 12 to 18 months with the goal of future sales volumes and scaling driving larger profits. Although volumes were not as originally planned for the year, we nonetheless managed to reduce our fourth quarter adjusted EBITDA loss to $3.8 million versus $10.2 million in the same quarter last year. That increased our trailing 12 months EBITDA to $35.4 million for the full year of 2025, down from $59.3 million in the prior year when we generated $120 million more in sales. I will now pass it over to John for some comments, after which I will come back and share a bit more about where we're focused moving forward. John? John Kimble: Thank you, Stephen, and hello, everyone. A decent quarter here to wrap up a mostly in decent year from a financial perspective. As Stephen mentioned, sales stabilized a bit with the tariff shocks of Q2 and Q3 behind us. Q4 benefited from FOB shipment of our product for the Super Mario Galaxy film, which led our Action Play & Collectibles business to a 19% year-over-year increase with growth from both North America and international. Beyond that, I'd say that most of Q4 sales results ended up being the squeeze from whatever happened or didn't happen in Q3 and didn't really suggest any meaningful change in trend or customer behavior. Gross margin dollars grew by 11% versus prior year, driven by a slightly better margin percentage. This result is a good outcome and generally consistent with prior quarters in 2025. Full year gross margin ended at 32.4%, better than last year's 30.8% and a bit more consistent with 2023's 31.4%. Product costs were held in check through persistent and consistent collaboration with our long-term factory network, along with tighter management of inventory, reducing our obsolescence expense. Royalty expenses crept up a bit. Significant sales reductions have driven some minimum unearned royalty payments along with some mix impact. We paid roughly $12 million in U.S. tariffs in 2025, which we feel we recovered through increased pricing. Higher price accompanied by a 1:1 cost addition has the math impact of a lower margin percentage, but that amount was not really material on an enterprise level. Tariffs were far more impactful in reducing sales. We estimate that our U.S. FOB customers paid nearly $50 million in tariffs on JAKKS and Disguise product in 2025. We feel that $50 million would have otherwise been allocated towards more actual product and by extension, generate more JAKKS revenue in any other year. That amount would be in addition to the additional reduction in units sold compared with our original plans as customers understandably derisk their year. That gives you a bit of insight into the financial implications of last year's actions on our company, although it may not be readily apparent simply looking at the financial statements. Moving on to more controllable parts of the P&L. Q4 benefited from our actions taken earlier in the year to keep SG&A spending on a tighter leash. Selling expense ended the year down 8% and G&A roughly flat. With the strength and flexibility of our balance sheet, we did this without handicapping any of the product development or new initiatives we have been working on for 2026 and 2027. Our operating loss and adjusted EBITDA for the quarter were both improvements versus prior year, but not enough to overcome the financial carnage of Q2 and Q3. Full year operating margin dropped to 2.5%, down from 5.7% last year. Adjusted EBITDA margin was 6.2%, down from 8.6%. It is a significant focus as we start the new year to revisit our processes to continue gross margin expansion while containing SG&A. We know we have the potential to do better from a margin perspective without relying on top line improvement. The ambition would be to do both, which would, by extension, generate meaningful value. A moral, if not economic victory of note, to offset our margin challenges, calendar year 2025 was the first year our interest income exceeded our interest expense for a very long time. Remembering that in 2020, we paid $21.6 million in interest expense with a full year adjusted EBITDA of $28.1 million helps to put 2025 in context a bit. These results all tally to an adjusted quarterly loss of $0.18 per share, an improvement from a $0.67 loss in Q4 2024, but nonetheless, still dragging down our full year adjusted EPS to $1.62, down from $3.79 for full year 2024. The diluted share count is based on roughly 11.5 million shares. Turning to the balance sheet. We finished the year with $54 million in cash, down from $70 million last year, obviously impacted by the drop in sales. Our inventory was up slightly at a bit less than $60 million, up from $53 million last year. That change is driven by our expanded distribution footprint in Europe and Mexico. Our U.S. held inventory was actually down 18% year-over-year to the lowest level we finished a year in over 10 years. Inventory management remains a focus and opportunity for us. Broadly speaking, we feel we read the second half of the year in the U.S. about as well as we could have hoped in terms of forecasting consumer and customer behavior. The hottest of product continue to move fast as hot products do with the bar essentially raised for everything else with more lukewarm results. We don't feel we missed sales in Q4, and we feel good about our U.S. inventory on hand. We also obviously feel good that imported product from China is now taxed to 20% compared to the 30% we were paying for a lot of the year, and we didn't have to import any more of that higher cost than we did. The company remains committed to the path of being a meaningful and consistent dividend payer. Despite a somewhat soft year financially, we did manage to generate over $8 million in cash flow from operations while also funding $11.2 million in common dividend payments. As mentioned in our release, the Board approved a Q1 payment of $0.25 per common share, payable at the end of Q1. The record date is February 27, and the payable date will be March 30. I think the pressures of the past year have pushed us to find new areas for incremental improvement, and that will be a lot of our focus this year to see what we can figure out. In a company of our size, we have the ability to make decisions faster and by extension capture opportunities sooner, so that's what I hope we can do. And now back to Stephen for some more comments about the year ahead. Stephen Berman: Thank you, John. The biggest story for us at the start of this year is certainly the theatrical release of the Super Mario Galaxy movie from Illumination. We are extremely excited for this new product launch, which will be available for purchase late February. The best-selling [indiscernible] scale figures are back in line along with new scale of many figures, new Playsets, Plush and more. The film releases April 1, and our line gives fans of all ages the chance to recreate their favorite film moments in the movie. This is a follow-up to the Super Mario Brothers movie, which went on to generate the largest theatrical box office of 2023. So you could imagine we're beyond thrilled to be back in the mix again here supporting this launch. Our Sonic DC crossover product launch received a great response in fourth quarter with exclusive retailer launches in both the U.S. and in Europe. Distribution of that line is going wide in the new year with new items like the DC Sonic [ Batmobile ] being added at key retailers. Sega is celebrating the 35th anniversary of Sonic all year with various activations. We are participating by launching special packaging, commemorating this event along with some exclusive items. We have other exciting news and plans around Sonic in 2026, but we're not ready to share those today, but stay tuned. Moving over to our Disney Doll business, we'll leave the Holiday season and Toy First season with solid momentum behind Disney Darlings, our latest homegrown Disney IP and the strong position of Style Collection and Disney's ily. For those of you unfamiliar with Disney Darlings, our launch in the nurturing doll category, similar to our ily line, these are not simply caricatures in figural form, but an approach we've developed in a partnership with Disney to bring new and innovative ways for our consumers to engage with the Disney brand. The intent is to spark the emotional response consumers feel when engaging with Disney. The joy and happiness when engaging experiences a bit of the Disney magic. These are truly beautiful dolls delivered with premium quality. And what's even more magical is that unlike other baby dolls, they are 100% joyful and happy, and there's no tears and no crying. Our soft launch of this line sold through well in fall, leading us to expand listings in the U.S. this year as well as a lot of interest and commitments internationally coming out of this past month's Toy Fair. We've seen enough positive feedback to feel that we have a winner here that can steadily build this year and into the next and to being another solid foundational piece of business for us. Congratulations to the team on this one. We're also supporting the live-action theatrical release of Moana in early July this year. Moana has been a steady part of our business for over the past 10 years going back to the original animated release in 2026 (sic) [ 2016 ]. We're happy to be able to bring back some of the most popular toys we've created over the years as a new audience engages with the story this summer. Our focus items include Moana's Necklace, Maui's Fish Hook, all the more aspirational with The Rock reprising his role to the film, our Hei Hei the screaming chicken and our super popular Moana large dolls. We also have a couple of additional exciting developments coming on our Disney Doll front later this year. In the other part of our Doll division, we continually steadily build our private label business with major retailers in the U.S. and expanding into Europe. It's an extremely broad array of dolls, Role Play toys and related subcategories that allow the retailers to make additional margin while the consumers get a high-quality, on-trend design product at a much lower price. In this area, we have several new launches that we will discuss in the following quarters that will be launched during the fall holiday season. In 2025, the company saw momentum across its Action Sports portfolio with Element emerging as a powerful growth engine in the second half of the year, expanded distribution and deepened retail partnerships most notably with Walmart, Amazon and Academy Sports and outdoors, significantly increased brand visibility, strengthened shelf presence, and drove meaningful gains in sell-through during the critical holiday period. These results reflect the company's disciplined execution, strategic product innovation, and unwavering focus on aligning with leading retail partners to deliver compelling value within the Active and Early Play category. Looking ahead, we are highly encouraged by rising retail confidence and growing consumer engagement across Action Sports as the industry builds towards the 2028 Summer Olympic Games. Skateboard sales trends are once again approaching elevated levels seen in 2020 and '21, figuring the renewed demand and sustained category momentum. This strengthening trajectory across skateboards and the adjacent Action Sports segments positions the company to further accelerate investment in innovation, expand strategic partnerships and drive durable long-term brand growth and shareholder value. With our Disguise business, we supported a wide range of new theatrical releases, we're excited to support Toy Story 5, which debuts in late June as each installment of this franchise has been great for the costume business. Also from Disney will be the Moana release and the latest Ascendant's installment, Wicked Wonderland. The second half of this year also has new movies coming from Minions as well as PAW Patrol. We will have some exciting new additions to the lineup coming from some new licensor relationships we've been busy establishing. So keep an eye out for these announcements coming soon. Finally, Halloween is once again on the weekend in 2026, Saturday, to be specific. So ideally that drives more energy and activity beyond traditional trick-or-treating. Those give you some highlights we're seeing coming into the market in the first half of the year. We remain very focused on some additional launches that we will have more in 2027 impact. Even if we can drop in some initial exclusives before the end of this year. Although a lot has changed in the past 12 months, we feel we are stronger in position today with more paths to grow than a year ago. Currently, we see this year as a low to mid-single-digit top line growth year with a continued focus on expanding margins, while we set up to maximize the potential of several potentially impactful new launches in 2027. There's still a lot of work to do, but I'm pleased with our progress to date and been able to share more publicly about some of the exciting things we've been working on. And with that, we'll take a couple of questions. Operator? Operator: [Operator Instructions] And our first question comes from Eric Beder of Small Cap Consumer Research LLC. Eric Beder: A lot going on here. Let's talk a little bit about the whole FOB model. When you look -- obviously, that got disrupted last year with the tariffs and other pieces and ramping it back up. When you look at that model and your retailers are seeing for '26 and beyond, is it back to the way the model was? And what kind of tweaks are you doing? If not and it's not what kind of tweaks are there being done in the model in terms of how the retailers and yourselves are handling the FOB model? Stephen Berman: Firstly, thank you, Eric. We're continuing to focus on an FOB first business that's been since inception. Last year, we stayed very focused on it as well, but we had to adapt based on where we manufactured, whether it was in China, Indonesia, so on and so forth in Southeast Asia. So we had a slight decrease in FOB, but not materially. Back into 2026 and '27, we will be moving forward again on an FOB first basis. At the same time, a lot of the major retailers in the U.S. have a first cost of sale program that we work with them to have the impact of the tariff be less of an impact to them and ourselves at the same time. So we're working through some of the major customers and secondary customers on a first sale basis. So we've learned a lot through this tariff, call it, congestion and confusion throughout last year, but we have a pretty good handle on it with our retail partners who we've worked extremely closely with. And our sales teams that are really entwined with our major retailers have worked very hand-in-hand with the buyers as well as the financial side of our retailers. To make sure that we stay focused on an FOB basis because it behooves both the retail for them to make more margin, behooves JAKKS as a sense of cost of capital, and it allows hopefully, the consumer to have a little bit lower price and bringing it in on a domestic basis. Eric Beder: How should we be thinking about the international opportunity with FOB? I know that you mentioned the inventory rose a little bit, primarily because of the international players. And some of them aren't, I guess, physically -- or physically big enough to do this. What's kind of the thought process there? Stephen Berman: Again, as a company and whole, not just in, call it, North America, but worldwide, we are a primarily focused FOB company. But in order for us to expand and see the growth that we are achieving, both in Latin America and EMEA and now new focuses -- additional focus is Southeast Asia. We do need to have distribution centers across strategic areas in order for us to achieve the customer base that is less the size of the major retailers that you see. In Europe, there's a lot of smaller customers that make up a lot of the business. So we have a mix on an FOB basis first and then follow up with domestic inventory in order for us to achieve growth as required in those territories. Many of the customers are not large enough to do an FOB and order a container or so on and so forth. So we adapt to that and work with them by each of the segments in which we're in, whether it's the Disney segment, the boys segment, seasonal and so on. So where appropriate, we work correctly with the retailer on the size of the product, pricing of the product and the bulk of the item in order to have the best shipping cost for them and price points to them. So we have warehouses of 5 different parts of the EMEA. We have it in Latin America. And we've now, as you see, at the end of this year, we brought in inventory to help us grow those areas with an FOB first basis as well as the backup inventory on a domestic basis. Eric Beder: Okay. Obviously, this year was tough for the entire toy industry. You guys managed to maintain your cash -- no debt basis, lots of cash. How have you -- have you been able to lever that? It sounds like you have based on '27, how are you able to deliver that in terms of adding new licenses, expanding the relationship and kind of moving up the ladder in terms of kind of the licensee of choice going forward? Stephen Berman: One thing, being healthy and clean and having a strong balance sheet. The licensors appreciate it very much. There are always in companies that have financial issues, and they don't want to take the risk of someone ruining their opportunities within their owned IP. So we, with that, have been very focused, not giving away top line revenue and to erode our profit, we took what was the right approach with retail, retail inventory and our own inventory to not push for higher sales and have that erode margin. We focused on margin with healthy sales. And as you can see, I think we were up 380 basis points for the year, for the quarter, as for -- I'll go back to give you the exact numbers. But we focused on the margin enhancement and retailers and licensors like that. At the same time, we've done an expansive amount of traveling worldwide, working on new initiatives, and we have some really exciting initiatives coming forward, and we'll be excited to talk about as soon as some of these deals get all accomplished. But during this period of time, we have focused on building '26 and '27 aggressively, and licensors have all fallen in line with us and are very supportive. Eric Beder: Okay. I know you don't give financial guidance, but just conceptually, Q1 last year was an extremely strong quarter. It was also a quarter, I believe, where you had a significant amount of product that was shipped early because people wanted to get in front of tariffs. How should we be thinking given that the flows in the quarters are so up and down last year, just conceptually in terms of how this year is going to flow? John Kimble: Yes, I'll jump in on that a little bit. To your point, Q1 was a really robust quarter for us this year -- this past year. And on one hand, we have some momentum, shipping product for Super Mario Galaxy as we pointed out in the call. But at the same time, too, is long-time listeners know, Q1 is always our smallest quarter. And so I've made the comment in the past. Q1 for us or maybe for everyone in the industry is like a Q1 of a basketball game, don't get 3 files at the end of the first quarter, and you'll kind of be okay. So really, we're probably thinking more first half, second half. And as to where the line gets drawn at the end of Q1, to be honest, we're not really overly fixating on it. Operator: And our next question comes from Gerrick Johnson of Seaport Research Partners. Gerrick Johnson: So one on POS. What was that in the quarter? How did it trend and evolve through the quarter? And then inventory at retail, what does yours look like? But also more broadly, the industry, is there any pockets of inventory that could clutter and affect the industry that way? John Kimble: Yes. So I'll take the first part of that, and Stephen can circle back on the inventory piece. From a POS point of view, you can read into the fact that we weren't bragging about it. It is that we weren't thrilled with it. But as we mentioned on the call, the super hot, like new launch items blew through in a way that we were happy to see and gave us confidence that broadly what we're doing. But I think broadly speaking, with where we saw higher retailer prices, that slowed down POS for those segments. So notwithstanding all the other kind of hair on the topic of POS in terms of what is the underlying margin for that POS, I think that's kind of what we'd have on that. From a retail inventory point of view, Stephen is a little bit closer to that. I'll let him... Stephen Berman: So I'll go through some of the two major retailers in the U.S. We're down at one of them, down 21% year-over-year and down about 4% on another. So our inventory at retail is very tight for us, which is good. We did -- again, as I said earlier and Eric asked the question, is we did not want to chase top line and worry about the inventory levels after the holiday season. So we really focused on shipping what was appropriate and focusing on profitability. And to answer what I did -- I mentioned earlier, I just want to make sure I clarify. We were 380 basis points higher in margin for fourth quarter than the year prior. I just want to make sure I got that out there. Gerrick Johnson: Yes. No, that's impressive. And so how would you describe the promotional activity and perhaps sales allowances in the fourth quarter? Stephen Berman: For us, they were quite normal or a little bit less than normal for I think a lot of the major -- our competitors put a lot of heavy in discounting and promotional. But to me, looking at what we've seen throughout the year, it was a very cautionary year because of the tariffs and not knowing what the consumer kind of appetite was. So again, we're pretty close to what we do. We sit with the factories, we sit with the retailers. So we did hear there's a lot of promotion activity that was done heavily in November, December. But for us, there wasn't much. Operator: This concludes our question-and-answer session. I'd like to turn it back to Stephen Berman for closing remarks. Stephen Berman: Ladies and gentlemen, thank you for today and finalizing and finishing 2025, and we are extremely excited for '26 and '27 and look forward to our next call. Thank you again. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to Live Nation's Full Year and Fourth Quarter 2025 Earnings Call. I would now like to turn the call over to Ms. Yong. Thank you, Ms. Yong. You may begin your conference. Amy Yong: Good afternoon, and welcome to the Live Nation Full Year and Fourth Quarter 2025 Earnings Conference Call. Joining us today is our President and CEO, Michael Rapino and our President and CFO, Joe Berchtold. We would like to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings of Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in our earnings release. The release reconciliation can be found under the Financial Information section on Live Nation's website and with that, we will now take your questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And the first question comes from the line of Stephen Laszczyk with Goldman Sachs. Stephen Laszczyk: Maybe to kick it off on the outlook for Joe. I wanted to see if you'd be willing to talk a little bit more about the building blocks to the outlook for double-digit AOI growth in 2026. Just curious if you could talk a little bit more about the puts and takes investors should be keeping in mind as they thinks through segment contribution this year. And ultimately, just at a high level, what's giving you confidence as you sit here today looking at the business, ahead for the next 12 months or so to guide for double-digit growth despite some of the headwinds. I think we're seeing Ticketmaster and then some of the preopening expense at Venue Nation on the back of some investment there, just the confidence in the double-digit guide despite some of those factors? Joe Berchtold: Sure. Happy to give you that guidance. So let's just take it by division. So sponsorship straightforward, expected to continue to be up double digits. AOI this year were over 70% booked and running double digits ahead. So I think we've got a pretty good visibility into the pipeline there to give us that confidence. On ticketing, I'd say we're not expecting a lot out of it this year. We've got some underlying mid-single-digit growth we've got some onetime headwinds on secondary and we'll let somebody else ask the question on that, we go into more detail on it. But -- so we're not expecting a lot there even with some underlying health and improvement on the fundamentals. And then it really comes down to concerts, getting some double-digit solid growth out of that, which, as we look to our supply-demand dynamics, we lay a lot of them out in the earnings release on the demand side, where we continue to see extremely robust demand on all aspects of the business globally. On the supply side, we gave you that the large venues were up. AMPs are up versus '24 and '25. We got about 80% of our shows booked. So we're optimistic that we can maintain staying ahead of '24 and '25. Arenas are up double digits in terms of our show count and now, which is largely U.S. driven. Last year, it was really international driven. This year, you got more U.S. driven. And then stadiums were up double digits. We've managed because of the forward planning to get the U.S. to be up a bit, but it's really driven by international being well up on stadiums even after a banner growth last year. U.K. and Europe, in particular, really seeing strong growth in our stadium business. Stephen Laszczyk: That's helpful. And then maybe just as a follow-up, Michael, if you could put a finer point on the outlook for supply in 2026, and Joe mentioned up double digits across a number of different verticals there, but just as you think about the quality of that supply and maybe some of their early demand indicators you're seeing across the footprint, other that stadium, amps or arenas, domestic versus internationally? Any trends or ways to compare what you're seeing play out today looking ahead for 2026, how that might have compared to where you were 12 months ago looking ahead to '25? Michael Rapino: Yes. I think we're continuing on our theme we've seen for multiple years now. It's a global business and continuing markets are growing. So that will be an ongoing theme for many years to come, new markets, extended markets around the world doing more shows, more demand from the consumer from all corners of the globe. #2, you see it on all Venue segments from my club business to stadium. It's all doing more business, more tickets, more shows. So the pie is growing on the complete supply side to fill the pipe and multiple pipes as I said, from top to bottom. So we don't see any new trend that we haven't kind of stated for the last few years that we think this is a continual growth industry on a global basis high single digits on an industry-wide and hopefully, we'll continue to beat that because we do believe that both the supply of the artists, more bands on the road and more fans want to see those artists, those 2 will continue to drive all segments, all geographies over time. Operator: The next question comes from the line of Brandon Ross with Lightshed Partners. Brandon Ross: Maybe switching gears to the DOJ. Yesterday, the judge partially granted your motion on the summary judgment dismissing claims that you're a monopoly and promotion and booking. I guess you're still going to proceed to trial on Venue-facing ticketing and [ AMPs ] time. But can you tell us your opinion on what the dismissal means for a potential breakup of the company and other structural or behavioral remedies? Joe Berchtold: Thanks, Brandon. Yes, we were obviously very pleasantly surprised. We never expected to get much of anything on that ruling, but pleasantly surprised that they're seeing the facts laid out on the table. As you said, the first thing that they determined was that the promotion and booking services are not a monopoly. It's not an accurate market definition, which in our minds, really takes away the breakup of the company argument because the breakup of the company argument was founded on some notion of mutually reinforcing monopolies. And they just found that the promotion and booking side isn't. So we think that, that is critical element takes away that edge risk that some folks had. And then the other key thing that they decided was that the national consumer monopoly market was also dismissed. And so what that means on a practical basis is they need to demonstrate that Ticketmaster's so-called monopoly harms the venues, not that they can just say it harm's fans, which would be a more emotional topic. So we think that also makes the case somewhat more difficult for them. So we're very pleased with yesterday. Brandon Ross: Okay. And switching agencies to the FTC. It's been several months, since the FTC hoopla started and you took a bunch of steps aimed at bad secondary market behavior. You reiterated in your answer to Stephen's question that it's having a real impact on Ticketmaster's secondary business. But can you tell us your view of the impact that your initiatives are having on the broader industry? And then maybe in the wake of the Senate hearing and the secondary price cap legislation that we're seeing. How you see the future of the secondary industry playing out in general? Joe Berchtold: Sure, I'll take the first part and I'll let Michael take the back part. In terms of what we're doing, I would put it in 2 buckets, what we're doing. 1 is -- as it relates to allowing brokers to sell tickets on our platform, we took some immediate action shortly after the FTC lawsuit that dramatically restricts the brokers, who have tickets from selling them on our platform, limiting them to 1 broker account per tax ID and the number of tickets being sold needing to stay within the limits. So the impact of that has been to substantially reduce roughly cut in half the number of tickets that are being listed by brokers for concerts on our platform. Now we think a lot of those are still being sold on the other platforms at this point, pending them taking similar steps. But the -- but we're also taking additional steps to stop the scalpers from getting the tickets in the first place. So we have ramped up our efforts starting with account creation and using identity verification more in account creation. We are increasing the use of various tools, including identity verification for artist sign up and for queues to try to give real fans a better chance than the brokers in terms of buying the tickets we're increasing our use of face value exchange. All of these tools, we think, have been effective in helping shrink the overall industry and keeping the artists with more control over tickets and their relationship with their fans. I don't know, Michael, if you want to comment on legislation. Michael Rapino: I guess, legislation is, obviously, a lot of it's going on a state-by-state level. We've been very clear that we're supportive of giving more control to the artists, we're in support of price caps because we don't seem to be getting more nuanced solutions to give the artists that control, and we'll continue to support that artist agenda. Joe Berchtold: And just to jump in, I'm Joe, on where the -- the Canadian say, where the puck is going. We clearly -- we've been saying this for a few years. There is a momentum in the air around secondary in general on the consumer side. and then from the artist. So we like that. We -- we're doing everything we can to build tools for the artists. We just launched something with Noah Kahan this week to do a better job. It's not perfect, but it's much better identifying -- we've rolled out a program with Kid Rock, worked hard with Kid to figure out how we can help him. I think we have over 100 artists now using face value exchange. So we're liking where this is headed. We believe that artists will continue to gain more control want to find better ways to limit secondary and the company that has more of the tools will win in the end. And ultimately, I think legislation will creep in as it is state-by-state to aid in their fight against secondary? Operator: And the next question comes from the line of David Karnovsky with JPMorgan. David Karnovsky: I guess, first for Joe, it'd be kind of helpful if you could dig in a bit more on the demand side of what you're seeing in terms of the indicators you could parse that by regions or venues or consumer segments, that would be helpful. And then for Michael, you've been quite active in arena acquisitions in Europe over the past few months. So I wanted to see if you can speak a bit more to the playbook there in terms of kind of the investments you're making into those venues and then just how it plays into your broader goals across the continent. Joe Berchtold: Sure. On the demand side, we're continuing to see very strong consistent demand. We gave you on the earnings release, a number of specific points on just the volume of fans that are showing up for artists how tremendously popular they continue to be. It also flows through to festivals. We continue to see strength of demand at the club and theater level. I think, the thing that to continue to remind ourselves to continue to remind you guys is, if you look at the U.S., 75% of the tickets are under $100. Artists are acutely aware of the need to have all of their fans be able to afford to buy a ticket, maybe not the front row, but to buy a ticket and they're very focused on keeping it affordable. So we're not seeing any pullback, any issues whatsoever in demand for any budget conscious fans. Sorry, Michael, you're on mute, if you want to... Michael Rapino: Sorry, I was just jumping in on answering your Venue Nation question. You've seen some announcements we're thrilled with the progress we're making. We outlined in our Investor Day, we have a large pipe around the world in arenas, some amphitheaters, 5,000 seats key markets around the world where we can add into our portfolio. So we're thrilled that division is growing on a global basis, hitting all of our benchmarks, the returns we're looking for and much more to come. Operator: And the next question comes from the line of Cameron Mansson-Perrone with Morgan Stanley. Cameron Mansson-Perrone: 2, if I could. On ticketing GTV growth, I know there was some lighter sports and third-party activity in the first half of the year. But curious how that subcategory grew in the second half of the year and just any kind of forward indications of how those kind of 2 areas of the ticketing business are pacing looking ahead of the '26. And then separately, Spotify, the other week reported facilitating about $1 billion, and I think it was over $1 billion in ticket purchase activity through the platform. I'm curious your thoughts on -- do you think that integration is growing the industry overall? Or is it just shifting the point of discovery. Any kind of feedback on how you view that integration and it's success would be helpful. Joe Berchtold: Yes. Just on Ticketmaster in terms of the GTV. So we ended the year with GTV growing about 6%, which was driven by concerts, really fully 9% increase in concerts with a 1% decline in sports and other third party. So as we look to this year, we expect to see that probably accelerate a bit. I think we'll see some come back on the other pieces over the course of the year. You need to see it play out, but we feel good about the runway that Ticketmaster's on an operational basis. We didn't think the majority of it will come from concerts, but it won't be overwhelming as it was this year. Michael Rapino: On distribution, Cameron, there's almost 2 businesses. There's the superstar stuff that has incredible reach tends to sell out on its own. And we don't need much help on that the artist has such a medium and efficiency. But a lot of the stuff that doesn't sell out around the globe, we love all of our distribution partners, Spotify, the Facebooks, Verizon. We've had lots of different partners, who help us reach bands and some of those shows that the Tuesday Night Show in Indianapolis that isn't sold out, we'll take all of the reach we can to help get to those customers. Operator: And the next question comes from the line of Robert Fishman with MoffettNathanson. Robert Fishman: 2 for Michael or Joe, please. First, I appreciate the extra disclosure on Venue Nation. Just given the preopening costs ramping up in '26, can you help us think about the overall ramp and trajectory for Venue Nation on a total portfolio AOI basis to reach that run rate in '28 and '29, that you called out? And then separately, when you think about the longer-term Venue Nation opportunity, how big of a contributor is international versus U.S. when you're thinking about that going forward? Joe Berchtold: So just first on the specific numbers. So this is the first time we've given you the exact numbers, but I think we've been talking about this concept for a while, which is you've got a bit of a ramp-up costs as we build out Venue Nation and some of those ramp-up costs are going to be large as a percentage of the benefit in your first few years. So you're seeing that $25 million cost this year, ramping up to -- sorry, last year, ramping up to $50 million this year. I don't expect it to continue increasing at that level as we get to more of a steady state. And then we start to get the full mature, when the buildings have been open 2 to 3 years. So I would expect we give you the fan count for both buildings that we opened last year in buildings that we're opening this year and how that is going to a steady state. We've given you the profitability per fan in different forms. I mean you can probably model out how you see the increases. But and then look at that in the context of the Investor Day and what we gave you over the multiyear in terms of the Venue Nation potential. So that should help you triangulate on the rate of increase. Robert Fishman: And just like when you think about international... Joe Berchtold: Yes, in terms of long term, clearly, international is a huge focus for us, both Latin America, Europe Asia, all areas, really, I don't think about it in top cities, more than markets, but you are underdeveloped in the international markets on key arenas because you don't have the NBA, NHL infrastructure like you do in the U.S. So we're seeing tremendous opportunities, whether it's building a new venue. We're going into a market like Paris with lot of fans, tremendous arena, great potential there. Didn't have the full rigging to hang a modern arena show, modern arena production. So after that acquisition closes, we'll do some renovations we expect it will help expand the marketplace, to be able to draw a lot more shows to that market help us grow the overall business. Operator: And the next question comes from the line of Kutgun Maral with Evercore ISI. Kutgun Maral: I had a few more on Venue Nation. First, Joe, to follow-up on what you just said, when we do use all the helpful detail you provided at the Investor Day and try to triangulate the rate of increase in the Venue Nation AOI. It really looks like this year 2026 could be an inflection year. And when you look at the AOI, the fan count build and revenue and AOI. It seems like it could accelerate further in 2027 and 2028. I know you don't provide specific guidance, but is that just the right framework to perhaps think about what's going on underneath the hood with not just Venue Nation and concerts, but maybe on a consolidated basis as well? And second, the acquisition of ForumNet Group in Italy was interesting. I know the heart of the deal was centered on their arena -- but there are 2 other venues in their portfolio as well. So I want to see if acquiring companies that operate in multiple venues could play a more prominent role in scaling Venue Nation going forward? Or was that more of a one-off? Joe Berchtold: Yes. And just in terms of the ramp, I think you will see an acceleration that you would naturally have if every set of venues that you get, if you build one, there's probably a 3-ish year to run rate when you buy them maybe a 2-year to run rate. So as we build that base, you're going to naturally get the benefit of all the pieces. I mean, just to give you a little bit of context. So if you look at how we envision building our owner/operated fan count this year, I'd say it's kind of 20% from venues we opened in '25 about 1/3 from venues we opened in '26 and about half organic. So if you think about that playing out as you add new venues, yes, you're going to accelerate your rate of increase because you just have more pieces that you're adding into that funnel. So I would absolutely expect each year to help grow that base of fans in our operated venues. Michael Rapino: Venue Nation, it's just a one-off. We're not looking to buy venue management companies. We don't love the return on those businesses as much as we like owning the venue and fully taking over the P&L. So in this case, they were added bonuses but not a regular strategy. Operator: And the next question comes from the line of Batya Levi with UBS. Batya Levi: Great. Just a follow-up on the demand side. Can you provide a bit more color on the recent down sale activity and sell-through rates, how they stack up advanced last year into the summer pipeline? And maybe a bit more color on consumers' willingness to pay up against higher ticket prices for the World Cup that we're seeing now? Joe Berchtold: Yes, in terms of the on sales, we're seeing consistent performance with overall demand sell-through levels as we were seeing last year. Obviously, every tour is a little different. We gave you a few at the very high end in the release with Harry Styles and BTS and Bruno Mars showing levels of demand higher than we've ever seen before. But in general, we're still seeing front to back the ticket selling across all the different sizes of venues. And then we're obviously -- we're not involved in FIFA at all. We're not involved in selling their tickets, so we can't really opine on what they're doing. What we do know is for the concerts, the artists are very acutely aware of who their fans are and how to manage that relationship with them and how to manage the brand. And as I said earlier, they're making sure they're pricing their tickets. So all their fans can get in the building and the front of house, where -- they think it's going to end up being somebody buying on secondary, if the brokers take them to get a big arbitrage, they'll take more of that money for themselves. So I think you're continuing to see that same macro story play out. Operator: And our final question comes from the line of Peter Henderson with Bank of America. Peter Henderson: Yes. So I mean, it seems like you're seeing a great international momentum across all regions. But I'm just curious, where you're seeing the best momentum -- is it in Europe, LatAm, Asia Pacific, and sort of what's the mix shift implication for margins and capital needs based on that? And then what's the biggest constraint internationally right now? Is it venues, local partners, regulation or for talent routing? And I have a follow-up. Michael Rapino: Yes. We're seeing all the countries equally have the appetite for that live show. So whether it's Sao Paulo or Milan, the major cities around the world all want to have superstar. Peter Henderson: Great. And then I guess when you -- when Ticketmaster, venue chooses Ticketmaster today, what are the top 2 or 3 differentiators that are consistently closing the deal for you guys? Is it the fact that you have the best technology? Is it the fact that you're investing tremendously in fraud tools or bot prevention. Just curious what your feedback is on why venues choose you so frequently? Joe Berchtold: Yes. I think #1 reason why they choose us is because we just sell more tickets. Empirically a promoter or a manager would tell you, they look at the shows on the tour, the Ticketmaster ones are most effective at helping them sell the most tickets. Getting the highest grosses from their show. So what they can do in terms of using our distribution, using our marketing capabilities in terms of using our pricing tools to make sure they understand what's the right level to get to all the fans. So that's the #1 reason. And then depending on the marketplace in the U.S., where it's more mature, it's going to be more economics driven. In other markets that are less mature, some of the other software tools on the venue level are going to matter more. But selling tickets is the overriding that #1 factor. Michael Rapino: My apologies, the line had dropped, but it looks like you took over, Joe. Thanks. Operator: Thank you, ladies and gentlemen. That does conclude the question-and-answer session, and that also concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Carolina Velásquez Zuluaga: Good morning, everyone. Thank you for being here with us today to discuss our fourth quarter results. My name is Carolina Velásquez. I am Cementos Argos' Investor Relations Officer, and I will be hosting today's call. On the call today are Juan Esteban Calle, our CEO; Felipe Aristizabal, our CFO; María Isabel Echeverri, VP of Legal Affairs; Carlos Yusty, VP of the Colombia Division; Gustavo Uribe, the Leader of Central America; and Jason Teter, the newly appointed CEO of Argos Materials. First, I would like to ask you to carefully read the legal disclaimer that is currently being projected on the screen, which is also available on the presentation that is posted on our website. Please consider that all the discussions of the financial and operational results held during the call will be based on the adjusted figures, excluding nonrecurring and noncore operations. For a detailed reconciliation of the adjustments, please refer to the annexes of our presentation. Today, after the initial remarks, there will be a Q&A session. [Operator Instructions]. We will record this session and upload it to our web page. It is now my pleasure to turn the call over to Juan Esteban. Juan Esteban Calle Restrepo: Thank you, Carolina, and welcome to everyone joining us today. 2025 was an exceptional year for us and I would like to highlight 3 key achievements. First, our LatAm operations, which showed remarkable resilience in overcoming challenges across core geographies, emerging stronger and more efficient to capture future opportunities. In other markets, we leverage favorable dynamics, deep industry expertise and long-standing client relationships to deliver a differentiated value proposition. As a result, we delivered an EBITDA of COP 1.28 trillion, achieving a 25% margin 1 year ahead of schedule. This accomplishment was supported by a highly sustainable operation reflected in our score of 86 out of 100 in the 2025 S&P Corporate Sustainability Assessment, a rating that positions us among the top performers in our industry. We feel immensely proud of this result as a reflection of the unparalleled execution capabilities of our teams. Strategically, we are well positioned for continued growth across the region, including Venezuela's recovery, where our brand already enjoys strong recognition. In preparation for a transition in Venezuela, we started positioning our brand in the market since 2023. Today, we export nearly 1,000 tonnes of white cement each month and are ramping up the exports of gray cement to about 900 clients, covering 23 states and districts of Caracas with the goal of exceeding 5,000 tonnes per month very soon. We are convinced that with our proud operational experience in the country and the pending legal claim that we have for the expropriation of our cement assets in 2006, we are in a prime position to take advantage of the eventual reconstruction of the country. Second, for our shareholders, 2025 was a record year in distributions with over COP 3.5 trillion return through dividends, buybacks and the spin-off of Grupo SURA shares, boosting total shareholder returns to over 700% in U.S. dollars since the launch of the SPRINT program through January of 2026. Third, our U.S. expansion. We reentered the market through the launch of our aggregates platform, successfully advancing the first phase of our growth strategy. Our first shipment of 47,000 tonnes are already in Tampa, and we secured 2 additional positions on the Southeastern Coast of the U.S. A key milestone was the appointment of Jason Teter as CEO of Argos Materials, LLC. Jason brings extensive leadership experience from Vulcan Materials and Lafarge USA with a prudent track record in strategy and business development, operational excellence, disciplined growth and commercial strategy in the U.S. aggregates sector. We are thrilled to have Jason on our team. With this brief overview, I would now like to invite Jason to introduce himself and share his perspective on our U.S. strategy. Jason Teter: Thank you, Juan, and good morning, everyone. It is with great pleasure that I today joined my first earnings call as part of the Cementos Argos team. As I have said, it is an honor to assume the role of CEO of Argos Materials at such a relevant moment for the company. Cementos Argos has a clear vision, a strong culture, strategic assets and an exceptional team. I'm excited to build a world-class team to lead this new phase and contribute to creating a differentiated platform that delivers high quality, high-impact solutions for our customers in the United States. I want to start this short intervention by reminding everyone of the great opportunity that lies before us. Aggregates is a large industry in the U.S. They are the backbone of concrete, asphalt and infrastructure projects. Its production is closely related to the population base and follows population growth. Combined, construction aggregates made up over 50% of the total U.S. industrial minerals value surpassing cement that represents around 16% of all other segments. Its main attribute is the constantly compounding growth of its price throughout the last 24 years with an average growth rate per year of 4.9% between 2000 and 2024. This performance is supported by 4 drivers: scarcity of reserves, market dynamics that enable the formation of micro markets shaped by logistics, operational characteristics and high barriers to entry. Argos has the right capabilities to capitalize on this opportunity with premium source assets in Central America and the Caribbean, a unique firepower to acquire and develop synergistic assets in the U.S. expertise and robust network at imports' sources and a strong reputation and extensive experience in the U.S. market. It is strongly positioned to become a relevant market player and generate value to its shareholders. We have a goal of building a business in the next 5 years that will earn more than $200 million. The strategy is a hybrid approach, combining organic and inorganic growth with an aggregates platform focused on imports and local supply capabilities. We will give further details on the business plan soon and keep all the market informed about our advancements. Thank you. Juan Esteban Calle Restrepo: Thank you, Jason. Now I would like to invite Felipe to walk us through the performance of our SPRINT program. Felipe Aristizabal: Thank you, Juan, and good morning, everyone. 2025 and the first few weeks of 2026 have been extraordinary for SPRINT. By the end of January, we achieved a cumulative total shareholder return of 764% in dollars since the programs launched in February 2023, reaching $1.2 billion in shareholder distributions. We believe this momentum will continue, supported by the strategic objectives outlined in the fourth edition of the program and our strong position as an issuer poised to benefit from the emerging markets cycle already underway. We'd like to introduce SPRINT 4.0 and provide detail on its pillars which now extend over a 2-year period to incorporate initiatives requiring longer execution time lines. In the first pillar, in terms of financial results, we are already operating at a top-tier industry level in terms of margins and return on capital. We acknowledge that presidential transitions in key markets such as Honduras and Colombia may challenge further margin expansion in the short term. Our goal is to maintain profitability between 24% and 26%, enabling us to deliver an EBITDA between COP 1.3 trillion and COP 1.4 trillion by 2027. We also expect to sustain ROCE above 16% over the next 2 years. For the second pillar related to distributions to our shareholders aiming to boost the TSR, we rely on 2 mechanisms: dividends and share buybacks. For dividends, we are considering an ordinary dividend of COP 430 per share, representing an 11% increase vis-a-vis the ordinary dividend paid in 2025, distributed in 4 equal installments and an extraordinary dividend of COP 150 per share payable fully in April. For buybacks, we are proposing to roll over the program and top it up to COP 450 billion for the next 2 years. These distributions underscore our commitment to delivering tangible value to our shareholders while preserving ample flexibility to advance our growth agenda. Our third pillar consists of our share liquidity. We remain highly optimistic about the inclusion in the MSCI Emerging Markets Standard Index in the near future as our share has exhibited a strong performance this year. We surpassed the highest nominal price in the company's history and closed January at COP 13,820, a 30% year-to-date return. Moreover, our average daily trading volume increased by 13% vis-a-vis the 2025 average, a clear reflection of growing investor interest, market visibility and LatAm equities momentum. To further strengthen liquidity and support both existing and new investors, we are implementing a dual market maker model, in which 2 independent firms with differentiated strategies will operate simultaneously. Finally, under the fourth pillar of this new face of SPRINT, aligned with our strategic priority to expand in the U.S. market, we are introducing key milestones to enhance visibility and enhance monitoring of progress across both organic and inorganic initiatives, as Jason mentioned. For organic growth, we reaffirm our target of generating approximately $100 million to $150 million in additional EBITDA by 2030 with investments of less than $500 million. The milestones enabling these include securing DOT certification in all operating states, enhancing logistics efficiencies through the development of a proprietary port in Dominican Republic and obtaining 2 additional marine terminals in the U.S. Southeast Coast, scaling production from our Dominican Republic and Panama quarries to exceed 3 million tons dispatched by 2027. And finally, achieving a positive EBITDA by the end of 2027. In our inorganic strategy, we aim to complete a medium-sized acquisition that provides local use presence along with more than 3 bolt-on transactions, seeking to generate an additional $100 million to $200 million in EBITDA by 2030. Additionally, in 2025, our cash holdings generated an average return of SOFR + 17 basis points, totaling around $100 million, through a strategy executed with global asset managers under the parameters set by our Board of Directors. In conclusion, with our clear strategy, a strong balance sheet and disciplined execution, we are well positioned to capture opportunities and generate long-term sustainable value. Juan Esteban Calle Restrepo: Thank you, Felipe, for your intervention. I would like now to comment on our consolidated results. Since the beginning of the year, our core markets such as Colombia and Panama, exhibited signs of complex dynamics. We had to rapidly adjust our business model for these conditions. In this short but profound reinvention process, we found ourselves developing key operational and commercial capabilities and strengthening our relationship with main stakeholders. Today, we feel proud of the results achieved and moreover of the solid foundations we have built for growth when the time comes. During the entire year, we dispatched 9.3 million tons of cement remaining flat versus 2024 as a result of mixed performances with a particularly sharp decline in exports from Colombia due to our decision to shut down kiln #3 in Cartagena in August of 2024 and a contraction in demand from the U.S. last year. In ready-mix, we dispatched 2.3 million cubic meters of ready-mix, which represented a decrease of 12%, mainly driven by the slowdown of the housing segment in Colombia and still affected by the lack of housing subsidies from the Ministry of Housing and the transformation in this business line strategy in Panama. However, fourth quarter volumes went up year-over-year, both for cement and ready-mix with growth rates of 3% and 2%, respectively, reflecting an improved environment. We achieved full year revenues of COP 5.2 trillion and adjusted EBITDA of COP 1.3 trillion expanding 6.6% versus last year and aligned with the upper limit of our full year guidance. This EBITDA performance was complemented by an adjusted margin of 25%, which meets our guidance one year ahead and [indiscernible] expansion of 215 basis points versus last year. The fourth quarter consistence on profitability focused initiatives was key for the consolidation of the results as we delivered COP 347,000 million of EBITDA, representing a 27% margin. Moving into the regions, we find positive results overall. We have seen a clear recovery of the industry in Colombia that ended up with a solid growth despite sharp first month decreases, strong economic fundamentals driving up consumption in Honduras and Guatemala and a still robust demand in the Dominican Republic. Now I would like to invite Carlos to discuss further on the financial and operating results for Colombia and our market strategic perspective. Carlos Horacio Yusty Calero: Thank you, Juan, and good morning, everyone. Since May 2025, we've seen a clear recovery in the Colombian cement market, with volumes trending upward after 7 months of contraction. Industry demand reached 12.7 million tons, up 5% year-over-year. And as we mentioned in our last call, the retail segment has been the main driver, growing 11% year-over-year, fueled by self construction. Our total cement volume for the year reached 3.9 million tons in the local market and 1.2 million tons in exports. The decline in exports versus 2024 was driven mainly by lower dispatches to the U.S. affected by the weakness in demand in this country. And ready-mix in line with the industry recovery observed since September, we had our first positive quarter of the year, contributing to a total of 2.1 million cubic meters for 2025. Quarterly revenues came in COP 735 billion with an EBITDA of COP 226 billion, representing a 9.3% increase year-over-year and a 30.7% EBITDA margin. In addition, I'd like to emphasize that fourth quarter delivered the best historical EBITDA per ton whichever recorded, reaching $53 per ton. This underscores the consolidation of our profitability strategy, supported by strong operational reliability and the positioning of our value proposition, which continues to deliver top level products and services to our clients. For the full year, revenues reached COP 2.8 trillion and adjusted EBITDA of COP 812 billion, up 3.6% versus 2024 with margin expansion of 182 basis points, reaching 28.4% despite a challenging start of the year to capture efficiencies across the value chain by approximately COP 70 billion, focused mainly on fixed costs, delivering positive consolidated results and building a solid foundation to leverage the ongoing market recovery. Our free cash flow conversion ratio reached 76% of EBITDA, underscoring the strength of our cash management strategy. This together with our EBITDA margin and return on capital employed are the highest levels in the last decade, reinforcing the strength of our results. Looking ahead, we expect cement and ready-mix market to continue the recovery path driven by demand in major cities and further momentum from self-construction. In the midterm, we remain optimistic supported by housing sales growth of 25% year-over-year and a robust pipeline of more than 100 projects, including Túnel de Oriente [indiscernible] and Metro de la 80. Regarding the recent minimum wage increase, we are conducting a thorough review of our operations to identify efficiency initiatives that can offset this impact and we already obtained encouraging results. Nevertheless, we foresee some short-term impacts derived from the higher-than-usual increase. We have developed a best-in-class operation and are confident in our ability to further strengthen performance and enhance profitability by capitalizing on market upside, operating leverage and potential pricing traction with the goal of reaching an overall EBITDA increase of $60 million in the next 3 to 5 years. Juan Esteban Calle Restrepo: Thank you, Carlos. We would like to invite Gustavo to comment on the result of Central America and the Caribbean. Gustavo Adolfo Uribe Villa: Thank you, Juan, and good morning, everyone. In the region, cement volumes showed solid growth, reaching 1 million tons in the quarter and 4.3 million tons for the year. This represents a year-over-year increase of 12.6% and 8.6% with most of our operations outperforming their markets. In ready-mix, the downward trend continued aligned with industry contraction and our strategic decision to scale back this business line in Central America. Fourth quarter revenues were $132 million, bringing the full year to total of $554 million, a slight decline versus 2024, mainly due to Panama's contraction. EBITDA reached $34 million in the quarter and $141 million for the year with margins of 25.6% and 25.4%. The 30 basis point margin expansion was driven by the Caribbean where the Dominican Republic and Puerto Rico delivered record profitability. Now let's turn to Central America. Cement volumes in the fourth quarter rose 8.4% (sic) [ 18.4%] to 441,000 tons, supported by strong demand in Guatemala. Revenues reached $59 million with EBITDA of $19 million and a margin of 33.1%, while slightly lower than last year, this margin remains the highest among our regions. Breaking it down by country, Honduras, despite the kiln stoppage in the first half, volumes recovered, ending with 1% growth and margins above 30%. Operational excellence initiatives reduced clinker used to 45% and maintain our kiln OEE above 90% and cut carbon emissions by nearly 20%. In Guatemala, the market grew 18% by November, supported by strong remittances and higher cement prices. We captured record EBITDA and continued positioning ourselves as local alternative to imports. In Panama, industry volumes and prices declined. However, efficiency measures offset the impact. We reduced fixed costs by $1 million and SG&A by $2 million, while expanding contributions from premixed materials, aggregates and terminals, driving 10% operating EBITDA growth. Now let's move to the Caribbean. Cement sales reached 376,000 tons in Q4 and 1.5 million tons for the year, up 4.1%. Revenues were $67 million in the quarter and $275 million for the year, aligned with the volume growth. EBITDA margin stood at 19.7% in Q4 and expanded to 21.1% for the year, thanks to efficiencies across the value chain. By country, in the Dominican Republic, volumes grew 7% despite currency evaluation and increased competition. EBITDA reached record levels, supported by a 30% capacity expansion completed early in the year. In Puerto Rico, industry growth slowed, but we achieved a 20% EBITDA increase and reinforced market leadership with capital-light model. In our Caribbean operations, Haiti moved from negative to positive EBITDA, while Suriname quadrupled its 2024 result. Together with French Guyana, and the Antilles, these markets contributed over 10% of the regional EBITDA. To wrap up, 2025 was a year of portfolio optimization and operational rightsizing. We consolidated the best models to serve each market and strengthen our leadership position in the region. Looking ahead, we are confident that these foundations will support continued positive performance. Juan Esteban Calle Restrepo: Thank you, Gustavo. Thanks to the strong country-level results and corporate initiatives, we successfully met all the objectives outlining our 2025 guidance. Building on these achievements and considering the near-term outlook for the markets where we operate, we are presenting the following guidance for 2026. EBITDA margin, we expect to maintain a margin between 24% and 26% within the next 2 years supported by the consolidation of our commercial, operational and logistical efficiency initiatives across our geographies. Profitability, we aim at further enhancing profitability target a ROCE above 16% for the next 2 years. CapEx. In 2026, we plan to invest between $80 million and $100 million in LatAm with at least $65 million allocated to maintenance CapEx and around $80 million to $100 million in our growth plan in the U.S. Adjusted EBITDA. We project adjusted EBITDA to a range between COP 1.3 trillion, COP 1.4 trillion or the equivalent of approximately $350 million. Representing a midpoint increase of 6% compared to our 2025 results. Net debt to EBITDA, taking into account our current cash position, we have set a midterm target of 2x net debt to EBITDA, which we expect to reach within the next 3 to 5 years as our growth plan advances. We remain confident about the road ahead and reaffirm our commitment to meeting our midterm targets. This outlook is supported by improving market conditions, the effective execution of our optimization strategies and our disciplined focus on sustainable high return investments that will secure long-term growth. Carolina, we can now proceed with the Q&A section. Carolina Velásquez Zuluaga: [Operator Instructions] Please note that Jason has recently joined and is currently reviewing the business plan for the U.S. Therefore, any detailed questions in this regard will be addressed in future sessions. First question comes from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: I guess I have two. The first one is on the ADR listing. I was just wondering if this is contingent on any particular milestone of your strategic path? And what's the timing for these? Or what do you have in mind here? . And the second one is, so you mentioned that this first phase of your strategic review will become EBITDA positive by 2027. So I was just wondering if you can perhaps walk us through the cadence of investments and the path to EBITDA growth in the earlier years. And what are sort of like the key milestones and the gating factors in the process for these aggregates or exports platform. Juan Esteban Calle Restrepo: Thank you, Alejandra. Even though, I mean, Jason is just in the onboarding process, I mean, he's more than ready to take your second question. So I would like Jason to start by answering your second question. Jason Teter: Alejandra, nice to meet you, and thank you for the question. In terms of the cadence of investment, we're -- as Carolina said, we're currently and I'm currently going through the plan and adjusting that. But I would expect in terms of the import platform for the majority of the capital to be spent probably in the second half of 2027 and in 2028 and maybe a little bit in 2029, but all that is subject to change based on engineering and timing of permits and all those kinds of key milestones as you talked about. In terms of the key milestones, as you know, we've already put on shipment into Tampa. We're currently commercially working on that. And then throughout this year, we will have a few more shipments likely into Houston, New Orleans and also Tampa. So I think those are the early key milestones that we're looking to achieve. And then internally, we're working on, obviously, the detailed engineering plans and permitting work in the Dominican Republic. And so those will hopefully happen, and we'll have clarity on all of that later this year. Juan Esteban Calle Restrepo: And just to add to Jason comments. I mean, the operation will get EBITDA positive once we have the ports and terminals in place in the Dominican Republic. I mean, as you know, we will start using some ports that are not our long-term ports. We will build a private port in the Dominican Republic, I mean, because the volume that we are expecting to handle is significant. So the first couple of years, we will be using 2 alternatives which are not ideal from the standpoint of our long-term competitive plan, Alejandra. And Felipe will take your first question regarding the ADR. Felipe Aristizabal: Alejandra, thank you for your question. As you mentioned, potential ADR listing is subject to the progress on the [indiscernible] business plan. We expect that -- I mean, we will be ready to pursue that path in around 2, 3 years. But that is -- I mean, the end game of this whole strategy is to pursue that path and have the market recognize the full value of that business plan. Carolina Velásquez Zuluaga: Next question comes from Gordon Lee from BTG Pactual. Gordon Lee: Two questions, both related to the U.S. business, and one is a little bit of a follow-up on Alejandra's question. But you mentioned the cadence of investment, but I was wondering if you could share with us what you expect the total investment to be from -- including with the $80 million to $100 million that you disclosed for 2026 through 2030 to produce that platform. That would generate the $200 million to $300 million in EBITDA. And the other question I had is I was wondering if you could share with us in your EBITDA guidance for 2026, what is the EBITDA drag from the U.S. business? In other words, can you share what you expect the EBITDA loss to be from the U.S. business in 2026? Juan Esteban Calle Restrepo: Sure, Gordon. And I can take, I mean, the first one. I mean, the total CapEx that we are foreseeing for the first phase of the aggregates platform is $500 million to get us to probably $150 million of EBITDA, which is going to be Phase 1. We will complement that as we have been explaining with bolt-ons in the U.S. and greenfields as well. So this Phase 1 is $500 million in CapEx and we expect that CapEx to get us to $150 million of EBITDA by 2030. And Felipe will get your second question regarding the drag and the deployment of this new business plan for [indiscernible]. Felipe Aristizabal: Gordon, and thank you for your questions. EBITDA drag for coming from the [indiscernible] business for 2026 is expected to be $6 million. Gordon Lee: Perfect. If I could just have one quick follow-up. Just to the CapEx, the $500 million that you mentioned, sorry, how much of that CapEx has already been expensed through 2025? Juan Esteban Calle Restrepo: It's just a small portion of that. Felipe Aristizabal: 2025, we probably invested around $3 million -- $3.5 million. Carolina Velásquez Zuluaga: Next question comes from Marcelo Furlan from Itau. Marcelo Palhares: My questions are three. The first one is just a follow up on the U.S. division. So if you guys can share a little bit, you mentioned that bolt-on acquisitions would be in the pipeline for the next months and years about the U.S. growth. So I guess... Juan Esteban Calle Restrepo: You are not sounding that clear, Marcelo. Can you repeat your question, please? Because we can't hear you well. Marcelo Palhares: Can you hear me better now? Juan Esteban Calle Restrepo: A little bit better. Marcelo Palhares: Okay. So my first question is a follow-up regarding the U.S. division. So if you guys can just share a little bit regarding the potential bolt-on acquisitions in terms of size. So what will be the size you expect for these future M&As? And my second question is related to the Colombia division. So if you guys can share what is implied for 2026 in terms of the milestones for the division. So if you guys are still working on cost efficiency and so forth. And the third question is related to be included in the MSCI Index. So if you guys could just give more details regarding what are the next steps or what is the current stage of being potential included in the MSCI Emerging Markets Index. So these are my questions. I hope you guys could hear me. Juan Esteban Calle Restrepo: Thank you, Marcelo. So Jason will take your first one. Jason Teter: Marcelo, nice to meet you. In terms of M&A and the size, I think that's going to vary both in size and in timing. Over time, as you know, that ends up being opportunistic in nature. But I can tell you, we will have a very robust pipeline and already have some potential targets in our pipeline that we will be diligently working on. In terms of the size, as you know, we have significant, I'll call it, firepower from the liquidity event with Quikrete. And so we will be looking to deploy that capital in M&A over time. Juan Esteban Calle Restrepo: Regarding Colombia, we're extremely happy with how the year ended up, strong fourth quarter, as you saw in our remarks, very strong margins, good volumes and 2026 started the same way. So I would like Carlos Horacio to give you a little bit more color on our milestones for 2026. So go ahead, Carlos. Carlos Horacio Yusty Calero: Marcelo, like Juan was mentioning, the idea is to continue in the same line that we ended the 2025. And we are delivering now some different strategies in terms of sales in the different regions of Colombia. We are capturing really a very good volume in the [indiscernible] segment. For that reason, we are expecting a very good first quarter and for the rest of the year in the same thing, working as well and continuing as well in the line of capture more reliability or more synergies in our operations. Juan Esteban Calle Restrepo: Thank you, Carlos. Now Felipe will take the question on the MSCI. So go ahead. Felipe Aristizabal: So honestly, we were somehow somewhat taken back by the announcement. Last week, we were expecting to be upgraded to the standard section of the MSCI based on our calculations. I mean we're very close to reach the overall market capitalization and float-adjusted capitalization. We are probably the most liquid stock in Colombia when compared to float-adjusted capitalization. So I mean, we would expect to -- for this upgrade to happen in 2026. We are right there. We're very committed to delivering on this promise. And this is still something that we really want to achieve in the context of the SPRINT program. Carolina Velásquez Zuluaga: Next question comes from Gabriel Pérez from CrediCorp Capital. Gabriel Pérez: I have three questions, mostly for the Colombian segment. The first would be that over the last 2 quarters, EBITDA margins in Colombia have been around 30%. How do you expect to sustain these high margins, particularly considering the impact that higher minimum wages could have on the sector? Also in line with the higher minimum wages. What do you expect the impact to be in the cement demand taking into account that higher construction costs could affect the construction recovery expected for 2026? And finally, in the earnings report, you mentioned that the absorption of [ Grupo Argos ] will be pursued to achieve additional operating efficiencies. So could you elaborate on how this transaction will translate into these efficiency gains, please? Juan Esteban Calle Restrepo: Sure, Gabriel. I would like Carlos Horacio to answer your two questions. So Carlos, go ahead. Carlos Horacio Yusty Calero: Starting with the first one, we are expecting pretty similar EBITDA margin for the 2026. Obviously, we have some impact from the increase of the minimum wage. But we are working from January 4, how to mitigate this impact in our cost, really working more in efficiencies. But obviously, that is -- it was a real impact, but we are working on it. In terms of the impact because of the minimum wage in the demand in the 2026, we have to split it to probably in the retail segment. Probably the volume increase because there is more [indiscernible] in the street and probably impact positive in the demand in the retail segment. In the construction segment, more in the housing sector, we are still analyzing or the sector is still analyzing what will be the impact in terms of the cost in the construction. But as well, what will be the impact because the increase in the mortgage rate. Really now it's not so clear how big could be the impact in the next months. And the third one is what about the merge the Cementos into -- [ Grupo Argos ] into Cementos Argos. Really, it will give us some efficiencies. The principal or the most important efficiencies is because we sell cement for Cementos Argos legal entity to [Grupo Argos ] legal entity. And when after the merge, we optimized the [indiscernible] industry commercial vehicle in the case of Colombia, you know very well. [indiscernible] transaction within the same legal entity and as well some other efficiencies in terms of optimizing the transaction between these 2 legal entities. Obviously, it will help us. But this -- the capture of these efficiencies will be more for the 2027. Carolina Velásquez Zuluaga: Next question comes from Marianne Goni also from CrediCorp Capital. Mariane Julie Goñi Tadeo: I have two questions. My first question is related to Venezuela. I see that the company is targeting a 2%, 3% market share this year. But given the country's economic context, what demand signals are you currently seeing that support expanding operations at this stage rather than taking a wait-and-see approach? My second question relates to the impairment recorded this quarter. Could you clarify if it's related with the Panama or the Puerto Rico operations? Additionally, should we expect further impairments over the course of the year? Juan Esteban Calle Restrepo: Thank you, Marianne. Thank you for your questions. I mean, regarding Venezuela, the reality is that we are extremely bullish about Venezuela. Yes, the market has decreased in a significant way. I mean, from a 10 million tons market per year to probably 1.5 million tons last year. But the reality is that, in our opinion, the reconstruction of the country, starting with the oil and gas sector plus the electricity sector will need significant volumes of cement and concrete. And we consider that we will have a first mover advantage. As you all know, we have a pending legal claim with the Venezuelan government for the expropriation of our cement plant in 2006. And we are completely sure that Venezuela is going to become one more significant market in Latin America. On top of that, I mean, what we have been doing since 2023 is just repositioning our brand in the market. So far, the product is getting a lot of traction, and Carlos can expand a little bit more about our current strategy. But the reality is that we have foreseen a future in which Venezuela is going to be an important part of our footprint. And we are like being extremely active with the U.S. government and in Venezuela in order to be that first mover in the cement industry. The reality is that the cement industry will have to be rebuilt and we see ourselves as the natural players to make that happen. So a lot of hope and optimism regarding Venezuela. And then Carlos, can you explain a little bit more, I mean, so far from a commercial standpoint, the traction that we are getting in Venezuela to complement? Carlos Horacio Yusty Calero: Okay, Juan. Marianne, we started with the export to Venezuela about 2 years ago, like Juan mentioned. And we started just exporting white cement. Since the last part of 2025, we started with the export of gray cement, really the reliability of the plants in Venezuela are really low. The current plants in Venezuela that are operating are really low. For that reason, we are taking advantage of that situation. And we established a very good relation with a very good client in Venezuela that has a big network of customers across the 23 states there and we are increasing month by month, both products, the white cement and the gray cement and as well giving us -- not just exporting the product but as well [ hope to apply ] better the product that really we have a very good expertise in technical support. And for that reason, we are very confident that we can increase like Juan mentioned already in the first part of this call that the idea is to take -- export to Colombia by the end of the year, about 3%, 3% to 4% of the local market there. We are seeing a very good opportunity for us because our quality, the reliability of our products and the technical support that we are -- our value proposition really is very, very strong to take a very -- to gain market share there. Juan Esteban Calle Restrepo: Thank you, Carlos. And now Felipe will take your second question, Marianne. Felipe Aristizabal: Marianne, regarding the permits that we have announced during 2025, these are nonrecurring transactions. They don't have any impact -- any negative impact on the cash flow generation ability of the company, on the contrary, particularly the impairment in Puerto Rico, given the existence of certain capital taxes in Puerto Rico. This impairment actually reduces the tax burden in cash terms going forward. So yes, we would expect a positive impact coming from these impairments, and we are not expecting any further impairments going forward in any of the businesses. Mariane Julie Goñi Tadeo: Just a follow-up question. So the impairment recorded this quarter is from Puerto Rico, not from Panama. Felipe Aristizabal: Okay. So in Panama, in particular, that impairment refers to clinker inventory that was acquired and has a cost that is above the current market price. So it is not currently economically feasible to exploit that inventory. So we are writing down the value of that inventory to account for that reality. This is an inventory that was acquired a few years ago. And given the evolution of the market, we believe that the most sensitive approach is to write it down and then wait for market conditions to maybe change in the future. And eventually, that clinker inventory might be economically feasible to exploit and commercialize in the market. Juan Esteban Calle Restrepo: Just to complement, Felipe, Marianne, it was the result of a take-or-pay contract like 10 years ago that we had to take some additional clinker because we didn't met the volumes -- required volumes. And it will be used. I mean, now with the write-off, the reality is that we create a full incentive for the plant to consume the clinker because it will be more cost efficient for them to start consuming that clinker as an addition to cement than to add limestone. So the reality is that it is an economic decision to create incentives for Panama that would not have like any impact in our cash flow. But thank you for the question. Carolina Velásquez Zuluaga: Next question comes from David Gomez from [indiscernible]. Unknown Analyst: My first question is, this year, what's your goal of production or shipping [indiscernible] this year? And the second one is, are you exploring to arrive to new countries in this year? Juan Esteban Calle Restrepo: Thank you, David. I mean, like the forecast for the export to, in general, out of Cartana close 1.2 million tons. That is basically the capacity that we have for exports. They will go mainly to Puerto Rico, the U.S. and the Caribbean. So that is our forecast of export for 2026. And the reality is that we have defined the north of Latin America as our target market. But currently, we are foreseen to continue putting our operations in all our current geographies. We have been having a very good performance in Guatemala, and we are looking at some options in that market. And as I mentioned a little bit earlier, Venezuela is the other geography that, in our opinion, will start becoming important in our footprint. So those are our plans for Latin America in 2026. Carolina Velásquez Zuluaga: Last question comes from [indiscernible] from Bancolombia. Unknown Analyst: I have two questions. First one is considering the pressures facing the contrition sector in Colombia at the end of 2025, what you think will be the main challenges for this year? And the second one is about the decline in the cement export segment in Colombia. Could you give us more details about that decline recorded in the quarter. Juan Esteban Calle Restrepo: Thank you, Javier. Just I'll take the second one first. I mean, we shut down a wet kiln in Cartagena in 2024 -- in August of 2024. So the reality is that we lost a little bit of capacity for export, but it was the right economic decision. So the only explanation is that one. We are using our full capacity to export out of Cartagena, but it decreased with a shutdown of kiln #3. And second, in Colombia for 2026, we are extremely optimistic. I mean, the reality is that we see all the investors looking at Colombia as a significant opportunity. And hopefully, politically, we will have a good change in the current situation and the country has a significant potential. You saw what happened with a little bit more volume with our numbers in the fourth quarter of the year. And once the demand starts the trend that it was having in the past that the reality is that we see that Colombia is full of opportunities. And consumption, as Carlos mentioned, will continue to be a significant driver of demand, especially during the first half of the year. Going forward, the reality is that what will drive demand will be all the fundamentals in Colombia. I think that there are plenty of investment waiting for a better political situation. Carolina Velásquez Zuluaga: Thank you all. Juan, there are no more questions. Juan Esteban Calle Restrepo: Okay. So once again, thank you so much for your interest in Cementos Argos and we continue to be extremely bullish with the future of the company. Thank you so much, and have a great day.
Operator: Greetings. Welcome to the Cengage Group's Third Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Richard Veith. Sir, you may begin. Richard Veith: Good morning, and welcome to Cengage's Fiscal 2026 Third Quarter Investor Update. Joining me on the call are Michael Hansen, Chief Executive Officer; and Dean Tilsley, Chief Financial Officer. A copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com/investors. The following discussion and the earnings materials contains forward-looking statements within the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as believe, expect, intend, may, could, should, will, estimate, likely or similar words and are neither historical facts nor assurances of future performance and relate to future results and events, and they are based on Cengage's current expectations and assumptions. Forward-looking statements relate to the future and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and you should not rely on any of these forward-looking statements. Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. Any forward-looking statement made during this discussion or any earnings materials is based on currently available information and speaks only as of the date of this discussion and the date of the earnings materials. The company disclaims any obligation to publicly update or revise any forward-looking statements, whether written or oral, except as required by law. On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures. Definitions and the rationale for using these measures and reconciliations to its most directly comparable GAAP financial measure are provided in the legal disclaimer and in the appendix to the slide presentation. I'll now turn the call over to Michael for an update on the business, followed by Dean, who will take you through the third quarter and year-to-date details before we open the call for questions. Michael? Michael Hansen: Thank you, Richard, and good morning, everyone. Our third quarter results reflect strong momentum across our major businesses and continued progress executing our strategy. Q3 adjusted cash revenue increased 10% with meaningful growth across nearly all segments. U.S. Higher Education outperformed expectations, driven by robust digital and institutional sales, reinforcing the strength of our platform strategy and customer relationships. Our Work segment also delivered solid growth, led by the advanced career certificate programs and continued momentum in career and technical education. These gains were partially offset by federal regulatory headwinds and immigration-related impacts on our cybersecurity and Beauty and Wellness business. During the quarter, we announced new partnerships and products that strengthen the connection between education and employment and help learners build career-ready skills. We deepened our AI partnership with Amazon Web Services to deliver scalable, trusted AI solutions that personalize instruction, save educators time and better prepare learners for the workforce. By combining AWS' AI capabilities with our expertise in learning design, we are embedding AI readiness across programs in health care, business and many other fields. We also partnered with LinkedIn Learning to expand access to 20 expert-led courses in AI, machine learning, security and threat intelligence, helping address the AI skilled confidence gap among graduates and working professionals. Our AI strategy is deliberate and course specific. Rather than building a stand-alone model, we leverage leading LLMs and embed them directly into our platforms to deliver targeted value within the flow of instruction. This ensures educators receive support when and how they need it and students learn in alignment with instructors' intent. Engagement with our AI tools remain strong. We are expanding availability of student assistant and seeing increased adoption with measurable improvements in learning outcomes among active users. Following a successful beta, we launched Instructor Assistant in January and will broaden access over the coming year. Our AI road map continues to focus on strengthening career alignment, evolving assessment for GenAI world, improving platform usability and supporting diverse learning preferences. In higher education, we launched Introduction to Artificial Intelligence: A Business Perspective. And we are developing a GenAI guide to the humanities, added AI modules across introductory computing and introduced an AI primer throughout our business school curriculum. Well beyond AI, we continue to enhance platform usability and guided experiences. In our school segment, we launched Explore, our unified K-12 digital learning platform designed to engage every student and personalize instruction. Explore is a key step in transforming our school business into a predominantly digital model. Consistent with our operating model, we are unifying all businesses under a single Cengage brand. This simplifies our go-to-market approach, strengthens institutional partnerships and creates additional cross and upselling opportunities. In closing, our third quarter results demonstrate strong operating performance and continued progress against our strategy to connect education to employment. I want to thank our customers for their partnership and my colleagues for their dedication to serving learners around the world. I will now turn the call over to our CFO, Dean Tilsley, for more details on our third quarter financial performance. Dean? Dean Tilsley: Thank you, Michael. As you have heard, the company is making impressive progress in terms of innovation, speed of execution and financial performance. I'm now going to walk through the specifics of our financial results, including highlights by segment and our continued improvement in leverage. Q3 was a very strong quarter for the company with adjusted cash revenues up $22 million or 10% year-on-year and adjusted cash EBITDA up $21 million to positive $18 million for the quarter versus negative $3 million reported in the same period last year. These results were led by the continued strong performance within our key Higher Ed and Work segments, which account for almost 70% of our revenues. They grew 14% and 6%, respectively, in Q3, supported by return to growth for our Gale and international businesses. On the cost side, the management team remains focused on implementing our new operating model to ensure we achieve our margin goals, improve the profitability of the business while better allocating capital to invest in focused areas of growth such as AI, ed2Go and digital-first strategies. Operating expenses were down year-on-year for the quarter and flat on a TTM basis, net of key investments, representing an improvement in our operating leverage and ensuring enhanced flow-through of revenue to EBITDA. Moving to our consolidated financials. TTM adjusted cash revenues came in at $1.53 billion, up $41 million or 3% year-on-year as reported, driven by growth in the key U.S. Higher Ed and ed2Go businesses, which were up 10% and 26% year-on-year, respectively. TTM adjusted cash EBITDA came in at $532 million, up $29 million or 6% year-on-year, improving from the 4% year-on-year growth reported in Q2 as cost discipline adds to revenue growth. This represents a 71% flow-through of revenue growth into EBITDA. Year-to-date results, both adjusted cash revenues and EBITDA report significant improvement from the first half of the year due to continued growth in Higher Ed and Work plus stabilization of our international and Gale businesses. Year-to-date adjusted cash revenues reached $1.1 billion, a slight increase year-on-year with Q3 performance helping lift year-to-date performance from the 2% decline reported for the first half of the year. Year-to-date adjusted cash EBITDA at $362 million represents a small decline of 2% year-on-year as reported, but flat when normalizing for a single nonrecurring $6 million ELL contract. This is a significant improvement from the 8% year-to-date decline reported for the first half of the year as we continue our upward trajectory. Moving to the quarter, where I'll also provide some segment highlights. Q3 adjusted cash revenues came in at $245 million, up $22 million or 10% year-on-year. Q3 adjusted cash EBITDA grew $21 million year-on-year to positive $18 million for the quarter. This compares to a reported negative $3 million as reported for the previous year. reflecting the continued impact of our new operating model. By segment, Higher Education, which represents nearly 50% of our business, leads in our digital-first strategy and is leveraging strong tailwinds within its key U.S. market. Q3 Higher Ed adjusted cash revenues grew 15% year-on-year and 3% year-to-date, primarily driven by the U.S. market, but helped with returns to growth for Gale and international markets. Q3 U.S. Higher Ed, the largest business within the segment, grew 20% year-on-year for the quarter, driven by 9% growth in digital sales and strong institutional sales. Institutional sales at circa $250 million year-to-date grew 23% year-on-year and now represent 56% of U.S. Higher Ed sales. As I said, Gale returned to growth with both renewals and demand for content beginning to normalize as we get past the uncertainty in federal funding for research universities that impacted the first half of the year. Adjusted cash revenues were up 8% year-on-year for Q3, following a 7% decline in Q2 and a 15% decline reported in Q1. International adjusted cash revenues, including Canada, grew 5% year-on-year in Q3 as this business stabilizes, helped by go-to-market improvements implemented for key markets. Turning now to the Work segment. Work is a key investment focus for the company in terms of both revenue and EBITDA growth due to our strong market position within this very large and growing TAM for work-based skills certification. Q3 adjusted cash revenues were up 6% year-on-year and 4% year-to-date, powered by ed2Go. Ed2go delivered 24% growth for the quarter and 26% growth year-to-date. Ed2go growth was driven by pricing initiatives, investment to improve pipeline conversion and triple-digit growth in our emerging employer sales channel. We continue to drive investment in this business with plans to expand the number of courses, institutions, geographies and languages that we operate in as we continue to build growth and scale for this key business. The other large revenue line within work, Career and Technical Education, or CTE, grew 14% year-on-year and as a company focused for continued future growth and new investment. The smaller InfoSec and Milady businesses remain challenged due to federal headwinds impacting enrollment. In line with expectations, they are down year-on-year with the near-term outlook still looking challenged. We are, therefore, managing costs within these businesses to reflect this expectation. Moving to our K-12 focused businesses. Just to remind everyone, 2026 is a low adoption year for our two K-12 focus segments, school and English language learning or ELL, with no large state adoptions in '26 versus the $50 million of large state adoption signed in 2025. School improved Q3 performance with adjusted cash revenues up 17% year-on-year for the quarter, really driven by the positive early Gale renewals and stabilization of this business following market headwinds earlier in the year, plus retaining strong win rates within open territories. I do want to note that Q3 is a quiet sales period for K-12. So whilst it's great to see this improved momentum, the key focus remains on the large adoption years in 2027 and 2028 with updated platforms, content and go-to-market capabilities. ELL, our smaller segment, reported Q3 adjusted cash revenues up 1% year-on-year. Year-to-date revenue comparisons are impacted by a single nonrepeating $6 million Caribbean deal. Normalized for this, ELL adjusted cash revenues would be down 5% year-on-year, reflecting the low adoption year in the U.S. Turning now to cash flows. Improvement in working capital reflects strong collections in Q3 as we get past the invoicing issues experienced in the first half of the year due to the new ERP system that was rolled out last April, plus growth in institutional sales and lower reimbursements to Big Ideas Learning as it relates to the new partnership deal. The improvements in working capital flows, coupled with lower interest payments, flow through to improved leverage free cash flow by $10 million versus the same period last year. Note, this past January, we successfully repriced our term loan, lowering our borrowing cost by 50 basis points, resulting in an incremental $8 million of annual interest savings going forward, bringing total savings from debt repricing to over $20 million since March 2024. Net cash taxes increase reflects improved profitability. And as a reminder, an additional preferred equity dividend payment was made in 2026. Finally, our liquidity position remains strong with net leverage down 0.2x to 2.5x. We remain on a continued path to lower leverage as we move forward. We expect this position to continue to strengthen as cash collections ramp up in Q4 and restructuring costs decline. Cumulative deleveraging over the past 24 months reinforces Cengage's prudent and proactive management of liquidity and provides capacity to navigate macro challenges while executing growth and transformation strategies. In summary, the Q3 strong performance without normalization reflects the culmination of management's efforts to build a sustainable and scalable cost structure that delivers both top line growth and enhanced profitability. Our key Higher Education and Work segments continued to deliver strong growth in the third quarter and on a TTM basis, supported by improvements in the Gale and international businesses. School and English Language Learning, our K-12 focus segments, year-on-year performance reflects the known low 2026 adoption year, but we continue to make the key investments to position us for the large adoption years in '27 and '28. We continue to implement our new operating model across the company to deliver improved efficiencies, productivity and profitability to free up capacity for focused investments while still improving margin. We will continue to improve our free cash flow and strong financial trajectory to generate value for our shareholders. We are now happy to take your questions. Operator: [Operator Instructions] Your first question for today is from Nick Dempsey with Barclays. Nick Dempsey: So just quickly, in terms of the competitive dynamic, I can see that both McGraw-Hill and yourselves have performed very well in this quarter in U.S. higher education. I can see that inclusive access is a big part of that for both of you in terms of your commentary. To what extent do you think that you're gaining share of adoptions and that that's also helping your strong growth? Michael Hansen: Yes, Nick, it's Michael. Good to hear your voice. You know, I mean, you followed this sector quite a while. You know that the source of data for real adoption share gain, the official source is NPI data. Based on the NPI data, we are seeing that we are actually gaining share. It's not clear from whom from that data. Obviously, that is not being disclosed. And based on our internal CRM system, we would also -- we are also able to confirm that we're gaining share. So yes, there is share gains, adoption share gains as part of that as well. Operator: Your next question is from Jon Kovacs with Diameter. Jonathan Kovacs: I'm glad to see the good billings results across the business. My question was also on the higher education side. It's obviously pretty atypical to see double-digit billings growth even if it was a single quarter year-over-year that we're talking about here. But can you just elaborate like how you guys actually achieve that? It sounds like there is some nominal share gain from your response to the last question. We know enrollments are probably up, call it, low single digits. But how do we get from there to like a double-digit increase in billings? Is there a timing involved in that, pricing? Or what are the other steps upwards, please? Michael Hansen: Yes. John, so I think, first of all, I think your -- the underlying assumption in your question that we should not assume double-digit growth in this sector every single quarter, I think, is correct. But what we are seeing is very robust growth that goes way beyond enrollment. And the simple reason is that we have now fully turned the corner away from print into digital. And what we are seeing with digital units is that they're growing because the market as a whole is not as digital as we are from a revenue perspective. So our revenues are approaching almost 90% digital and so does our large competitors. But if you think about number of seats, number of courses being taught in the United States, roughly about 90 million, only about 50% of them are really taught with digital platforms. So we still have substantial growth opportunity from that, that comes from courses that are currently being taught with print and that we're gaining share with digital platforms. And we expect that also to continue, particularly as we are leveraging AI to make the platforms even more powerful and more personalized. Dean Tilsley: And Michael, if I could just add to that, there's no timing issues. There's no balance sheet adjustments that is a real year-on-year growth. And obviously, with institutional sales, to support Michael's point, it does improve our sell-through rate or the amount of ability to monetize students who are using our content is significantly enhanced by the growth in institutional sales and digital sales versus the traditional print textbook sales. And these trends will continue for the foreseeable future. Jonathan Kovacs: That's helpful. And it seems like the, I guess, the acceleration, which is the part that I'm still a little bit confused on was mostly driven by a continued transition away from print to digital, which you guys are obviously ahead of the curve on. But that's not really new. Like that transition has been happening for years now. And I think you guys have always been a step ahead of the competitor. So what was it about this quarter that kind of stood out as an acceleration? Michael Hansen: Well, John, I think it's basically simple math in the sense that our print sales used to be a much higher portion of our total sales. They are now de minimis. And they are declining, still continue to decline, but they're overpowered by the digital sales, which are growing robustly, as Dean was pointing out. So part of it is just the simple math of print being so de minimis at this point. Dean, any other observations that would be helpful for John. Dean Tilsley: Yes. Yes. So John, like print, look, I'm 12 months in here, but print just several years ago was $120 million annualized just in U.S. alone. It's down now to something just in the $40 million range. So print has been declining by about deliberately and intentionally been declining by about 28%, 29% year-on-year. Well, that's now 29% of a much, much smaller number. So you're getting -- that's been a drag on the growth historically over the last few years, including the first half of this year. That's now sort of significantly gone away. And again, that drag going forward will go away as print continues closer to trend towards 0. I think also Q3 is not the biggest quarter for U.S. Higher Ed. So to Michael's point, are we going to do this growth rate every quarter? Probably, probably not. Q4 is the second highest sales season. So whilst we're seeing -- we've got very good expectations for Q4. A little bit of also Q3 is a relatively quiet period for Higher Ed. So again, you get a function of the math around that. Jonathan Kovacs: Yes, that's certainly helpful. Those are both very good points. I appreciate you clarifying. So I think if I were to take something away, the very, the biggest driver of improvement here is there's no longer a significant drag from print, which has been declining in the past. Dean Tilsley: You got it. Absolutely. Absolutely. And I'll say some of your competitive question, McGraw-Hill historically have been a little more aggressive on pricing than we have. But as we continue to roll out our AI functionality tools, digitization, clearly, we're always -- we are assessing what is the appropriate pricing strategy for ourselves. Operator: Your next question for today is from Alexey Tilataz with JPMorgan. Unknown Analyst: Can you please share some color what you see on the ground in K-12 biggest markets like California and Texas? I appreciate it's early days in the cycle, but you have some early wins or competitive dynamics so far that you can share? Michael Hansen: Yes. It's -- I would say it's still early, as you said. The signs that we're seeing are encouraging, but we would need to continue to see this encouraging signs for the next few weeks and months, but early indications are positive. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to the CF Industries Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Martin Jarosick. Please go ahead. Martin Jarosick: Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Rich Hoker, Vice President, Interim CFO and Chief Accounting Officer. CF Industries reported its results for the full year and fourth quarter of 2025 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now let me introduce Chris Bohn. Christopher Bohn: Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the full year 2025, in which we generated adjusted EBITDA of approximately $2.9 billion. These strong results reflect outstanding operational performance by the CF Industries team, the enduring advantages of our manufacturing and distribution network and constructive global nitrogen industry dynamics that have persisted into 2026. Starting with safety, our full year recordable incident rate was 0.26 incidents per 200,000 hours worked, and we experienced our lowest ever number of process safety events. This enabled us to produce 10.1 million tons of gross ammonia in 2025, which represents a 97% utilization rate. However, that performance is tempered by the incident, Yazoo City Complex in Mississippi experienced in November. While there are no significant injuries, this event is a reminder of why we emphasize individual and process safety every day across our entire network. We do not expect the Yazoo City Complex to resume production until the fourth quarter of 2026 at the earliest, given the long lead times required to fabricate and deliver certain equipment. As a result, we expect our network to produce approximately 9.5 million tons of gross ammonia in 2026. Turning to Blue Point, our joint venture with JERA and Mitsui, the project has progressed well from positive FID in April through hitting all our planned milestones by the end of the year. This included our partner securing offtake from new low-carbon ammonia demand sources and receiving contract for difference awards from the Japanese government. We expect to begin civil work at the Blue Point site in the second quarter of 2026. Finally, we continue to efficiently convert adjusted EBITDA to free cash flow. At a rate outpacing material and industrial sector averages, as you can see on Slide 10. Net cash from operations in 2025 was $2.75 billion, and free cash flow was approximately $1.8 billion. We returned $1.7 billion to shareholders in 2025. This included deploying over $1.3 billion to repurchase 16.6 million shares, approximately 10% of the outstanding shares at the beginning of the year. Given our high-performing, high-margin business, progress on strategic initiatives and what we believe are constructive global nitrogen industry dynamics ahead, we expect to continue to generate substantial free cash flow. As a result, we remain firmly committed to our capital allocation framework, investing in the business for growth and returning capital to long-term shareholders. With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert? Bert Frost: Thanks, Chris. For the last 12 to 18 months, we had expected the global nitrogen market to be more balanced in this time frame as new capacity was slated to come online with significant tightening through the end of the decade to follow. However, the global nitrogen market remains tighter than expected. New capacity has been delayed, global production has not maintained historical levels and demand continues to grow. Nowhere is this more apparent than in our indicative global urea cost curve, which we share on Slide 13. Global urea prices are currently trading well above even the high end of the cost for range. Strong demand led by India, Brazil and North America as well by European buyers securing volumes before the EU's carbon border adjustment mechanism was implemented, has pushed demand to the right. At the same time, supply is constrained by natural gas availability in Trinidad and Iran, challenging production economics in Europe and the end of seasonal Chinese urea exports in 2025. Additionally, geopolitical concerns for the Middle East loom over the market. Through the first half of this year, we do not see many catalysts that would move prices toward the cost curve floor levels. India's February urea tender is atypical for this time of year, suggesting demand continues to meaningfully outstrip lower-than-expected domestic production. CF Industries had a very strong fall 2025 ammonia application season in North America as we position supply well, enabling farmers to capture good value per nitrogen unit from ammonia. This, along with continued strong global corn demand suggests to us that 2026 will be another year of high planted corn acres domestically, helping support nitrogen demand. From a supply perspective, we believe global nitrogen channel inventories are lower than historical averages. Chinese urea exports are also unlikely to return until the end of the Northern Hemisphere spring application season. However, we do expect that new North American ammonia capacity, should it come online at full rates, will affect prices for globally traded ammonia, but will not impact tightness for urea or UAN. As a result, we expect the global nitrogen market to remain constructive in the near term. At the same time, interest in low-carbon ammonia and low carbon nitrogen products continues to grow, both for tonnes from our Donaldsonville Complex and for our portion of Blue Point volumes. In the near term, global customers have demonstrated a willingness to pay a premium for low carbon ammonia given the benefits for their sustainability goals. We also expect demand to continue to grow from customers in Europe and Africa, seeking to reduce additional costs from EU regulations on carbon. We're also excited about the progress we're making domestically as we work with domestic retailers and end users of ag and industrial products to lower carbon footprint of their value chain. Most significantly, we have advanced our pilot project with POET, the world's largest producer of biofuels and with retailers in the U.S. to enable the production of low-carbon ethanol. We expect the project will be a model for building a low-carbon ammonia and nitrogen fertilizer supply chain in the U.S. and in North America. With that, I'll turn it over to Rich. Richard Hoker: Thanks, Bert, and good morning, everyone. For the full year 2025, the company reported net earnings attributable to common stockholders of approximately $1.5 billion or $8.97 per diluted share. EBITDA was approximately $2.8 billion and adjusted EBITDA was approximately $2.9 billion. For the fourth quarter of 2025, we reported net earnings attributable to common stockholders of $404 million, or $2.59 per diluted share. EBITDA for the quarter was $731 million and adjusted EBITDA was $821 million. For the fourth quarter, we recorded two impairment charges totaling $76 million, of which $51 million was related to the electrolyzer pilot project at the Donaldsonville Complex in Louisiana. We made the decision not to continue to invest in this pilot project given its return profile. We also recorded a $25 million impairment charge related to the incident at Yazoo City that Chris mentioned earlier. We satisfied the business interruption insurance deductible in December and expect to begin receiving insurance proceeds based on lost profitability during 2026. During the fourth quarter of 2025, we also completed a $1 billion senior notes offering. We did this both to refinance $750 million in debt that was coming due in December 2026, and to further strengthen our financial flexibility. Looking ahead, we expect capital expenditures in 2026 to total approximately $1.3 billion on a consolidated basis. CF Industries portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network, plus approximately $400 million relating to both the Blue Point joint venture and the common infrastructure we are building. Finally, we repurchased 4.1 million shares for $340 million in the fourth quarter. These repurchases completed our $3 billion share repurchase program, which was authorized in 2022. After this was completed, we commenced our $2 billion program, which was authorized by our Board in 2025. Approximately $1.7 billion remains on the 2025 program, which expires in December 2029. With that, Chris will provide some closing remarks before we open the call to Q&A. Christopher Bohn: Thanks, Rich. First and foremost, I want to thank CF Industries employees for their contributions to our success in 2025. They delivered fantastic results in the midst of the tumultuous global nitrogen market and did so with a focus on safety. We're extremely proud of what our 2,900 employees can accomplish when moving in the same direction towards shared goals. 2025 showed how much we can do. From operational excellence and positive FID for Blue Point to completing two major decarbonization projects and securing our first low-carbon ammonia sales for our premium. This level of execution is not a one-year story, but rather has been consistently delivered over time. This, along with our operational advantages and structural advantages, where we operate underpins our ability to invest in growth and return in capital. This, in turn, increases long-term shareholder participation in our underlying assets and the free cash flow they generate. As you can see on Slide 9, we have increased nitrogen participation per share by over 35% in just the last five years. Given our strong core business, strategic growth initiatives in our near, medium and long-term outlook for tightening global nitrogen market, we believe we are well positioned to build on this track record and continue to create substantial value for long-term shareholders. With that, operator, we'll now open the call to questions. Operator: [Operator Instructions] Our first question comes from Andrew Wong of RBC Capital Markets. Andrew Wong: I just wanted to ask about the pace of spending at the Blue Point project, it looked like some of the project might have been pushed now [indiscernible] -- just talk about that [indiscernible]. Unknown Executive: Andrew, I think you broke up a little bit, but I believe your question was related to the slide we had in the deck on Slide 12, just the capital cost related -- excuse me, Slide 15, the capital costs related to the Blue point. So the overall expenditure for Blue Point hasn't changed our -- it's still forecasted at $3.7 billion. But with any project of this size, as you get closer and get into it, both from ordering some of the long lead items like we've done and engaging the modular contractors, you get a better idea of not only what the costs are, which haven't changed here, but also the timing of when that cost is going to occur. So we thought it would be worthwhile just given that we've moved into that stage just to re-update what the cash flow outflow will look like over the next five years. I think the important part of that slide on Slide 15 is the bottom line where it shows what's our annual cash outflow as a company. And given our free cash flow generation and the strength of it at $1.8 billion last year, $1.5 billion the year before. You can see the level of CapEx going out each of those years, is not something that we're concerned about affecting other capital allocation decisions in which we're making. And that's really one of the reasons why with this growth platform that we structured the deal the way we did, taking a 40% interest in it so that we'd be able to manage and continue to be strategic in how we do other growth projects, but also return cash to our shareholders. Andrew Wong: Okay. Great. And then maybe just a little bit more on Blue Point here. I recall there being quite a lot of room for expansion nearby on that site. CF is obviously building themselves, some of the logistics and infrastructure there potentially to handle more volumes in the future. And so I know it's still early days here, but if we're thinking longer term, like 5, 10 years from now, does it make sense that we'll see a larger complex there? And is there a timing where it's more efficient to like so that you have workers that are already working at Blue Point to move to the second side? Like how should we think about that? Christopher Bohn: Yes. So initially here, I would say our focus is on the first site. But you're right, the common infrastructure we're building, there'll be synergies where if we were to build a second plant, we wouldn't have near the level of expense that we would have for this first site. And the site itself that we purchased could hold up to 5 ammonia plants world scale the size of this one, 1.5 million metric tons. So it is an organic growth platform that we're looking at here, what the timing is where we had moved into a second site, I'm not certain that we know that just yet. There are some questions that we want to answer as we get into these module yards. But I think as we look at the long-term dynamics of the nitrogen market, there's just not enough new supply coming on to meet demand. So as we see that going forward, we do think there will be a tightening in the S&D, that will provide other organic opportunities for us, but nothing to mention right now. Operator: Our next question comes from Joel Jackson of BMO Capital Markets. Joel Jackson: I want to talk to you about CBAM, obviously, a lot in the news on CBAM. So what I want to ask you about is, it's a different scenarios. If CBAM for fertilizers goes as it is, if there's some suspension on fertilizer, if you get some offsets and other cost subsidies that sort of offset it. What does that mean for a, your business, just your business this year? And then what does it mean for returns on Blue Point as you have modeled it in the different CBAM scenarios effects? Christopher Bohn: Yes. So maybe I'll start with CBAM, then I'll get to the implications on the business in Blue Point. So CBAM, today, while there's a lot of uncertainty around it, it's in place. And so it's happening. We are continuing to see our European customers show interest in low-carbon product and willingness to pay a premium for it. So I think that speaks to their thoughts that it's going to maintain. I think whether CBAM stays or goes is probably more of an issue for European producers than it is for our North American centric production base. We view CBAM as one of several opportunities. Bert and his team and the clean energy team have been working on many different sales that go outside of Europe that we're receiving premiums on some here building in the U.S., others in Asia and Africa, that we don't necessarily have everything tagged where it has to be from a CBAM standpoint. Now what I'll say is if CBAM's altered or goes away. At some point, there's going to be some type of carbon program in Europe. And us having low carbon product, these benefits should accrue to us in that. Regarding how this is going to affect our business, I would say, as we talked about before, we did not model in any type of premium from Blue Point or even in our Donaldsonville production with related to low-carbon products. So all of that is upside to our internal rate of returns on that. So when you think about the CCS project, we started online last year at Donaldsonville. We weren't looking at anything besides the 45Q benefit that we would get from that. Now we're realizing that we're able to sell that at a premium. So that's building on that. And similar with Blue Point, our analysis was without looking at any type of product premium. Joel Jackson: Okay. And then second question. On Yazoo City, when the plant starts, hopefully, end of the year, will it look the same as it did before. Will the mix be the same? And maybe if you can just elaborate a little bit more on, is there specifically for equipment that you really need to get in that, that's the manufacturing schedule that you have to hit to get in Q4? Christopher Bohn: Yes. Just to remind everybody on the Yazoo plant, so where the incident occurred within the ammonium nitrate plant, the site itself has an ammonia plant, a urea liquor plant and nitric acid plants. All that has been effect -- has been unaffected. However, given there's the site's not logistically equipped to move that much net ammonia if the upgrades are not operating, that's why the entire plant is down right now. So the only plant that we're looking to rebuild here is the ammonium nitrate plant. And I would say it's too early to judge on a lot of different aspects of that, but our intent is to get the plant up as soon as possible. The time frame that we've given with late Q4 here in 2026 is just as we've gone out to get switchgear and some of the electrical stuff, which is longer lead time items, we've been given those dates as delivery. If it comes in sooner, that would be excellent. But we're right now just basing it on that. Maybe I'll -- just on this particular point with Yazoo City, I'll have Rich talk through some of the economics for 2026. Richard Hoker: Yes. Thanks, Chris. Joel, in terms of the economics, the full year EBITDA impact of not running the Yazoo City Complex, is it going to be in the $200 million range. And again, that's an EBITDA number. But I also want to highlight, we mentioned in our prepared remarks that we have business interruption insurance for the site. And so we are working with our insurance carriers. We're pulling together all of those claims, and we would expect to be receiving those business interruption proceeds during 2026. Our goal is to see if we can offset most or all of that kind of loss with the insurance proceeds, because that's the program that we have. I'll also mention that the timing of those insurance proceeds are going to be a little bumpy, because we will record those as they come in to the company, but that's the impact. Operator: Our next question comes from Ben Theurer of Barclays. Benjamin Theurer: Just wanted to kind of like get a little more commentary around the current tightness in the market. And you've laid this out as '25 was expected to be not as tight and then it was actually tightest towards the end of it, and we saw this because you guys doing almost $3 billion in EBITDA versus the $2.5 billion that you talked about kind of on the current mid-cycle. So as we look into 2026 and some of the drivers that you think can take you towards the mid-cycle of $3 billion, some of them might come already in 2026. So how should we think about, a, the market and b, some of these drivers over more EBITDA generation, the tax credits, et cetera, as we move through 2026, considering the [ $200 ] million miss on Yazoo related that you just mentioned? Bert Frost: Ben, this is Bert. And relative to 2025, a very interesting market as things unfolded globally. And because we're -- we participate in the global market, A lot of those issues drive what happens in different regions. And starting off with the conflict in the Middle East, which shut down production in Iran and in Egypt, and then you had high demand levels in India throughout the year, much higher than expected. I think the industry expected $6 million, we were close to $10 million and additional demand for Brazil and then European difficulty due to high gas cost took production down and it required higher levels of imports. And then the United States planting 98 million acres of corn, incremental tons were needed to satisfy that demand, even though we carried in lower inventory levels into fertilizer year '26. So a very interesting market and the combination of lack of supply and high demand drove the market to levels that were unexpected. That dynamic is carrying forward into 2026. We expect -- the USDA came out with 93 million acres of corn. I think the industry would say it's that or higher. So consistently, I would say, over the last 10 years, higher corn acres, so higher demand. And you're seeing additional needs for India, the current tender that was announced or opened on Wednesday, when those numbers will be probably disclosed tomorrow or early next week. And then you're seeing, again, around the world with $11 gas in Europe and CBAM issues, you're seeing higher levels of imports eventually will come there and South America as well. So again, a positive demand and probably limited supply. So you're seeing today in NOLA, urea pricing at $450 a short ton, which is $100 higher than it was in December of 2025. So exceptionally positive dynamics driving the industry in North America where the preponderance of our production is located and we're participating in that market. Then you have the positive gas dynamics that are taking place. Today, we're at $3 for the forward market, positive economics for that structure as well. So we see 2026 as being at least through the first half having a challenging market on supply and high demand going forward. Christopher Bohn: Yes, Ben, and I think you framed it nicely when you talked about 2025 that we thought would be balanced, some people thought a little bit long, same thing with '26. And as Bert just mentioned, '25 came out with $2.9 billion in EBITDA and the first half of '26 certainly looks very strong here. And all of that is sort of bridging those years to where the market gets what I think is going to be even tighter given the lack of new supply coming on, setting us up for when Blue Point does come on the market. And that's why in our commentary, we said we see the near, medium and long-term nitrogen dynamics, very strong, because we've bridged kind of a little bit of that time frame where we thought we'd be balanced during this, and it's actually tighter. Related to the tax credit piece for next year, we will have a full year of the carbon capture and sequestration unit operating at Donaldsonville. Last year, we did about 700,000 tons we had sequestered. This year, it will be just under 1.5 million tons that will sequester. And that number is really based on just the amount of process CO2 we have remaining after we do upgrades and with the plant turnaround schedules with ammonia plants being down. So we're going to max out the most we can sequester during that particular time frame. And right now, we're thinking that's around 1.5 million tons for 2026. Operator: Our next question comes from Mike Sison of Wells Fargo. Michael Sison: Yes, I just had a quick question on CBAM, again. So if it goes away, does that make it difficult or maybe impossible to get a premium price for Blue Point? And if it stays, then there's a good chance to get a premium for Blue Point? And then just curious what you're all hearing in terms of timing when we'll find out on a decision for that by the EU. Christopher Bohn: Yes. So with CBAM, I mean, I think it's more complicated than just whether CBAM stays or not, because you have the whole ETS scheme over there that gives free allowances that are beginning to stop. Does that continue where they don't receive those free allowances, which then would basically push European producer cost even higher without CBAM. And I think on the premium side, I'll let Bert comment on this a little bit more, but I think it goes beyond what we're hearing from European customers about buying low-carbon product when it comes to the premium. Bert Frost: The premiums in place, we have contracts in place for 2026 in demand for more. So we are constructive. We continue to have further dialogue. I agree with Chris, that this is set in motion, CBAM that is in carbon pricing. This is a train that has left the station, I believe. And so how that transpires to CBAM and our premiums were constructive. And we're even seeing that now across the globe with industrial customers and agricultural customers desiring low-carbon products. So I don't see that decreasing at all. Michael Sison: Got it. And then just one quick follow-up. Given the dynamics you shared for nitrogen this year. Is your bias that pricing kind of stays at this level and maybe the biases may be potentially to go up from here? Or how do you sort of see the kind of the scenarios for potential pricing there? Bert Frost: Yes. I'm never biased. I'm just correct. I think that because this is a global market, and you have so many different dynamics driving the world price structure with different producers and different localities producing this product that don't consume it. And you have some very gigantic producing places like China that are sometimes in and sometimes out of the market. And then you couple that with 3 to 4 months of demand in North America of actually using this product in 6 to 7 months of inventory build. And so you have to be a student of the market and follow these things. And we had an opinion coming out of Q4 or in Q4 that because of the supply demand dynamics I had explained earlier, we were on an uptick of pricing, a positive uptick in pricing, and that has transpired. How much further it goes. There's all kinds of expectations in the market today. I think there is still room to go, especially in North America. But I do think there will be a correction in the back half of the year like there always is, as we move from the Northern Hemisphere to the Southern Hemisphere of planting. Operator: Our next question comes from Kristen Owen of Oppenheimer. Kristen Owen: Carbon opportunities and maybe double-click on the agreement with POET for the low carbon fertilizers. Just given some of the proposed changes in the 45V guidelines, practice changes, I'm wondering how you're thinking about low CI fertilizer demand opportunity domestically. And if those 45V tax credits maybe help improve the unit economics or pricing premium that you're seeing here in the U.S. Bert Frost: Yes. So for the -- we missed a little bit of the first part of your question, but it's about low carbon and low carbon in the ag sector and the consumption of that product and the demand profile going forward. And our agreement with POET is exciting. POET is a super strong company and the leader in biofuels. We're also talking to other ethanol producers. But the vision is about the core value chain. And how do you take a low-carbon corn? Well, how do you create that with low carbon fertilizer, who supplies that we do and who has plenty of supply for our customers, we're building it. And so as you take that low carbon product through the value chain and as the ethanol plants decarbonize themselves, there's a tremendous opportunity for domestic and export ethanol demand to be satisfied by the United States. And we're the one place that can supply that in terms of the gasoline blends globally. And then for low carbon or low CI score fertilizer as well, we're seeing -- we're having conversations. We're seeing demand through the retail sector driven by the CPGs and other food producers as they look at their sustainability goals and Scope 3 and scope emissions. Christopher Bohn: Yes. And I think anything related to the 45V is just going to be an upside to us. As Bert mentioned, he's hearing enough activity even though at this particular point, low carbon fertilizer is not recognized in the 45V now, that is up for comment right now as the USDA is defining what are those qualifying activities and you would think low-carbon fertilizer, which would be an attractive pathway as it's very easy to verify what is the carbon score of that. So we're hopeful that gets included. But as Bert mentioned, he's already getting interest in that, even with it not being included in the 45V just yet. Kristen Owen: Super interesting. My follow-up question is a little more boring and on the modeling. So you -- can you just remind us your operating costs in 2026 you threw out the $200 million EBITDA headwind from Yazoo City, I imagine there are some stranded costs or overhead costs that won't be recoverable through the BI insurance just some thoughts around operating costs and any sort of turnaround that we should be thinking about in 2026? Christopher Bohn: Yes. In terms of the BI, our hope is that virtually all of those costs are going to be recovered through BI. We're not expecting anything major outside of it. And as we go through the rest of the year, our turnaround schedule, I think, is projected to be pretty normal in terms of what we would normally expect. So I don't really have anything I want to highlight. Operator: Our next question comes from Christopher Parkinson of Wolfe Research. Christopher Parkinson: Just a short-term question and a lot of questions for me. The short term, just Bert. Going back to some of the things you were discussing before, how are you thinking about order book flexibility into this year? I mean farmers are just now getting some deferred direct payments. You're waiting news [indiscernible] and then you mentioned India, Iran, Trinidad out, Texas capacity and it seems like there are more moving parts now than in previous years, at least going back to '22, let's say. How are you thinking about that with your team? Are you leaving some flexibility as you enter spring? Or are you happy with prices where they are now? Bert Frost: Yes. In general, we're pleased with our order book. And as I highlighted earlier, coming out of 2025 into 2026, we carried some inventory in to 2026 on purpose, because of these dynamics that we're laying out that -- and this has been the discussion. We just finished the TFI, The Fertilizer Institute meetings in Orlando this week with all of our major customers. And the message is we're heading into a logistics game that as good as the weather has been that it's been warm. We're seeing applications already start Texas, Kansas, Oklahoma and Nebraska. And I think that's going to be even more pronounced and we could see in early spring, similar to what we did in 2012. If that is the case or even if it's normal, we're approaching where the need to get products where you have difficulties on the river due to low water, you have, we believe, shortages or lower inventories in the upper Midwest. There's been a number of plant issues in our sector in Canada and through the winter storm that came through in January, we think there's been some downtime. All that equates to lower levels of available product and we're having 93 million, 94 million, 95 million acres of corn. So in terms of the flexibility, we're all about execution right now, identifying where the product needs to be, where are the orders placed against our terminals and plants and communicating with our customers where they believe they're going to be requiring tons and then communicating about those -- getting those orders placed and in the process and working with our freight providers, the railroads, the barge companies to move it. So this is all about execution from now forward. Christopher Parkinson: And perhaps a slightly longer-term question. There's obviously been a few questions here already on CBAM. But switching over to the other side of the Blue Point equation and heading to the east, Japan has actually been moving as far as I can tell, further forward, you've seen as of December [ medi ] certifications, further go forward on a $20 billion hydrogen hub, a lot of those consumers and potential, have lost supply agreements with others based on three project cancellations, one long-term deferral and one final blue -- blue ammonia facility that's, let's say, currently a flux for the next six months. As much as everybody is focusing on Europe, do you think the buy side and the Street is missing something more pronounced in Japan that's still ongoing? Christopher Bohn: Yes. I think it's an excellent point, Chris. I mean, as we mentioned every one years ago thought that there was just going to be this big wave of low-carbon supply coming online. And we had said, it's easy to announce a project, it's difficult to execute on it. And so as you mentioned, a lot of those projects have fallen off. Now what we're continuing to see a lot of interest in, and it goes beyond Japan and Asia, but it is in low carbon. And I think the JERA and the Mitsui and others over there are the leaders in this. I think more importantly, it's not only the low carbon aspect of it, it's for a new demand source. And that's something that when you look at the Medi agreement and what they were able to do with the contract for difference, their 60% of this new plant is going to a new demand source that didn't exist a year ago. And so we're optimistic that we continue to build out on that along with continuing to see additional demand growth in the legacy agricultural business of sort of that 1% to 2% a year. And all those factors are why we are suggesting that longer term, not enough supply coming on, new demand centers coming on and then just the regular legacy growth that we're going to have a very tight market when Blue Point does come up. Operator: Our next question comes from Lucas Beaumont of UBS. Lucas Beaumont: I just wanted to go back to the sort of difference between the pricing outlook and the cost curve. So I mean, we've had like strong pricing to start the year. Cost care has moved up a bit, but not as much. And I mean the sort of premium there is going to widen. And as we look further out, the energy futures curve continues to ship lower kind of now into like the [ $7 to $8.50 ] range kind of later in the decade. So I just wanted to sort of get your view on how is that sort of resolved with your view of sustained market shortages on the supply side? Does this kind of need to correct in some way? Or do you expect it to persist, I guess, through this year and then into the medium term? Christopher Bohn: Yes. Maybe I'll start. So on that, from a longer-term standpoint, there is the gas differential that you're talking about. And today, that sits at around $7 to $8 per MMBtu delta. We do expect that, that will converge a little bit with Henry Hub, by no means do we think that goes away or flattens to a level that doesn't keep us economically competitive. But I think there's another side of that, that we've just been talking about on many of these questions through here, which is the SMB side. So yes, you have the COGS side of what it would cost, but you have to bring on new capital in order to meet that demand growth without even clean energy growth coming into this, just the incremental growth of demand is going to push the cost curve demand side farther to the right, having to pull in either higher cost production than we have today or require new plants to be built. And like I said, our plants alone at $3.7 billion, capital costs are only going up. And with that, people are going to expect returns. So I think as we look at -- we expect the natural gas differential to continue, but we also expect that we're going to see demand move to the right on the cost curve and also the cost curve to be supported by new plants that are going to be needed and required or high-cost production to remain in. Bert Frost: And that also doesn't consider just what's going on dynamically around the world with energy and shortages of energy in certain locales like Trinidad or high-cost energy in Europe and suboptimally operating at 80% or less as well as other specific locations of limited production. Brazil is going to be bringing back. They're supposedly, their plants that would have been -- not been operating over the last several years. And so supply is limited that we see in the forward, demand continues to grow, but also supply continues to be cut in other locations, making for a very solid structural market, as Chris explained. Lucas Beaumont: All right. And then I guess just maybe a bit of a short-term question on the Middle East tensions with Iran. So I mean, they're about 10% of the global urea export markets. I guess, how would you see the market dealing with any disruption to production there and the impact on pricing? And I guess how would that sort of need to flow through from a timing perspective in terms of, I guess, disruption to the shipments before it's really starting to have an impact and how long it would be down. Bert Frost: Yes. If you look at the Middle East and the suppliers that are located there, the producers, are in Iran, Oman, Qatar, Saudi Arabia and UAE for urea, that's about 20 million tons. So in a globally traded ocean going traded ton, that's about 35% of the world's supply that goes through the Strait of Hormuz or close to it. However, you also have to look at ammonia where those same countries referenced are about 5 million tons or also 30% of the globally traded ammonia ton. And so if something were to happen, the constraining factor to supply would be pronounced. As well as LNG, about 25% of the world's LNG also transit through that the Strait. So if conflict were to occur, it would be, I would think, even more difficult or more challenging than the current situation in Russia and Ukraine and moving out of the Black Sea. Operator: Our next question comes from Vincent Andrews of Morgan Stanley. Unknown Analyst: This is [ Justin Pellegrino ] on for Vincent. Thank you for all the commentary on where prices and market commentary are headed over the last few weeks. But I kind of wanted to step back and go back to Blue Point for a second. You mentioned earlier in the call that as you kind of started going through the process, permitting or whatever, that the time line may have shifted around a little bit. And I was just curious, where have the pressure points been as you started to go through the process, whether that be tariffs, labor, whatever it may be? And then can you kind of just flag anything that we should be watching as that project starts to progress through the stages and anything else that's worth talking about there? Christopher Bohn: Yes. Thanks, Justin. The timing really hasn't shifted at all. So our expectation is still in 2029, the plant will come on by timing, I mean timing of payments. In which case, as you get closer into these larger projects and you're actually talking to the -- whether it be the modular yards to civil contractors, you've engaged different things like that, you have a better idea of when those payments would be going out. So, nothing's changed from our time line on the particular project. I think as far as milestones go, as I mentioned, we've pretty much achieved the milestones that we have in place where the next big ones would be the Air permit and Army Corps permit as we look to build the heavy haul bridge that will bring the modules over. Additionally, as we start to do some of the civil work, which our expectation is here in the next couple of months, we'll start moving ground, driving piles. We've already driven test piles. So I think right now, there isn't much of these milestones other than the permitting process, which, like I said, our expectation is that we will have that going here in the next couple of months. The other part that I should mention is of our $3.7 billion in total capital spend, we still have about $500 million of that, that is built in as contingency. So not knowing really where tariffs are going to fall out based on Supreme Court and also that a lot of this lead time -- longer lead time stuff doesn't come for 3 years, but we do have a sizable contingency built into this particular project. Operator: Our next question comes from Edlain Rodriguez of Mizuho. Edlain Rodriguez: Just one quick one for me. We've had some affordability issues with phosphate. And of course, you don't produce that, but you know what's going on there. And with urea prices moving higher, like any concerns about affordability in nitrogen, like is it better to be as affordable as possible just to prevent a bunch of issues or the market will just determine where nitrogen lands on the affordability spectrum, and we just have to deal with it? Bert Frost: Yes. Edlain, I think you raised an important issue because we're a part of a value chain that the farmer plays the most important role because he or she is planting and harvesting and storing many times those crops and then there's a payout. And so we do study that. We do study where that lays out for the major crops, corn, soybeans, wheat, cotton, sugar, at least for North America and what those economics look like. We are in a global market, however, and product moves pretty freely around the world from the Middle East to North America, from North America to Europe from Russia to North -- to the United States and like same thing with corn and soybeans. And so I think we're aware of that. We're looking at what that means for -- in terms of return on variable costs, return on full cost. And I think the [ Trump ] money that flowed down from Washington is helpful for in terms of balance of payments. I do think there are some credit issues in certain parts of at least the United States, I'm aware of that retailers are holding and those are conversations with how they balance their year, and so yes, we're aware, yes, we're following it. And yes, we want to be a part of the solution for the American and Canadian farmer. Operator: Our next question comes from Matthew DeYoe of Bank of America. Matthew DeYoe: I don't know. You had mentioned Brazil, and so I wanted to tap in a little bit on that and the plants that were being restarted. I know it's not your plants, and so companies don't often like to highlight or talk about that a little bit. But at least from a headline basis, there's like 1 million tons of urea in that production. And effectively, it was supposed to be started up or starting to start up by the back half of last year. Seems like you're calling for Brazilian urea to be flat on an import basis year-over-year. Is there some expectation that growth is in there? Or are you treating that plant -- those plants is 0? Or is it they'll take too long to ramp and demand will offset. I'm just kind of wondering your thoughts on that. And in general, I guess, like recommissioning in the commissioning cycle in plants and how that's creating or can create gaps in supply. Bert Frost: Yes. Brazil has been an amazing story over the last 25 years with their consumption of urea and especially on imports, because they become one of the drivers of the globe of demand. But if you go back to those earlier years, it was about 2 million, 2.5 million tons of imports to today, almost 8 million tons of imports, but parallel to that ammonium sulfate coming in at also around 8 million tons. So on the end molecule or the end product, the nitrogen product coming into Brazil has grown substantially. Ammonium nitrate being fairly consistent. And so what has happened, though, during that time period, these plants are -- you have the plant in Parana -- close to Paranagua and in Camacari and some of the plants in [indiscernible] that are up north. Those plants are not well placed, at least the northern plants to where demand is, and they've struggled to operate over the years, one, that they're inefficient, two, that their high logistics costs to move the product to the high-demand areas. Brazil continues to grow in acres and acres planted and especially with the double cropping being economically viable. And so we do see these plants coming on, and they've also talked about reinitiating construction at [indiscernible] that was stopped about 10 or 15 years ago. And so Brazil has the capability. What they don't have is the gas where these plants are producing or enough gas that's been an issue as well. So they get to an initiative of the Lula government and [ Petrobras ] to continue to invest and serve their domestic farmers as they can. But Brazil will still be a major importer, a major driver of urea demand or nitrogen demand worldwide. Christopher Bohn: Yes. And just from the urea supply side in Brazil, I'm probably a little more skeptical than others on this just from my time in manufacturing and what the cost would be to bring plants that have been idle, but likely were not necessarily taken down just because of the number of years they've been down. I think the capital -- the upfront capital cost to do that and then the efficiency of those particular plants after they are up would cause a lot of issues. So I'm still in a wait and see what happens with those particular facilities. Matthew DeYoe: Now loan on that, Bert, I just wanted to know what the -- your input. Operator: Our next question comes from David Symonds of BNP. David Symonds: I just wanted to ask on your assumption of a 4 million to 6 million tonne export quota from China in 2026. That's pretty much flat year-on-year versus what they did in 2025. And my understanding is they've got 4 million tonnes of additional capacity coming online at some point through the year and I think inventories are still quite high. So I've been penciling in a little bit more than 6 million, like 6 million, 7 million tonnes. Just curious to hear your thoughts on that. Bert Frost: I think that's possible. I think we've seen a different China in most years from the heydays of their export activity in 2015, '16, '17 to really pulling that back and recognizing the economic and political benefit of exporting that urea is fairly de minimis. But keeping that product in country for the Chinese farmers and the growth of Chinese production has been important to them. So I think there is a differential between the domestic price and the international opportunity. Last year, you're correct, it was around 5 million tons of exports, and we're penciling in. We're being conservative to say that, that maybe something that the government is initiating. But if you take their capacity and run it at an 80% plus or minus run rate, they really don't have that much to export, and that's about the run rate they've been running over the last several years. So I would say your number might be a little high, but we'll have to have a coffee over that number next at the end of the year. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Martin Jarosick for closing remarks. Martin Jarosick: Thank you, everyone, for joining us today. We look forward to seeing you at upcoming conferences. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Hello, and welcome to the Klépierre 2025 Full Year Results Presentation, hosted by Jean-Marc Jestin, Chairman of the Executive Board; and Stephane Tortajada, CFO. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jean-Marc Jestin, to begin today's conference. Please go ahead, sir. Jean-Marc Jestin: Good evening, everyone, and thank you for joining us. I'm pleased to present Klépierre's full year results together with Stephane Tortajada, our Group CFO. And once again, 2025 has proven to be a remarkable year for your company. Before presenting our detailed full year results, I would like to stress in the first few slides that our strong 2025 earnings build on our sustained track record. Over the past 3 years, Klépierre has delivered unmatched growth across the board. Our net rental income has risen by 21%, underscoring the exceptionally strong demand from omnichannel retailers, while our EBITDA has increased by 23%, reflecting the significant operational leverage inherent to our business model. In addition, our disciplined balance sheet management, combined with our operational excellence, has enabled us to grow our net current cash flow per share by 21%. This outstanding track record reflects the unique quality of platform of leading shopping centers located in the most dynamic and affluent catchment area of Continental Europe. In recent years, we have undertaken a profound transformation of our portfolio to further align with new consumer behaviors and the continuous expansion needs of major international brands. Since 2020, we have completed over EUR 2 billion of noncore asset disposals, allowing us to refocus the portfolio on malls with the strongest fundamentals while also completing three accretive acquisitions. This reshaping of the portfolio has resulted in net current cash flow per share growth well ahead of retail peers. Over the past 3 years, not only have we significantly outperformed the European property sector, but also the wider European equity market in terms of earnings growth. Specifically, we generated earnings growth 4x higher than that of the top 20 companies of the EPRA Developed Europe Index and up to 20x that of the broad Euro STOXX 600 index. Since the valuation through, we have benefited from continued appreciation of our assets that have already delivered 20% NTA growth. Today, our top 70 malls account for 95% of the value of our portfolio. Combining these solid capital-driven returns with consistent and uninterrupted dividend growth, we delivered a total accounting return of more than 31% over the last 2 years. Such a performance is 50% above the second-best performer, and twice that of #3. Now delving into our 2025 performance. Retailer sales across our malls rose by 3.4% on a like-for-like basis, underpinned by solid consumer spending and our ability to attract leading retail brands, while enhancing the shopping experience. This strong performance, once again, translated into market share gains with retailer sales growth running at twice the pace of national retail indices. Over the years, this momentum delivered a 4.6% rental uplift on renewals and relettings and pushed occupancy up by 60 basis points to 97.1%. At the same time, occupancy cost ratios improved further to 12.5%, providing us clear headroom for additional rental uplift. More income posted a strong 12.1% increase, supported by the continued expansion of specialty leasing and retail media across the portfolio, and once again, our results beat guidance. In 2025, we have delivered a net current cash flow per share of EUR 2.72, marking a 5% jump year-on-year. This result was well above the initial guidance of EUR 2.60, EUR 2.65 per share. The group has achieved a 5.1% increase in net rental income to EUR 1.120 billion, outperforming indexation by 330 basis points. This performance was underpinned by a 4.5% like-for-like growth and fueled a 5.5% EBITDA growth. This was supported by controlled payroll and G&A, which enabled a 50 basis points improvement to our EBITDA margin to 87.3%. For the second consecutive year, our NAV grew 9% again. This increase has brought our NAV per share to EUR 35.9, compared to EUR 32.8 in 2024. Overall, this marks a 19% growth over the last 2 years. Such an increase is driven on the one hand by a positive cash flow effect triggered by an increase in net rental income and, on the other hand, by a positive market effect fueled by slight decrease in discount rates during the past year. Over 2025, as was the case the prior year, Klépierre generated a remarkable total accounting return of 15% or 31% over the last 2 years. Following our strong operational and financial results, we will propose to shareholders at the forthcoming Annual General Meeting on May 7, the distribution of a cash dividend of EUR 1.9 per share for 2025, representing a 6% spot dividend yield. Obviously, our achievements are the fruit of a clear strategy that allows us to confidently continue growing in the years to come. We strongly believe in our capacity to deliver further growth through organic means, extensions as well as value-creative acquisitions. First, let me turn to our organic growth drivers. We have consistently delivered rental uplift over the past years, and our ability to continue doing so in the coming years remains fully intact. At the same time, mall income represents a major opportunity to monetize our EUR 720 million annual footfall. Second, our ability to reshape our shopping centers is unrivaled. At Klépierre, we have the expertise to adjust the scale of our malls and fulfill our retailers' constant demand. To accommodate such demand, we are launching extensions when necessary. Every single project we carry out delivers a minimum 8% hurdle rate, strengthening our shopping centers with increased footfall and retailer sales allowing further market share gains in the catchment area. In parallel, we pursue an active external growth strategy. We acquire assets, for which we are certain we can create value, assets that both strong fundamentals that are endorsed by leading international retailers and for which we see operating efficiency and significant incremental rental growth potential. But make no mistake, the best portfolio is the one that delivers the highest returns for shareholders. So why do our malls remain so highly regarded? Because our malls are rightsized for their catchment areas and deliver high sales density per square meter, enabling a gradual rental uplift over time. Additionally, investments to create streaming shopping experiences for our visitors remain core to our strategy. These investments are carried in a highly disciplined manner in order to maximize our cash flow generation and shareholders return. In addition, new supply in prime shopping centers is extremely limited, which increases further scarcity in the quality space. The A asset category is the one and only that benefits from this setup. As a consequence, our occupancy rate has steadily increased over the past years, reaching 97.1% at the end of 2025, and this is 130 basis points higher than 3 years ago. In the meantime, category killers continue to expand their store size to support their omnichannel strategy and better meet the needs of their customers. And to keep up with the evolving needs of our retailers, we strive to make continuous portfolio optimizations. By actively rotating our tenant mix, we bring in higher productivity retailers, we elevate our offer and seamlessly replace slower-performing retailers. This ongoing rebalancing enabled us to dramatically increase sales density while clearly enhancing the customer experience through the introduction of innovative brands and the expansion of our leisure and experiential offer. Consequently, we have seen our overall retail mix shift steadily over the past 5 years, moving towards health-oriented wellness and entertainment categories. Our Health & Beauty and Dining segments, for example, have been the fastest growing over the past 2 years. To name a few brands, Rituals, Normal and Aroma-Zone, a fast-growing pioneer in DIY cosmetics, continue to boom. Our Dining options and retailer mix are once again being refreshed to attract and retain a diverse and evolving demographic as the number of households continue to grow and ongoing urbanization brings more visitors to our malls. Klépierre continued to maintain a very healthy OCR of 12.5%, compared with 15.9% for listed destination peers. This performance is a direct consequence of our retenanting campaigns that focus on introducing the best retail concepts, delivering exceptionally high sales density. In 2025, sustained leasing tension and continued low OCR drove a solid rental uplift of 4.6% after annual increases of at least 4% every single year since 2022. Let me now stress the other key source of incremental organic growth, mall income. This encompasses our specialty leasing and retail media activities as well as parking and EV charging stations. These levels have been reactivated recently since 2022 and have been growing at an annual average of 12% ever since. We expect further sustained growth going forward. Specialty Leasing through [indiscernible] pop-ups and Retail Media enables our business partner to engage more directly, more deeply with shopping center visitors. The core premise of Klépierre's offering to retailers and business partners is at annual 720 million qualified audience, I just mentioned earlier. Such a large cohort provides immediate brand visibility, allowing large-scale promotions, whether through pop-up stores during festive season, major promotional campaigns in our malls or even full mall domination by omnichannel on national brands. Our nascent retail media business model is clearly shifting from a previously outsourced advertising agency type to a hybrid model. We are actively pursuing to regain full control of our mall ecosystem and better leverage our long-standing relationships with brands and business partner. Practically, by accelerating the deployment of digital screens, including the latest giant led screen technology, we are highly confident in our ability to generate significantly higher average media revenue per footfall than currently. Overall, Specialty Leasing and Retail Media are two highly complementary and synergistic activities, that let me remind you, require very little CapEx. Regarding parkings, we have taken several initiatives in order to introduce paid parking in a number of countries, in particular, in Southern Europe. Now turning to our other growth pillar, namely accretive capital allocation. We have the means to achieve our ambition as we have a rock-solid balance sheet, historically low leverage ratio and top credit ratings among our Continental European peer group. Our value creative capital allocation consists of critical extension as we continue to accompany and fulfill anchor omnichannel and iconic international retailers demand in their pursuit of ever larger flagship stores. Beyond the incremental rental income generated by each extension, such projects unlock substantial value, creating a halo effect across the entire center by driving stronger footfall, lifting total retailer turnover and strengthening leasing extension. Ultimately, such extensions allow us to gain further market share in the best catchment areas. And to be specific, over the past few years, we have launched very successful extension projects. In the Paris region, for instance, we extended our [indiscernible] mall Créteil Soleil. We subsequently initiated a similar transformative operation in Bologna at Gran Reno, and the results speak for themselves. Rents increased by double digit, if not triple digit since the extensions. Both shopping centers recorded a strong double-digit growth in sales density. If we take the Créteil Soleil example, rents were up close to 30%, and average sales density per square meter for the whole center increased by 20% since the completion of our extension. This demonstrates again our unique expertise to transform our shopping malls into unrivaled shopping and entertainment venues. In the same spirit, we have recently launched 3 additional major projects that we are confident, will create further value for our portfolio and for our shareholders. Following the completion of the latest French extension at Odysseum, Montpellier, we have initiated two major transformative projects in Italy, at Le Gru in Turin and Romagna in Rimini. And once completed, this extension will raise both assets into the super prime mall category and will boost our rental growth momentum in 2027. In parallel, we continue to have appetite for external growth. Any prospective acquisition must not only meet our financial criteria, but most critically, allows us to enhance operational performance through reversion, retenanting and the ability to rolling out our mall income solutions. O'Parinor and Romaest acquisition in 2024 strongly illustrate our strategy and clinical execution with significant value creation of 71% and 64%, respectively. Our most recent acquisition of Casamassima, the leading mall in the Mari metropolitan area in Italy, meets exactly our requirements, and we will be applying the same recipe, and we are looking forward to generating a high single-digit return as early as in 2026. In summary, we are confident about 2026 as our organic rental uplift and more income drivers are well positioned in addition to our capacity to carry out high-value extensions and selective acquisition come on top. Moving to 2026. The resilient macroeconomic and consumption environment, coupled with healthy retail sales backdrop underpin a continuous recovery of the European transaction market. According to European retail investment volumes are to reach over EUR 35.5 billion in 2025, i.e., a 5% increase year-on-year. Shopping centers, in particular, have continued to regain favor with investments accounting for close to 1/3 of total volumes since the start of 2025. This improved investment environment was illustrated by multiple prime mall landmark transactions in 2025. As a consequence, the strong operating performance of our malls continue to feed the expansionary valuation cycle of our portfolio. Over the last 12 months, our total portfolio valuation increased by 4.9% on a like-for-like basis. Our well-anchored growth profile was reflected into a slight risk premium compression in 2025, though remaining well above those of other asset classes. We believe this compression represents the early innings of a durable ongoing trend. Building on the positive momentum, we disposed EUR 205 million of small-scale assets, 8% above appraisal value and at a 5.6% blended net initial yield. While we enjoy high visibility on long-term rental growth in a more conducive capital environment, our sound financial structure also provides us great comfort in terms of refinancing and remains a key competitive advantage. We secured more than EUR 1 billion of long-term financing in the past year with an average 8.5-year maturity at a highly competitive blended yield of 3.3%. The proceeds were notably used for repaying a EUR 500 million bond maturing in February 2026, significantly limiting the impact of refinancing activities on our expected net current cash flow generation for the coming year. Looking ahead to 2026, as we believe a firmer market is set to provide tailwind for capital appreciation, and as we benefit from visibility on the cost of debt, we expect to achieve a minimum of EUR 1.13 billion of EBITDA and at least EUR 2.75 net current cash flow per share. Thank you for your attention, and I will now open the floor to questions with Stephane. Operator: [Operator Instructions] The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: So my first question would be on the guidance, I know that, I don't know, Jean-Marc and Stephane, you never itemized the guidance, but it seems a bit cautious in my view. So it would be nice if you can give us, let's say, the main building blocks of the guidance, especially on the NII like-for-like rental growth that you are expecting in 2026, in light of the deceleration of indexation, especially in France, and maybe also the expected cost of debt increase that we might expect in 2026. Stephane Tortajada: Okay. Thank you, Pierre-Emmanuel. So I will say first that the guidance is bang in line with the Bloomberg consensus. So I'm not sure it's cautious, I would say it's in line with the market expectation. And second point, I will mention also that this is a usual pattern of guidance at Klépierre because you follow Klépierre for a very long time now that, I think, it's a usual pattern of giving guidance at the beginning of the year. I would not say cautious, I would say, just as usual. So indexation, you're right, will be lower in 2026 compared to 2025. We may expect indexation around 0.8%, we had 1.8% in 2025. But as Jean-Marc just explained, we feel that we have a lot of levers internal growth first, but also extension plus the acquisition we have just completed end of December in Bari that obviously will be positive for 2026. And for the, you mentioned also the cost of debt, as we have said, we have already covered all the financing for 2026. So you should not expect a big jump in the cost of debt in 2026 for sure. Pierre-Emmanuel Clouard: Okay. And my second question is on obviously your firepower. So if you can give us a view on your current firepower today, in order to keep your A minus rating? And what's your minimum yield requirement, when you are ready to buy assets, I would say, I'll take my chances, but if you have anything to say about the [indiscernible] portfolio, it would be interesting. And also on disposals, what's left in the noncore bucket in 2026 in your view? Jean-Marc Jestin: Okay. Thank you, Pierre Emmanuel. You have exceeding the 2 questions, but... Pierre-Emmanuel Clouard: It's a blended one. Jean-Marc Jestin: Yes, and I will answer with pleasure. I think the -- and I will add on the guidance. When we elaborate a budget, we do it very carefully, and we do that at the end of the year in September, October. And what we have also -- and we take what we know for certain, and we have done some disposals also that will have a full year impact, and we have integrated, as usual, no acquisition in 2026 and development project that we have launched, even though they are not very long in terms of construction, they will deliver in 2027. When it comes to acquisition, we have been quite successful over the recent past to seize some very interesting opportunities where we can really create value. So to the question of what can we do, we look at different type of opportunities. We are extremely selective in terms of pricing. Pricing, it's a combination of, obviously, accretion day 1, compared to our financial metrics, but also the reversionary potential that we can deliver in, I would say, in the next 3 to 4 years. So it's difficult to indicate kind of a threshold that will apply from Scandinavia to Portugal or Italy or France. I would say we have -- we think we still have some opportunities to look at, but for the time being, there is nothing ready to go. And we don't really comment on rumors. So on the portfolio, you mentioned it's market knowledge that this is for sale. We suspect there is a lot of competition on it. And as you know, we don't really like competition. So we cannot comment. It's a very slow process, we will see. For disposals, we are still doing it one by one. So just as a reminder, the top 70 assets, that's 95%. So by telling it, we said that there is 5% that are noncore, 5%, it's EUR 1 billion, and EUR 1 billion, when you sell it at EUR 200 million every year, it will take quite a distance to finish it, but we have no pressure to do that. We do it at a good net initial yield above appraisal value. We don't like the impact of dilution. So we tried to combine it with acquisition. So we do it steadily and try to protect the shareholders' return. So yes, we will continue, and it will take some couple of years to finish. Operator: The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: Actually, I would have a first question, a follow-up question on the guidance for 2026. So I agree with Pierre-Emmanuel that it seems to be very first. And actually, I just looked at what you published last year at the same day, and it was actually quite more the same type of guidance, and we can see that today you deliver plus 5%. So maybe, could you please tell us how you beat your guidance, so we understand that you just put things for which you are maybe sure at 100%. But how can we take into account, for example, some growth, I don't know, in more income or some growth due to revisions, maybe that would be very useful. Jean-Marc Jestin: No. Thank you, Florent, and happy to see you are in line with Pierre-Emmanuel, but -- the -- on the guidance, as I said, we build and we take what is certain, okay? So most of the time, if we do better than the guidance is because we are delivering what we have at work. So in this presentation, we have remind, I think, the main cylinders for the growth. But this is under construction and needs to be done and to be delivered. So there is a very high visibility on our rental, on our occupancy, on our rent collection. But on mall income, retail media, retailer sales, also we always assume that retailer sales will be flat because we can't do better than that. And most of the time, we are delivering more than expected, but as this is under construction, we take it as it comes. So we update the market on our performance on those cylinders. So what we can say that the beginning of the year in terms of sales is very good. We have a good sales for January which allow us also to be more optimistic, even though it's only 1 month. So the sale-based rent, the appetite from retailers is also quite linked to the sales environment. So -- and that's where most of our overall performance come from. Florent Laroche-Joubert: Okay. That's very useful. And maybe a second question on the valuation of assets. So we can see that you have a significant increase this year. You tell us that maybe this is the beginning of cycle. Could you maybe give us maybe more color on your discussion with appraisals on that? Stephane Tortajada: Yes. The first building block for valuation is the cash flow. As you have just said, in 2025, we had better cash flow than expected 1 year before. So just because when you have a better cash flow, it directly translates into a better valuation. This is the first point. So it plays. Second point, it's obviously the fact that we have seen more and more transactions for very prime mature assets in various geography, France, Eastern Europe, Spain, at a very compressed yield starting by 5. So for the appraisers, it gives really them the comfort to decrease the risk premium they add on the discount rate because obviously, a few years ago, 3, 4 years ago, they were quite cautious because they did not see any significant transaction. Now we see more and more transaction coming. So it gives them the comfort just to decrease the risk premium. So I think when you add these 2 building blocks, it gives us a lot of confidence in the path of decreasing the net initial yield and increasing the valuation going forward. Operator: [Operator Instructions] The next question comes from Frederic Renard from Kepler Cheuvreux. Frederic Renard: First, maybe, can you comment on the performance of your mall by geography, which area currently the best and, which are doing worst? Jean-Marc Jestin: Thank you, Frederic, for your question. It's a very wide question. So are you talking about retailer sales or organic performance or? Frederic Renard: Yes. Jean-Marc Jestin: Yes, retailer sales, I think the pattern is for the last 3 years, I would say, and 2025 is just a confirmation of this pattern. Sales have been increasing everywhere in all geographies, but in Germany. We have a very small exposure in Germany, but the only exception where our sales have been slightly declining, it's Germany. All the rest is positive. The second pattern is that it's more dynamic in South Europe. So clearly, the Italy, Spain, Portugal are doing more than the average. And together with the Netherlands, it's not really country-specific, it's more asset-specific than country-specific, but that's to answered your question. And there are some variances in Scandinavia. It's below the average, but it's positive. And France has been a bit more lukewarm, I would say, in 2025 and also beginning of 2026. This is not only in our malls, I think it's something you have been able to see with other release. But overall, I think this is a remarkable year. And when it comes to the segments, they have been all positive, all positive. There is only from time to time, I would say, an accident in some segments like electronics or home equipment on decoration, but even fashion has been positive. And the beginning of 2026, it's everywhere, it's positive, but Germany, every segment is positive, including fashion. Southern Europe is doing above the average, and for January, the sales that we have just connected is above 2025 numbers, so for 2025 was at 3.8% and January, it's above. So it's quite interesting. What has maybe sometimes when we look at the month to month. So sometimes, months can be a bit slow and the other one, much stronger. So there is quite a bit of volatility from a month to another, but overall, October has been very strong. November has been very strong. December have been weaker, January is very strong. So that's -- there is -- so the geographies are not really meaningful to us because they are all positive. Frederic Renard: Okay. Understood. And maybe a second one, I'd like to come back on the capital allocation, if I may. I mean, the stock price has been clearly on fire over the last 3 years on the back of very good assets and liability management, still liability management that put you in a very good shape. But today, it seems to me the capital structure is inadequate and the net debt to EBITDA will continue to go down. And actually, as you mentioned, that you have a good lever from an organic point of view and that will continue like this. So you mentioned that we didn't like competition or you don't like competition. But actually, competition is increasing a bit everywhere for retail. So are you afraid of missing the right opportunities in this market? Jean-Marc Jestin: Never. Never. No, I think we take it easy, I think, okay? We are in a long-term business, okay? And if we look at the capital allocation, I think there is one strategy, which is very clear. 2025 was the 10th anniversary of the big transformation at Klépierre. You remember, we did the disposal of convenience shopping centers in '15, we acquired Corio. We had, at that time, 300 assets we acquired 57 from Corio. We are left with 70% for 95% of the portfolio. So the capital allocation that's something you build step by step, okay? And you have to make it carefully. There are so many examples of people going big time, okay? So we do it carefully. So our net debt to EBITDA -- our balance sheet -- and that was -- is, I think, a good achievement is that even though we continue to grow the EBITDA, grow the earnings, grow the dividend, uninterrupted, we deleverage the company, okay? So this is not an objective to deleverage the company. It's just a consequence of managing very well the capital allocation. So the -- we have a lot of room for maneuver. We have done a very good acquisition, as you have seen in my presentation, where we have created 71% value in O'Parinor, 50-something percent in RomaEst, Casamassima will be there. So we are very -- I don't know if we are selective. We do it a try. Timing is always an issue. It's going to be this year, going to be next year, we'll see, okay? So we invest for the long term. We invest for our shareholders, and we want to find the right product where we can build the rents up quite quickly. So I hope it answered your question. So we are in a strong position, so we cannot regret that, but we will not rush. Operator: The next question comes from Alexandre Xerri from All Invest. Alexandre Xerri: Just one question on my side, also on the capital allocation. With current very limited discount on net asset value. Does this advantage could influence your M&A strategy? And could you consider, in other words, acquisition using equity markets? Thanks to this advantage. Jean-Marc Jestin: Thank you for the question. That's a question for which I don't have an answer because there is nothing on the radar. There is nothing to build on that. I think the performance of share prices, the testament to the quality of the portfolio, the testament to our capacity never to disappoint to continue to grow, to pay dividend, to have a very strong balance sheet. And as you said, we have ample opportunities to raise capital. So we have easy access to debt, low cost of debt. So unfortunately, your question is too broad, and I can't really answer to that. Stephane Tortajada: But maybe what I could add is that the most accretive way to make acquisition is to be financed by debt. And we have a lot of room of maneuver of firepower is huge today, really huge, because when we increase our EBITDA, we increase our firepower, because -- to keep the same rating. So I think what we will first do is to look at our internal resources to make it very accretive if we make acquisitions. And then if we have really some very large acquisition, we may think about equity capital market, but the first stage will really be from internal resources. Alexandre Xerri: Okay. Understood. So maybe have you fixed an LTV level, you will not go beyond? Stephane Tortajada: No. We do not really think about LTV. We are more focused on ratings and net debt-to-EBITDA. Net debt-to-EBITDA today is 6.7x, which is the historic low at Klépierre. The rating is the best ever at Klépierre. It's A range, for sure. So basically, we want to keep a high level of rating and have net debt-to-EBITDA, which is in the right range to be A-rated. So basically, we target net debt-to-EBITDA 7.5 around, which is the right place to be for the rating. Operator: Now let me hand the conference back to the management for any written questions. Jean-Marc Jestin: We have an incoming question regarding taxation on dividends for 2025. So if management could provide us some answers as to whether or not it includes an emission premium. Stephane Tortajada: Yes. So for 2025, we have a SIIC dividend from Klépierre French tax-exempt activities of EUR 0.87 per share and non-SIIC dividend of EUR 1.03 per share. So we do not use the premium in 2025 to answer your question. And the SIIC dividend from French tax exempt obviously, is not eligible for the 40% tax rebate in the tax -- French tax code. . Jean-Marc Jestin: So thank you, Michael, for your question. . Operator: The next question comes from Tom Berry from Green Street. Tom Berry: A couple of questions really. I guess how many on a capital allocation front, how many more Casamassima style opportunities do you think are out there in the future? Do you think your focus is more tilted towards the value-add side of things? Or do you think maybe more on a stabilized portfolio basis? And then a second question just on the French operating market is obviously a little bit weaker than the others, such as Italy and Spain. How much does that sort of poor macro weigh on your '26 forecast and reversionary potential? Jean-Marc Jestin: Okay. Thank you for your question. I will try to be specific. So for the I think for the acquisition, if we will only look in countries where we already have a very strong footprint, we think we have a very strong underwriting expertise in France, in Italy and Iberia, probably better than the rest of Europe. So that's probably where we have done a lot very recently. And if we come look 5 years ago, we bought 2 malls in Spain. I think we -- the criteria for us to invest are very simple. It's a big city, regional malls, lifestyle malls, a good set of retailers, strong leasing demand and high sales per square meter. And from there, what can we build? Can we add value? So we try to find something which is not really value add. It's more very strong performance, very good fundamentals where we can roll over our expertise. And so we will never compromise too much on the fundamentals, okay, and the sales per square meter. And if the OCRs are too elevated or there is not so much a reversion, probably, we are not a good buyer for that. So this is what I would say on the capital allocation profile we are looking for. And I missed the second one, that's for disposals or? Stephane Tortajada: But what I could say maybe on the French environment because you say it looks tough. But when you look at 2025 and if you look at the NRI like-for-like geography. In France, we had plus 4.6%, which is really strong. And in Southern Europe, which is the strongest true, 5.1%. So in terms of NII growth, France was just slightly below Southern Europe, but at a very strong pace. So what I would say is that the French market, there is a lot of buzz about politics, macro, blah, blah, blah, but at the end of the day, consumption is fine. And what we see is that we gain market share in our catchment area. So, so far, we say the French market is more an impression and a feeling of being weak, but on the ground, in the number, it's fine. Operator: The next question comes from Celine Huynh from Barclays. Celine Huynh: Mark, I do apologize in advance for this question. I know you're not going to like it. Simon Properties, the management of Simon recently mentioned on the earnings call, having issued EUR 1.5 million of Klépierre shares. So I was just wondering if you could comment on that? And what are your conversations like with Simon currently regarding the stake? Jean-Marc Jestin: Thank you for the question. And obviously, I will not be upset, why should I? So I know, I think, if the -- as you know, Simon, is a shareholder of Klépierre and if you have any question regarding their shareholding, I can only recommend you to ask the question directly to them. So when it comes to the Simon implication in the company, it has been of great support so far, including yesterday where we had our Board meeting to close 2025. So they are still on Board. So on this question, I'm neither upset or surprised, but if you want answers, you should ask them. Operator: There are no more questions, so I hand the conference back to the management for any closing comments. Jean-Marc Jestin: So thank you very much, all of you, for attending, listening and understanding our fantastic 2025 results and our guidance for 2026. Thank you for your questions. And we will take the road and meet our investors in London and in Paris, and looking forward to do so. Thank you very much.
Operator: Good morning, and welcome to the Rural Funds Group Half Year Results Presentation and the Half Year Ended 31 December 2025. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to James Powell, General Manager of Investor Relations. Sir, please go ahead. James Powell: Good morning, and welcome to the financial results presentation for the Rural Funds Group for the half year ended 31 December 2025. Presenting today is David Bryant, Managing Director; Tim Sheridan, Chief Operating Officer; and Daniel Yap, Chief Financial Officer. After the presentation, we have allowed time to take questions from attendees who can submit a question by typing into the question box and clicking submit. For those dialing in today, to ask a question, please dial star 1 when prompted, and I'll now hand over to our first presenter. Tim? Tim Sheridan: Good morning, everyone. I will present the financial results for the half before handing over to David Bryant. The first half of FY '26 has been a positive period for the group. Net property income is up 7% and Gearing has reduced on a pro forma basis and FY '27 CapEx is significantly lower compared to the past several years. Independent valuations and asset sales continue to confirm RFF's asset values and both adjusted funds from operations, AFFO, and distributions are on track to achieve full year guidance. Now moving on to the financial results in more detail. The first slide of this section details RFF's key earnings drivers for the period. Net property income from leased assets increased by $3 million to $49 million. The 7% increase is mainly due to additional rent being charged from the development of leased macadamia orchards as well as annual indexation mechanisms that occur in all of our leases. Net farming income represented $1.1 million, mainly derived from favorable dryland cropping and cattle results on Kaiuroo. While this result is an improvement on the prior corresponding period, the second half contribution of this segment is forecast to be significantly higher following the harvest of macadamia and cotton crops. From an expense perspective, fund expenses were in line with the prior period. However, interest on debt increased by $4 million. This was largely due to a decrease in the interest that is able to be capitalized, reflecting the completion of various asset development programs. These results provided net cash earnings or adjusted funds from operations of $21.5 million or $0.55 on a per unit basis. Importantly, AFFO is on track to achieve full year forecast, noting the expected second half skew in farming income. After adding noncash items, earnings of $44 million or $0.113 per unit was generated in first half '26. This is compared to $13 million for the prior period. The favorable result driven by positive revaluations on interest rate swaps as well as the gain on the sale of water entitlements. Finally, on this page, RFF paid 2 distributions during the half totaling $0.0587 per unit, which is in line with forecast. Now looking at the balance sheet. Assets increased marginally during the period as a consequence of development capital expenditure. The adjusted NAV per unit at 31 December was $3.10 per unit, a minor increase of $0.02 per unit, reflecting the mark-to-market of interest rate swaps. Pro forma gearing remained largely unchanged at 39.1% despite $70 million of development CapEx being deployed during the period. This CapEx was funded from the sale of 2 surplus sugarcane properties and excess water entitlements. These transactions demonstrate RFM's commitment to fund capital expenditure with asset sales and ultimately bring RFS gearing back towards the target range of 30% to 35%. Further to this, additional asset sales are expected during the balance of this financial year. This next page provides additional detail of property valuation movements that have occurred within RFF over the past 6 months. Independent valuations were a range for 25% of assets which were in line with book values and consistent with our policy to independently revalue all assets at least every 2 years. On the remaining portion of the portfolio, directors' valuations were applied. The movement in this segment mainly reflects the depreciation of bearer plans in line with accounting standards. Further evidence to support asset valuations is the divestment of farms, which have occurred at or above book value. 2 sugarcane farms were sold for 10% above their book value and water entitlements sold at their adjusted book value. Water is held at cost in the statutory accounts in line with accounting standards. And therefore, this sale provided a substantial gain as they were sold at approximately 2.5x their purchase price. Looking now at the capital management aspect of the group. During the period, RFF's core syndicated debt facility went through a scheduled refinance, providing a tenor extension and an improvement in the bank margin. The core facility remains well within all covenants, including the loan-to-value ratio and ICR. Despite our intention to fund development, capital expenditure program with asset sales, we note that the facility does have sufficient headroom to fund committed CapEx for FY '26 and '27, if necessary. Forecast FY '27 committed capital expenditure compared to the prior 3 years is detailed on this page. It highlights that RFF is now past its peak CapEx requirement for intensive asset development programs with significantly lower forecast CapEx to occur in FY '27. The debt facility is 60% hedged with a reasonable level of hedging locked in through to FY '29. The portion of hedging may also increase as asset sales are completed and debt is reduced, positioning the fund well in the event of any future increases in interest rates. I'll now hand over to David. Thank you. David Bryant: Good morning, ladies and gentlemen. I'll provide a portfolio and strategy update for the Rural Funds Group. Starting this section is a photograph of the Queensland property Kaiuroo, shown in the image or the first stage developments, which were detailed in the prior results presentation and are now complete, including pumping infrastructure, a water storage and irrigated cropping area. Similar developments will be inducted on different locations on Kaiuroo over the next 18 months. Once fully developed, this property will be more profitable and more attractive to potential lessees. Kaiuroo serves as a useful example of the broader strategy for the Rural Funds Group to generate higher returns through asset developments using RFM's farm development expertise while maintaining a majority of lease income from a diversified portfolio of agricultural assets. The various metrics on this page provide evidence of this approach. Looking more closely at the leasing revenue of the group as at the 31st of December, 83% of RFF's assets were leased for a weighted average lease expiry of 13.2 years. The largest lessees are shown on the left of this page and include high-quality institutional grade counterparts. Revenue is also diversified by agricultural sector and indexation mechanisms. As noted at the start of this section, the Rural Funds Group seeks higher returns through asset development opportunities. Assets in this category are presented on this page and include those being held for potential future development currently under development and properties for which the developments have been completed. Overall, these assets represent $342 million or 17% of the portfolio. Importantly, the majority of these assets are able to be operated by RFF and contribute farming income. Two sectors providing a material contribution to farming income in FY '26, our macadamias and cropping. Macadamia orchards on 2 aggregations will be harvested over the coming months and the harvest of irrigated cotton fields will occur over April and May on Kaiuroo and on Lynora Downs. Turning to additional income-producing opportunities for the Rural Funds Group. RFM will shortly provide documentation for unitholders to approve a further increase to the J&F guarantee. The guarantee is a security arrangement, which supports the cattle finance facility for the Rural Funds Group lessee, JBS, and has been in place since 2018. As a result of growth in JBS' business, increases to the J&F guarantee have been previously approved by unitholders in 2020 and 2022, shown in the chart in the top left. Unitholders will be asked to vote on 2 increases, the second being contingent on asset sales, which ensures that RFF's pro forma LVR does not increase. Importantly, the increases to the J&F guarantee are accretive to RFF providing up to an additional $0.01 per unit of AFFO on a full year basis, assuming the approved increases are fully utilized. Documentation is expected to be provided to unitholders in March '26, and a separate investor webinar will be held to provide more details on the resolutions. Finally, the last page of this section summarized the sustainability updates, which were provided in the FY '25 annual report, including emissions, which have been disclosed by the group for several years. Now moving to the outlook and conclusion. In summary, the results presented today represent a business as usual set of disclosures. We have made some progress on asset sales, but intend to do more as evidenced by our clear statements that capital expenditure programs will be funded by asset sales. Capital management is ongoing with appropriate debt headroom and hedging in place. And finally, guidance is reaffirmed both for AFFO and distributions. Following the retail investor road show RFM held last year, we are offering our retail investors the opportunity to participate in an asset tour at a Victorian vineyard in late 2026. If this is of interest, I encourage you to register via the QR code or directly with our Investor Services team. Thank you for listening, and I now invite questions from attendees. Operator: [Operator Instructions] Our first question will come from the line of Cody Shield with UBS. Cody Shield: Just firstly, on the $80 million of asset sales you look to do as part of the J&F guarantee piece. What kind of assets would you be looking to divest there? And what kind of time line would you be looking to achieve that in? Tim Sheridan: Cody, it's Tim speaking. It's further water sales. So we still have some high security water entitlements which haven't been sold, and it's a couple of the low-yielding cattle properties. So asset sales, additional asset sales, they're well progressed. We're targeting selling approximately $200 million worth of assets over the next, call it, 12 months, and they're just all processes are ongoing for those. Cody Shield: Okay, that's clear. And then just on the scheduled refinance, could you provide some flavor on where the overall margins were prior to this and where they sit now? Daniel Yap: Cody, it's Daniel here. So we went through the refinance back in November and December last year. So we did see some savings in margins compared to the previous tranches. So we're probably seeing about 5 to 10 basis point decreases on those respective margins. Cody Shield: Okay. Daniel, maybe just the last one for me on just where yield is sitting across the book and what you're seeing in the way of transaction evidence? Tim Sheridan: So we've offloaded about $65 million worth of assets in the past 6 months. They have all occurred at or above book value. So we sold a few sugar can farms, which were at about a 10% premium to book value all the water is transacted at book value, the adjusted book value because water is held at cost. And then beyond that, the process we're going through to sell some cattle assets, we're confident that we will achieve book values on those. So I think it's -- we're not seeing any significant increases in asset values, what we're seeing a bit of a plateauing, but it's really supporting our asset base. Operator: Our next question comes from the line of James Ferrier with Canaccord Genuity. James Ferrier: Just a follow-up from the first question around the asset divestments associated with the J&F guarantee increase. You've got that $34 million of New South Wales River water contracted to divest in the second half. Is that included in the $80 million? And I guess you could add on Cobungra, which is in the market that probably gets you 80% if those 2 assets qualify? Tim Sheridan: Thanks, James. It's Tim. So at the full year results, we had flagged that we were going to sell $200 million worth of assets. We're now targeting at selling $260 million worth. So we've increased it because we still want to get our gearing back towards the target range of 30% to 35%. And so that we've sold $60 million during the period, we still have about $20 million, call it $22 million of high security water that has not yet been sold. We will look to sell that. And then beyond that, we've got Cobungra, which is on the market, and we have some other cattle assets we're looking at. James Ferrier: Yes. Understood. Okay. And so based on those plans, the gearing would reduce to that 30%, 35% range? Tim Sheridan: Yes, it would still be towards the upper end on a pro forma basis, so call it 35%, certainly won't get the 30%. That's on the basis that we do the J&F increase. Initially, that J&F increase that we're proposing, we're only looking to take that to $160 million. We're seeking approval to $200 million, but that will occur over time. James Ferrier: Okay. On Slide 15 with respect to the development portfolio there, what's the implied yield on those assets as it sort of stands within the FY '26 guidance? I mean, some of those assets would be are applicable to no income? Tim Sheridan: That's right. If we look at the ones that we're operating, so our farming income for the first half was about $1 million. On a full year basis, we're expecting that to grow to just over $5 million. So the ones that we're operating, we're anticipating to generate $5 million of farming income. And then you can divide that by the asset they use to give you the yield. But we're forecasting about a $4 million income from farming in the second half. So $1 million in the first and then $4 million in the second half. James Ferrier: Okay. That's helpful. And what's the outlook as it stands today? What's the outlook in terms of your leasing or divesting some of those assets? Tim Sheridan: Yes. So with Kaiuroo, so Stage 1 is completed. We still got to do Stage 2 of the developments. That will occur over the next or call it, 18 months, 12 to 18 months depending on the wet season and rain. So Kaiuroo would then be fully developed at the end of that. In terms of the Macadamia, that 670 hectares we're planning, it will be fully planned by the end of this financial year. So then it's developed and ready to lease out. They're probably the 2 most significant in terms of when they are actually leased out. It depends when we can find the right or the right counterparty at the right rate. So that may take more time. James Ferrier: Yes. Understood. And then last question for me just on the proposed increase in guarantee previously increased that instrument in the past. What's interesting from my perspective is that we've got some pretty extreme volatility in cattle prices over the past 5 years or so. And I'm interested in what you've had around the variability in the income stream to RFF through that period. What sort of variability you've seen from JBS as the operator through that price volatility period? Tim Sheridan: Yes. It's a good question. Because of the structure of that transaction, we have seen no -- we haven't seen any variability in returns. So that guarantee is providing about a 10.5% cash yield on it, no variability. It's been we simply pay a fee based on guaranteed earnout. What is happening because of the increase were seeing in cattle prices and because of demand for Australian beef, JBS is simply wishing to feed more cattle and the purchase of those cattle is costing them more. So that is why they're seeking an additional guarantee amount. In terms of the counterpart, JBS, they've been fantastic. It's a highly acquisitive transaction for RFF with a strong counterpart. Operator: Our next question on the line of Thomas Ryan with Moelis Australia. Thomas Ryan: Just a question on yields in general across each of the segments. Could you just talk through where you're still finding that that's too low? And just noting your words, how you presented these in your reports just in terms of those assets that you might look to divest outside of the $80 million? Tim Sheridan: Yes. Slide 29 is probably illustrates this best. So where we've got natural resource. So these are cattle properties or dryland cropping properties. They have relatively low yields. So call it a 5% -- we can get about a 5% lease rate. That suggest a backdrop of interest rates at, call it, 5.8%. So those types of assets at the moment on a fully levered basis that's accretive to earnings. But because the gain in cattle land base has been so significant over the last 4 years, it's hard to see that cap rate of, call it, 5% increasing. And it's hard to see the capital growth being as significant as it has been. So they're the types of assets we're looking to divest. On the left -- on the things like the J&F guarantee or the permanent planning, they all have much higher cap rates and much more long-dated leases. So we don't see any variability in those lease rates and those assets are all accretive based on current interest rates. Thomas Ryan: And just one more question on your hedge profile. It hasn't really changed from the full year. Can I just get a clarification over how you can see that going out for the outer years and also be sort of the state of your existing facilities and how you're thinking about the headroom? Daniel Yap: Yes. It's Daniel here. So we are continuing to monitor the hedging market on a regular basis. At this stage, we are approximately 60% to 70% hedged. Particularly with asset sales in the pipeline, that could potentially increase. But we are looking for opportunities in the mid- to long term sort of period where rates come back to -- or hopefully come back to what we said we would target. So it is something that we'll continue to monitor as we look to extend our hedging profile. Thomas Ryan: And just the last question if I may. Just noting the result from TWA the other week. How are you thinking about their opinion in general? David Bryant: We don't think about them at all because we're not investing any more money in them. I mean it's an industry that's probably got 25% overcapacity globally and that is going to take capacity destruction to reduce the oversupply, and it's going to take time for consumption to increase very slowly. So that industry is going through a very deep cycle. Our vineyards, they're performing very well. We've got the leases that we renewed them last year such that now, I think we've got 13 years to lease expiry. The assets are performing very well for treasury. They're part of their core brands, particularly the high-end brands. So we're very relaxed about continuing to own those assets. There's indexation clauses in them. And in 13 years' time, I hope for the sake of everybody in the wine industry, that it's through the cycle. Tim Sheridan: And I'll just add those in any make up 5% of our forecast revenue. So it's quite a small segment. Operator: Our next question comes from the line of James Druce with CLSA. James Druce: Sorry if this has already been addressed but across the real estate sector, we've seen bank margins come in quite considerably over the last 6 to 12 months, we've seen sort of 20 to 30 basis points improvement. I appreciate you guys didn't have anything expiring for a couple of years but is there -- and you probably have done some recently as well, but can you just talk to what margins are doing for you and any opportunity that you have there? Daniel Yap: It's Daniel here. So we have been going through an annual refinancing cycle for each of our tranches. So we just went through one of the -- refinance one of our tranches. As part of that, we did see margins come back. But I previously quoted that margins came back about 5 to 10 basis points from the previous margin, which was 2 years ago. So what we'll see as we look to refinance at the end of this calendar year is hopefully a continuation of the decrease in margins. James Druce: Okay. And do you have a feel for what it is compared to where? I mean are you still looking for another 10 basis points or I mean what can you kind of see in there? Tim Sheridan: After your comments, James, we'll try and seek another 30 basis points. I think I mean that we see another 10, at least on another on 35, but that's 12 months away. Operator: Thank you. I'd like to hand the conference to James Powell for web Q&A. James Powell: Thank you. Just a reminder to our unitholders that have dialed into the presentation this morning, that we'd encourage you to submit a question via the question box which you should be able to see at the bottom screen, and there's a Submit button as well as sometimes falls outside of the aperture. So scroll down and hit Submit so we will answer your question as they come in. We have had a few which is coming already from ours. So I'll hand over to David in the first instance to respond to them. David Bryant: Thanks, James. There's a few questions that -- there's some very good questions here actually. But anyway, I'll start with the first one, which is why is the dividend the same each year despite net profit being different each year. So our dividend is driven by our FFO, so the amount of cash that we generate each year as distinct from profit. And the distinction -- if you go to Page 7 in the presentation, the distinction is best drawn by looking at earnings for the half year, which was $44 million and FFO for the half year was $21 million. So you've got a big disparity. What you'll see, if you go back through the years is the FFO has been largely consistent but flat. whilst the earnings has been generally significantly higher than the FFO. The difference is explained by noncash items, and it's normally in 90% of the times, it's the property valuations, the revaluations of property, and we've experienced really strong capital growth over the past, I suppose, 5 or 6 years. And that's why the earnings has been high, but it's been moving around because it depends on the valuation cycle, depends on the capital growth and so forth. But the FFO is really the cash we collect minus the expenses. And that stayed fairly consistent, but flat largely. So there's the distinction. And now that leads me to the next question, which it's a very good question, so good, in fact, that we've had it from 3 different people so far this morning, and that is when are we going to increase distributions? The answer is -- one of the question has made the very good point that if we -- is it closing the gap between our share price and NTA, why is that gap there and that perhaps increasing distributions would close that gap. So when are we going to increase distributions? The answer is when FFO increases. When is FFO going to increase? It started to increase. We've got to the point now where our FFO and our distributions are roughly the same, so that we've got about 100% payout ratio. We are achieving growth in income from indexation clauses and a range of other things. We're achieving growth in income, so that growth in FFO, I should say. And so we would expect continued FFO growth. Once we get to 95% or below payout ratio, in other words, once we can get our FFO, so it's higher than our distributions, then we'll have room to move with increasing distributions. Look, I reckon that that's more than 12 months away. But I would hope, but I can't -- it's impossible to be certain because there's a lot of moving parts to this more than 12 months away, but less than 2 years away. But the moving parts that are perhaps obvious to you all, but I won't labor the point here, but the moving parts, of course, are interest rates in particular. And then just the various volatility that you have when you're renting things out, generally, you get the rent, and we would expect that would always be the case, and we would get indexation as well. That's a long answer to 4 questions. So thanks for your patience. Just one moment, we'll just absorb another question here is if asset development drives growth, how does that reconcile with a marked reduction in CapEx? So yes, there's been a marked reduction or there is forecast to be a marked reduction in CapEx because we have not been putting more -- acquiring more assets for development because we have fully utilized the balance sheet capacity. In other words, we've got enough gearing. We don't want any more gearing or any more debt, particularly with higher interest rates and just -- and what is prudent. So that is what's capped the development pipeline. However, what you'll see that we're doing is selling some assets to pursue growth by wanting to finance more cattle in feedlots. So there's more than one way to skin a cat without getting fair in your mouth. And so we're going to drive growth through a different strategy in this higher interest rate environment, and that is by increasing our allocation of capital to the livestock business. I think that's all of our questions. And so I'll say thank you very much for your attendance and for your interest in the Rural Funds Group, and we look forward to continuing the journey over the coming year. Thank you. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Thank you for standing by, and welcome to the PWR Limited Half Year '26 Results Call. [Operator Instructions] I'll now like to hand the conference over to Mr. Matthew Bryson, acting CEO. Please go ahead. Matthew Bryson: Good morning, I'm Matthew Bryson, acting CEO of PWR Holdings Limited; and I am joined by Sharyn Williams, PWR's Chief Financial Officer and incoming CEO. Today I am pleased to present PWR's half year results for the financial year 2026. This presentation will provide an overview of our financial performance, strategic priorities and outlook. Turning to Slide 4. Following a transitional year for the company in FY '25, the first half of 2026 demonstrates clear earnings momentum underpinned by volume growth and the early emergence of operating leverage as the significant investments in capacity and capability begin to scale. Group revenue growth of almost 28% was weighted to a stronger second quarter as operational disruption associated with the final stages of the factory move and temporary power arrangements was removed, enabling improved execution and higher throughput. With the transition complete and stable infrastructure in place, the business is now operating on a far more consistent and scalable footing. NPAT growth of 38% to $5.7 million outpaced revenue growth, supported by higher utilization of our expanded labor base and improving operational efficiency as throughput increased. Strong cash conversion at over 100% remains a core characteristic of the business, supporting continued strategic investment. Net debt at period end is modest and already reflects deleveraging from peak levels earlier in the half. We expect further deleveraging in the second half. A major milestone in the half was the completion of our transition to the new Stapylton headquarters in February. Delivered in line with budget, the new facility materially increases capacity and enhances operational capability, positioning the business to execute on larger, more technically complex opportunities. Importantly, we successfully completed recertification to AS9100 and NADCAP following the relocation, ensuring no disruption to our aerospace and defense credentials and positioning us to capture further program opportunities. This facility underpins our ability to scale over the medium- to long-term. We're seeing strong momentum in the order book, supported by improving mix and structural drivers in the key markets we serve. There is growing adoption of next-generation technologies across high-power motorsports and aerospace and defense applications. This is driving both market share gains and profitable growth. The structural shift towards increasingly advanced and technically complex cooling solutions aligns directly with PWR's core strengths in engineering, vertical integration, and quality. We're also seeing increased A&D program activity, broader customer diversification, and early repeat activity, which is strengthening the quality and visibility of the order book as the pipeline matures. With the Australian facility now scaled, we have capacity to support long-term growth well into the next decade. In the U.S., we've progressed key accreditations and production capability for A&D products, expanding our ability to service customers locally. Additional investment across the U.K. and the U.S. enhances flexibility and de-risks supply for global customers. Capital allocation remains disciplined. We're balancing growth investment with financial conservatism, ensuring the business is positioned to deliver sustainable returns as operating leverage continues to build. Overall, half 1 reflects a business that has completed a significant investment phase and is now beginning to translate that scale into earnings momentum, with a stronger platform to capture growth across our key markets. On Slide 5, we outline the progress made in the half in service of our 4 key strategic priorities. The relocation of our new Australian site is now complete, a significant milestone for the company and one we are extremely proud to have delivered. We continue to strengthen our aerospace and defense platform. We've also expanded our position as an approved supplier, now covering all key defense primes including Tier 1 players. This materially broadens our addressable opportunity set. Growth in the half was strong and profitable. Operationally, we continue to build a more resilient global model. Finally, we have implemented a more scalable global operating structure, positioning the business to support continued growth across our global footprint. Turning to Slide 6, where we break down revenue by market sector. As evidenced in the revenue bridge, the key drivers of growth this half were motorsports and A&D. Motorsports growth of 40% exceeded our expectations, in part reflecting race testing for Formula 1 commencing 2 to 3 weeks earlier, and increased uptake of our technical services. This result also reflects a broadening customer base across categories outside of Formula 1 and increased customer adoption of PWR's unique core constructions. This increase in market share is driven by improved thermal performance, packaging, and aerodynamic advantage that our solutions provide our customers. Aerospace and defense delivered over 30% growth on PCP, reflecting contributions from defense, commercial aerospace including eVTOL, and the developing MRO or maintenance, repair, and overhaul segments. Following delays caused by customer design changes, 75% of the U.S. government project was recognized in Q2, albeit production spanned Q1 and Q2. Lastly, we exited the half with strong year-on-year growth in backorders. In OEM, the strong revenue growth reflects the cycling of a softer PCP that was marked by the completion of 2 concurrent high-volume, high-complexity OEM programs. This half was supported by the maturing of new programs into production phases, and we expect this to underpin stable second-half revenue on half 1. Automotive aftermarket revenue declined due to a deliberate revision of discount structures to improve margins. To this end, we streamlined the historical catalog to concentrate on high-volume vehicle opportunities. The external environment is challenging for discretionary spend, but demand for our premium aftermarket products is resilient. I'll now hand over to Sharyn to run through the financial performance in greater detail. Sharyn Williams: Thanks Matt. I'll walk through the key parts of our financial performance on Slide 8. We delivered strong revenue growth during the half, particularly the second quarter, with uplift in aerospace and defense and motorsports of 31% and 40% respectively. In our trading update provided at the October 2025 AGM, revenue for the first quarter was up 6% as the business settled into the new Australian facility. During the first quarter, we undertook production work in preparation for the U.S. government order. This groundwork supported stronger execution and revenue recognition in the second quarter. Raw materials were broadly in line with PCP as a percentage of revenue. We did have some increase in costs, both direct and indirect, associated with U.S. tariffs. These are being actively managed through increased production in the U.S. facility, supply chain adjustments, and our pricing strategies. Employee expenses increased in absolute terms, reflecting higher revenue volumes, and declined as a percentage of revenue, improving margins. This reflects operating leverage with the existing platform and headcounts supporting higher throughput without scaling proportionally in line with revenues. Average headcount increased by circa 5% versus PCP. This single-digit increase reflects early benefits from the implementation of the scheduling and capacity planning system. In addition, labor availability across some skill sets has tightened, leading to a higher number of vacant roles. Wage inflation ranged between 5.5% to 7% across Australia and the U.S. respectively, with the U.K. being approximately 2%. During the half, we increased provisioning for incentives and recognized an accelerated expense in relation to the Chairman's performance rights, which will remain on foot until their original vesting date. As flagged previously, the relocation to the new factory has resulted in a step-up in our fixed cost base, particularly across occupancy and right-of-use expenses, and depreciation and debt finance costs. This has temporarily diluted return on equity. As capacity utilization increases and margins progressively normalize, we expect returns to improve over the medium-term. Notwithstanding the step-up in fixed costs, NPAT increased 39% versus the PCP. Finally, a fully franked interim dividend of $0.03 per share has been declared and is payable in March 2026, equating to a 53% payout ratio. This is consistent with our proportional payout policy of between 40% and 60% of net profit after tax. We remain disciplined in our capital allocation decisions, balancing shareholder returns with investment in growth. Slide 9 speaks to working capital and cash flow. Our working capital increased by $2.5 million since June 2025, driven by an increase in inventory to support stronger revenue and A&D programs. Cash conversion remains strong at over 100% on a rolling 12-month basis. Free cash flow was negative for the period, reflecting the final stages of the investment cycle as we completed the new factory construction, particularly the controlled environment areas. FX remains an important consideration, particularly as our A&D revenues increase, which are largely denominated in USD. Consequently, we have commenced disclosing a constant currency growth rate to enhance transparency. As a net exporter, a weaker AUD benefits us, especially against the USD and the pound. A key advantage of our global manufacturing strategy is the natural hedge that it provides, with a proportion of our costs denominated in those currencies. Moving into FY '27, we will continue to actively manage FX risk, maintaining hedges to provide budget certainty and to act as shock absorbers when FX rates fluctuate. Moving on to Slide 10. Strategic investments in CapEx and the Australian factory are essential for supporting growth and enhancing production capacity and our ability to deliver more technically complex programs. This investment positions the business to support the increasing demand for our products and deliver sustainable long-term growth. CapEx for the first half was $12.7 million. This investment was predominantly focused on the completion of the Australian facility and installing new equipment to expand capacity and capability, while improving automation, compliance, and business continuity. The investment facility facilitates a step change in scalable production capacity that was simply not possible in the previous footprint. For the full year, we estimate total CapEx of $22.5 million. This slight increase relates to specific production equipment that produces direct revenue benefits by increasing our capacity. Specific investments during the period include the Stapylton electrical connection upgrade and substation, where energy infrastructure requirements added an incremental $2 million. This connection occurred in late September, allowing our investment in solar power to reduce our reliance on grid electricity and help offset the higher energy requirements of a larger factory footprint. Further investments include a step change in our controlled atmosphere environments, new materials capabilities, and software for our scheduling and planning system to enable realization of efficiency gains. This completes the Stapylton factory upgrade, extends our U.S. A&D capabilities, unlocks some capacity constraints in the technical services area, and our emerging technology capability. We have incurred modest one-off costs of $0.8 million to relocate our controlled atmosphere production to Stapylton, and additional energy costs due to running on generators for the first quarter. This new site has lifted our cost base in 3 areas, as can be seen in the first half profit and loss. Firstly, increased right-of-use depreciation and interest due to the new 15-year lease with AASB16 front-loading lease expenses, meaning we will see a $2.2 million increase in lease expenses per year from FY '26. Secondly, leasehold improvements and equipment depreciation. The new equipment and fit-out unwind in our depreciation expenses, estimated at $1.2 million per year. The other area is occupancy expenses related to increased outgoings of circa $1.1 million per annum. In FY '27, our investment focus will shift towards targeted efficiency initiatives and leveraging our global operating model, particularly as we expand A&D activity in Europe and with a view to increasing production flexibility. Turning to Slide 11. We are pleased to have moved past our peak debt period and have already reduced net debt to $13.4 million at 31 December. The balance sheet remains strong, with cash of $10.6 million and undrawn facilities of $18.5 million. Importantly, we have maintained a conservative leverage position while completing a significant investment cycle. As the Group's expanded capacity and capabilities come online, we are seeing the signs of those investments translating into revenue growth, particularly through new technical capability and R&D-driven opportunities. Since listing, the Group has pursued growth with discipline. Strong cash generation has funded reinvestment, resulting in modest leverage and preserving balance sheet flexibility. We remain committed to maintaining financial discipline as we pursue the opportunities ahead, with a clear focus on generating appropriate returns on invested capital. Matt will now talk through the outlook for the Group. Matthew Bryson: Thanks Sharyn. Turning to Slide 13. PWR is extending its global leadership position in high-performance thermal management, leveraging our motorsports innovation capability into aerospace and defense and other mission-critical applications. Underpinning this momentum are 4 structural competitive advantages. First, vertical integration across Australia, the U.S., and the U.K. provides geographic flexibility, operational resilience, and control over quality and delivery. Second, we are technology agnostic. We select the optimal cooling solution for the application rather than forcing customers into a single process, enabling higher performance, application-specific outcomes as our key competitive advantage. Third, we maintain a structural lead time advantage. Vertical integration and in-house capability allow us to quote materially shorter lead times, often around 50% of industry norms, which is increasingly decisive for defense programs to simplify the supply chain or offer responsiveness when operating under tight schedules. Finally, our defense-grade quality systems and accreditations position PWR as a credible, approved supplier to major primes. Collectively, these advantages are resonating with motorsports and A&D customers and are translating into tangible demand growth. Turning to Slide 14. We see 4 clear structural drivers underpinning long-term demand for advanced thermal management. Collectively, these structural trends underpin our confidence in the medium-term outlook for aerospace and defense. Importantly, these trends directly align with PWR's core competitive strengths. Turning to Slide 15, PWR's strategic priorities continue to focus on 4 key areas: innovation; profitable growth; sustainability; and investing in our people. Our strategic priorities will be led by our experienced leadership team, as outlined on Slide 16. Slide 17, OEM and emerging technology motorsports. We're currently tracking 37 discrete programs across financial year '26 to financial year '28. Current financial year programs are up approximately 54% versus the PCP, reflecting improved program momentum and forward visibility. Our motorsports product development in emerging technologies remains strong, and we continue to be encouraged by the outlook for the balance of 2026 and beyond. The new Formula 1 regulations represent a technical shift of unprecedented complexity. And we have seen in the past new regulations drive rapid innovation cycles within the teams and their critical supply chain partners, such as PWR. We expect ongoing optimization and performance development through the second half and into financial year '27 first half, as learnings from the current cars are transferred into FY '27 designs. Early Formula 1 power unit track testing has initially exceeded mileage expectations. This reinforces confidence in the long-term viability of the new hybrid formula and the increasingly technically complex both power unit and chassis cooling systems. Adding to this, our engagement in LMH and LMDH classes continues to strengthen, supported by new manufacturer participation in premier endurance racing categories. We're also seeing increased activity in European and U.S. off-road racing markets, including Dakar and the U.S. Trophy Truck programs. The number of programs we supply to OEM, and whilst our revenue for this sector has recently declined on prior year due to high-end program completions, our presence in niche OEM opportunities continues to expand, with new program engagements offering volumes such as the 800-vehicle hypercar referenced on this slide, and with the supporting commencement of the Ford Mustang S650 program late in financial year '26. Our future focus in OEM is not exclusive to automotive, with industrial and marine sector leads giving confidence in new opportunities for PWR advanced cooling and emerging technology adoption. Turning to Slide 18. Our aerospace and defense pipeline continues to strengthen, with a broadening customer base contributing to improved order book resilience. As shown in the slide, of the total top 40 programs identified out to financial year '28, 33 are already secured in financial year '26. Importantly, approximately 38% of the top 40 programs represent new customers, demonstrating deliberate diversification of the revenue base and reducing concentration risk. Pipeline momentum continues to build. Current financial year secured programs are up approximately 10% versus the prior comparable period, and we now have 51 approved supplier relationships covering all key defense players, including Tier 1 primes. That uplift in approved supplier status continues to underpin program access and order book durability. Turning briefly to the key segments on the right-hand slide. The demand backdrop remains supportive. U.S. defense spending continues to increase, with a growing proportion directed towards advanced platforms aligned to PWR's cooling capabilities. NATO commitments reinforce a multi-year demand outlook. A follow-up U.S. government order of USD 9.1 million was received in Q3. With delivery scheduled across Q4 in FY '26 and into FY '27, this reinforces execution capability and strengthens our position for future program participation. Commercial air and MRO remain strategically important segments. MRO typically represents 60 to 70% of total aircraft lifecycle costs and provides longer-dated, repeatable revenue streams once qualified. We continue to expand our presence here, supporting diversification and improving stability of A&D revenue base over time. Overall, the aerospace and defense outlook remains supported by increasing program scale, broadening customer relationships, and a shift towards longer duration, high-visibility revenue streams. Turning now to the outlook on Slide 19. Outlined on the left-hand side of the slide are our revenue expectations by market sector. Firstly for motorsports, we expect strong but moderating second-half revenue growth based on the current pipeline. FY '27 is expected to be in line with elevated regulation-driven FY '26 revenue. For A&D, continued momentum is expected to support a broadly even first half, second half revenue split. Financial year '27 revenue is expected to be supported by the follow-on U.S. government order with aggregate growth dependent on the timing of pipeline conversion. OEM, the medium-term pipeline is rebuilding momentum. Consequently, we expect a broadly even first-half, second-half revenue split, with modest growth expected in FY '27. Lastly, in terms of our aftermarket business, we continue to expect muted FY '26 revenue growth due to the continued reshaping of the sales mix towards higher-value, higher-volume programs. At a Group level, our expectation for modest statutory NPAT margin improvement in FY '26 is unchanged. This is driven by higher volumes with improved operating leverage and early productivity gains, partly offset by investment in the Australian factory, incremental costs of $5.5 million as outlined on Slide 10, a U.S. cyber accreditation, and some one-off costs relating to the factory move and CEO transition. Over the medium-term, we continue to see a pathway to NPAT margin recovery. The step-change investment in capacity and capability is now largely complete. That expanded platform positions us to scale without a corresponding increase in fixed costs. Going forward, investment remains a fundamental part of the business, particularly in technology, capability, and accreditations, but at a more normalized level. As volumes continue to grow across motorsports and aerospace and defense, we expect operating leverage to progressively rebuild margins towards FY '24 levels over a 3 to 5-year period. That concludes our presentation on the first half results, but before handing back to the moderator, I would like to acknowledge and thank our team. This last period has been a demanding period for the entire organization, with the completion of the factory transition alongside continued delivery to customers across all markets. That level of execution evidenced in the result today is a credit to the capability and professionalism of our people. I'm incredibly proud of the way our team has stepped up during this period of transition. On behalf of the Board and the management team, I'd like to thank our global team for their effort and ongoing commitment to PWR. Thank you. Operator: [Operator Instructions] Your first question today comes from Alex Lu from Morgans Financial. Alexander Lu: Can I just start with motorsports revenue please. I know you've given some guidance there around the second half revenue growth, but historically you've had that skew to the second half. Yes, it looks like you've had some pull forward of demand into the first half, particularly the second quarter. So should we still expect a second half skew this year, but maybe just not as big as previous years? Matthew Bryson: Yes, Alex, I think you've interpreted that correctly. But yes, definitely we saw an effect of the new regulations, clearly in terms of opportunity, which is obviously reflected in the results. But also timing, because of the scale of regulation change, a lot of the work was done a little earlier in regards to the releases of new season designs. With all teams, it was brought forward, and testing of the new Formula actually commenced in January, whereas historically that testing would commence in February. So what you're seeing there is both an increase in the, I guess, base going forward, but also there is also influence in starting some of the new season work a little bit earlier, which will change the shift between first and second half a little bit more than what we would have historically seen, but we still see a very strong result for the second half as well. Alexander Lu: Okay. And can I just clarify the one-off costs for FY '26 please. So it looks like you had the $1.2 million related to the factory relocation, the generator, the CEO transition. So was that $1.2 million all in the first half, and is there anything in the second half and also FY '27 that we should expect? Sharyn Williams: Alex, all in the first half, that's correct. $800,000 relating to the factory expenses and then the remainder to the CEO transition. No large one-offs expected in the second half, besides calling out the CMMC is predominantly second half weighted. Alexander Lu: Okay. So that $0.8 million, most of that is going to be second half for the CMMC, Sharyn? Sharyn Williams: About 75% in the second half for CMMC, that's right. Alexander Lu: Okay. And just lastly, can you just talk about that CapEx for increased capacity and extended capability into new materials. So yes, just interested on what types of new materials and what you're looking at, and I guess for what applications they're for please. Sharyn Williams: Yes, sure, happy to talk to that, and Matt will likely build on my comments. So we're really looking at other materials that we'll be able to use across the business. So whether that be in additive, brazing, et cetera., we think there's real opportunity in that space. We do focus our R&D in terms of looking at new materials, et cetera. So this CapEx largely helps us progress that capacity. Matthew Bryson: Yes, and Alex, that is really capitalizing on new materials opportunities in key markets like aerospace and defense space applications, also some hydrogen. So in particular investment in equipment and processes to expand on stainless steel and Inconel product, which is a key opportunity, particularly in the MRO space for supporting our A&D growth. So yes, see some areas of investment we've commenced on that already, but there is obviously future work. Operator: [Operator Instructions] Your next question today comes from Sarah Mann from MA Moelis Australia. Sarah Mann: My first question was just on the aerospace and defense pipeline. Just wondering if you could give us a bit more of a qualitative update on how the MRO opportunity is progressing, specifically, I guess, how much contribution was in this half and how we should think about it in terms of the makeup of the pipeline. Matthew Bryson: Yes, sure. Not actually disclosing the percentage of contribution there from MRO, but needless to say, we are very pleased with the contribution that it has started to make to PWR's A&D pipeline, and for sure it will be a significant driver of A&D growth going forward. It's not of the scale yet of our programs the likes that we've announced for the U.S. government, but it's seen as a key opportunity for PWR because it's work that PWR can influence the speed at which we enter that market more so than we can the contract-based business of A&D. So at the moment, I would say it is a good contributor to A&D, and it will continue to build as we grow the opportunity with existing customers and new customers as we continue to explore that market. We've attended several trade shows over the last 12 months that are specific to the MRO business, and we continue to gain further optimism in PWR's opportunity to grow this business. So it's only a relatively new addition to the pipeline, not long ago it was a very, very small acorn, but it has grown to be a meaningful contributor to the results discussed today, and we're quite buoyant with regards to its opportunities going forward. But like everything that PWR does, we will always take a measured approach to our entry, and the speed at which we take that up, ensuring that we're always seen as a high-quality supplier, always looking to deliver against customer expectations. So the opportunity is substantial, but it will be responsible growth into that space to ensure that we maintain a strong reputation within that business, and we set a foundation for the long-term. So it is a good contributor to the result there today, and the potential going forward is undoubtedly substantial. Sarah Mann: Excellent. And then on the defense side I suppose of A&D, like you've had really good success so far in the U.S., but it feels like the world's kind of spending more on defense, particularly in Europe and Asia. Just curious if your pipeline reflects this as well, or is the focus more just on the big opportunity that you have in the U.S. at the moment? Matthew Bryson: Yes, yes. Look, it's fair to say that the current pipeline is probably more reflective of U.S. opportunities, because that's where the business has initially focused its early attentions and certainly its relationship building with key primes. We are absolutely now starting to explore European opportunities. It's been several years behind, I guess, the majority of the commencement in the U.S. That probably also speaks to the strategic entry to market that PWR has always traditionally held, not wishing to find ourselves in a situation where we're overpromising against our ability to deliver. But for sure, there is shift in that space at the moment, there is greater interest within the European sector for them to be able to build more, and be less reliant on the United States, and that's certainly going to create further opportunities for PWR to grow our European A&D base as well. Operator: There are no further phone questions at this time. We'll now pause briefly before addressing any questions from the webcast. Your first question from the webcast today is from Chris Savage. Chris asks: Are employee expenses expected to rise in the second half relative to the first half? Sharyn Williams: Yes. As an absolute dollar, yes, wages will increase given we're seasonally stronger in the second half in terms of revenue. But we do expect it to reduce slightly as a percentage of revenue to reflect the leverage we have in that space as revenue grows. In terms of growth on prior year, I will draw out that we did reduce head count prior year significantly. So any modeling you do, please focus on the first half and build from there in terms of the '26 numbers. Operator: Your second question from the webcast today is also from Chris Savage. Chris asks: What capacity are you now operating at in the new Stapylton facility? Matthew Bryson: Yes. Thanks Chris. Yes, look I would probably say in terms of the floor space, we're probably in the order of about 70% of the floor space now currently spoken for. Certainly with respect to constraints, it's now about people. The business has always been about people. We have a strong history of investing in tremendous new technologies and that will continue, but the skill base of the people is always what has made the difference, capitalizing on that technology investment. So I would say as far as the team is concerned at the moment, we're probably up around high 90s in terms of 100% utilization of our people, there is more expansion to come from investment in the team. But in terms of machinery and equipment, yes, we would probably only be at 50% utilization of the physical equipment within the new facility, lots of opportunity to continue to flex on that. Operator: We do have another question from the phone. The question comes from Evan Karatzas from UBS. Evan Karatzas: Just one for me. I'm taking your outlook comments for FY '26 for the aerospace and defense, what sort of implies like around that $36 million of revenue setting a good, at least $10 million from last year. Is this a typical type or a minimum type of dollar revenue growth cadence we should be expecting for A&D? Just trying to get a better idea of how you're thinking about the growth cadence for aerospace and defense in FY '27 and beyond. Sharyn Williams: Yes, certainly our strongest growth area. We are conscious that we have been growing at 30% this year and last year. I do note though growing on a higher base each year does get more challenging to keep those percentages up. So we're very -- we're recognizing the strong opportunity we've got in that space. It is dependent as we said in the outlook on when some of that pipeline converts and we are conscious there's a lead time for that. So very happy with the growth rates we've been getting, expecting solid growth rates to continue in that space. Evan Karatzas: Okay. And just a minor one again around that lead time as well. So when you need to start winning or announcing contracts that can help support the '27 and '28 type growth pipeline as well? Sharyn Williams: Sorry, when will we be announcing? Evan Karatzas: No, no, sorry, just around the lead time that's required for some of these A&D type contracts and projects. Matthew Bryson: That is a very difficult question to answer based around very program specific requirements and obviously complexity of parts and supply. So it can be in some instances operating at motorsport type lead times. But more typically you would probably say that aerospace lead times are expected to be in the order of magnitude twice that of motorsport and you're generally talking months to possibly even out to 6 months depending on the complexity of product that's intended to be supplied. Operator: [Operator Instructions] Your next question comes from Kieran Harris from E&P. Kieran Harris: Just wanted to unpack that comment you made before about your cost base and particularly the employees piece. So just to clarify you said that we should expect that to increase in the second half. And I suppose just wanting to get a bit more color around some comments around the overtime that you had to push through to make those motorsport orders in the first half. Sharyn Williams: Sure. So as Matt pointed out, team constraints in terms of skilled team members is becoming more prevalent now. So we did use a fair bit of overtime in the first half. However, that was really offset by vacancies that we had as we were still seeking team members. So in terms of the second half, we're confident the percentage of revenue for wages does come down in the seasonally stronger second half. But where we will be increasing head count would be in production roles to deliver stronger revenues in the second half. And also in areas that drive growth such as our tech sales and engineers, managing a lot of programs, particularly in the A&D space, doesn't equate to revenue straight away. So we really need to, as we're getting more and more approved supplier status with people, make sure that we've got the team there to help manage that through to revenue realization. So we'll be very moderate with our head count increases, but seasonally second half stronger revenues does mean an absolute higher wage dollar in the second half. Kieran Harris: Okay. And just on the guidance comment for a modest NPAT margin improvement. Appreciate you can't give specifics but anything just to, I guess, help us understand the magnitude of that would be useful and whether that's been moderated I suppose since coming into the full year. Sharyn Williams: Yes. Certainly no change to our comments 6 months ago. We are looking for margin expansion over the next 3 to 5 years that won't necessarily be linear. And the reason it's more subdued in the earlier phases is because to drive our revenue growth we certainly need those growth driver investments such as in R&D and that head count I spoke about earlier. So when we talk about modest NPAT margin improvement, we're referencing the FY '25 underlying base of around 9.5%. So when we look at FY '26, modest margin improvement -- you are talking low single digit modest margin improvement. We're very serious about investing where we need to make sure we can generate revenue growth through FY '26 and FY '27 and from there the linear momentum in margin then starts to pick up as those revenues come into play. We certainly see strong operating margins flow through as we outperform on revenue, we do see that flow through to the bottom line. So there's no change to our comments from last time, it's really around how that realizes itself over the next few years. Operator: We do have another question from the webcast. The question comes from Jeff Rogers. It reads: Has there been any significant interest from the AI/data center market? Matthew Bryson: Yes. Yes, there is certain interest from that market. But what I would say to that is, typical to our key opportunities in aerospace and motorsport, it's typically around the areas where there are packaging constraints. You're looking for high-performance, lightweight, low-volume applications. So in instances where there are maybe mobile applications and the likes, where packaging space is critical, that's where PWR's real skill set is required. Mass production of heat exchanges for data centers that don't have those technical limitations mean that sometimes relatively cheap and low-cost and low-technology solutions are able to be utilized to provide the thermal management. So undoubtedly opportunity, and PWR is engaged in that space, but no different to I'd probably liken it to automotive and our work with niche prestige manufacturers. The same would be very much true in this space, where we don't seek to be producing millions of radiators for mainstream automotive, that's not our space. Our space is where there's real high technology and requirement for PWR's engineering expertise to deliver the solution. So it's an opportunity, but it needs to be considered scaled, probably likening it to automotive. Operator: There are no further questions at this time. I'll now hand back to Mr. Bryson for any closing remarks. Matthew Bryson: Well, I'd like to thank everybody for your time this morning, and certainly thank you for your interest in PWR, your interest in PWR both now and in the future. We're excited about our future and capitalizing on the new foundations that we've built within our team and our operations. So thank you again for your time this morning. It's been a pleasure to present, and we're looking forward to the direction of this business. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome to OET's Fourth Quarter 2025 Financial Results Presentation. We will begin shortly. Aristidis Alafouzos, CEO; and Iraklis Sbarounis, CFO of Okeanis Eco Tankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. Matters that are forward-looking in nature will be discussed, and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer on Slide 2. I would like to advise you that this session is being recorded. Aristidis will begin the presentation now. Aristidis Alafouzos: Thank you. Since August of last year, the large crude tanker market entered the freight cycle that we've been waiting for and prepared for all these years. This is a unique opportunity to have exposure to a fleet that is on the water and able to capitalize today. For a shipping investor, on the water exposure is critical in the current circumstances. As our conviction strengthened after the summer, we executed 2 opportunistic transactions and acquired 4 resale Suezmax newbuildings from Korea. The first 2 have already delivered, one has loaded her first cargo and the other one is about to load, while the remaining 2 will be delivered in the next 2, 3 months. We have already had a structurally strong freight market with strong asset values. But we added the Venezuelan barrels coming back to normal fleet and the new trade flows that creates, India materially reducing Russian imports, the Iranian question looming, and likely, most importantly, Synacor consolidating the VLCC market in a manner that has not been done before. They are currently owning and operating and waiting to be delivered a fleet of around 150 VLCCs. As a result, our NAV has been consistently and rapidly increasing and our NAV premium attempting to continue to catch up, but it has somewhat compressed, especially given these absolutely unique fundamentals in our market. We currently have no additional opportunistic transactions in play. Our focus is clear, disciplined outperformance and maximizing shareholder returns through both dividends and sustainable share price appreciation. We will catch up later, and I'll hand you over to Ira right now. Iraklis Sbarounis: Thanks, Aristidis. Let's dive into it. Starting on Slide 4 and the executive summary. I'm pleased to present the highlights of the fourth quarter of 2025. We achieved fleet-wide time charter equivalent of about $77,000 per vessel per day. Our VLCCs were at $92,000 and our Suezmaxes at $53,000. We report adjusted EBITDA of $79 million, adjusted net profit of $60 million and adjusted EPS of $1.78. This is basis our average share count for the quarter. Continuing to deliver on our commitment to distribute value to our shareholders, our Board declared a 15th consecutive quarterly distribution in the form of a dividend of $1.55 per share. With visibility on very strong Q1 fixtures and our outlook on the market, that figure represents 102% of our net income, i.e. on our current fully diluted share count post our recent equity transactions. Total distributions over the last 4 quarters stand at $3.32 per share or approximately 95% of our reported net income for the period. In November, we executed a successful and accretive equity raise of $115 million in gross proceeds against the acquisition of the Nissos Piperi and Nissos Serifopoula that were delivered by the yard in early January. This quarter, we did another similar transaction, bringing the total amount of gross proceeds raised to $245 million, acquiring at the same time, another 2 recent Suezmaxes, which are expected to be delivered to us in the second quarter. Moving on to Slide 5. Since our IPO in Oslo, we have distributed over 2x our initial market cap with over $461 million in dividends paid. Since we have had a fully delivered fleet in 2022, we have paid out 92% of our reported net income, clearly demonstrating our commitment to distributing value to our shareholders. On Slide 6, we show the detail of our income statement for the quarter and the full year 2025. TCE revenue for the year stood at $265.4 million. EBITDA was almost $204 million and reported net income was about $130 million or $3.77 per share. Moving on to Slide 7 and our balance sheet. We ended the year with $122.5 million of cash. That included a portion of the equity earmarked for the acquisition of the Nissos Piperi and Nissos Serifopoula a couple of weeks after. We also had at the end of the year, approximately $85 million in trade receivables. Our balance sheet debt was $605 million, and we subsequently drew $90 million for the 2 Suezmaxes. Our book leverage stands at 46%, while our market adjusted net LTV basis latest broker values and pro forma for the acquisition and recent transactions is around 35% . Slide 8, looking at our fleet. I'm pleased to show the addition of 4 modern and high-spec vessels. We have a total of 16 vessels on the water, 8 Suezmaxes and 8 VLCCs with an average age of only 6 years, which will further improve once we get delivered in Q2 of our 2 Suezmax resales currently under construction in South Korea. With the initial sequence of seeking of dry docks out of the way in Q4 of last year, our only dry dock for 2026 is that of the Milos 10-year survey. Slide 9, moving on to our capital structure. I have been very pleased with how our capital structure has been shaping up with the recent refinancings and new financings for the recently acquired vessels. Our margin has improved by about 140 basis points with meaningful further reduction expected once we decide how to refinance the Nissos Rhenia and Nissos Despotiko. The Piperi and Serifopoula were financed by the Greek market at record terms at 130 basis points over SOFR for 7- and 8-year terms, respectively. The debt financing market continues to be open and extremely competitive for us as we're exploring our options for the 4 vessels in the second quarter. Slide 10. We wanted to spend some time going through the 2 transactions we executed since our last quarterly update. In November, we raised $115 million at $35.5 per share, priced at roughly 1.25x our NAV at the time. In January, we followed with $130 million at $36 per share, priced at approximately 1.2x our NAV at the time. Both transactions were heavily oversubscribed executed a significant premium to NAV and were completed with third-party vessels locked on [indiscernible]. That combination is extremely rare. Very few companies, particularly in shipping, have been able to raise equity at a significant premium to NAV, secure modern tonnage, execute cleanly and immediately create value for shareholders, and we managed all 4. And here's the most important one. Since those 2 raises, shareholders have generated more than 20% return plus dividends. That is not theoretical accretion, that is realized value. We view it as a very strong statement of our shareholder aligned capital allocation discipline. We do not raise equity to grow for growth's sake. We decided to raise equity when it is accretive. It lowers breakeven, it strengthens the balance sheet. It enhances per share value and increase company share trading liquidity. Both transactions met such parameters. Slide 11, walking through the mechanics for the first transaction, vessel acquisition price was $97 million each. Imputed price taking into account the NAV arbitrage on the equity portion of the funding of the transaction implies $85.5 million. On the second transaction in January, vessel acquisition price $99.3 million. Imputed price after the NAV arbitrage implies $88.5 million. We effectively acquired recent vessels with [ promt ] delivery at the cost of a newbuild as a pure capital markets arbitrage. Above NAV [indiscernible] funded asset purchases at or below NAV, resulting in immediate NAV accretion. But it didn't stop there. And as I briefly mentioned before, the raise has also increased free float and liquidity, expanded and diversified the shareholder base, strengthened capital markets credibility and reduced fleet-wide breakeven levels. And importantly, we executed while asset values were rising. So not only did we have -- did we buy accretively, we bought ahead of further appreciation. We consider this a textbook example of shareholder-friendly execution. Growth only makes sense when it improves per share economics, and that is the filter we apply. I will now pass over the presentation back to Aristidis for the commercial market update. Aristidis Alafouzos: Thank you, Iraklis. Again, we had another great quarter. Q4 was a fantastic quarter with a consistent strong freight market and appreciating asset values. We positioned our fleet to take advantage of the seasonal strong quarter, and this year, it worked out for us quite well. The market dipped aggressively right after Christmas on the VLCCs, but we're lucky to have limited exposure during this brief window. Fleet-wide TCE came in around $76,700 per day with $92,000 on our VLCCs and 53,100 on the Suezmaxes. And we achieved 100% utilization across the fleet. Q4 looked like it would be a strong quarter since August when rates in the spot market and future started moving in a period that is usually quiet. On the Suezmaxes, as usual, we tried to minimize waiting time, fix shorter voyages as the market was going up through the quarter and triangulate as best as possible. We were penalized by dry docking our 2 2020-built Suezmaxes in China. The freight rates to move out East were actually at a discount to the local Western voyages, while the backhauls were also below round trip economics. We have a Suezmax requiring dry dock this year, and we are strongly considering putting her into dry dock in Turkey, which is slightly more expensive as a dry dock cost, but we'll be able to earn a lot more as we do not have to position her and reposition her outside of our preferred trading areas. On the VLCCs, we were quite pragmatic. On our Western positions, we fixed long voyages to go east and capture the front haul economics. And on the vessels in the East, we minimize waiting time to optimize time -- TCE, time charter equivalent, while also fixing a couple of backhauls when we're able to find the cargo offer dates and achieve a triangulated outperformance over the equivalent round voyage. The Nissos Rhenia was lucky to fix a voyage loading in the AG and discharging in the U.S. Gulf. Her next voyage had no ballast passage. This was the first quarter where our VLCCs outperformed our Suezmaxes since Q2 2024. Q1 started with a bang. We already had an excellent structural setup in crude tankers. Then as the New Year's gift and Christmas gift as well, 2 developments reinforced the market. Venezuelan barrels returned exclusively to the compliant fleet and Synacor aggressively consolidating the VLCC market, controlling over 90 ships and now operating roughly 150 vessels. We will elaborate on both shortly. We think that our Q1 guidance is strong. We have very strong fixtures from Q4 flowing into Q1 and even stronger fixtures getting concluded in Q1. We fixed a 12-month charter at $91,140 on the Nissos Nikouria. While I strongly believe our spot vessels will outperform this over this year, we still have another 15 to 17 spot ships, and we deemed it prudent. In addition, the previous batch of fixtures in the mid-70s were quite low, and we took the opportunity to set the bar higher, which has now been set even higher with multiple fixtures done at $100,000 per day for 12 months. At the moment, we do not have any interest to fix further ships on TCE. But with the volatility and rapidly appreciating market, this could change, even though we really like and want to continue our current spot exposure. As of today, we have 67% of our VLCC spot days fixed at $104,200 per day and 64% of our Suezmax days fixed at $84,600 per day, giving us a fleet-wide average about $94,800 per day on the fixed portion, roughly 2/3 of the quarter. On the VLCCs, we fixed a combination of longer and shorter voyages in order to structure their next fixing -- cargo fixing windows. The Suezmaxes have also been performing wonderfully with many opportunities for them to earn over $100,000 a day. Take note that our Q1 guidance also includes repositioning our 2 newbuild vessels from South Korea into the West where we like to trade our ships. We secured crude cargoes on both vessels from West Africa, where now they're going to move up into our preferred areas. CPC Black Sea volumes have resumed at full force as the SPM that was damaged earlier is back in use. This is a great support on the Suezmax market as we see around 40 cargoes a month from that port alone. While recently, we have seen these barrels also getting sold into the East, which has not been the case for months. This is very supportive ton miles as a vast majority of the flows usually go into Europe. Another large factor in the strength of the market and our earnings has been the Venezuela being back in the open market. But again, we'll talk about this signed for and sanctions in the following slides. We were able to capitalize on many opportunities in this quarter and look to do so going forward. On Slide 15, apologies for the repetitive slide, and I'll keep this one brief. Since Q4 '19, we've generated approximately $235 million of cumulative outperformance versus our peers. So this is a 22% outperformance on RVs and 39% outperformance on our Suezmaxes over a 5.5-year period. This reflects consistent commercial execution, not just one strong quarter. On the following slide, we look a little bit at the order book and the fleet structure. The order book has grown on the VLCCs since our Q4 report, but context matters. If we consider the 20-year mark is the end of the useful life of a normal fleet vessel, the fleet is declining year-by-year. We saw an interesting development of how a change in sanctions affects oil flows and shipping flows with Venezuela. Oil sanctions are lifted, flows resume in the normal market. The world's best traders and oil managers get involved in the trading and production. What else do we see? That the ships that were sanctioned or engaged in this dark trade remain isolated. They will not be coming back to compete against us. As we look on the next weeks to Iran, is this how it plays out there. Eventually, when the Ukrainian conflict comes to an end, is that again the same pattern? I strongly believe that sanctioned and dark fleet tainted ships do not come back to the normal market. The only window potentially for some to return are those owned by national oil companies, whether it's the National Iranian Tanker Company or [indiscernible]. But this is a very small number in the overall dark fleet. And looking at our fleet, we are sitting exactly where investors want to be. We have a young eco-designed, fully scrubber-fitted fleet and most importantly, in the water, earning today. In our opinion, what does the shipping investor want? Exposure and returns today. This is what OET delivers. And now for the more exciting slides, we have over 20% of the fleet of large tankers sanctioned and even more engaged in the trade tainted but not yet sanctioned. Against all oil analysts and traders predictions, we do not have a massive oil blood in the market. What we see instead is an inability for sanctioned barrels to find a buyer and a lot of floating sanctioned cargoes. This inability has stretched the dark fleet, increased freight rates for them and forces them to absorb more tonnage, which further restricts the size of the normal fleet. The result is simple, fewer ships available for the compliant market. That is structurally bullish. Against this, we have 3 main noncompliant trades, Venezuela, Iran and the non-price capped Russian business. Today, Venezuela is gone. The oil exporting from Venezuela is only on the normal fleet. Every single barrel from Venezuela is a cargo that wasn't around in 2025. This is extremely positive for tanker ton-mile demand as the market settles and the trade grows, it will become even more pronounced. Another sign on the tightening enforcement of sanctions, which many respected oil and political analysts gathered was Trump's ability to impact oil flows, but he succeeded and India has materially decreased their purchases of Russian crude. So instead, we are seeing constant market quotes from the Arabian Gulf, from West Africa, from Brazil, from the U.S. Gulf and even flows from Venezuela. Again, every cargo from these places is a new cargo from the compliant fleet that's replacing the Russian crude. And the final and most bullish part of our 3-slide tanker dream section is the massive unprecedented consolidation in the VLCC sector by a privately owned non-trader. Synacor has or will take control of over 85 ships since Christmas. Their total fleet footprint should be around 156 ships. This is just unbelievable. They control 17% of the total fleet, while almost 40% of the smaller part of the pie of the fleet which we actually compete with in the spot market. They have been very effective at pushing up the market. Hats off and congratulations to Synacor for this. They have done the heavy lifting and let the rest of the market reap the rewards. The market must understand that this is a seismic shift and the biggest owner-operator of tonnage is not a charter or a state oil company. They are not trying to protect their own oil trading P&L. They're only trying to maximize freight for themselves. Looking at utilization on Slide 22. When I started my career, a good friend and a highly respected broker, Chuck Monson, always told me that as you move forward -- as you move toward the high end of the utilization curve, rates don't increase linearly. They move exponentially. And that's exactly what this slide illustrates. When the market tightens at these levels, even a small shift in utilization can translate into a very meaningful move in earnings. With how fast the market has moved recently, I suspect that as we give this presentation, we are most likely out of the light blue box and perhaps one click to the right. This is precisely where modern, fully spot exposed fleets like ours benefit the most. And if this trajectory continues, I look forward to making our Q1 presentation even more exciting. Thank you for joining us today. Operator: [Operator Instructions] Your first question comes from the line of Even Kolsgaard with Clarksons Securities. Even Kolsgaard: So you mentioned it yourself as well, but I'm interested in your take on the VLCC market versus the Suezmaxes because I think the market today is mostly focused on the VLCCs. The rates are good and you have the Synacor event. But as you mentioned, the VLCC market has finally begun to outperform the Suezmaxes reversing basically trend we've seen for the last few years. So how do you think about the Suezmax versus VLCC market going forward, both for earnings and values? Aristidis Alafouzos: Even, thanks for your question. I mean, even in Q4 and potentially look -- I mean, at least through our guidance in Q1, on a dollar per metric ton or on a relative basis, the Suezmax is still outperforming the VLCC. So I mean, obviously, it's a cheaper ship, but the delta between price and earnings isn't still justified. So we think that the Suezmax is a really attractive asset. And as the VLCC market continues to tighten, and charters do their best to find ways to reduce the cost of transporting the oil from A to B. We think that the Suezmax will become a very versatile asset in order to do it. So we could -- I mean, there are some trades which will never make sense on the Suez instead of the VLCC or rarely. And this is like the really long-haul business, U.S. Gulf to China or a lot of the AG business to China. But a lot of the voyages WAF med or backhauls and the shorter runs, Suezmaxes can easily jump in and find a lot of opportunities to do backhauls or nontraditional Suezmax cargoes, which we would consider like a triangulated bonus over the normal Suezmax market. So for this reason, we think that the strength in VLCCs will be equally beneficial to the Suezmaxes and for savvy owners can give them even more opportunities to creatively trade their ships in this market. Even Kolsgaard: Got it. And just a follow-up. I guess you said you don't want to get take on any more time charter contracts at these rates. So you're pretty bullish towards the market. But when it comes to Synacor, it seems like they're bidding for VLCCs from basically every owner. Have you been tempted to sell some of your ships to Synacor? Aristidis Alafouzos: In [indiscernible] And my personal view is that Synacor will be successful in what he's trying to achieve. So I think that the exposure to the spot market and in the future, potentially TCE market or sales market is what we want to have today. Now going forwards, once things continue to reprice higher, I can't tell you what's the best choice for us to do. But I think right now, there's a lot of upside left in what's happening in the market. And right now, we've seen rates move up 20 points, a little bit more this week. And I still feel like that's just the beginning of the current spike that we're entering. So at the moment, no, we haven't seriously considered selling our Okeanis vessels to Synacor. Operator: Your next question comes from the line of Liam Burke with B. Riley. Liam Burke: You're generating a lot of cash at this level. You've got a nice hefty cash balance to support the acquisition of the 2 new Suezmaxes. Is your capital allocation strategy going to change from how it has been in the past? It's here. Iraklis Sbarounis: Liam, it's Iraklis here. I don't think it has changed. I mean it has been for some time, a key priority for us to distribute as much value as possible to shareholders. The transactions that we did were structured in a way where that was not jeopardized by any means. And this quarter and the distribution we're giving is indicative of such strategy. So not really, we're trying to give out as much as possible, and we're just focusing on extracting as much possible -- as much value as possible from the market to deliver that to shareholders. Liam Burke: Okay. Just a follow-on, on the market. In the prepared comments, the spot market is still continuing to move, I mean, exponentially at this point. But is there any thought to taking some money off the table and moving some vessel or more vessels to term charters? Aristidis Alafouzos: Liam, we answered that during the presentation as well. At the moment, the answer is no. I think what we want is to have a vast majority of the fleet in the spot market, especially as we feel that there's a lot more upside to spot rates and to the charters and owners' expectations of spot rates over the next considerable period. So I think for now, we need to keep our ships in the spot market, so we have all the optionality we need. And then in a few months, we look at it again. But for the time being, the answer is clear no. Operator: Your next question comes from the line of Fredrik Dybwad with Fearnley. Fredrik Dybwad: Congratulations with the strong results and strong bookings. I was just trying to circle a bit back to Synacor. I was a bit interested in hearing your take on how -- can you guys hear me? Aristidis Alafouzos: Yes, you got cut off right when you're asking the question. Fredrik Dybwad: Okay. Okay. Yes, I was just circling back to the Synacor stuff. How -- interested in hearing your take about how in practical terms, how is he going to be able to corner the market as we know, he hasn't fixed that many ships yet, has fixed a couple. And then lastly, how long do you think that can last if he's successful? Aristidis Alafouzos: I think that's a better question for Synacor then or [indiscernible]. I do see that his ships have been fixing. And I mean, I think that he has -- the company has stated where they think the market should be, and they will fix at those levels, and they've been very consistent with that. So I assume once rates get to the levels that they want, they'll fix some ships, they'll assess where the market is, and they'll continue to raise their expectations and put the rates higher and continue pushing this market higher. So I don't know. Again, the specific strategy of the company, and it's a question for Synacor. Operator: Your next question comes from the line of Clement Moll with Value Investors Edge. Climent Molins: First of all, congratulations on the 2 accretive offerings you pursued in recent months. I wanted to start by asking about where you see your maximum fleet size, say, on VLCCs and on Suezmaxes, where you can still capture this kind of premium you've been able to realize in recent years? Aristidis Alafouzos: Thank you for the question and being on the call. I think we answered it on a previous call as well that we would be comfortable for the fleet to continue to -- on a theoretical level, we'd be comfortable if the VLCC or Suezmax fleet was slightly larger, and we could still capture the same earnings. But what I can tell you for sure is that the fleet is the right size today for us to continue doing so. So it's not just about fleet size. It's also about the team and personnel and the technical manager. So it's -- there's many facets to how we hope -- how we have and hope to continue outperforming. But I can tell you that currently, our fleet size is perfect for us to keep doing so. Climent Molins: Makes sense. And this one is a bit more on the modeling side, but you mentioned you were thinking about potentially doing a dry docking in Turkey. Could you talk a bit about the delta between doing that in Turkey versus, say, in China? Aristidis Alafouzos: Yes. I mean I think that depending on the type of paint specification you want and maybe you have an expectation of like $0.25 million to $0.5 million more expensive [indiscernible]. But in a strong market, you save way more of that by being able to keep your earnings higher and not repositioning all the way out there and all the way back. Some owners prefer to trade in the East. Historically, as a company, we've always -- we started off on smaller ships as well like before we were public on Aframaxes and our strongest relationships are in the West and with the more Western-based oil companies and traders. So we really feel that this is the area that we can outperform. And if we have a ship that goes in the East for dry docking or she gets, a Suezmax gets an option declared out there, we never think, okay, let's trade in the East. It's always about bringing her back home into the West. And by dry docking in Turkey, we can avoid the whole positioning out there and repositioning her back. Now I think at times, this can be easier. So let's say now like CPC Korea is $9.5 million in freight to go around the cape. So those are great earnings to position your ship out there. But the CPC volumes that I mentioned during our call aren't always flowing east. Sometimes they flow only into Europe. Now I assume that with Venezuela and all the knock-on effects of the Venezuelan oil and what places what and down the line, perhaps that has something to do with why we see more CPC going east. But it's not something consistent. And then you also have the issue of the backhaul. And before the war started -- before the war in Gaza started, the Suezmaxes would be easy to go through the Suez Canal as well. And that was a way to have a backhaul that it was always at a discount to the front haul, but because you're going through the Suez Canal, it wasn't such a long voyage. Now being forced to go around the cape both ways, it becomes an extremely long voyage. So you kind of -- you lengthen those lower rate economics, which is something that we don't prefer for the next dry dock. Climent Molins: Yes. Makes sense. The opportunity cost is simply too high. Operator: There are no further questions at this time. I will now turn the call back to Iraklis for closing remarks. Iraklis Sbarounis: Thanks, everyone, for attending this call. We look forward to touching base in May for our first quarter update. Aristidis Alafouzos: Bye, everyone. Operator: This concludes today's call. Thank you for attending. You may now disconnect.