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Operator: Greetings, and welcome to the American Coastal Insurance Corporation's Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Jeremy Hellman , Vice President at The Equity Group and American Coastal's Investor Relations representative. Please go ahead, Jeremy. Jeremy Hellman: Thank you, operator, and good afternoon, everyone. American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. Replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the Investors section of the company's website. Speaking today will be President and Chief Executive Officer, Bennett Bradford Martz; and Chief Financial Officer, Svetlana Castle. On behalf of the company, I'd like to note that statements made in this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially may be found in the company's filings with the U.S. Securities and Exchange Commission in the Risk Factors section in the most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made and except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements. With that, it is my pleasure to turn the call over to Brad Martz. Brad? B. Martz: Thank you, Jeremy, and welcome, everyone. During the fourth quarter of 2025, American Coastal continued to demonstrate that we are a unique, high-performing specialty underwriter producing strong returns on capital that is very well positioned for the future. A lack of hurricane activity in the current period helped drive solid earnings growth compared to the same period last year that was impacted by catastrophe losses yet remain profitable. Our full year net income of $106.8 million exceeded our full year guidance at the beginning of 2025, which was $70 million to $90 million. And even with a major hurricane loss, ACIC would have landed above the midpoint of our guidance. Over the last 3 years, ACIC has produced over $336 million of pretax profits and returned over $60 million to shareholders through special dividends. I think it's fair to say our strategic transformation has been nothing short of spectacular. Yet I believe we're capable of more. As forecasted last quarter, premiums written in the current period rebounded nicely, increasing approximately 59% compared to the third quarter of 2025, but declined 19% year-over-year due primarily to rate decreases. Rates are falling in our business due in large part to Florida's legislative reforms that are clearly working as evidenced by reduced reinsurance costs and lower losses incurred. For the full year, our net premiums earned of $306.8 million were also above the midpoint of our 2025 guidance, which was $290 million to $320 million. Total revenues increased year-over-year despite a much more competitive environment without sacrificing underwriting discipline. With softer market conditions persisting in commercial property insurance, we expect premium production to remain challenging as our risk appetite is highly correlated to modeled expected returns on capital. Last month, we revealed plans to improve the company's business profile by introducing new revenue and earnings growth pathways in the E&S market. While we are not necessarily looking to grow commercial property exposure in the short term, we do believe there are pockets of opportunity to underwrite new profitable commercial residential property insurance business inside and outside of Florida, where we can leverage American Coastal's technical expertise and competitive advantages. Our E&S ambitions and investments are more about putting the company in the best possible position to succeed over time rather than chasing growth in this part of the property cycle. With that, I'd like to now turn it over to our Chief Financial Officer, Lana Castle, for more specifics on our fourth quarter and full year results. Svetlana Castle: Thank you, Brad, and hello. I'll provide a financial update, but encourage everyone to review the company's press release, earnings and investor presentation and Form 10-K for more information regarding our performance. As reflected on Page 5 of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $26.6 million. Core income was $25.8 million, an increase of $19.8 million year-over-year due to a $20.5 million decrease in incurred losses as Hurricane Milton made landfall in the fourth quarter of 2024, resulting in a full excess of loss catastrophe retention. For the full year, net income was $106.8 million and core income was $103.7 million, an increase of $26.8 million. Our combined ratio was 58.6% for the quarter and 60.1% for the full year. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 58.9% for the quarter, a decrease of 7 points from the prior year. For the full year, our underlying combined ratio was 61.5%, which is below our 65% target. We continue to maintain a strong reserve position. Page 6 of our presentation shows more detailed quarter-over-quarter comparison with net premiums earned driving higher revenue compared to 2024 as a product of stepping down our gross catastrophe quota share from 20% to 15% effective June 1, 2025. Operating expenses remained relatively flat, decreasing $1.3 million or 3.4%. Page 7 provides a year-over-year comparison of our results. Revenues for the full year increased $38.8 million or 13.1% in 2025, driven by the quota share step down previously mentioned as well as a step down from 40% to 20%, which was effective June 1, 2024, and impacted 2024 results. Total expenses remained flat year-over-year, though operating costs increased $22.6 million, largely as a result of reduced ceding commissions. This was offset by the retention related to Hurricane Milton. Page 8 shows balance sheet highlights. Cash and investments grew 19.8% in 2025 to $647.7 million, reflecting the company's strong liquidity position. Stockholders' equity increased 34.8% since year-end to $317.6 million, driven by strong underwriting results. Book value per share is $6.51, a 33.2% increase from year-end 2024. These increases are inclusive of a special dividend of $0.75 per share declared in the fourth quarter, totaling $36.6 million. As shown on Page 9, through strong results, the company has seen increased liquidity and book value per share since the first quarter of 2023. I'll now turn it over to Brad Martz for closing remarks. B. Martz: Thank you, Lana. I'm extremely grateful for our team and for our business partners as they are the true reasons for ACIC's outperformance of its peer group and the insurance industry returns overall. That completes our prepared remarks for today, and we are now happy to field any questions. Operator: [Operator Instructions] Our first question today is coming from Michael Phillips from Oppenheimer. Michael Phillips: I guess I wanted to start, I guess, Brad, with the gross premium results this quarter down around 19%. It looks like from December through September, at least your commentary on the rate environment is 13%. It looks like it kind of maybe stabilized. I guess I want to see if you can comment on that. But then talk more about the premium in this quarter. Last quarter, you said you intentionally slowed down for exposure limitations and expected to rebound this quarter to continue into the next quarter. It looks like maybe that didn't happen or maybe it did in your view. I just want to talk about that and kind of how this quarter's 19% drop compares to what you were thinking. B. Martz: Thanks, Mike. Good questions. And I would just reiterate that quarter-over-quarter, premium rebounded almost 60%. So we're okay with that. The machine, when you slow it down, it does take time to crank it back up sometimes. So we felt it was super important to hit the average annual loss targets that we set for September 30. That's a key measuring stick for our core catastrophe reinsurance program, and we were successful in delivering on hitting that target. So we believe we took the appropriate measures to manage our exposures in the third quarter. That being said, obviously, October got off to a little bit of a slow start because of just the time it takes to continue to receive quote, bind and issue policies given the lead times associated with that activity. So it's a challenging market environment. We make no bones about it. We are walking away from risks that are previously may have met our return on capital hurdle rates, but today might not be. So we're trying to be disciplined. And I think you'll see a little bit of volatility in the written. But from an earn perspective, I have no worries. I think we've given solid revenue guidance for 2026. No promises on us being able to hit those numbers, of course. But hopefully, we did demonstrate some predictability in our business with the results we posted relative to the guidance in 2025. Michael Phillips: Okay. That was helpful. I guess your last couple of words there were what I was going to go next. Maybe I'll still go there and just to see what you think. But if growth continues to slow maybe more than you thought, that obviously will affect earned later in the year. It sounds like you're not worried of the -- at least for now, you're not worried about the revenue numbers you talked about earlier this year. B. Martz: Yes, that's right. I mean we're going to push hard for changes in expenses commensurate with the changes in revenues. So I think it's just super important for us to continue to work extremely hard on obviously putting together the best possible risk transfer program. We can compile at 6/1. We had a very successful placement of our 1/1 AOP CAT program and our Catastrophe Aggregate program with those being down year-over-year on a risk-adjusted basis quite substantially, well ahead of the rate change in the fourth quarter or the premium -- written premium change year-over-year in the fourth quarter. So we feel good about the 6/1 renewal. It's not -- those programs are much smaller. It's not a perfect read-through to the June 1 program. But obviously, if we're suffering rate change of whatever percentage, we're going to be pushing hard to see loss costs and reinsurance costs come down a commensurate rate to protect margin. And if not, that could put some pressure on the combined ratio and/or we will be more selective in what business gets written, both new business and renewal business. Michael Phillips: Okay. Maybe one smaller one on the margin piece. The G&A ratio has kind of ticked up a bit. And I wonder what's driving that? And any expectations for this year on that one? B. Martz: Nothing notable to point out. Obviously, we had some distortion in the first half of the year with some payroll tax credits that artificially reduced our recurring normal operating expense levels, but third quarter and fourth quarter represent a true current run rate. So first half of '26 won't necessarily be a perfect comparison with first half of '25. But other than that, I don't have anything to call out on G&A. Michael Phillips: Phenomenal results on the margin side. So congrats on that. Operator: Next question is coming from Mitchell Rubin from Raymond James. Mitchell Rubin: You've outlined plans for expansion into South Carolina, Texas and broader nationwide E&S markets through ACES and the expanded AmRisc partnership. Could you provide some color on how underwriting margins, catastrophe profiles and reinsurance structures in these markets differ from your Florida book? B. Martz: Sure. Thanks for your question, Mitch. I think they are relatively similar. The phenomenon of named windstorm exposure is not much different in Texas and in South Carolina. That being said, I think those states will run at a slightly higher combined ratio. So it's hard to forecast that precisely. But our experience having underwritten in those states previously through Journey Insurance Company would suggest that it's comparable. So we're going to focus on the same classes of commercial residential property that we write today. It's primarily condos, apartments and assisted living facilities. Any other classes would be outside of our comfort zone today, and we would have to provide you a little bit more color around such initiatives. But the expansion with AmRisc, to answer that part, we're super excited about. That's been a long time coming for us. They're obviously a terrific partner, 25 years of successful inception-to-date results through their organization, and we're proud to have offered them some capacity. It's a modest line that we're starting with, with roughly $100 million of full year premiums. That being said, under -- if the market hardens and they needed more capacity, we could consider increasing that. And conversely, if the market softens and margins are not in line with expectations, we could see that being reduced. But it's a 2-year deal. It's done. It's off and running. We'll start recognizing some premiums from their nationwide commercial E&S property portfolio in March. Mitchell Rubin: I appreciate the color there. So with the debt to total capital ratio at 32% in the quarter, and you've previously stated a long-term target of around 25%, how are you prioritizing deleveraging, funding ACES and potential capital return in 2026? B. Martz: The debt matures at the end of 2027. So there's no immediate need to address that. Obviously, job 1 is to earn an underwriting profit, continue to drive book value per share and increasing shareholder equity through our organic earnings profile. So I think that in and of itself will continue to bring down that debt-to-cap ratio. That being said, we've stated that we will be seeking to reduce the overall amount of financial leverage in the system. So I think when it comes time to refinance that debt, I would expect the company to shy away from a straight refinance. I think total debt would likely fall anywhere between $50 million and $75 million. And that's a level we're comfortable with. But we'll see. That -- a lot of that will depend on the earnings generation, cash flow generation in the business. We're excited to be able to return some of our profits to shareholders in the last 2 years, so $60 million, as I noted. And we're watching the stock price carefully. We do think the company is significantly undervalued and repurchasing shares is also an option. Typically, we think about buybacks as something that would require a significant market dislocation. But that being said, at the current earnings multiples, we think the stock is a good buy. Mitchell Rubin: Congrats on the quarter and the year. Operator: Your next question today is coming from [ Akshay Forma ], a private investor. Unknown Attendee: Congratulations on a good quarter and a great 2025. I have questions on the E&S opportunity, so the new company, ACES. I joined the call a little late, so forgive me, but do you mind giving an update on where you are with creating the new entity from your last call and the update? And then I have one more follow-up question. B. Martz: Yes. The update is -- it is still pending regulatory approval in the state of Arizona. So it did take us pretty much the better part of the fourth quarter to complete all the background checks and biographical affidavits, et cetera, that were required. Typically, the state of Arizona doesn't even begin reviewing any kind of new company application until that's been completed. So we've cleared that hurdle, and I believe they're working on it, and we should have an update for you shortly. But right now, the certificate of authority is still pending. Unknown Attendee: And how should we think about like the forecasted gross premiums for ACES for 2026? And then also like thinking longer term, how should one think about ACES market share? So in the January presentation, you had mentioned about the E&S opportunity market, about $1.4 billion in Florida, $1.9 billion in Texas and $455 million in South Carolina, which comes up to like a total of $3.7 billion of opportunity. So like can we expect if things fall in the right place, ACES also to have the same market share as what AmCoastal has, which is, I think, around 25% market share. Is that kind of like where the team is targeting? Or how should one think about it in the long term? B. Martz: I mean it's a great question. I think, obviously, we want to have a market leadership position in anything we do. That's the ultimate goal. How long it takes to achieve something like that is anyone's guess. But for 2026, the premium ambition for ACES is relatively small. I'd say 5% or less of our total revenue guidance for the year is going to come from ACES. It's really about '27 and beyond. For the initial year of ACES, assuming it's gets approved and capitalized, which, of course, the timing of that is still even uncertain. But in the first 12 months of its operation, it's going to operate just as a collateralized reinsurer. It will take time for us to go and get it rated by A.M. Best and put it in a position to be a direct writer of commercial property business. So -- but that being said, whatever capital we inject into ACES, we are going to put it to work, doing deals to -- similar to what we've recently done with AmRisc with that net quota share producing -- expected to produce over $100 million on a first -- on a full year basis. So it's not out of the realm of possibility that ACES could someday be on par with American Coastal, but it's probably unlikely. I see it being a little bit smaller for the next 3 to 5 years. But beyond that, yes, I mean utopia would be a perfectly balanced portfolio between admitted and non-admitted business between Florida and non-Florida states with great spread of risk and geographic diversification. Unknown Attendee: Got it. And then in terms of like combined ratios for all these -- for ACES -- would you say that, that kind of tracks like your goal of 65% combined ratio like while you have for AmCoastal? Is that still like the overall kind of target what you're looking for? B. Martz: I think that's aggressive. The condo book in Florida is a little bit unique because of its -- the Florida market and because of the duration at which we've been underwriting in that particular geography. So the knowledge, the experience, the scale we have and as well as the benefit of the Florida hurricane cat fund probably make that unachievable. But historically, the commercial residential property insurance combined ratio in Florida underlying combined, again, excluding cat, has operated between 65% and 75% throughout the 18-year history of the company. So we -- it depends on the loss experience, of course. But you got to have an underlying margin. That's what our Chairman is constantly preaching. With an underwriting margin that allows you to absorb the catastrophes when they occur and the soft market cycles when they occur. Without a margin, then you're really setting yourself up for disappointment. So we believe that the -- everything we do is going to be accretive and earn an acceptable return on capital, but I wouldn't expect business generated through the E&S platform to achieve the same exact results that our condo book in Florida has achieved. Unknown Attendee: My last question is going to be on share repurchases. So I know the team has mentioned in a couple of conferences as well that the stock is undervalued. I believe it, too, and I'm a shareholder as well, and I believe the stock is undervalued. So I guess my question is, what's holding the team back from share repurchases? I know you mentioned you would do or you would look at share repurchases when the stock is undervalued. So I'm just curious what's holding the team back. B. Martz: It just hasn't been our top priority. I appreciate the sentiment, and we hear you. And I think going forward, it will be given slightly more consideration. I don't know if that consideration will trump how we feel about special dividends. We love the optionality of that and waiting until we're through hurricane season to really be able to accurately measure what excess capital we may or may not have. So ideally, we'll obviously still be able to pay a special dividend every year, but the amount of that will be driven by our loss results, which are inherently unpredictable. That being said, we're monitoring the stock. We're obviously not a complete outlier with some of our peers. But to the extent that we are not rewarded for continuing to produce exceptional returns, yes, I mean we're buyers at these levels. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. B. Martz: Nothing further from the American Coastal team. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good evening, and welcome to the Texas Roadhouse Fourth Quarter Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference. Michael Bailen: Thank you, Krista, and good evening. By now, you should have access to our earnings release for the fourth quarter ended December 30, 2025. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; Mike Lenihan, our Chief Financial Officer; and Keith Humpich, our Chief Accounting and Financial Services Officer. Following the prepared remarks, we will be available to answer your questions. [Operator Instructions] Now I would like to turn the call over to Jerry. Gerald Morgan: Thanks, Michael, and good evening, everyone. 2025 was another successful year as revenue grew to nearly $5.9 billion, and all 3 brands delivered positive sales and traffic growth. We also just completed our 60th consecutive quarter of comparable restaurant sales growth, excluding 2020. That's 15 years of sales growth going back to 2010. 2025 included a number of company milestones and accomplishments. We opened our 800th system-wide restaurant and acquired 20 of our franchise locations. Over 70% of our restaurants set both daily and weekly sales records. We completed the rollout of our digital kitchen and upgraded guest management systems. We also solidified our home in Louisville by purchasing our support center buildings. Our operators continue to serve their communities by raising over $40 million for local schools and nonprofit organizations through their dedicated Dine to Donate fundraisers. And finally, we remain proud to honor those who have served our nation by providing 1.2 million meals to veterans and active military in honor of Veterans Day. On the development front, in 2025, we added 48 restaurants to our company-owned restaurant base. This included 28 new store openings and the previously mentioned acquisition of 20 franchise restaurants, and our franchise partners opened 4 restaurants, including 3 international Texas Roadhouses and 1 domestic Jaggers. For 2026, we continue to expect approximately 35 company restaurant openings across the 3 brands. 2026 will also benefit from the acquisition of 5 California franchise restaurants, which occurred on the first day of the fiscal year. Our outlook for franchise development also remains unchanged with the expectation of opening 6 international Texas Roadhouses and 4 domestic Jaggers. For 33 years, our mission has been legendary food and legendary service, with a focus on high-level hospitality and value. This will remain the same in 2026 and beyond. While commodity inflation will continue to be a headwind this year, our operators remain committed to driving growth over the long term by providing a legendary experience to every guest. We just completed menu pricing calls with our operators. As always, maintaining our value proposition was a big topic of conversation. Based on these calls, we will be implementing a 1.9% menu price increase at the beginning of the second quarter. We will also continue to focus on our lineup of beverages with all of our restaurants offering some combination of mocktails, dirty sodas and a $5 all-day everyday beverage special. Moving on to technology. As I mentioned earlier, in late 2025, we completed the rollout of our digital kitchen and upgraded guest management systems. We are pleased with the results and our technology priorities in 2026 will include the continued integration of these enhanced systems. Additionally, in 2026, we will expand the testing of a handheld tablet that our servers can use to input guest orders at the table. As our attention shift to 2026 and beyond, we will remain relentless in our commitment to driving top line growth, providing high-level hospitality in everyday value to our guests and remaining a people-first company. Finally, I want to welcome Mike Lenihan, our new CFO, to the Texas Roadhouse family. For purposes of today's call, Mike is on for introductory purposes only. I will tell you that we are extremely excited to have Mike on the team. He's been getting to know us and beginning next week, he will start his operations training at each of our brands. Mike, please share some thoughts on your experience so far. Mike Lenihan: Thanks, Jerry. I'm honored to have the privilege of joining Texas Roadhouse. As a member of the restaurant community for the last 20-plus years, and a longtime resident of Louisville, I have witnessed Texas Roadhouse's incredible journey to become a leader in the industry and our community. Since joining in December, I've immersed myself into the culture of the support center, learning about the incredible hard work, people-first approach and teamwork needed to support our restaurants. I would like to specifically thank Keith, along with the rest of team CFO, who have made my transition seamless and special. It's become clear that we have an incredible team and I look forward to the opportunity to lead it while helping Texas Roadhouse on its growth journey. Finally, as Jerry mentioned, I'm looking forward to spending the next several weeks in our restaurants, learning from the best operators in the industry. And now I'd like to turn it over to Keith for some thoughts on our 2025 performance as well as comments on 2026. Keith Humpich: Thanks, Mike. Along with the rest of the team, I would like to welcome you and your family to Texas Roadhouse. We can't wait to support you further in your Texas Roadhouse journey. Moving on to our results. 2025 was another banner year for top line growth in our restaurants. Same-store sales increased 4.9% for the full year, including 2.8% traffic growth. Consolidated average unit volume exceeded $8.4 million with average weekly sales of over $166,000 at Texas Roadhouse, $122,000 at Bubba's 33 and nearly $73,000 at Jaggers. In addition, despite cost pressures, we still generated the second highest restaurant margin dollars, income from operations and earnings per share in our history. While commodity inflation and the lapping of an additional week impacted our ability to generate earnings growth in 2025, we have not deviated from our strategy of serving more guests and expanding our restaurant base across the 3 brands. We are confident in our long-term strategy and believe we are set up for continued success over the coming years. Additionally, we ended the year with over $130 million of cash, and cash flow from operations for the full year was over $730 million. With this cash flow, we funded $388 million of capital expenditures as well as the acquisition of 20 franchise restaurants for $108 million. We also returned $180 million to shareholders through dividends and another $150 million in share repurchases. Moving on to 2026. Our commodity inflation guidance of approximately 7% remains unchanged with the continued expectation of being above the guidance in the first half of the year and below the guidance in the second half of the year. Beef inflation accounts for nearly all of the expected commodity inflation throughout the year. Our guidance for wage and other labor inflation also remains unchanged at 3% to 4%. We expect the wage component of the inflation should moderate despite state-mandated increases, while cost pressures on insurance and other employee benefits will likely trend higher. Our approach to capital allocation for 2026 remains consistent with our proven philosophy of prioritizing new restaurant development and maintaining the condition of our existing locations. As such, our capital expenditure guidance of approximately $400 million remains unchanged. This amount does not include $72 million paid at the beginning of the year to complete the previously mentioned acquisition of 5 California franchise locations. As part of funding this acquisition, we borrowed $50 million on our credit facility. Also today, we announced a 10% increase to our quarterly dividend, which brings it to $0.75 per quarter. And now, Michael will provide the fourth quarter financial update. Michael Bailen: Thanks, Keith. Before I begin the discussion of results, I want to remind everyone that the fourth quarter of 2024 included an additional week. Lapping the additional week negatively impacted fourth quarter revenue growth by approximately 9% and earnings growth by approximately 12%. My discussion will be based on reported results, which include the negative impact. For the fourth quarter of 2025, we reported revenue growth of 3.1%, driven by a 4% increase in average weekly sales, partially offset by a 0.6% decline in store weeks. We also reported restaurant margin dollar decrease of 15.6% to $205 million and diluted earnings per share decrease of 26.1% to $1.28. Average weekly sales in the fourth quarter were over $160,000 with to-go representing approximately $22,000 or 13.8% of these total weekly sales. Comparable sales increased 4.2% in the fourth quarter, driven by 1.9% traffic growth and a 2.3% increase in average check. By month, comparable sales grew 6.1%, 4.8% and 2.2% for our October, November and December periods, respectively. And comparable sales for the first 7 weeks of the first quarter were up 8.2% with our restaurants averaging sales of approximately $170,000 per week during that period. In the fourth quarter, restaurant margin dollars per store week decreased 15.1% to $22,200. Restaurant margin as a percentage of total sales decreased 309 basis points year-over-year to 13.9%. The year-over-year decline included lapping an estimated 45 basis point benefit from the additional week. Food and beverage costs as a percentage of total sales were 36.4% for the fourth quarter. The 281-basis point year-over-year increase was driven by 9.5% commodity inflation, combined with shifts within the entree category. This was partially offset by the benefit of a 2.3% check increase. Commodity inflation for full year 2025 was 6.1%, which was in line with our guidance of approximately 6%. Labor as a percentage of total sales increased 18 basis points to 33.2% as compared to the fourth quarter of 2024. Labor dollars per store week increased 4.3% due to wage and other labor inflation of 2.9% and growth in hours of 1.4%. For the full year, wage and other labor inflation came in at 3.7%, which was slightly below our guidance of approximately 4%. Other operating costs were 14.9% of sales, which was 4 basis points better than the fourth quarter of 2024. While higher sales continue to generate leverage within some line items of other operating costs, it was almost fully offset this quarter by lapping the benefit of last year's additional week as well as an increase in our quarterly reserve for general liability insurance. These insurance adjustments included $3.5 million of additional expense this year as compared to $2.7 million of additional expense last year. Moving below restaurant margin, G&A dollars declined 6% as compared to the fourth quarter of 2024, and came in at 3.6% of revenue for the fourth quarter. This was primarily driven by lapping approximately $3.7 million of higher expense related to last year's additional week. With our budgeting process for 2026 complete, we are currently forecasting a low double-digit percentage increase in G&A dollars for full year 2026. Our effective tax rate for the quarter was 11.5%, and our full year 2025 income tax rate was 13.8%. At this time, we are updating our forecast for the full year 2026 income tax rate from approximately 15% to between 14% and 15%. Now I will turn the call back over to Jerry for final comments. Gerald Morgan: Thanks, Michael. I want to take a moment to thank our guests and our operators for their continued support of our recent tinnitus fundraiser in honor of our founder, Kent Taylor. This year was our fifth annual event, and we raised over $1.1 million to the American Tinnitus Association. We are proud to raise funds for research, education and awareness for this condition that impacts so many people. Finally, 33 years ago, Kent opened the first Texas Roadhouse. While most milestone birthday celebrations end in a 0 or a 5, at our company, we believe 33 means something special. When we celebrate our birthday, we are also celebrating opportunity, growth and a commitment to operating at a high level. What started as Kent's dream on a napkin has grown to over 800 locations, 3 brands and more than 100,000 Roadies. I'll close with a happy 33rd birthday to Texas Roadhouse and all of Roadie Nation. So on the count of 3, can I get a big yeehaw? One, two, three. Yeehaw. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from David Palmer with Evercore ISI. David Palmer: Congrats on a great year. I wanted to just squeeze 2 questions. And the one is just sort of about that fourth quarter and the fact that the sales slowed down in December, we heard in the industry that there was some weather dislocation in that month. And so a lot of times in when a chain gets caught with slow sales late in the quarter, it's tough to adjust the labor and to sort of save the budget for the quarter, so to speak. And you did have a higher ratio of labor hours versus traffic than normal for you. So I suspect that was something you're not wanting to make excuses, but maybe you could speak to what sort of a drag that, that noise or even just the fact that, that happened late in the quarter might have had on your earnings that quarter. And then I'm just wondering also bigger picture question is just the long term, when it comes to beef inflation, it feels weird this cycle where it's not getting better fast in terms of the number of battle head out there, and the demand is remaining strong. So it feels like the relief might not be as fast as it was the last time we saw one of these cycles. And I'm just wondering if you're thinking, is there things that you could do besides have food costs get down to 34% to get back to 17% plus? I mean you talked about the handhelds, but is there anything that you're thinking about on the labor side and effectiveness there to really offset some -- what might be longer -- higher for longer on beef? Michael Bailen: David, it's Michael. I appreciate the question. Hopefully, I can touch on all the topics. You are correct, for the fourth quarter, that labor hours ratio was 68%. For October and November, it was sub-50% and that slowed down. The entire industry saw in December certainly resulted in an elevated number there. I can tell you so far, in the first quarter, we are back to sub-40%. So that does feel like it was a little bit of an anomaly given the results from December. And again, December was impacted by both holiday shifts and weather. So for 2026, I think we believe that we can continue to run in that sub-50% level. As far as beef inflation, yes, we're going to have that pressure here in '26, Far too early to start predicting what may happen in '27. But I think the industry would say that it will be certainly a little early to see the herd beginning to expand before late '27. So in periods like this, we focus on the dollars and growing the top line, and that's what flows through. And certainly, more dollars can help you leverage labor, can help you leverage other operating. We're going to stay true to who we are, and that's really going to be our approach to the business. Operator: Your next question comes from Andrew Charles with TD Cowen. Andrew Charles: Maybe just first, just if you just quantify, if you can, the impact of [ Fern ] on the quarter-to-date, obviously, a very stellar number, but just curious with weather, how much that impacted it. And my real question is really around now that you're focused -- now that you fully rolled out the digital kitchen. How does it allow you to go on offense in 2026? Can we expect more advertising around carryout, could a market test a third-party delivery potentially be something you're focused on? I'd love to learn more about now the digital kitchen is over, what this allows you to do? Michael Bailen: Andrew, it's Michael. I'll certainly start with the question on Fern. It definitely -- on the first 7 weeks, it had about a 2.5% negative impact. Now we were lapping some weather from last year that offset some of that. So I would say the net impact of weather on the 7 weeks was about 1.5% negative for us. And then when it relates to the digital kitchen, maybe I'll start there and see if anybody else wants to join in. Certainly, it has led to that calmer, quieter restaurant -- excuse me, kitchen experience. And I think it does free us up to do more to-go business. And I think we've seen that over the last several quarters. Don't know what else will change fundamentally about how we do the business. But I do believe that our operators know that it allows them to do some more to-go. Gerald Morgan: And Andrew, this is Jerry. I would tell you, we will continue to learn as we now have the whole concept on the digital kitchen, what all it can do for us other than create a very calm environment that our cooks are really enjoying and just how we execute in the back. So it will not lead us to looking at delivery service at this time. Operator: Your next question comes from the line of Sara Senatore with Bank of America. Sara Senatore: Just, I guess, first housekeeping. Could you just let me know what price was for the quarter? And also, I know you talked about taking 1.9% in 2026, at least the first price. So can you -- what should we expect for pricing? What does that mean on a quarterly basis pricing looks like? And then I do have a question. Michael Bailen: Yes, Sara, it's Michael. So we had 3.1% pricing for the fourth quarter. We'll have that same 3.1% here in the first quarter. And then with the [ 1.9% ]rolling on, that means we'll have 3.6% in the menu for the second and third quarters before we have conversations about what we may do at the beginning of the fourth quarter. Sara Senatore: Okay. Great. And then I guess, as I think about the sort of price cost dynamic, I know typically you price just for sort of structural changes. But I guess, as I think through the year ahead, I guess, is your sense that part of the reason the traffic growth has accelerated so much is because you've maintained your pricing kind of substantially below the competitive set? Or I guess trying to understand like how you think about that elasticity because certainly, the quarter-to-date trends, again, including weather, were very impressive. Just a sort of philosophy as you think about the year ahead. Gerald Morgan: Thanks, Sara. This is Jerry. I'll start it off a little bit on the pricing. We continue to try to be very conservative. We believe that the full-service dining segment, we are still well underneath that. So we continue to have great conversations with our operators. We look at it from the lens of our guests and our business and our shareholders and try to find a solid balance. We also know beef is a challenge, and we will continue to look at it. But we focus on a great experience, value in our menu that's built in throughout everything that we have. And it's been a great strategy. And I believe we don't skimp on any of our portions. We really focus on nothing has changed. All we try to do is get a little bit better for our guest experience. Operator: Your next question comes from the line of Jim Salera with Stephens. James Salera: I wanted to ask around tax refunds. There's been a lot of conversations around that potentially driving some incremental consumption, particularly in, I guess, more in the second quarter. Do you have any historical precedent for years where there's a larger-than-expected tax refunds? Do you see kind of an immediate flow through into the restaurants and more engagement? And if so, does that show up just purely in transactions? Or do you maybe see higher attachments? Any comments you could provide there would be helpful. Michael Bailen: Jim, it's Michael. I would say historically, if the timing of the refunds moves around, I think we can see it a little bit in our numbers. So I do think refunds do have the potential to be a tailwind for us, whether this time around and who may be getting these refunds will result in a benefit for us to be determined. But typically, yes, when people are getting a larger than normal refund, I would say it may result in them looking to spend some of that. Operator: Your next question comes from the line of David Tarantino with Baird. David Tarantino: Michael, just a clarification on the recent comp trends. Did you have a calendar impact in December from the shift of New Year's Eve? And if so, can you quantify the impact of that on Q4 and on Q1 quarter-to-date? And then I have a follow-up to that. Michael Bailen: Yes, David, definitely, we had a negative impact from Christmas shifting and also the timing of our year-end. Those two on the quarter had about a little under -- when you combine in Halloween shifting as well, all of those had about a 1% negative impact on the fourth quarter. The first quarter -- or I'm sorry, the first 7 weeks is benefiting from having New Year's Eve in the first quarter, and that's had about a 1 -- a little over 1% benefit to our first quarter -- first 7 weeks, excuse me. David Tarantino: Great. That's helpful. So if I net all the impacts from the calendar and the weather, it does look like Q1 has accelerated pretty meaningfully on the traffic side. So I just wanted to get your thoughts on why that's occurred. I guess I know there's a lot of cross currents in the economy. But I guess what are your thoughts on what's driving the recent strength? Gerald Morgan: Well, thanks, David. This is Jerry. I do know there was some weather in that time line, but I really do believe that it's just about us operating at a high level. Our operators are out there hustling. We're continuing to provide a great experience for the guest. And we benefited a little bit from some of that. It would be hard to measure exactly what it is, but I just think we're out there hustling, we're trying to make sure our employees have a great experience coming to work, and our guests are having a great experience dining with us, and we are very appreciative of their business. Operator: Your next question comes from the line of Brian Harbour with Morgan Stanley. Brian Harbour: Can you comment on just where you are with commodity contracting at this point? And then is your expectation that inflation in the first quarter could look similar to 4Q and then it sort of comes down ratably from there. Could you help us a little bit on that? Michael Bailen: Sure, Brian, it's Michael. I would -- as far as locked, we're certainly more locked our fixed price in the first half of the year, probably about 65% locked in first half of the year and only about 25% in the back half of the year, and that's probably not abnormal over the more recent years from that standpoint. As far as the cadence of the commodity inflation, I would -- we mentioned that the first half of the year would be probably above our 7% guidance. I'd say within that, Q1 is probably in line with the guidance. And Q2 is probably where we expect to have our highest commodity inflation of the year, and that could be in the very high single-digit level. And then it should start to come down in the back half of the year. Operator: Your next question comes from the line of Peter Saleh with BTIG. Peter Saleh: Great. Jerry, I wanted to ask real quick on the expanding test of the handheld ordering in 2026. I think you guys have been testing this for -- since 2024, I think it was in about 40 restaurants. So can you maybe a little bit talk about what you're seeing, how much this test will expand and what you expect to see? And then, Michael, if you could just comment on the G&A and how that goes throughout the year? I think you said a low double-digit increase. So any details you could provide there would be helpful. Gerald Morgan: Yes. Thanks, Peter. This is Jerry. On the handhelds, we are -- we did absolutely have a test out there. We have pulled back on it just a little bit to rewrite some software. We have had it in a store right before the holidays and learned a lot of things. We paused it for a minute. We now have it back in that store, and we've just got a couple of more tweaks to make before I think we can offer it up to the operators. There's no doubt that the handheld and technology side of it doesn't make us a little bit quicker when it allows the server to take the order at the table to press send, and obviously, from an order accuracy standpoint. So there's a lot of things that we really like about it what we have to have is it to be reliable. And so we're just working through a few more things. We'll continue to get it out there and test and then I think later on in the year, we should be ready to kind of offer it up for our operators to opt in if they want to do that. But we have made a lot of progress, and I feel good that a lot of focus on it right now. Keith Humpich: And Peter, this is Keith. On the G&A, I think we guided to low double-digit increases, and I think you can pretty much see that throughout the year, evenly throughout the year. Operator: Your next question comes from the line of Jeff Farmer with Gordon Haskett. Jeffrey Farmer: You did touch on it, but with all the moving pieces, how should we be thinking about the restaurant level margin for the full year 2026? Michael Bailen: Jeff, this is Michael. Obviously, there are a lot of moving pieces. I would say with 7% commodity inflation and that's where we end up and with the pricing that we're talking about, taking and assuming that some of that, not all of it flows through the check, I think it's going to be a challenge to get leverage on the cost of sales line. Now I do believe there is opportunity on the other components of restaurant margin, but that may not fully offset. So it is certainly possible that restaurant margin percents remain under pressure. But the restaurant margin dollars certainly have a path, both on an absolute and a dollar per store week basis to go higher, and that's really where more of our focus is right now during this cattle cycle. Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Jerry, just curious your updated thoughts on Bob is, obviously, it's taking on a bigger role in the unit growth. And needless to say, when you're big brothers, Texas Roadhouse, your results probably won't look as good in the short term. I'm wondering if you can, just because it is in a different category, do you think that one day, if you do the same focus on Bubba's that you do on Texas, it will have the same level of resilience that Texas has had or probably maybe in a different category in a different position where it will never achieve something similar? Just trying to get your sense on Bubba's outlook, obviously, you're accelerating that growth for the next few years, but how you vision that brand long term relative to Texas? Gerald Morgan: Thanks, Jeff. Yes, I mean, I see Bubba's. I really like to compare it to the competitive set that it goes in it. Obviously, 6.4 million average unit volume. We have a lot of confidence in what Bubba's is doing and who it's competing with. And so we are very excited about it. We've got a great team over there. We've got great people, great operators executing at a high level. So we continue to lean into it and how we can support Bubba's to be as successful as they can be and I am really proud of where we're at from that. We have done a lot of great things getting some of the cost out of the building to make it a little more profitability or profitable for our operators as we go forward. We'll continue to look at ways to offset some of the inflation and other sides of it for that business. But yes, we'll ramp up the growth on it. We'll get to approximately 10 this year, and that's what's on schedule for the following year. And we believe that it will continue to add a lot of value to our company as we go forward from a sales and profit standpoint. Operator: Your next question comes from the line of Jake Bartlett with Truist Securities. Jake Bartlett: Mine is about mix, and there's 2 kind of mixes here that I want to ask about. One is on COGS. Your COGS have been higher than we would think or one would think given the pricing and the commodity inflation. You mentioned that's a shift towards stake. I think that differential increased in the fourth quarter. So the question is, what should we expect from that dynamic in '26? I mean is there a possibility that, that reverses out? Should we continue to expect maybe an increased pressure on COGS from that dynamic. And then if I look at just a mix within check, it increased in the fourth quarter. So a little bit kind of confusing. Have that increased or get more negative yet the COGS impact getting bigger. So the question on mix, what is driving the negative mix within same-store sales? And should that continue? What are the dynamics there going into '26? Michael Bailen: Thanks, Jake. This is Michael. First on that mix within our food cost, it was lower in the fourth quarter than it had been in the third. It probably was 30, maybe 35 basis points of pressure where it had been over 50 basis points in the third quarter. From what we're seeing so far this year, it does seem like we have lapped a lot of that trade up to the state category. That doesn't mean that it couldn't reaccelerate. But right now, my assumption is maybe 10 to 15 basis points of pressure coming from that, call it, usage line within the cost of sales. As far as the product mix, you are right, it did step up a little bit in the fourth quarter. And we saw that trend higher as we move through the last several months of the quarter. And some of that, I think, more of that came from the to-go side of it and the growth of our to-go putting a little bit of pressure, more pressure on that line. As I've looked at the beginning of this year, some of that pressure has abated, alcohol is still negative but not as negative as it was at any point last year. So some encouraging signs within our mix. We continue within the dining room to see positive mix in entrees, appetizers, soft beverages mocktails. But when the to-go business is growing at a slightly faster rate and that comes with a lower average check, it does continue to put a little bit of pressure on mix. Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: So I just wanted to ask about share gains. And you've shown super consistent traffic strength and peers have shown less so. I mean restaurants, food, fast casual, QSR, et cetera, what portion of the traffic outperformance do you view as structural share gains versus like people trading between channels or in and out? And how should we view that durability if the consumer weakens further? Gerald Morgan: Yes. Jacob, I can start. I mean it's hard to predict all of that. I mean we open up our doors and we serve our guests and represent our communities all across America in the world. And I think the guest has to make a choice, and their choice is where do they get quality food, where they get great value and where do they get hospitality at a high level? And I do believe that that's where we continue to win and that reputation that we have in the industry for consistently providing great service, great food and what we call legendary food and luxury service and that just resonates with our consumer. And they want to spend money, but they want to spend money where they're getting a great product with value. And I believe that's where we settled in nicely. Operator: Your next question comes from the line of Dennis Geiger with UBS. Dennis Geiger: Great. Welcome, Mike. Just wondering if you guys could break down that -- the G&A guidance, the G&A increase a bit more. Is that increase coming from? Is it a compensation dynamic? Is it related to the acquisitions? Anything more you could say there? And then, I guess, longer term, has anything changed on how you think about G&A beyond this year? I know you've kind of given some targets in the past for the long term as a percent basis. Keith Humpich: Dennis, it's Keith. Thanks for the question. Yes. So in December, we completed our 2026 budget process that included finalizing our incentive plans for the year. So as part of that, we did increase our G&A forecast. And this was mainly due to the new long-term management equity grants that we announced in late December and then also some higher forecasted incentive compensation. I can tell you that when we look at G&A as a percentage of sales, though, I think we see it coming in very similar and consistent to what our recent years have been, and we're comfortable with that level. Operator: Your next question comes from the line of Andy Barish with Jefferies. Andrew Barish: One question and a quick follow-up. Just can you give us a little better sense on sort of what the guest management software is potentially driving this year? Is it table yields or wait time quotes? Or how is that kind of up and running? Gerald Morgan: Thanks, Andy. This is Jerry. I think it helps in all categories. To be able to manage your floor plan with the amount of consumers that are on the wait list and for them to be able to navigate a little bit on their own to get on the wait list and allowing us to -- if folks aren't there. So there are so many components that can help us be faster, not only in managing how table turns work, how we get guests on the list, how we get them set and then how do we accurately quote them when we're on longer waits. And we just went through a tremendous weekend over Valentine's Day and what a success. And I think it all contributes to the ability to handle that kind of volume. So we believe that there are so many things that you -- just little things that all add up to additional success. So it's about all I can share on that, but it's about really being bigger, faster and stronger and getting more people sat accurately from that standpoint. But thank you, Andy. Andrew Barish: Yes. Very helpful. And then on the headquarters acquisition, is that -- I assume that's a benefit to G&A this year versus last, but maybe I'm thinking about it wrong. Keith Humpich: No, Andy, this is Keith. Yes, you are correct. It will definitely be a benefit for us this year. Operator: Your next question comes from the line of Jon Tower with Citigroup. Jon Tower: Jerry, just a quick question for you. The past year, 1.5 years or so, you focused a lot of -- some time on innovating around and focusing on beverage in the menu, I think mocktails, dirty sodas are a couple of things, and then having the $5 draft on tap and messaging that to the guests. Is there anything else on your menu that you see today as an opportunity, either you're not currently -- it's not either on the menu today or it's something that's underperforming your internal expectations? Or anything you're hearing from your operators that says, hey, this would be a nice area we should be focusing more on? Gerald Morgan: Well, thanks, Jon. Yes, I think on the beverage side, I mean, obviously, mocktails have become very popular out there, dirty sodas, the 5-day $5 all day every day. It is about the beer, but it's really also about that margarita and really, Roadhouse was built on ice cold beer and a legendary margarita. And having that $5 10-ounce margarita back in the system has been really, really popular. And on the food side, I mean, we're always looking at some innovative ideas in talking with our operators about trying different things, whether it be a menu item, whether it be the ability to add on a different kind of smother or even a sidekick of some sort. So we are constantly out there looking at things. We have some things that are out there in test. We'll continue to monitor and look at them and make a decision down the road if we think it goes regionally or nationwide could be impactful. So yes, we're constantly kind of testing and looking and talking with our operators about what we might look at on the menu. We don't have a lot that underperform at the level that they would be replaced. So it would be a tough one for us to take anything off. It really have to be a superstar to get added to it. Operator: Your next question comes from the line of Andrew Strelzik with BMO Capital Markets. Andrew Strelzik: Going back to the beef topic, and I appreciate some of the color you gave on the cattle cycle dynamics. There's been some optimism, I guess, around beef inflation easing at some point in '26 because of demand destruction at retail. So I guess I was curious if you've seen any evidence in any of the data that you've looked at or any of your discussions around that dynamic that maybe does offer a little bit of optimism as the year progresses. Michael Bailen: Andrew, it's Michael. Thanks for the question. I mean I think we've certainly seen at retail some trade away from beef over the last several quarters to whether it be pork or chicken or other proteins. And so that has been in effect. So the level that, that may or may not continue, it is hard for us to know. We aren't trying -- in our forecast, we aren't trying to predict what the demand side might be. So if there was a further, call it, demand destruction or trade away from beef, then maybe there is some potential for our numbers to come down. But a lot of things to learn about there. What we do know is what's going on with the size of the herd and what that takes for a rebuild. So the demand will really play into how things fully play out. Operator: Your next question comes from the line of Rahul Kro with JPMorgan. Rahul Krotthapalli: Can you update us on the build cost inflation and how it is tracking at both Roadhouse and Bubba's and especially how you're thinking about cash-on-cash returns for both these concepts as we go forward? And I have a follow-up on the company versus franchise mix. I've seen this slowly pick up over time from low 80s company mix to the high 80s we are currently. Is there a conscious goal to get to a certain level over time? Can you share some of your thoughts here? Michael Bailen: Yes, sure. This is Michael. I'll start with the investment costs. So on the Roadhouse side, we are expecting our average all-in investment cost that includes 10x rent factor will be increasing to around $8.9 million. We think we're around $8.3 million to $8.4 million here in 2025. Some of that increase is coming from higher rents. Certainly, it is not getting any cheaper to build a building. But we -- and we also have a handful of restaurants in California that we will be opening in '26 and that probably adds a few hundred thousand dollars to that cost for Roadhouse. On the Bubba's side, the opposite is expected. We're expecting to see maybe a little more than $0.5 million reduction in our investment costs going from around $9 million down to $8.5 million, $8.4 million for 2026. We've done a lot of work on the building and getting the prototype to where we want it to be. And we also have a handful of conversions that we are going to be doing. So taking an existing building and turning it into a Bubba's. We've done 2 of those so far that have opened and definitely seen some cost savings by doing that. So we are hopeful and expecting that, that can continue with some more of these conversions. And as far as returns, we look at it more as an IRR. We're targeting a mid-teen IRR for our new restaurants. And I'd say we are achieving or exceeding that expectation as an overall portfolio. Operator: Your next question comes from the line of Brian Vaccaro with Raymond James. Brian Vaccaro: Most of mine have been asked, but just 2 nitpicks, if I could. Within the other OpEx line, I'm curious what you're seeing just from an underlying inflation perspective within that line? And any changes in the outlook related to utilities or other areas we should be mindful of? And on the acquisition of the 5 units for $72 million, was there acquired real estate within that acquisition price? Michael Bailen: Yes. Brian, I'll just start with the second one first. There is no acquired real estate within that acquisition price for those California stores. As far as the other OpEx, I think, certainly, there is an expectation that utility costs will continue to go higher. But I do think there is still opportunity to get some -- potentially to get some leverage another op in 2026, probably low single-digit growth in dollars per store week is probably the best guidance I can give you. I don't think I have an inflationary percentage to throw out at this time. So we do think we're going to continue to see some cost pressures, but nothing other than utilities too out of the ordinary. Operator: Your next question comes from the line of Gregory Francfort with Guggenheim. Gregory Francfort: Maybe sticking with expenses, just labor inflation running under 3% this quarter. I guess is there anything that maybe there were less overtime hours just given the sales? Or I guess I'm trying to figure why that might ramp next year or, I guess, this year in '26? Michael Bailen: Yes. I mean there are several components. We talk about wage and other inflation. And so the wage components, certainly, we have seen that trend down and stabilize, and that's kind of the expectation that we have into 2026. But we do think that there's still going to be some pressures on insurance costs and other components within labor that may be a little bit higher than what we saw in 2025. So we guided the 3% to 4% wage and other. I think the underlying wage component is probably down year-over-year and the overall could be a little bit down versus 2025. Operator: Your next question comes from the line of Jim Sanderson with Northcoast Research. James Sanderson: I wanted to talk a little bit more about pricing. Given the 3.6% you'll have in the second quarter, how you see yourself positioned with respect to top competitors if you feel that your value gap is just as strong and compelling? And maybe if you have any consumer feedback about how the consumer perceives the brand on a value basis, if that's improving? Gerald Morgan: Thanks, Jim. Absolutely, we will keep our close eye on any conversation that comes up. But obviously, after these first 7 weeks as we continue to roll. But again, we're built on a conservative approach to pricing. We still believe we're well under our competitors and full-service dining average 12 months rolling. So we will continue to look at that. But if we get feedback, we absolutely will consider and talk with that but we really feel like we've got such a great value, and we're continuing to operate at a high level, and that's the approach that we'll continue to take, and we feel great about it. Operator: And that concludes our question-and-answer session. I will now turn the conference back over to Jerry Morgan for closing comments. Gerald Morgan: Thank you all for your time with us tonight. And to Roadie Nation, stay focused on high-level hospitality. Let's go to Roadhouse. Operator: Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Thank you for standing by, and welcome to the Qube Holdings Limited FY '26 Half Year Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Digney, Managing Director. Please go ahead. Paul Digney: Hi, all. Thank you for joining this morning's call. I'm joined in the room by Qube's CFO, Mark Wratten; and Head of Investor Relations, Paul Lewis. As usual, I'll kick off the call with a summary of our highlights for the half, followed by some comments on the divisional performance. Then I'll hand over to Mark to discuss some key financial items. And then back to me for -- to go through the full year outlook before taking your questions. Starting on Slide 6, results overview. Qube has once again delivered a solid half year result. The financial performance reflects the strength of our business, reflects a combination of organic growth and the contribution from acquisitions recently completed. Activity levels remain mostly favorable across our core markets. And as you've heard before, the diversity of our operations supported growth and helped offset any challenges. Both Mark and I will talk more about the financial results as we get through this presentation. On to Slide 7. We provide an update of the scheme of arrangements here. As you know, on Monday, we announced that the MAM led consortium have confirmed their offer at $5.20 per share per Qube. We have now entered into a scheme implementation deals with the consortium. This is an exciting milestone in the evolution of our business. And MAM's offer underscores the value of our strategy and the quality of our business and our people, most importantly. I'm confident that this transaction will provide a platform for the business to grow and continue to grow while maintaining a strong track record of enhancing supply chains in the regions that we operate. Obviously, the timing is contingent now on regulatory and other approvals, and we're aiming to have a scheme booklet out to shareholders in May so that shareholders will then have the opportunity to vote on the scheme. Returning to our performance for the half and safety performance on Slide 8. Our positive safety performance was sadly marked by the death of a tire fitting contractor at our Narromine Agri facility in October. Qube and the management team has continued to support investigations into this tragic event. During the period with our ongoing focus on safety, our TRIFR continued to improve, decreasing by 21% compared to last year's result. Our LTIFR and our CIFR also improved during the half. The rollout of our BeSafe program also continued. There are some great safety videos worth checking out on our social media networks. Turning to our key markets, Slide 9. Once again, it's clear that strong performance in some areas helped balance out some challenges in others. In Containers, the Australian logistics operations performed in line. New Zealand container logistics impressively performed better than expected and so did Patrick's, performing better than expected also. In Agri, Agri again made a good contribution, which underscores the value of our trading strategy, and an agile integrated service offering to our customers. More automotive benefit from a full period contribution from the AAT Webb Dock West, which is also known as MIRRAT, but was offset by lower than anticipated storage and quarantine services across all AAT terminals. Forestry was relatively stable despite some softer wood chip volumes in Australia, while in New Zealand, we saw a modest uplift in earnings. The resources business was better than we expected due to better volumes and also with better cost controls, which helped offset a major contract ceasing in the period. Energy once again delivered ahead of expectations, except for some delays in renewable projects. And in general, Stevedoring and the other sections on the slide, this was slightly impacted mainly due to unfavorable volume mix across our port operations in Australia. Now turning to divisional performance on to Slide 11. For the operating division, I won't spend much time on this slide as I'll dive into each BU shortly. As you can see from the slide, logistics and infrastructure was responsible for the lion's share of the growth in the half. Turning to Slide 12, logistics and infrastructure. EBITDA profits jumped around 22%. The addition of Web Dock West helped the performance in the period. However, the AAT terminals performed weaker overall due to a decline in high margins and ancillary services, which I mentioned before. Container and logistics volumes were broadly stable across Australia and provided another solid result. The New Zealand performance was better than expected in the half. And with the Nexus acquisition completed in December, we are expecting further New Zealand upside in the second half. The IMEX continued to deliver improved results and volumes as volumes ramped up. And Agri performed well in the period with grain up almost 50% through our bulk channels in the half. Turning to Slide 13, Ports and Bulk. In the Ports and Bulk business unit, it's fair to say it had some mixed performance across its end markets. The Energy business delivered another strong earnings contribution from the oil and gas activities, including the commencement of decommissioning work getting underway during the period. However, in the energy space, we had profit impacts from our renewable sector due to setup costs in Western Australia and some project delays in Queensland. We saw reasonable volume at Stevedoring across most commodities in our ports operation. However, unfavorable product mix in the half did impact earnings and margins. Overall, forestry was relatively stable with a modest uptick in earnings in New Zealand. The bulk activities in resources sectors was better than we expected. This helped offset the impacts of some major projects ceasing and the delays in some new projects coming on stream. And also, the bulk business did benefit from a full period contribution from the Coleman's acquisition, and the initial contribution from the Albany Bulk Handling acquisition. Now on to Slide 14, briefly looking at Patrick. Patrick was better than we originally forecasted, which is pleasing. Market share was relatively stable at 41%, and the EBITDA improved, thanks to a number of things, higher volumes, favorable volume mix and increasing ancillary revenues. And pleasingly, during the period, the business also extended several key customer contracts. I will now hand over to Mark to take you through some of the key financial information, and then I'll get to the outlook after that. Mark Wratten: Thank you, Paul, and thank you to everyone on today's call for listening in. As Paul has already highlighted, Qube delivered a very pleasing first half set of results. I'll now take you through a few financial slides. Starting with Slide 16, Qube's underlying results. Paul has already covered our Logistics and Infrastructure and Ports and Bulk business units as well as Patrick. A few other points to note include: strong result in our operating division contributed to an increase in group underlying EBITDA of 9.8% over the prior period. Pleasingly, Qube's EBITDA margins, excluding the high revenue, low-margin grain trading business, improved from 10% to 10.6%. As we had guided to earlier in the financial year, this EBITDA improvement was partly offset by an increase in net finance costs which increased by $9 million against the prior period due to higher average debt balances and no interest income on the now fully paid repaid shareholder loans to Patrick. The NPAT share from associates increased by $7.5 million, which was mainly attributable to the great first half result from the Patrick business. At the underlying NPATA line, we delivered $157.5 million, which was an increase of 10.1% over the first half FY '25. On the back of these results, the Board has declared an interim dividend of $0.0535 per share fully franked, which will be payable on the 9th of April. This dividend is at the top end of the Board approved dividend payout ratio, which is 60%. Before leaving this slide, I'll make some short comments on the 2 material nonunderlying adjustments that we reported in our H1 statutory results. The first item is $101.5 million pretax profit on the divestment of our interest in the beverage property, which we announced was sold in December 2025. The second material item of $37.3 million was a reversal of an onerous contract provision relating to Qube's obligations at the time of exiting the Minto Properties, which we divested in January '25. This obligation was successfully resolved during the period, allowing us to now reverse this provision. The original provision was also treated as a nonunderlying item in our FY '25 accounts. Moving to Slide 17, capital expenditure. In first half FY '26, Qube's gross CapEx was $216 million. This is broken down into the 4 major categories on this slide. Qube spent $35 million on 2 small but strategic acquisitions in the first half, being the Albany Bulk Handling business in Western Australia in July and the Nexus Logistics business in New Zealand in early December. The Albany Bulk Handling business has been fully integrated into the Qube, while the Nexus integration is progressing to plan. We also spent $88 million on organic growth-related assets in the category set out in the table below. The major spend was on new bulk storage facilities in Queensland and Western Australia and mobile assets and specialized containers to support new or expanded contracts. The $22 million investment in specialized containers predominantly relates to new contracts with Iluka for the Balranald project and WA Oil for a decommissioning project. In the period, we also spent $88 million of replacement CapEx, mostly on mobile fleet assets and material handling equipment. Finally, we spent $5 million on the 2 Moorebank rail terminals. During the first half, Qube also received proceeds of $163 million from the divestment of assets with a significant amount being for the beverage property, which I mentioned earlier, and some rail rolling stock assets in excess of our business requirements. After all of the above, net CapEx in the first half was $53 million. Taking you now to Slide 18, cash flow. During the first half 2016, Qube's net debt decreased by circa $51 million with the key cash flow items detailed on this bridge. The first half cash conversion, excluding grain trading working capital was 71%, which is a relatively typical result for Qube given the material first half outflows that don't repeat in the second half. Working capital movements for our grain trading business was a positive $29 million for the period to total $117 million at the end of the first half. The first half FY '26 cash flows also included the $53 million of net CapEx that I just spoke to as well as $81 million in distributions received from our associates, mainly from Patrick. Finally, if I can now take you to Slide 19, balance sheet and funding. You will remember that in FY '25 Qube completed a number of capital management initiatives, which together continue to place the business in a strong balance sheet position. During the first half of FY '26, we haven't been required to revisit our debt facility as we have significant available liquidity, which at the end of December '25 was over $1.1 billion. Our average debt maturity is 4.4 years, and we have no facilities maturing in the second half or in FY '27. Qube's gearing ratio reduced to 31.6%, which is at the lower end of the Board's current approved range. overall ore, we retain significant headroom against our bank covenants. Qube maintains investment grade credit ratings from both Fitch Ratings and S&P. That's all for me. Now I'll hand you back to Paul. Paul Digney: Thanks, Mark. And now Slide 21, the full year '26 outlook by key markets. Across our -- the outlook across our key markets for the full year is generally favorable. In containers, we expect Patrick to perform slightly better as well as New Zealand. The outlook for Agri year-to-date has been good, although the remainder of the year could moderate due to global conditions and farmers currently holding on to inventory, which is reflected in the revised outlook for Agri. In automotive, there are some early signs of improvement in the demand for ancillary service in the second half, which is positive. In forestry, we expect that to stay the same as the first half of the year. And while in our resources businesses, we anticipate some improvements, thanks to more favorable product mix and better volumes. This should partly offset that misalignment I spoke about before between contracts ending and new one starting. Finally, in Energy, as I mentioned before, the outlook remains positive for the oil and gas activities However, the new renewable projects will be delayed into next year and will be a benefit to next year's revenue. Now to the final slide, Slide 22, before I take questions. Full year 2026 underlying earnings outlook. The underlying earnings outlook remains positive for the full year, with solid EBITDA growth for the operating division. The outlook for associates also looks positive, largely thanks to the higher contribution from Patrick's. And at a group level, we expect to deliver a solid NPATA and EPSA growth of between 6% and 10% for the year. To summarize, while it's been a very busy half particularly with the Macquarie transaction and the due diligence bubbling along in the background, our half year performance saw us deliver another record result. Revenue improved, margins improved again. Return on average capital employed improved above 10% for the first time and now on its way to our new target plus above 12%. And our earnings per share improved and the outlook remains positive for the full year. Thank you for your time. I now would be happy to take your questions. Operator: [Operator Instructions] Your first question comes from Justin Barratt from CLSA. Justin Barratt: My first question, I just wanted to ask about if you could talk a little bit more about your grain trading business. It looks to be doing a pretty good job of materially improving throughput through your operations? Paul Digney: Yes. Justin, I mean, yes, our strategy has been very successful. A lot of the grain that's moving through our assets is I think more than 50% is our trading arm, pushing that inventory through our terminals and our up-country facilities. So yes, we've been -- we've built a pretty good strategy there. We've kept our product to our customers and through our trading arm fully agile and fully flexible. So Yes. I mean the current conditions, pricing is a bit lower. FX is not working as good as possible for trading, but we're pushing through some good volumes. Justin Barratt: Okay. Great. And then on Ports and Bulk, your guidance for FY '26 now a little bit softer than your previous guidance. And just noting your comment around the timing between cessation of some contracts and ramp-up of new contracts. I was wondering if you could expand on that comment a little bit for us, please? Paul Digney: Yes. I mean some areas -- I mean, we've had. Probably in the wind farm sector, we felt that we probably -- from a profit point of view, we do a bit better. There's probably -- setup costs have been a bit more, but we're setting up for the future in Western Australia. Some of the tail of some of the wind farms that we're finishing off at the moment, before other ones start in 12 months' time or so. It's probably been probably not as financially benefit for us. So there's been some impacts there. General Stevedoring turnaround after the industrial. The IR issues last year have improved, but we felt that they probably might improve a bit better. So we're looking for that improvement in the second half a bit. So we're just being a bit cautious there. Iluka Balranald is delayed probably 3 months into next half. So yes, it sort of swings around about. But yes, we are sort of broadly flat outlook for Ports and Bulk. Operator: Your next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: Paul, Mark, just 2 for me, if I could, please. Can you just talk to the drivers of the CapEx guidance change, please, for FY '26. So just interested in your considerations as you've put that together for us today, please? Paul Digney: I'll hand over to Mark. Obviously, there's quite a reduction there. Mark Wratten: Jakob, yes. No, so we spent less CapEx in the first half than we had anticipated and there's an element of that flowing through into the second half. I think we had -- in the initial guidance that we gave in August, we had included sort of what we call, referred to as a CapEx pool. So for acquisitions and we've completed a couple, as I mentioned, $35 million in the first half. We've got a couple that we sort of anticipate may drop in the second half. But overall, we think across the year, it's less than what we sort of had, sort of set as a sort of an amount aside back in August. And then there's just an element of the guide just being very careful around other maintenance CapEx, and we've been not -- I guess, to make sure that we're sweating our assets as much as we could. So I think it's just been a -- it's just maybe an element of first half being a bit too ambitious around when we could spend it. But we've got some really good -- I think some of it goes to what Paul was mentioning earlier around timing. So we've got some project -- really good projects coming up where the CapEx is now more likely to be spent in '27 than it is in '26. Jakob Cakarnis: Understand that maybe you'll be in a different environment as that goes ahead. Just one final question. I appreciate that there's still a bit of water under the bridge. But for those on the call, how do we think about a distribution of any surplus capital if that exists in the business? And how do we think that around timing with your other announcements and maybe the implementation deed, please? Mark Wratten: Yes. So if -- per the announcement on Monday morning and you'll see it in the scheme implementation deed as well. Obviously, the cash price is $5.20 but reduced by any dividends that we pay between now and completion, and that's inclusive of the interim dividend that we announced today, $0.0535. So we can -- for the scheme implementation, we can pay a maximum of $0.40 of dividends overall. And the whole idea around that, Jakob, is to say to try and optimize our franking credits. We've got quite a large franking credit balance and we're trying to get a lot of that to the benefit of shareholders between now and completion. So you'll see that we've got the ability to pay a special dividend within this -- agreed with Macquarie. And we'll seek, per the note -- in the announcement, we'll seek ATO class ruling to make sure that, that's all dot the I's, cross the T's, so to speak, in regards to those franking credits for any special dividend being available to shareholders. Jakob Cakarnis: Mark. So am I right in thinking that, that occurs, sorry, in terms of timing as the deal is closing? Or is there an interim milestone that we need to keep in mind? Mark Wratten: No. So obviously, if the deal dragged into the second half of this calendar year, Jakob, and we do our full year results, you could expect a final dividend, right, if it's sort of -- if not completed before October, say. Otherwise, a special dividend is likely to be paid immediately prior to the actual completion of the deal. So very -- a few days probably before the actual cash component would get paid. So it would be almost simultaneous. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Maybe just staying on the scheme topic. Wondering if you could give any sense of what are the main regulatory approvals that are going to require you to work on? And what kind of time line you would expect around that? Paul Digney: Yes. So obviously, ACCC and Feb are the key approvals. And so I mean, I think we're working a time frame between up to 4 to 6 months, potentially that. So yes. Andre Fromyhr: Are there any particular parts of the portfolio that you've already identified as sort of more in focus from an ACCC approval? Paul Digney: I mean from our perspective, we don't think there should be any issues. I mean other than actuals around this process. I mean, again, this is not a merger. It's a change of ownership transaction. So there may be a look-through on Port of Newcastle, but the actuals will go through that process. But once they start that process and go through it, they'll understand. The ownership structure and the management structure is totally different. So there's no alignment there. And again, this is just an ownership change. It's not a merger of operations. So from my view, there shouldn't be any issues, but obviously, there's a process we need to run through, and we'll respect that process and so will Macquarie. Andre Fromyhr: Okay. Then back on the operations. I was just wondering if you could talk a bit more about the drivers of the margin in Ports and Bulk? I understand it's a diverse segment. But I guess that margin has been depressed for a few years now and has come down year-on-year again this period. Wondering if you can talk through the role that demand or utilization side has played there? Or is there cost inflation? Or is it a mix issue? Just curious to understand a bit more detail around that. Paul Digney: I think for the period, it's just been, I mean, we did call out that bulk would sort of go into a little bit of a decline because of contracts ceasing and that sort of stuff. That we did call out. Actually, it was better than we expected and the way the guys have managed that process. We haven't really seen much wind farm activity which sits in that sector, which is -- which goes through a lot of fixed costs, and it's reasonably high margin. So we didn't get that. The general Stevedoring business, we had products, we had reasonable volumes, but certain volumes, certain commodities and certain ports make more money than other things, in just the way that mix fell out. Probably it wasn't -- hopefully, the second half better with how that product mix goes. There's some stuff that we're working through in that area. I just think it's the period, it's just sort of a combination of some areas of where we would have impacted margins, and hopefully, we can get that improving in the second half. Andre Fromyhr: Okay. And last one for me is MIRRAT, Wondering if you're able to share what the EBITDA contribution was in the period or even better, like a sense of what a normal annualized run rate is for MIRRAT's EBITDA under Qube's ownership and sort of what your plans are for growing that business? Or is it more just the bolt-on to your existing AAT terminals? Paul Digney: I haven't got a number in front of me, so I can't provide that. I think we provided maybe a number at acquisition. So we were tracking a little bit lower than that this period because of less quarantine and storage services. So -- but we look at MIRRAT as a long-term asset. And so we're very confident where we're at with MIRRAT. Mark Wratten: Yes. Andre, when we -- I think the normalized or sort of what we sort of coming into the year is around $30 million to $33 million of EBITDA. And as Paul said, the first half, which is sort of a little bit -- sort of below what we expected, then that $30 million to $33 million is sort of on a full year basis. And that's sort of at a very I guess, at a sort of very normalized run rate without sort of heavy volumes of ancillary services. Operator: Your next question comes from Samantha Edie from Morgan Stanley. Samantha Edie: Congratulations on the result and the takeover. I just have 2 questions today, please. So just with the first question. So I can see that the resources outlook has improved, which was guided to be a bit of a headwind in FY '26. And you did have a strong first half overall. But I guess, if we're just thinking about the second half earnings in each of the key markets you provided on Page 21 of the preso, are there any key market earnings there that are expected to go backwards half and half? Paul Digney: I think I'll probably called out a little bit cautious around -- just around the Agri volumes. I mean, we've done very well to date in regards to the strategy. And there's a lot of wheat on storage and upcountry and that sort of stuff. So we look to continue to push that through. So we've been a bit more cautious on that. Renewable projects is that's not going to change too much. We're not going to see much of that work, so which we expect it to be better. So there are probably 2 areas. But on the flip side of that, I think as I called out, the auto the storage and quarantine services that we have through AAT terminals looks to be more demand for that coming in the second half. It was very light in the first half. Patrick, New Zealand has been really good for us and looks promising in what we've done there, putting those businesses together. So that's been a good sign in oil and gas. There's probably potential slight upside there to offset any of those other things that might be maybe a bit lighter than we would have expected probably a couple of months ago. Samantha Edie: Okay. That's great. Mark Wratten: Sam, sorry, I mean it just goes about diversity again, right? That's just -- yes, it's sort of self-protect ourselves through the strategy. Samantha Edie: Yes. Great. And then just the second question is around Patrick's Fremantle lease. So I think that lease is meant to expire around 2031 unless that's changed. So is this like still the case? And then is it likely that this will be extended? And then can you also talk through what an extension will look like. So yes, just any color around that, please? Paul Digney: Yes. I think, Sam. The unknown on that is really what happens at Westport and the relocation from Fremantle down to Westport. It's still unclear of time frames on that sort of stuff. So you would assume an extension at Fremont or will occur when that occurs, I'm not too sure. But yes, it will go beyond the current position at this point in time. So I mean, we'll work with the Fremantle Port and the other stakeholders around that and potentially transitioning in the long term, which is a long way away still. There's plenty -- there's still plenty of capacity at Fremantle to operate for decades. So yes, it's -- I think to answer your question, very likely of an extension. I can't give the time frame of when the port would get relocated and when it does and if it does. Operator: Your next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: One follow-up on grain and the comment that you've moved 57% of New South Wales bulk volume. Could you comment on whether there's it clear change in market share you're seeing or whether the volume remains a function of crop volumes, high and solid crop volumes? And secondly, if you could comment on in addition to farmers holding on to grain that you already mentioned. Are you seeing any other structural changes in farmer selling behavior? Paul Digney: I think just what I called out. I mean, yes, I mean, we've increased our market share, I guess, in the New South Wales market. I'm not to comment about what our competitors do and what we do, but we have done that. I think our strategy has been quite good and quite agile with our customers and what we've built out over the last 2 years. Fundamental changes, I think as I called out earlier, the price of wheat at the moment is a point where -- and I think farmers are holding on for this point in time, but there is abundance of week there. So how it pushes through the system. We'll see how that plays out over the next 6 months. But we're just a little bit -- I guess, we've been able to push grain through. We've been able to source grain, put it through our network, but we're just a little bit cautious with how that's sort of playing out at the moment. So I don't think anything has really changed. I think farmers have decided to not sell as much as they want at this point in time. At some point in time, it's got to push through the system. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just one first question with regards to that special dividend potential. In your slides, you say you have the potential to pay $0.40 per share dividend with franking credits worth up to approximately $0.17 per share. Can I just confirm that, that $0.17 per share is the level of franking credit balance you have at the moment? And if not, where is your franking credit balance. Mark Wratten: That would be -- we have a franking credit balance is subject to some further work that we're doing, but we believe that at this point in time that we'll be able to fully frank up to the $0.40 that we have agreement with. So yes, we're pretty confident about that. But as I said, we're making sure that -- and you'll see in the little footnote on the bottom of that page that we're going to seek ATO-class ruling, make sure that we pass all of their relevant franking credit integrity rules to make sure that it's fully available to our shareholders or particularly obviously those ones that can benefit from a franking credit. Owen Birrell: Okay. Perfect. I understand that. And just secondly on the -- again, on the ag business. Obviously, it's been a very good success story for you. I just wanted to get a sense of where your export terminals are relative to potential capacity? A 49% increase to the 1.8 million tonnes exported through your terminals. It sounds like a big increase. But if the -- if FX wasn't a headwind, if pricing wasn't a headwind, where do you think you would have been able to get to with that volume? Paul Digney: Good question. I mean we still have got extra capacity to push through our network. So the first half is pretty good numbers. I mean, if you double that and plus another 10% or 20%, that would be getting towards maybe capacity in those terminals, but we're still pushing the limits and we still have the ability to expand a bit of that capacity if needed to. So we're in a pretty good spot there. Owen Birrell: I guess, the origin of my question is that your grain trading activity is effectively running at 0 margin. Actually, it's even less margin than you were doing last year. So you're clearly leaving something on the table. Obviously, you're making it back through your utilization of your physical assets. But at some point, those physical assets get full. I guess the question is, do you then start to take margin through grain trading? Paul Digney: Potentially. It will just matter to the circumstances of the world grain prices, right? So at this point in time, it's quite low. So if prices are higher, yes, there's probably more margin going forward. Operator: There are no further questions at this time. I'll now hand back to Mr. Digney for closing remarks. Paul Digney: Thanks, everyone, for joining the call. I'll be speaking to some of you guys and lady soon. Yes, thanks again for your support, and have a good day. Cheers. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Q4 2025 Akamai Technologies, Inc. Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Mark Stoutenberg, Head of Investor Relations. Please go ahead, sir. Mark Stoutenberg: Good afternoon, everyone, and thank you for joining Akamai's Fourth Quarter 2025 Earnings Call. Speaking today will be Tom Leighton, Akamai's Chief Executive Officer; and Ed McGowan, Akamai's Chief Financial Officer. Please note that today's comments include forward-looking statements, including those regarding revenue and earnings guidance. These forward-looking statements are based on current expectations and assumptions that are subject to certain risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments and other risk factors identified in our filings with the SEC. The statements included on today's call represent the company's views on February 19, 2026, and we assume no obligation to update any forward-looking statements. As a reminder, we will be referring to certain non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP to non-GAAP metrics can be found under the financial portion of the Investor Relations section of akamai.com. With that, I'll now hand the call off to our CEO, Dr. Tom Leighton. F. Leighton: Thanks, Mark. I'm pleased to report that Akamai delivered strong fourth quarter results as we continue to make major progress in positioning Akamai for the future. Revenue grew to $1.095 billion, up 7% year-over-year as reported and up 6% in constant currency. Non-GAAP operating margin was 29% and non-GAAP earnings per share was $1.84, up 11% year-over-year as reported and in constant currency. Q4 revenue for Cloud Infrastructure Services, or CIS, was $94 million, up 45% year-over-year as reported and up 44% in constant currency. That's an acceleration from the 39% growth rate we achieved in Q3. The rapid growth was broad-based within CIS, driven by our ISV solutions, by Infrastructure as a Service and storage customers and by customers leveraging EdgeWorkers and WebAssembly, which offer improved performance and lower cost for edge native applications. In each of these areas, we're starting to benefit from AI-related tailwinds as customers make greater use of AI applications and agents across their businesses. Last quarter, Akamai took a major step towards the future with the launch of Akamai Inference Cloud, our platform to support the growing demand to scale AI inference on the Internet. Akamai's architecture uniquely positions us to power and protect AI the way we power and protect the web by bringing AI physically close to users enabling the faster performance and global scale needed to unlock AI's full potential. We believe the AI market is entering a critical transition point, the first inning of a long game to come, where inference or the execution of queries against a trained model is the new frontier. This requires purpose-built infrastructure to enable distributed low-latency, globally scalable AI at the edge with response times measured in a few tens of milliseconds. Akamai Inference Cloud does just that by incorporating NVIDIA Blackwell GPUs into Akamai's distributed cloud infrastructure with its unparalleled global reach and security at the edge. This enables intelligence to run instantly, securely and exactly where it's needed, right next to the user, agent or device. As evidence of our strong momentum, we're delighted to announce that we recently signed a 4-year $200 million commitment for our Cloud Infrastructure Services with a major U.S. tech company at the forefront of the AI revolution. I've had the privilege to work at Akamai for many years, and I have to say that it's really exciting to see such a pivotal player in the AI ecosystem choosing Akamai Inference Cloud for such a large AI use case. We also signed many other new and expanded contracts for our Cloud Infrastructure Services in Q4. An AI chatbot platform based in India signed a 3-year contract for our IaaS and Enhanced Compute Support solutions and save 45% on compute costs they would have paid to a hyperscaler. A very well-known antivirus software company chose Akamai's cloud for their VPN service, telling us they liked our performance and support better than what they previously got from 2 of our cloud competitors. A leading social networking platform that was using us on a pay-as-you-go basis committed to consolidate their multi-vendor stack on to Akamai's cloud platform, providing us with another takeaway from a hyperscaler. Two adtech companies in China chose us for our significantly lower latency and dramatically reduced egress costs. And one of the world's largest retail companies expanded their use of our edge compute platform to improve their digital shopping experience and increase conversion rates. As a result of the strong customer demand that we're seeing and the strong AI tailwinds across the marketplace, we anticipate that the very rapid growth rate for our Cloud Infrastructure Services will accelerate further in 2026. Our security solutions also performed well in Q4, led by continued strong demand for our market-leading API security and Guardicore Segmentation solutions. Revenue from these high-growth security products grew 36% year-over-year as reported and 34% in constant currency. Last month, Akamai was recognized as a customer's choice for Network Security Microsegmentation in the Gartner Peer Insights report for 2026. Akamai earned a 99% recommendation rate, scoring above market norms for both user adoption and overall experience. Last quarter, we saw continued strong demand for our Guardicore Segmentation platform with both new and existing customers. One of North America's largest financial institutions purchased our segmentation solution to gain visibility and protection across all of their network assets as part of a 4-year $40 million contract. South Korea's largest mobile operator selected Akamai following the well-publicized BPFDoor security incident, which exposed gaps in East West Security and Zero Trust maturity. The customer chose our solution for workload level segmentation, deep visibility and resilient enforcement across hybrid environments. We also signed deals for segmentation in Q4 with one of the largest carriers in the U.K., a major branch of the U.S. armed services and multinational banks in North and South America and Scandinavia. In Q4, we also saw increased demand for our API Security solution, signing new customers across multiple verticals including financial services, technology, health care, real estate, retail and travel. Customers who chose Akamai API Security in Q4 included a major European automaker, a telco in the Middle East as well as airlines serving Asia Pacific and Latin America. We also signed a 5-year $47 million commitment from one of the largest hardware companies in the world, in a contract that included API Security and Cloud Infrastructure Services Along with other Akamai offerings. We had many other customers in Q4 who purchased multiple security products across our portfolio including one of Asia's largest airlines, which signed a $10 million contract for multilayer protection over 5 years and a 3-year $45 million renewal with one of the world's largest financial institutions, to migrate nearly 100 critical applications away from hyperscaler security and onto the Akamai platform to ensure best-in-class DDoS and web application protection, high availability, and robust security support from Akamai Security Operations Command Center. Earning the trust of customers is imperative for Akamai. The world's biggest brands trust us to keep their apps performing well even under peak traffic conditions. They trust us to protect them from myriad attacks and to keep their data safe. And they trust us for our reliability. We saw how much this trust matter to customers who relied on us during the recent holiday season, a time when one of our competitors took down their customers with multiple multi-hour outages. Major enterprises know who they can trust, and we're grateful for the trust that our customers place in Akamai. Last quarter, we were honored to be named by Forbes in their list of America's Most Trusted Companies and in their list of America's Best Companies for 2026. Forbes analyzed thousands of the largest public and private companies in the U.S. across 11 dimensions, including financial performance, customer sentiment, employee ratings, reputation for innovation, executive leadership, cybersecurity and sustainability. We were also honored by The Wall Street Journal, naming Akamai to its list of America's best managed companies, The Management Top 250. This ranking by the Drucker Institute analyzed publicly traded companies based on customer satisfaction, innovation, financial strength, social responsibility and employee engagement and development. Before I hand off to Ed, I want to thank our employees and our management team for their achievements in 2025. Together, we're successfully executing on our ongoing transformation of Akamai into the cybersecurity and cloud company that powers and protects business online. We believe that the investments we're making today are enabling Akamai to do for cloud and AI, what we've done for security and CDN and enabling Akamai to grow even faster as a result. Now I'll turn the call over to Ed to say more about our results and our outlook for Q1 and the year. Ed? Ed McGowan: Thank you, Tom. I'm pleased to report that we delivered excellent fourth quarter results with total revenue of $1.095 billion, up 7% year-over-year as reported and up 6% in constant currency. We also delivered strong bottom line results with non-GAAP EPS of $1.84, up 11% year-over-year as reported and in constant currency. Moving now to revenue. Compute revenue, which is comprised of the high-growth Cloud Infrastructure Services or CIS solutions and our Other Cloud Applications, or OCA, was $191 million, up 14% year-over-year as reported and in constant currency. For Q4, CIS revenue was $94 million, accelerating to 45% growth year-over-year as reported and 44% in constant currency, a nice jump from 39% growth last quarter. CIS now represents approximately 50% of total compute revenue. Moving to security. Revenue was $592 million, up 11% year-over-year as reported and 9% in constant currency. Revenue from API Security and Zero Trust Enterprise Security combined was $90 million, an increase of 36% year-over-year and 34% in constant currency. Notably, API Security grew by more than 100% year-over-year, exiting the year with a revenue run rate exceeding $100 million. Security revenue was driven by strength of our high-growth product suites and a favorable tailwind from term license revenue. For the fourth quarter, license revenue rose to $18 million, up from $12 million in the same period last year. As a reminder, our term license agreements are generally for one to 3 years and we continue to maintain exceptionally high renewal rates in our term license business. Moving to delivery. Revenue was $311 million, down 2% year-over-year as reported and down 3% in constant currency. These results highlight the continued steadying trends we have seen in our delivery business throughout 2025. International revenue was $542 million, up 11% year-over-year or up 8% in constant currency, representing 50% of total revenue in Q4. U.S. foreign exchange fluctuations had a negative impact on revenue of $5 million on a sequential basis and a $12 million positive impact on a year-over-year basis. Moving to profitability. In Q4, we generated non-GAAP net income of $270 million or $1.84 of earnings per diluted share, up 11% year-over-year as reported and in constant currency. This better-than-expected performance was primarily driven by higher-than-expected top line revenue in the fourth quarter. Finally, our Q4 CapEx was $154 million or 14% of revenue. Moving to cash in our capital allocation strategy. As of December 31, our cash, cash equivalents and marketable securities totaled approximately $1.9 billion. During the fourth quarter, we did not repurchase any shares. For the full year 2025, we spent $800 million to buy back approximately 10 million shares, marking the largest annual buyback in our history. As it relates to the use of capital, our intentions remain the same, to continue buying back shares over time, to offset dilution from employee equity programs and to be opportunistic in both M&A and share repurchases. Now before I provide Q1 and full year 2026 guidance, I want to touch on some housekeeping items. First, as Tom pointed out, we recently signed our largest compute customer contract. We're very excited that this technology company has committed to a minimum 4-year spend of approximately $200 million on our Cloud Infrastructure Services with a large majority of that spend for our AI Inference Cloud. We expect to start recognizing revenue from this contract in the fourth quarter of 2026. Second, to capitalize on this transaction and with growing AI Inference Cloud pipeline, we intend to invest approximately $250 million of CapEx this year to augment our AI Inference Cloud. Third, we have recently observed significant inflationary pressure within the computer hardware market due to unprecedented industry investment in AI, specifically, we're seeing a dramatic increase in the price of memory chips, which is driving up the cost of servers. This supply constraint has necessitated an upward adjustment to our CapEx forecast of approximately $200 million for 2026. Next, I want to remind you some typical seasonality we experienced in operating expenses throughout the year. First, we recently completed a targeted reduction in our workforce to better align our talent with our long-term growth priorities. While this action streamlined certain areas and reduced our OpEx, we do not anticipate generating net savings for the full year. Instead, we are reinvesting those savings directly back into the business, specifically to scale our go-to-market efforts and to support our colocation and CIS infrastructure requirements to maximize our growth opportunities. In Q4, we took a $55 million restructuring charge that was primarily comprised of severance costs and impairments of certain intangible assets. Second, looking at the first quarter, we typically see a seasonal increase in expense. This is driven by higher payroll costs resulting from the reset of social security taxes for employees who maxed out in 2025 and stock vesting from employee equity programs, which tend to be more heavily concentrated in the first quarter. Third, as we look to the second quarter, we expect operating expenses to remain relatively flat on a sequential basis. The savings realized from our restructuring and the roll off of the higher Q1 payroll taxes will be offset by our annual merit cycle, which takes effect on April 1. Moving to FX. Foreign currency markets are expected to remain volatile throughout 2026. As a reminder, we have approximately $1.3 billion in revenue that is denominated in foreign currency. Largest currency exposure on revenue includes the euro, the yen and the Great British pound. Finally, as previously noted, Cloud Infrastructure Services now accounts for approximately 50% of our total compute revenue and is growing rapidly. Recognizing CIS is the primary growth engine and a significant focus of our investments. For the compute business, we will begin reporting it as a stand-alone revenue category effective in the first quarter of 2026. For simplicity, we will consolidate delivery and other cloud apps into a single reporting category starting in Q1. To assist with your year-over-year analysis and financial modeling, we have published 8 quarters of revenue history, for these revenue categories and supplemental schedules as part of today's reporting package on our Investor Relations website. In addition, for added transparency, we will disclose quarterly revenue for OCA independently for the remainder of 2026. Now moving on to guidance. For the first quarter of 2026, we are projecting revenue in the range of $1.06 billion to $1.085 billion, up 4% to 7% as reported or 2% to 5% in constant currency over Q1 2025. We expect Q1 revenue to be lower sequentially from Q4, driven by the following factors. First, reduced onetime license revenue in Q1 from Q4 levels; second, 2 fewer calendar days in Q1 compared to Q4, plus 2 less days of usage revenue; and finally, less seasonal traffic in Q1 compared to Q4. The current spot rates, foreign exchange fluctuations are expected to have a positive $4 million impact on Q1 revenue compared to Q4 levels and a positive $22 million impact year-over-year. At these revenue levels, we expect cash gross margins of approximately 71% to 72%. Q1 non-GAAP operating expenses are projected to be $339 million to $348 million. We anticipate Q1 EBITDA margin of approximately 39% to 41%. We expect non-GAAP depreciation expense of $145 million to $147 million and we expect non-GAAP operating margin of approximately 26% to 27%. With the overall revenue and spend configuration I just outlined, we expect Q1 non-GAAP EPS in the range of $1.50 to $1.67. This EPS guidance assumes taxes of $57 million to $60 million based on an estimated quarterly non-GAAP tax rate of approximately 19%. It also reflects a fully diluted share count of approximately 148 million shares. Moving on to CapEx. The reason I highlighted earlier, we expect to spend approximately $254 million to $264 million in the first quarter. This represents approximately 23% to 25% of revenue. Looking ahead to the full year for 2026, we expect revenue of $4.4 billion to $4.55 billion, which is up 5% to 8% as reported and 4% to 7% in constant currency. Moving on to Security. We expect Security revenue to grow in the high single digits on a constant currency basis in 2026. The Cloud Infrastructure Services or CIS, we project revenue growth to accelerate to 45% to 50% year-over-year. We expect this momentum to build throughout the second half of 2026 driven mainly by the scaling of our AI Inference Cloud business. For delivery and other cloud apps, we expect both will decline in the mid-single digits year-over-year. Specific to delivery, we expect the revenue to decline in mid-single digits for the year, with Q1 being slightly higher due to the wraparound impact of the Edgio transaction from last year. By way of comparison and for consistency with 2025, using our former compute reporting methodology, we expect the combined growth of CIS and OCA to be at least 20% year-over-year. At current spot rates, our guidance assumes foreign exchange will have a positive $36 million impact on revenue in '26 on a year-over-year basis. Moving on to operating margins for 2026. We are estimating non-GAAP operating margin of approximately 26% to 28% as measured in today's FX rates. The decline in operating margin for the full year 2026 is due mainly to increased colocation and depreciation expense associated with the continued buildup of our CIS business. We anticipate that full year capital expenditures will be approximately 23% to 26% of total revenue, driven by the investments and costs that I mentioned earlier. As a percentage of total revenue, our 2026 CapEx is expected to be roughly broken down as follows: for network-related CapEx, we expect approximately 4% for our delivery & security business, approximately 10% to 13% for compute, and for other CapEx, we expect approximately 8% for capitalized software with the remainder being for IT and facilities related spending. Excluding the impact of the increased hardware pricing, 2026 CapEx would have trended within the 18% to 22% range. The impact of increased server costs is mainly included in the compute line item above. Moving to EPS. For the full year 2026, we expect non-GAAP earnings per diluted share in the range of $6.20 to $7.20. This non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 19% and a fully diluted share count of approximately 147 million shares. With that, I'll wrap things up. Tom and I are happy to take your questions. Operator? Operator: [Operator Instructions] And today's first question comes from Sanjit Singh with Morgan Stanley. Sanjit Singh: Congrats on a very strong Q4 results. Ed, you provided a lot of great detail on the dynamics around CapEx as well as the momentum you're seeing within -- with the CIS business. When I look at the increase in CapEx, I mean, it's roughly coming up by, I think, $270 million. Going back to like the discussion that we've had in prior quarters, that roughly $1 of CapEx equals to $1 of revenue. Does that still hold? And as we think about this increase in CapEx, how should we think about that translating into revenue from a timing perspective, both this year and then maybe going beyond 2026? Ed McGowan: Sanjit, thanks for the question. So obviously, I talked about having some inflation in memory chips, hopefully, that is something that doesn't last for a long time. So that obviously skews your CapEx a bit. And as I talked about, most of that is affecting your compute because there's a lot more memory in those servers. So the $1 CapEx for $1 of revenue would not hold true for this particular buying CapEx, but it's not that far off. Generally speaking, we're seeing something roughly like that. Obviously, for larger deals with longer commitments, we will offer volume discounts. But even for some stuff, you might get a slightly better return like, for example, we'll be launching a rental service where you can rent GPU by the hour starting sometime later this quarter, where the list price for that's $250 million, so that would work out a little bit higher. But generally speaking, it's a decent number to work with -- modeled it a little bit lower for this year, just given that we've seen higher CapEx costs associated with the memory prices. Sanjit Singh: Understood. And then just one follow-up on the Akamai Inference Cloud opportunity. Really encouraging to see that 4-year deal with a major tech company. Can you speak a little bit about the pipeline? I know we have some really big customers looking at the opportunity. But just in terms of the breadth of interest pipeline. Any color you can provide there on potential more customers signing up for the service? F. Leighton: Yes. Pipeline is very strong. In fact, the Inference Cloud offering we announced in the fall where we deployed the GPUs into 20 cities that's already sold out, even though it's not generally available yet, just from the beta customers. And so now we're ramping up the investment there, as Ed mentioned, and very strong pipeline. In fact, with the large customer we talked about already committing to take over a substantial portion of that. The areas of interest are broad at a high level, obviously, inference applications, also post-model training, but specifically things like transcoding, real-time translation, generative media to generate images and video on the fly and the new Blackwell GPUs, very good at doing that with much lower latencies. Vision, processing what is seen, customer support bots, all sorts of gaming applications, streaming, rendering, modifying characters as you go along in the game. In commerce, virtual fitting room kinds of applications. So it's almost like the buyers looking at themselves in a mirror wearing the clothes, also making sure the close will fit, so you have fewer returns, a lot of robotics and autonomous vehicle kinds of applications, areas that these folks might not traditionally be Akamai customers, now potentially large compute customers. And generally, the field of local LLMs, as people -- companies do more kinds of things themselves, but want to operate their own model. That's great because that's the kind of thing you'd want to do on Inference Cloud and have it done close to where your employees are. So we're very enthused about what we're seeing so far and a lot of potential for growth for us. Operator: And the next question comes from Mike Cikos with Needham & Company. Michael Cikos: Congrats on the strong end to '25. The first question I have for you on that major U.S. tech customer, can you help us think about how this came together? It's great to see the duration. We're talking 4 years and the $200 million minimum commitment. But was this a new logo to Akamai? Or were they a previously existing customer within CIS or another portion of the Akamai portfolio? And then I just have a quick follow-up. Ed McGowan: Sure. I'll take this one, Tom. So the good news, it was an existing customer. It wasn't one of our largest customers, though. This was somebody who was using us for CDN and security and then had discussions with them going for several months now on a pretty exciting workload. We're not at liberty to disclose who it is. But the good news is existing customer who has dramatically increased their spend, and we hope there's a lot more business to do with them. Michael Cikos: That's excellent. And I appreciate that, Ed. I guess the follow-up, some of the Sanjit's line of questioning. When thinking about the capital intensity here, and I really appreciate the disclosure. It sounds like you guys have been busy on your side, but how do we think about the level of CapEx you guys are deploying here? Are you changing in any way how you're sourcing servers or going in and buying hardware versus where we've been previously, just given the heightened price components that we're seeing out there in the market and they feel that this is somewhat different as far as the cycle and persistence of these pricing dynamics? Anything that would be incremental as well. Ed McGowan: Yes, sure. No problem. And the capital intensity isn't necessarily increasing for any other reason than we're seeing significant demand for CIS. So that's the major driver. And obviously, making that purchase of $250 million for the Inference Cloud is very well informed. And as Tom mentioned, we have -- it's great to have one customer who's taking a good chunk of that and having that committed, it's just a great opportunity for us to put that capital to use. So I hope we do more of that. So I'm very happy about that. Now in terms of -- as the complexity of what we're doing or what we're buying, changing, no, not really. We're buying mostly servers and networking equipment and things like that. We are looking at trying to reduce the impact of the server -- the memory chip increase in costs. So we're looking at sourcing things differently from different sources, et cetera. But generally speaking, there isn't really any significant change. And as far as our co-location posture, we're still using the third-party colo providers. At some point, maybe that changes once we get a lot larger. But no real significant change. And hopefully, as I broke out the different components, if you want to think about it this way, you take out the $200 million for the price increases. And then if you look at that purchase of the AI Inference Cloud as sort of something that we did that was a little -- a little different than last year. The normalized CapEx is kind of at the lower end of what our range typically would have been. So this is a good kind of capital intensity increase when you have a chance to fuel a business that's growing as fast as CIS is. Operator: The next question comes from Rishi Jaluria with RBC. Rishi Jaluria: Nice to see acceleration in the CIS business at scale. Maybe 2 questions, if I may. Number one, if I start to think about some of the success that you're having on CIS, it sounds like you're having that with existing Akamai customers that may have used you for delivery or security or combination thereabove. Maybe can you help us understand, as you think about going back to those customers, is the total ACV or whatever sort of metric you want to use, with those customers growing meaningfully as a result of this? In other words, just trying to get a sense that it's not a situation of money that maybe they would have spent for delivery in the past. And as we think about pricing in DIY, it's money that's going elsewhere that this is actually being additive to those customers' total bills, if that makes sense. And then I've got a quick follow-up. Ed McGowan: Yes, yes, great question. It's certainly, it's additive. We don't -- we're not horsetrading any delivery for compute or anything like that. As a matter of fact, this particular large customer was done out of cycle, so it wasn't even done as part of a renewal. So it's all 100% additive. And I would say, yes, we're having good success with existing customers, but also with new customers. And Tom talked about the pipeline. What's interesting with that pipeline is we are starting to see verticals. We don't typically are strong in from a legacy perspective as far as CDN goes. And so that's good to see. We see partners bringing us new business. And there's really a mix in that pipeline of new and existing customers. And we've actually seen total new customer count pick up over the last 1.5 years or so, and I think a lot of that has to do with having CIS as an offering that's more broad. Rishi Jaluria: Got it. That's helpful. And then maybe I'd be a little remiss if I didn't ask about kind of some of the onetime factors going on in calendar year '26. As you think about your guide for the year and obviously appreciate the granularity. Just can you maybe help us understand, I know this isn't the Akamai of 10 years ago when maybe live events were a lot more meaningful. But I still just want to understand what are kind of your assumptions in terms of the major events are happening between Winter Olympics going on right now between the FIFA World Cup in the summer, got some big AAA gaming releases that may or may not happen, obviously, release dates kept getting pushed out. Maybe just help us understand kind of the puts and takes and how that ties into your numbers? Ed McGowan: Yes, sure. Happy to take that one. So if you think about events, they come in different flavors, you get the small events like a live concert or a Super Bowl, those tend to be very small revenue. Sometimes you might get a capacity reservation fee. So maybe that might be $0.5 million to $1 million or something. So nothing too dramatic there. Something like the Olympics 3 weeks long, it's a few million dollars, depends on how many rights holders you have, how many different rights holders you sign, et cetera. So it's not a huge jump. Doing $1 billion-plus a quarter, it's fairly insignificant to the quarter. It's a good business, so we'll take it. Something like the World Cup, it's a little bit longer. So you'd probably see maybe $3 million to $5 million, $5 million to $6 million, something like that. But again, nothing overly material, although it's nice to have all these events. And then the things like an NFL season much better, you're going to generate a lot more revenue there from a number of different customers. So it really depends on the length of time and the number of people that have rights. Something like a gaming release depends if it's a really popular release that has a lot of updates to it that can be popular and can drive some extra revenue. It really depends. Something like Fortnite certainly was a big tailwind for us several years ago. If you see a new console refresh cycle, that's a much bigger impact for us because you're talking now about hundreds of millions of consoles getting firmware updates and lots of updates. So that's the way to think about the event. So it's nice to have them, but it's not overly material for the year. Operator: And our next question comes from Roger Boyd with UBS. Roger Boyd: Congrats on a good end of the year. I wanted to ask about the handful of larger CIS deals that you had noted last year as being delayed out of the back half of the year. Can you just update us on how those are progressing and maybe how those are embedded into the 2026 guide? And I think you mentioned the $200 million deal you signed this quarter will start to ramp in the fourth quarter. At a high level, can you just talk about the typical ramps you're seeing in compute? Is any part of this result of capacity constraints? And do you expect to see these ramps on the compute deals get shorter over time? Ed McGowan: Yes, it really depends. Some we can get up and running pretty quickly. It really just depends on the size of the transaction and if there's any specific geo where we may need to get some additional colocation. The colocation market is tight. But we've got -- we're a big buyer of colocation, so we're doing pretty well there. We did see some of the larger workloads ramp up at the end of last year, and we've modeled in what we think those will do. And I talked about this particular really large deal will start ramping in Q4. And part of that is we have to -- we're ordering all the chips, putting them in place, getting some space. So it just takes a bit to ramp that up. It is -- obviously, GPUs are pretty tight supply chain, but we're able to get those out and launched here. So we've modeled in a variety of different outcomes on that in terms of our guidance range. But if the bigger the deal usually takes a little bit longer to ramp, and in some cases, people can get up and running very shortly. Operator: The next question is from Fatima Boolani with Citi. Fatima Boolani: I wanted to focus on the trajectory of the delivery business. I think this has been asked in a couple of different permutations. But I wanted to ask it at more of a higher level with respect to the aggregate environment for internet traffic and traffic volumes. You've had a bunch of your peers sort of talk to accelerating or improving traffic trends. I was hoping you could compare and contrast for us what you're seeing on the Connected Cloud Network? And then the flip side of that coin is just the pricing dynamic. So to your point, the delivery business has seen a pretty substantive degree of stabilization over calendar '25, and it seems like that is going to persist. So I just kind of wanted to unpack the P and the Q on the delivery equation? And then I have a follow-up as well, please. F. Leighton: Yes. At a high level, the trends that we're seeing and projecting for this year are pretty comparable to what we saw towards the latter half of last year. Traffic environment seems very reasonable. Obviously, fewer players in the market than a couple of years ago. Pricing environment remains competitive. We still have folks out there selling, in some cases, at very low prices, which we won't do. We -- in particular, we see some costs rising as we've talked about, especially in memory and in some cases, we'll actually be raising prices to help offset those costs. But I would say at a high level, what we're expecting this year is pretty comparable to what we saw last year, especially in the back half of the year. Fatima Boolani: I appreciate that. And Tom, you had sort of talked about the rental service that you're going to launch in the upcoming quarter. I wanted to take the opportunity to have you unpack that, what the expected structure is, what the economics look like? And maybe in a more broader sense, the type of utilization that you are expecting on your network as you think about and deploy this $250 million of incremental capital to scale out the inferencing cloud ahead of the capturable opportunity? F. Leighton: Yes. So in terms of Inference Cloud, there's 2 models. One is the traditional model where you buy access to the GPU by the [ VM hour ] or the token. And that's what we'll be going GA later this quarter. The GPUs we deployed into 20 cities are already pretty much sold out. So we're adding an order of magnitude, more capacity, and that's what the $250 million investment is for. And in addition to selling by the token or [ VM hour ], we will be selling clusters so that you might decide to buy hundreds or thousands of GPUs in certain locations. So that will be a new model that we're introducing this year and have some very large customers buying CIS in that way. Ed McGowan: Yes. The one thing I would add, Fatima, is in terms of the early pipeline, we are seeing a bit more skewed to the customers who want to guarantee the capacity. So they're asking for whether it's several hundred or thousand or whatever GPU for a period of time, multiyear time kind of deals, which is obviously a better model. I'd like to see that. In terms of the usage, we haven't done that yet. So we don't know exactly how that's going to play out. So we've got a range of various outcomes there. But certainly, there's a lot of early excitement and demand in the pipeline that we're seeing for what we're buying. Operator: And the next question comes from Frank Louthan with Raymond James. Robert Palmisano: This is Rob on for Frank. Congratulations on the strong 4Q. So my question is, what sort of revenue commitments are you guys able to get from customers today relative to before? How prevalent are those now versus previously what percentage of revenue on the delivery side is under those commitments? And what's your outlook for delivery growth this year, specifically with AI-based traffic, if you can give us a better sense of that? F. Leighton: Yes. We are seeing longer commits for -- really for all of our services, partly that's by design. And I think customers also interested in having that take place. And with the delivery growth, we're looking at about the same rate, so mid-single digits this year. And Ed, do you want to add to that? Ed McGowan: No. I would just say you'll see like the RPO is growing for the total company quite a bit. That's just a function of what Tom is talking about in terms of folks making longer-term commitments. And we've incentivized our sales force to get longer commitments. As far as the delivery market itself, not a huge change there in terms of commitments. There are some customers that might commit a percentage. Some might give you some type of exclusive or either a part of their business or geographic area, et cetera. So there's really no dynamic change in the delivery business. It's roughly the same in terms of committed versus uncommitted. But since the other parts of the business are growing much faster, security and compute, we're seeing a lot longer and bigger commitments. Operator: And our next question comes from John DiFucci with Guggenheim. John DiFucci: A lot of interesting things happening here, Tom and Ed, and especially around the CIS business. And thanks again -- thanks for breaking that out historically, too. Last year, you announced a very large contract with a social media customer. And I think this is sort of a follow-up to Roger's question. And that company had a lot going on internally, right, and externally, too. And it required the additional build-out of capacity by you. I think we're a year into that, and we believe -- I believe the buildout is complete by you, but I still think there's a lot going on with that company. I guess could you -- because a lot of this stuff could come on lumpy. And I'm just trying to figure out how to think about this going forward? And this is like the first deal like this, and it was great to hear about that $200 million 4-year deal, too. But with this deal, have you started recognizing revenue yet from that customer? And if not, can you share a little bit about what you expect to recognize revenue? And then I guess one other part related to this is that social networking deal you talked about that's going to consolidate on Akamai and take away from a hyperscaler that I think Tom mentioned in his prepared remarks, is that the same customer? Or is that another customer? Sorry for the long-winded question. Ed McGowan: No worries, John. I hope by interesting you mean good interesting. So I'll take that. It's not the same customer. It's a different customer. In terms of the lumpiness you talked about, generally speaking, we don't see lumpiness per se. As I talked about with the new deal we just signed, the $200 million 4-year deal, I expect that to be fairly even, maybe there's some upside as usage ramps. But there's not like say, a big chunk of revenue and then it goes away or whatnot. But we do expect that to start ramping in Q4 just as we start deploying, make the purchase, get the GPUs, get them up, customer has to do their testing and then they go into a full launch. So that just takes some time. So starting in Q4, we expect that to ramp up and then continue into next year. And then in terms of the large customer we signed last year a $100 million deal, we did start taking a little bit of revenue in Q4. We expect that to continue to ramp up throughout the year. I will say there is some seasonality. We do have a little bit of work in the compute business that might be tied to, say, like a season or something like that, say, a sports season. So you may see a little bit of extra revenue in, say, Q4, and it dips a little bit in Q1. But generally speaking, you don't see big lumpiness, as you said, in the compute business. John DiFucci: Okay. And that makes sense. That makes sense. I was thinking sort of like Oracle, but they're bringing on these huge AI training data centers, which are just come all online, but that's not how your business is. And I guess just one follow-up, not a little bit unrelated here, added to an accounting question. How much of that fourth quarter restructuring charge of $55 million, was any of that in cash for this quarter? Or was the -- because the cash flow was a little weaker than I think people expected. And CapEx is higher so I get that. But was that... Ed McGowan: Yes, good question. So most of the cash flow is a timing issue just in terms of timing of cash receipts and payments and we made some pretty big tax payments before the end of the year. So that skews the cash flow. But if you look at last year, I think it's relatively in line with last year. But in terms of the restructuring, that cash will go out in Q1. So the majority, a little over half was intangible assets, so there's no cash associated with that. Severance was a little less than half that will hit in Q1. John DiFucci: Okay. Great. And a lot going on here, but -- and I actually -- I definitely meant good when I said interesting. Operator: The next question is from Will Power with Baird. William Power: Okay. Great. Maybe just to switch gears to security. Great to see the continued Guardicore Segmentation API Security strength and API, I guess, topping up $100 million. It'd be great just to get a better kind of outlook since for growth expectations on those 2 pieces in 2026, how that folds in? And then probably for you, Tom, it would be great to get your perspective just on how you're thinking about any potential AI risk kind of across your security portfolio, just given some of the market concerns out there? It seems like the businesses have been pretty resilient. But maybe you can just comments on what you're maybe seeing competitively from any other AI entrants or technologies in the marketplace. F. Leighton: Ed, why don't you take the first then I'll do the second. Ed McGowan: Sure. Happy to. So yes, very happy with what we're seeing with Guardicore and API Security. We had a really good, strong fourth quarter finish in terms of bookings. And the nice thing with both of these businesses is we're seeing a nice mix of new customers versus existing, especially with Guardicore. As a matter of fact, the majority of revenue is coming from new customers associated with Guardicore, which is great. And then with API, both actually are very low on a penetration rate within API Security, less than 10% of our existing customers have purchased that. So there's an enormous amount of runway there. We're seeing a lot of -- big adoption across many, many different verticals, too. So it's not just a one vertical like financial services. It's really across everything. So we expect, as we go into next year, very similar to last year. In terms of API and Guardicore now a little bit more scale, driving the majority of the growth. The other product lines, whether it's bot management and WAF continuing to grow, albeit slower and then service is continuing to grow as well. So we expect growth in most of those categories, maybe Prolexic tends to be a little bit more ventured but maybe that's not, I guess, more flattish. But we do expect growth across the board and this year to look pretty similar to last year with the majority coming from API and Guardicore. F. Leighton: Yes. And to your second question, that's a great question. We are not seeing risk from AI and do SaaS do-it-yourself kinds of things. One of the key reasons for that is for our services, security services, you really need to run it on the large distributed platform by and large. And one reason for that is if you try to sort of do it yourself and your data center in a few locations, you just get overwhelmed with the volume of the traffic. And you don't have any chance to really apply the security because you're flooded. And that's where Akamai's distributed platform makes the critical difference as we intercept all that traffic, the bad traffic, out where it starts, and we can do that at great scale. And so we're not -- I don't think -- we don't have that kind of exposure. Now the good news is if the AI induced risk to SaaS as that materializes, that's a big tailwind for us on the compute side because these enterprises are going to need to run their models that are doing these SaaS tasks and generally, they're going to probably want to run them close to where their employees are, and that's a perfect application for our inference cloud. So on balance, if that really materializes, that's a tailwind for Akamai, I think, not a headwind. Operator: Next question comes from Jackson Ader with KeyBanc Capital Markets. Aidan Daniels: This is Aidan Daniels on for Jackson Ader. Just curious on the compute side. What are you guys seeing as some of the main reasons for customers choosing Akamai over whether it's other hyperscalers or other competitors for compute workloads at the edge? And I know cost has been a key element you guys have called out in the past, but was just looking for some added color on how Akamai can continue to win some of these deals? F. Leighton: Yes. Great question. It's performance. It's scale. And yes, cost is generally lower. But just as an example, we talked about on the last call, the 3 big hyperscalers in the U.S. are all using our compute. And for them, it's not a cost issue because they have their own clouds, obviously, for them, it's performance issue because we can run their logic in a lot more locations than they can do themselves with their clouds. And so that results in better performance for them, they're closer to the users and better scale, especially if you're doing things around video that are a bit intensive. You need to do that in a much more distributed fashion. And then for other customers, cost does come into play. As we talked about some of our customers getting really substantial savings as they move out of the major cloud providers, the hyperscalers to Akamai. In fact, Akamai achieve major savings as we moved out of the hyperscalers, a lot of our applications onto our own cloud. So better performance, better scalability and better cost in many cases. Operator: And the next question comes from Patrick Colville with Scotiabank. Patrick Edwin Colville: Just one for Dr. Tom, please. I guess I just want to go back to the Inference Cloud. I mean you talked earlier about some nice use cases for accelerated compute at the edge. And it seems like the comment spread is that latency is important for those use cases. But I guess my question is this. I mean, in the CPU world, edge compute was a good market, but it wasn't enormous. Most compute happened locally on device or at the hyperscaler core. Why would accelerate compute be different that you're going to have this large and very exciting markets at the edge? F. Leighton: Yes, good question. And it's not just latency. Latency of course, matters, but it's scale. When you think about some of the AI applications, generative media, you're generating video, processing video. And just -- you don't have the capacity, the bandwidth at a core data center to be generating or processing millions of personalized videos concurrently. You got to do that in a distributed fashion. Just like anything with live sports or anything like that, it's got to be distributed. So it's not just latency. And increasingly, as we're seeing these applications, they are bandwidth intensive. Also, when you talk about doing speech, when you're conversing with your avatar, it does need to be real time. You can't be going far away to a data center or it's not the same experience. Now in the past, the GPUs weren't fast enough to make that work. But now they are getting to that point where it is a few tens of milliseconds. And so the latency does matter more now. Patrick Edwin Colville: And can I just ask a quick follow-up there on the Inference Cloud, again, actually. I mean, 2 parts. First one is, do you need to do any software updates in terms of the software that Akamai has for customers to run Inference Cloud? And then, I guess, the kind of -- the second part is in terms of Akamai's target customers here, it seems like the customer profile is slightly different to the existing customers. Am I interpreting that right that you will be able to sell this to existing customers, but also a new cohort and maybe even AI natives? F. Leighton: It's a broader customer pool. So our existing customer base, yes, they are good targets for us. But there's also, as we talked about, Ed mentioned, there's a lot of customers who are signing that weren't using Akamai before because maybe they didn't really have delivery needs or even web app firewall at any kind of scale. And so they're new to Akamai. And in terms of software updates, we're always upgrading the software in our cloud platform, but it's nothing special per se with the GPUs. It works very much in the way that Akamai Cloud has worked, Linode has worked. We are selling an additional model, as Ed talked about, with clusters with a long-term contract in addition to the traditional model, which by the VM hour or by the token. Operator: The next question is from Jonathan Ho with William Blair. Jonathan Ho: Congratulations on the large AI inferencing deal. I was wondering if you could give us a little bit more color in terms of what was unique about Akamai to cause the customer to maybe choose your solution over competitors? And if you could maybe give us a sense of philosophically, whether you're building out capacity to meet that demand? Or are you comfortable investing even above that demand as you're adding capacity? F. Leighton: Yes. It's what we've been talking about, it's really good performance, very reasonable cost. And I'd add for something that's this critical an application, trust matters. And we talked a little bit about that a few minutes ago. Akamai customers do trust us. We've really earned that with our delivery and security services, our reliability, our customer support. And for something this big and critical, I think that makes a big difference. So -- and we are needing to build out in this case. And that's part of the large investment that Ed talked about, we're greatly increasing the capacity of Inference Cloud. As I mentioned, we pretty much sold out the 20 locations with the GPUs that we have deployed starting in the fall. And now we're going to increase that by about an order of magnitude and part of that will be used by this large customer that we talked about. Operator: And the next question comes from Rudy Kessinger with D.A. Davidson. Rudy Kessinger: Jonathan actually took the main one that I had. But on the $250 million, you're spending to augment the AI Inference Cloud build-out. I guess by year-end this year, I mean, how many locations do you intend to have GPU capacity? And I believe that the initial announcement last quarter, it was like 17 or 19 locations or something. But how many do you intend to have that GPUs in by the end of this year? F. Leighton: Yes. I -- we're in about 20 now, and I don't expect that number to be a lot larger, but the locations we're in, themselves will be a lot larger, which enables us to add the model where we can sell clusters of GPUs. Operator: And the next question comes from Mark Murphy with JPMorgan. Arti Vula: This is Arti Vula on for Mark Murphy. Ed, I believe you mentioned that you're seeing deals in the pipeline coming from verticals that maybe weren't as prevalent before. Can you help us understand what those newer verticals are? And then are those coming more from the direct sell motion or from the channel? Ed McGowan: Yes. So it's a little of both. We're getting some from the partners that we work with. We announced a relationship with NVIDIA. They refer customers over to us as an example. And in terms of the verticals, think of things like life sciences, manufacturing, health care, different types of industrials. Typically, generally don't have really big websites, but do spend an awful lot on compute and they're also good security customers as well. So direct motion is part of it. The direct is doing a good job of introducing this to all of our existing customers. I've gone on a couple of calls. And certainly, it's really going to have a lot of interest and customer feedback is that they believe we have a right to win here. It makes a lot of sense for us going here. There's an enormous amount of curiosity and we're doing a lot of proof of concepts. So good to see that the demand is coming from a variety of different sources. Arti Vula: And then [indiscernible] at least 3 named wins versus hyperscalers now it's across CIS and security. You guys have always found success there, but do you see any changes in the competitive dynamics there? Is that improving for you guys versus the hyperscalers? F. Leighton: You cut out on the first part of the question, the competitive dynamic in what area? Arti Vula: Against the hyperscalers. F. Leighton: So what we've competed with the hyperscalers in delivery and security for over a decade, I don't see any fundamental change there. We compete very successfully against them. In fact, 2 of the 3 big hyperscalers are large Akamai customers for delivery and security. And of course, now we're adding compute into the mix and already all 3 are using us for our compute capabilities. And again, there, it's not an issue of cost for them. It's an issue of better performance, at least in part because of our distributed nature. We can get their compute logic closer to their users where they want it. Ed McGowan: Yes. One thing I'd add, it's not just -- just would add, it's not necessarily that the only way we win is by taking business away from them. In a lot of cases, we're seeing new workloads, especially as inference becomes a much bigger part of the equation in AI, a very good spot to go to, and customers have challenges where either latency needs to be very, very low and you need to be super close. We've seen some customers tell us that even being in a different state in the U.S. gives them too much latency. They need to be within couple of hundred miles, which is different than what you've typically seen in even the CDN world. So it's not a question of a zero-sum game where we win they lose, it's we do some from time to time, take some workloads. We do go head-to-head in competition where we would go in a bake-off and sometimes we'll perform better, et cetera. So the market is just growing so fast that there's plenty of room here for us. I think we're starting to demonstrate that we're becoming a real player here. Operator: And the next question comes from Jeff Van Rhee with Craig-Hallum. Vijay Homan: This is Vijay Homan on for Jeff. Just one for me. I know you mentioned the impact of AI on the cloud segment. I was hoping you could just expand on the impacts of AI on security and delivery revenue maybe to the extent that that's driving traffic and how it's changing the demand of your customers for your services? F. Leighton: Yes. So there's a variety of impacts with AI on security. One of them is that AI really helps enable the attacker. And so we're seeing much larger bot nets out there because the attacker can use AI to take over a lot more devices, they can use the AI to train malware to get around known defenses, and so you see more penetrations. You've seen the AI with deep fakes you couldn't possibly know are fake. So in a lot of ways, it's making the attack environment much harder to defend against. Also, as enterprises adopt a lot of AI apps and agents, that's a whole new attack surface. And you need special defenses, like, for example, our new firewall for AI. Also today, enterprises are in a tough shape. They don't even know all the shadow AI they have. And so we have new capabilities there with our API security to extend it, to identify the AI applications they have exposed. So you need to know what AI you've got out there and you need to defend it with special firewall capabilities, which we do. So I think AI is having and will continue to have a positive impact for our security business in terms of our revenue even though the attack landscape is nastier, in some ways, it's more need for Akamai services. In terms of delivery, we are, of course, seeing a rise in the scraper bots. And so if left undefended, that would create a need for more traffic. Now for our customers through our bot management solutions, we actually help them to deflect a lot of the scraper bots, give them visibility into what the various bots are, what they're doing. And then our customers decide, okay, which ones do they want to block, which ones do they want to do special things for. So I'd say on balance, yes, probably a traffic increase to an extent. But again, there, it's more -- creating more of a need for our bot management so that our customers can handle the various scraper bots in the way that makes sense for their business. Operator: And this does conclude today's question-and-answer session as well as today's conference. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the LegalZoom's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Madeleine Crane, Head of Investor Relations. Please go ahead. Madeleine Crane: Thank you, operator. Welcome to LegalZoom's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today is Jeff Stibel, our Chairman and Chief Executive Officer; and Noel Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend, and similar expressions, and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in our investor presentation, which can be found on the Investor Relations section of our website at investors.legalzoom.com. I will now turn the call over to Jeff. Jeffrey Stibel: Thank you, Madeleine, and thank you all for joining our call. 2026 marks LegalZoom's 25th anniversary, reflecting our longevity and evolution as a company. Our founders set out to democratize law by transforming how people navigate the legal system. Today, AI is making legal work easier to start. LegalZoom makes it safe and seamless to finish. Since I became CEO, we have been steadily refocusing our business to capture the AI opportunity while recognizing that certain tasks and complex legal matters will always require human judgment and supervision. We are winning by combining intuitive technology with trusted experts, strong execution and ongoing compliance. In short, we solved the last mile with humans in the loop. Our performance in 2025 is an early validation of our strategy. I'm proud of our results, but I am even more excited for what's to come. We entered 2026 from a position of strength. Let me remind you of our strategy, how we're winning and why it's durable? Our goal is to be the trusted guardians of small businesses and individuals lives and aspirations, enabled by the best technology available. We do this through our ecosystem of AI and expert powered legal, compliance and business management solutions that support small businesses as they form and grow. Our strategy is simple, automate what can be automated and then win through deep expertise and high-touch service where it matters most. AI can help you start. LegalZoom helps you get it done. Today, more customers are starting with AI platforms like ChatGPT, Gemini, Claude and Perplexity, getting information, document reviews and insights while increasingly trying to complete complex tasks. We believe AI tools are accelerating entrepreneurship by lowering barriers to starting and running a business, as evidenced by the data, U.S. business formations have accelerated over the last few quarters. We suspect some of this is anomalous, but we believe AI is a meaningful tailwind. Crucially, this is expanding our addressable market, and we plan to capture more of that market but not with the old software-only playbook. As our market expands, we will leverage AI to continue to lead in what can be automated, but we recognized early that long-term growth cannot come from automation alone. That's why in 2023, we moved our flagship automated formation product to free, choosing to cannibalize our own business before the market did. Here is the key insight. Defense alone is not a strategy. We believe durable growth will come from what AI cannot automate, nuance, judgment, execution and accountability. Over the past 2 years, we've laid the foundation for the shift by strengthening our subscription business, reorienting our go-to-market strategy to focus on higher-value customers and scaling AI while strategically integrating human experts into the workflow at critical junctures. Better still, a human in the loop also increases conversion and attachment across our automated products because customers move forward with confidence knowing we stand behind that. This brings us to the opportunity ahead. We are expanding beyond formations to serve existing businesses. We are confident this will enable us to capture a greater share of our serviceable addressable market by broadening our customer base and driving higher wallet share. Human expertise applied where it matters most will drive our growth. We are capturing this opportunity through our human-in-the-loop strategy, which is 2 layers, expert and service. Our expert layer includes our legal advice subscriptions delivered through our nationwide attorney network, trademark and IP services delivered by our owned law firm and most recently, our white glove concierge offerings. We expect these products to be our fastest growing. This is where we solve the last mile for AI by inserting the right level of human review by building trust, ensuring quality, maintaining confidentiality and meeting ongoing regulatory requirements. Our service layer, products like registered agent and virtual mail, benefits from structural advantages tied to regulation, physical presence and human execution, making it inherently durable. Over the past 2 years, we've enhanced service levels and have grown through premium pricing and retention improvements. These products anchor long-term relationships and function as a platform from which we can expand into higher-value services across our entire existing base. Our near-term goal is to accelerate growth in our human-in-the-loop strategy by prioritizing high-value subscription products. Longer term, as we expand our go-to-market efforts to reach established businesses, we expect to capture accelerated share of our serviceable addressable market. As Noel will detail, we will leverage our partnerships both with key AI platforms and our broader partner channel as we unlock to activate and scale. To sum up, we are leveraging AI to grow efficiently, scaling human-in-the-loop services and expanding our ecosystem to help small businesses stay compliant, protective and confident over time. AI may change how businesses begin but LegalZoom is how they thrive. We are uniquely positioned to deliver what others cannot. The last mile, real accountability, real expertise and real outcomes. Our 25-year foundation of data, trust and legal infrastructure gives us a moat that compounds as technology evolves. This positions us for durable growth not just in 2026 but for decades to come. With that, I'll say thank you for your continued support and turn it over to Noel. Noel? Noel Watson: Thanks, Jeff, and good afternoon, everyone. Before I walk through the results and our outlook, I want to briefly reanchor on our financial priorities. Over the past year, our focus has been clear: driving durable, high-quality subscription growth while scaling efficiencies across the business to expand margins. We made meaningful progress on both in 2025, and we expect that momentum to continue in 2026. As you heard earlier, our strategy is focused on building a more resilient revenue base through higher value subscription offerings and AI-enabled human-in-the-loop services. These efforts are improving unit economics, driving predictable revenue and reinforcing our competitive position where execution and expertise matter most. With that context, I'll start with our financial results and then discuss our outlook for the year. For the full year 2025, we grew revenue 11% to $756 million, more than double the growth rate from our initial outlook, inclusive of the Formation Nation acquisition. This performance reflects successful integration and incremental growth of Formation Nation, organic revenue growth of 3% and strength across our subscription portfolio. Full year subscription revenue increased 13%, the result of continued focus on higher-value customers and differentiated premium human-in-the-loop service offerings. We also delivered strong profitability. Full year adjusted EBITDA was $172 million representing a 23% margin, up approximately 100 basis points year-over-year. We expanded margins while continuing to invest in AI and product innovation, demonstrating our ability to grow efficiently and with discipline. Turning to our fourth quarter results. Total revenue was $190 million in the quarter, reflecting growth of 18%. Subscription revenue increased 20% to $131 million marking the fourth consecutive quarter of accelerating growth. Subscription revenue was driven by strength in our registered agent and compliance offerings, along with contributions from Virtual Mail, our 1-800Accountant partnership and Formation Nation. This performance reflects the combined impact of several initiatives executed throughout the year, including pricing actions and improved retention in our registered agent and compliance offerings. We ended the quarter with approximately 1.94 million subscription units, up 10% year-over-year. Unit growth was driven by increased Virtual Mail adoption, the inclusion of Formation Nation subscriptions and bundled offerings that combine bookkeeping and legal advisory services with certain Formation products. We expect modest unit growth in 2026 as we fully lap the bundling of these offerings. ARPU was $266 for the quarter, up 1% year-over-year. This reflects the early benefit of our focus on ARPU expansion, particularly in higher-touch human-led services, partially offset by bundled subscriptions that included lower-priced offerings. Looking ahead to 2026, we expect ARPU to be an important driver of subscription revenue growth as we see a customer mix shift toward higher-value subscriptions, including legal plans, compliance and concierge where human expertise, regulatory rigor and ongoing engagement matter most. This mix shift toward higher-value offerings reflects the early success of our human-in-the-loop strategy. We continue to see encouraging adoption of our concierge product suite. These white glove do-it-for-me offerings provide one-on-one guidance and related full-service filing and fulfillment services, allowing customers to offload complexity and focus on running their business. Today, we are selling our concierge subscription offerings online and directly through our sales force. At an average price of over $1,100 per year, they are driving stronger lifetime value and higher quality customer relationships. Turning to transactions. Revenue increased 12% to $59 million. driven largely by Formation Nation and growth in annual report filings. This was partially offset by the expected decline in BOIR revenue. Transaction units declined 1% to 239,000, reflecting the elimination of BOIR activity, partially offset by Formation Nation transactions and higher annual report volumes. Excluding BOIR and Formation Nation, transaction units increased 5%. We processed 112,000 business formations in the quarter, representing 17% year-over-year growth. This increase was driven by Formation Nation and continued growth in formations acquired through our partner channel. This year, we aim to further leverage our partner channel to acquire high-quality small businesses. In 2025, we laid the foundation to scale by modernizing our partner platform building new embedded partner experiences and adding more than 100 partners and collaborators, including Perplexity, OpenAI's ChatGPT, VistaPrint, SoFi and American Express. In 2026, we plan to build on this momentum as we deepen these relationships, expand embedded integrations and onboard a strong pipeline of SMB-focused brands. Average order value was $248 for the quarter, up 13% year-over-year, driven by increased adoption of higher-priced concierge services and the elimination of lower-value BOIR transactions. Looking ahead, we expect transaction revenue growth in 2026 to benefit from higher value customer acquisition and growth in our concierge suite. Finally, deferred revenue declined by $10 million sequentially, reflecting normal seasonality in the business. Turning to profitability, where all of the following metrics are on a non-GAAP basis. Fourth quarter gross margin was 71%, flat with the prior year period. Sales and marketing costs were $56 million or 30% of revenue, an increase of 29% from prior year. Customer acquisition marketing costs increased $5 million or 13%. You may recall last year, we tested lower performance marketing spend levels to evaluate efficiencies. In 2026, we expect to continue investing in brand and partner channel initiatives concentrated in Q1, resulting in CAM spend increasing slightly faster than revenue. Non-CAM sales and marketing expenses increased $8 million or 103% from the addition of Formation Nation and investments in our concierge sales team. Technology and development costs were $14 million, up 5%. General and administrative expenses were $15 million, an increase of $1 million or 10%. Our strong execution drove adjusted EBITDA of $50 million, representing a margin of 26%. Free cash flow was $28 million in the quarter, down 22% compared to $36 million for the same period in 2024. Our free cash flow decrease was largely due to the timing of changes in working capital. For the full year, free cash flow was a record $148 million, up 48% year-over-year. We ended the quarter with cash and cash equivalents of $203 million. Our cash position decreased by $34 million versus Q3 2025, driven by share repurchases, partially offset by strong free cash flow generation. During the quarter, we repurchased approximately 4.3 million shares of our common stock for approximately $42 million. For the full year, we returned approximately $80 million to shareholders through share repurchases, repurchasing 8.3 million shares of our common stock at an average price of $9.71 per share. Through consistent share repurchases since our IPO, we've reduced our share count by approximately 10%. As of December 31, 2025, we had approximately $70 million authorized and available under our share repurchase authorization. So far in Q1, we have remained active in the market. As a reflection of our confidence in the business, our Board of Directors approved a $100 million increase to our existing share repurchase authorization. Our $100 million revolving credit facility remains undrawn. Supported by a strong cash position and robust free cash flow generation, we intend to continue to balance returning capital to our shareholders, investing in high-growth areas of our business and selectively assessing strategic M&A opportunities. Now turning to our outlook. We feel confident in the trajectory of the business as we exit 2025 and the stronger, more scalable foundation we are operating on. This positions us well to continue to drive high-quality growth even as we lap several initiatives from last year. For the full year, we expect revenue in the range of $805 million to $825 million, representing approximately 8% year-over-year growth at the midpoint. This compares to 3% organic growth last year, representing meaningful acceleration. Critically, the acceleration is being driven by contributions from higher value offerings as we prioritize quality customer acquisition and our human-in-the-loop strategy. For the full year, we expect to achieve adjusted EBITDA in the range of $190 million to $200 million or growth of 13% at the midpoint. Our outlook reflects improved gross margins and disciplined cost management, partially offset by higher product and marketing investments focused on higher value and established business customer acquisition. Of note, we continue to be disciplined with head count as our organization onboards more AI and technology into our processes. Relatedly, we recently completed a gross reduction in headcount of 5% earlier this month, allowing for improved operating leverage while preserving investment in high-growth initiatives. For the first quarter, we expect revenue in the range of $200 million to $203 million or 10% growth at the midpoint. This includes continued execution of our initiatives and balanced growth across transaction and subscription revenue. And we expect to achieve adjusted EBITDA in the range of $34 million to $36 million, representing a 5% year-over-year decline at the midpoint. This reflects a shift in the timing of our CAM investments with brand spend and partner channel investments weighted more heavily toward the beginning of the year to align with peak business formation seasonality. As reflected in our full year guidance, we expect a stronger year-over-year adjusted EBITDA performance over the remainder of 2026. In closing, we've never been more optimistic about the future of LegalZoom and the opportunities that lie ahead. The transformational progress we have made uniquely positions us to lead in the online legal services space as the only company that combines AI-assisted legal services with human expertise at scale to deliver trustworthy, high-value products to small businesses. Through a series of high-impact initiatives, we are confident in our ability to drive strong financial performance as we further differentiate LegalZoom's competitive positioning. I'd like to thank the entire team for their efforts and dedication to our success. And with that, I will now turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions] Our first question will come from the line of Ella Smith from JPMorgan. Eleanor Smith: So first, Jeff, maybe for you. Are there any early metrics on how the concierge product is doing? And to what extent is that factored into your 2026 expectations? Jeffrey Stibel: Thank you, Ella. There are some early proof points and the green shoots, and we have factored those in. That said, we factored them in, in a conservative way. We're still in the early innings. We're still launching products regularly. We continue to launch products, but the success that we've seen is quite encouraging. And it's one of the reasons why we said this will become one of our biggest growth drivers. Eleanor Smith: Great. And given the strength of the business formation environment, do you see any likeliness of sizing up customer acquisition marketing throughout the year? Jeffrey Stibel: We do. And you see this to some extent, with our Q1 marketing and we accelerated a bit of that spend earlier in the year as a result. What we're looking for are the right types of customers, not just all customers who are forming, but the ones who will go through their life cycle alongside us. And we have gotten really, really good at identifying those, targeting those and marking to them, both through traditional marketing means through our brand advertising and ultimately through the partner channel. Noel Watson: And just to add, Ella, the Q1 incremental marketing spend is driven primarily by brand. And so that's a message that we want to get out there early. That's their peak seasonality in terms of customer demand. And you'll see for the full year, we're still expecting CAM spend to be relatively in line from a percent of revenue standpoint for the full year, maybe a slight -- we have it growing slightly faster than revenue, but the timing throughout the year will be a little bit more optimized to our peak seasonality. And the other thing to mention is our marketing is performance-based, right? So if we see strength in demand, we will spend up into that. And if we see some softer demand, then it adjusts appropriately as well. Operator: Our next question will come from the line of Trevor Young from Barclays. Trevor Young: Great. Two for me. First, just on the revenue growth guide and the cadence throughout the year. It does imply a bit of a step down for the full year, kind of starting the year in 1Q at 11% at the high end full year 9%. Is that just a function of the tougher compares as the year goes on, lapping Formation Nation here in 1Q? Or is there something else going on? And then my second question for Jeff kind of relatedly, what needs to go right from here to be a durable double-digit grower? You've said in the past that you intend to accelerate growth without having to dip into the margins. And my rough math is you grew kind of high single digits organic in '25 and '26 is somewhere around kind of stable or slight acceleration in that upper half of the guide. So what needs to go right to get back to double-digit growth durably? Noel Watson: Yes. Thanks for the question, Trevor. I think importantly and excitingly, the outperformance we saw in Q4 was driven by several different initiatives where we're seeing strength in the business. We mentioned in our prepared remarks, our compliance-related retention rates are improving, which we're really excited about. I think that speaks generally to the health of our customer base in the broader environment, but we're also seeing strength in the younger cohorts, which we think is a reflection or a signal of some of the value improvements we've made in terms of the delivery of our service. We also saw a strength in Virtual Mail, Formation Nation, our partner channel. So lots of initiatives that we expect to carry forward and drive growth in 2026. But to your point, there are some meaningful initiatives that were really successful in 2025 and drove growth that are creating some comping challenges and grow overs including Formation Nation, our 1-800 Accountant tax partnerships, some pricing that we did last year. And those do accelerate throughout the year. So you hit the nail on the head. That is what is creating some of the decel that you see from Q1 relative to the full year guide. Jeffrey Stibel: And to address your second question, which is very much related to the first and similar to what we were talking about earlier with Ella's question and as well, what we talked about at your conference when we dug into the things that need to happen, we've laid most of the groundwork there. And I think we're being appropriately smart and thoughtful about what our guide is in '26. But the reality is our guide does show organic acceleration, and it's already pretty significant. To shift over into the double-digit side where we want to be, where we are looking to be as we come out of '26 and into '27, what needs to go right is this human-in-the-loop strategy. First and foremost, it needs to expand our serviceable addressable market. We talked about this a number of times. This allows us to penetrate into a broader set of small businesses, those who are established, those who will give us greater share of wallet and those who are going to grow with us and such that we can grow alongside them. And then second, as we look at this AI opportunity, it also incrementally drives the SAM in a different way in that what you're doing is you're opening up a market of individuals, mainly small business owners who didn't know they previously had a legal problem. And we are already seeing that now. So we're seeing green shoots on the market expansion and then we're able to capture those, clip those with the new products that we're developing. So as we deploy more and more products, as we start to lap the 1-year indicator on subscription so that we can see what churn looks like and retention, that's where we're going to have increasing confidence and be able to increase that guide. Operator: Next question come from the line of Michael McGovern from Bank of America. Michael McGovern: I guess could you speak to the conversations that are ongoing with some of your partners, I think you mentioned Perplexity, OpenAI. How -- can you update us on like the mechanics of how you get to being that last-mile delivery type of provider for legal services for LLMs and what does that kind of handoff look like from the middle mile to the last mile in that scenario? Jeffrey Stibel: Great question, something we're deeply focused on, something I am personally incredibly excited about, and have taken the initiative and lead alongside our business development team and the operations and technology folks. The bottom line is the right answer is we don't know and they don't know yet. However, both parties have identified a problem, whether AI is able to complete the first 80%, 85% or 90% can be in dispute. Whether they will be able to finish the job for most small businesses is not in dispute. There is no question that more and more people are self-identifying as having a legal issue. And what we want to do is make sure that we are front and center and perhaps the only solution in many cases to solve that last mile. And when you think about the infrastructure that we have, thousands of network lawyers and owned and operated law firm, the ability to tackle national matters, local matters, state matters, IP matters, personal matters, there really isn't anyone on the technology side positioned at all, forget well positioned to tackle the problem of I've reviewed something, I've identified some issues. I either feel reasonably comfortable with like a second opinion or I don't even understand what I'm supposed to be signing outside of LegalZoom. And that's where we come in, and we've been rapidly working both on the partnership side and on the technology and product integration side to make sure that we are there when these technologies actually get a customer to an awareness stage and 80% stage and then now what? And we want to be that solution to the now what. Michael McGovern: Got it. And a quick follow-up. I think in the past, you've talked about how you're relatively platform-agnostic, if you will, when it comes to LLMs. Is it safe to say you're attempting to have more and more conversations throughout the industry longer term, expand partners longer term? Jeffrey Stibel: Absolutely. That is that statement is spot on. Operator: Next question will come from the line of Elizabeth Porter from Morgan Stanley. Lucas Cerisola: This is Lucas Cerisola on for Elizabeth Porter tonight. Could you talk to the contribution from Formation Nation to both subscription and transaction revenue in Q4? And how might that progress throughout the year if new business formations remain strong? Noel Watson: Yes. This is Noel. I'll take that question. So in Q4, Formation Nation contributed about $9.8 million on the transaction side and $5.7 million in subscription revenue. Formation Nation, since we acquired them, the business has performed really nicely. A lot of that stems from the integration and the sharing of resources and knowledge between the 2 groups. And we have an expectation that, that business will continue to grow in 2026. So we're seeing growth throughout 2025, and the expectation is that momentum carries forward. Lucas Cerisola: Got it. Super helpful. And then how do you think about the additional investments needed to ramp up the human-in-the-loop and last-mile services within the business? And then as you expand into new products next year, how that progresses? Jeffrey Stibel: Yes. I'll take it at a high level and I'll maybe speak to any specifics. There will and have been and will continue to be significant investment going into that. That's at the high level. Underneath, we're seeing material savings in other areas. Both of these are driven by AI. One is strategic, shifting to that human-in-the-loop. The other is tactical, driving AI throughout our organizations to create savings that we can use to deliver what we need to do on the product side for human-in-the-loop and continue to drive margin expansion. And you can see this in the dichotomy between a really strong print in Q4, accelerated growth into 2026 and beyond. Yet we did an approximately 5% reduction in force that we just announced because we were able to do it with some of the technology efficiency that we've driven throughout the organization. Noel Watson: Yes. And I would just say that you can see that reflected in our guide. We've been very conscious of balancing both the focus on revenue growth as well as profitability. And so we've realized margin improvements for several consecutive years now, and our guide suggests a margin improvement, both from a gross margin standpoint and an EBITDA margin standpoint in 2026. So those efficiencies -- and we still feel like we're middle innings. We're getting more efficient every day. We're leveraging a lot of the tools that folks are talking about in market to generate efficiencies. And as Jeff said, we're balancing -- reinvesting some of those in growth and taking some to the bottom line. Operator: Our next question will come from the line of Matt Condon from Citizens. Matthew Condon: My first one is just as you've continued to focus more on acquiring existing businesses and less on business formation. Have you seen any material change in the top of funnel metrics to date? Or is that more of an opportunity as we move into 2026? And then my second question is just on competitive dynamics. Just have you seen or observed any meaningful changes in the competitive landscape over the past few quarters? Any new entrances, anything different from existing players? And just how do we think about competitive intensity in 2026? Jeffrey Stibel: You bet. Those questions are actually interrelated. So I'll again try to take those at a high level. When you look at the opportunity for existing businesses, as we mentioned in the last couple of quarters, we've started with our own base of businesses, and we have seen proof points and growth therein. We have gone from there to leverage partners. It is probably one of the biggest unlocks in the strategy because we can now go to an SMB ecosystem of partners to start to drive customers that way and leverage other people's channels. And we've had some success, some early success with the partner channel and driving partnerships. And ultimately, we think that the real opportunity is going to come in '26 and beyond as we start to grow those partnerships and then do direct marketing. But again, that's really a '27 and beyond point more than anything. And then on the competitive intensity side, sorry, I didn't mean to ignore that. Although we haven't seen much. Frankly, we look at much of what people have considered as competitors, potential partners for us because what we are doing with this human-in-the-loop strategy isn't something that those competitors can do. They are largely pure-play software providers. So from my standpoint, our standpoint, the real focus is how can we work with them and dominate this larger expanded SAM in such a way that what you might historically think of as a competitor should actually want to partner with us or might need to actually send customers our way just so that they can solve those customers' problems. Operator: Next question will come from the line of Patrick McIlwee from William Blair. Patrick McIlwee: Great results here. So my first question, I believe in September of 2025, you lapped some of the changes you made to your compliance pricing and your bundling strategy. Noel, with that said, is there any way you can frame or quantify the impact that had over the last year, just as we think about how impressive your fourth consecutive quarter of accelerating growth was? Noel Watson: Yes. I think first of all, the growth acceleration came from multiple fronts. Part of it was the bundling. Part of it was pricing action. Part of it was just some of our other products attaching well. And then finally starting to see some improvement in retention as well. So it was really multifaceted. I will say the bundling that we did through -- we did multiple different trials of different bundles throughout the year. That's something that we're going to continue to do. We're going to continue to test in that regard and include different products. What we saw was that really helped progress us along our focus on quality share and driving quality customers to us. And it really impacted SKU mix. So we started to see people move up SKU into more of our premium SKUs and some of the foundation that supported what we saw on the concierge side. So it has different tentacles and there are multiple fronts driving it. I wouldn't call out any one in particular, as being the clear driver of growth. Patrick McIlwee: Okay. And I know formations grew substantially year-over-year, understanding that's not a big focus anymore, but obviously, that grew largely year-over-year. You've got a larger denominator there, but it does look like your share slipped a bit more than normal even with the contribution of Formation Nation. I mean is that largely a result of your focus on higher intent customers? Or how should we think about your pursuit of share versus customer LTV going forward? Noel Watson: Yes. This is something we've been talking about for a while, where we are keenly focused on quality share. We want customers that are serious about starting a business or willing to make an investment in that business. And we think those customers we can help and they'll sustain longer, which creates more of an LTV opportunity for us. And so from a macro standpoint, I'd say the macro has been supportive. We feel like it's a very healthy environment, but we think some of the census reporting is anomalous. And we've seen it where it's been weak, and we don't feel that in our business. It's been stronger. We don't feel that same impact that we had previously. And I think that's partly because of this focus on quality share. It's partly because we've increased the percentage of our business that's subscription-oriented. So we generally take a neutral position when we think about our plan and expectations moving forward from a macro standpoint. And our expectation is that we will meet the guidance that we set out for the year regardless of the macro backdrop. Operator: Our next question will come from the line of Brent Thill from Jefferies. Sang-Jin Byun: This is John Byun on behalf of Brent Thill. Just two questions. One, you mentioned 3% organic growth in '25. And I want to see how we should think about the 8% guide that you gave? I mean is that comparable to that 3%? And obviously, it depends on how you treat Formation Nation, I guess. And then on the concierge products, I mean you've rolled out several, I suppose, and -- which one is doing better where you're seeing more traction, more success? Noel Watson: Yes. On the guidance, yes, you could think about -- we think about those as apples-to-apples. There's a little rounding errors around that in terms of we're not taking any credit in that 3% for growth that we drove post the acquisition within Formation Nation. And then this year, there's a little bit of inorganic from the timing of the acquisition last year. But that's the reason why we called that out is to really shed a light on the fact that organically the business we expect to accelerate this year from a full year basis. Jeffrey Stibel: Yes. We're actually pretty excited about the organic trajectory. I'd say we're pleased but not satisfied. We can do better, but it's in the right direction. And on concierge, I would say our compliance-oriented products around concierge feels like the strongest uptake and adoption right now and the biggest opportunity for us long term. So that's the predominant one that we're focused on because it is so opaque between regional, state and national levels, how to remain compliant, particularly how that changes over time, and that's where our concierge experts and specialists really add a lot of value. Noel Watson: And one of the ways we really activate customers within our base is through communication around their compliance status, right? Many businesses, they start -- they're in compliance when they start their business, but over time, their businesses evolve and change and their compliance -- either regulatory requirements change or the business becomes more complex and their individual set of requirements change, and they fall out of compliance. And so starting with reinstatement by letting folks know that they're out of compliance and those folks responding saying, "Hey, I need your help getting reinstated. And then clearly, I also need help managing my compliance moving forward." So that's been a real successful approach for us as well. And that really extends that learning, we think, will extend into the opportunity for existing businesses. Operator: Our next question will come from the line of Kishan Patel from Raymond James. Kishan Patel: This is Kish Patel on for Josh Beck. How are you thinking about the potential impact to key workflows or billing terms across the core business and human expert network as agentic legal tools and software start to proliferate? Jeffrey Stibel: I mean for us, it's actually an accelerant in two respects. First, internally because we use so many of those workflows to actually power our human-in-the-loop strategy, it actually allows us to scale more cost effectively. And externally, it drives increased SAM, serviceable addressable market. So as we said earlier, this is a big unlock for us to increase our market and market share of those established and existing businesses. Kishan Patel: Got it. And can you share any trends through the year and into 1Q '26 on how AI search is impacting traffic and conversions? Jeffrey Stibel: Sure. I mean, look, it's still pretty early in terms of what is happening, but the trend should look no different and look no different than what you're seeing overall in the general market. You're seeing less and less traffic and quality traffic come through traditional search engines and more and more coming from AI queries. And we're seeing that as well, and we're actually taking advantage of that as what we see as a key opportunity into '26 and '27. Noel Watson: Yes. I think one other trend to call out there is when you think about the traffic coming through, it's higher qualified traffic. There's more folks that are getting question answered without -- while still in AI experience. So the ones that actually come through tend to be more highly qualified and convert better. Operator: Our next question will come from the line of Ron Josey from Citi. Ronald Josey: Jeff, you talked about reorienting to higher-value clients and broadening the customer base. Just talk to us about the tools the team is using to do just that and the progress you're making. And then, Noel, on the shift in timing on marketing, it makes a lot of sense given the seasonality here in the year, but talk to us about the brand focus and where you plan to be ramping the spend on marketing? And when do you think you'll see the returns, is this a 1Q thing? Or is this a quarter lag? Jeffrey Stibel: Great. Thank you. On that first question with respect to the tools that we're using, I'll break it up into 2 categories, and then probably break it down even further. On the tools question directly, what you're asking, we're leveraging a variety of different AI systems. What we're not doing is leveraging specialized systems. So most of them are on the generalized side. We discussed what we're doing with Perplexity and with OpenAI and ChatGPT. We're seeing huge efficiency gains and advantages that help us drive new product deployment at a faster rate, which is absolutely critical as we focus on the other side of the toolkit which are these experts that we're bringing in. We, right out of the gate, when I joined, started to bring in that service layer back that we didn't have prior, and we've now been filling that out with layers on top of that. So we went from service and sales to concierge, think of those as business consultants and business advisers to our legal network, which we're getting more and more entwined into our products and becoming more customer facing. What is effectively allowing us to do is take a model that wouldn't have scaled prior because if you had a lawyer, they might be able to manage 10 clients a day and get the lawyer to leverage technology or the concierge rep to leverage technology or the service rep to leverage technology to go from 10 customers to 100 to 1,000 and then on so that it scales proportionately or super linearly even in some cases such that we can expand margins and drive more throughput while satisfying our customers' problems. So we are rapidly deploying technology. Some of it is owned and operated, and we're doing it in-house. This is particularly around our data on the proprietary side. But most of it, we're leveraging generalized systems and specializing it to our various use cases. Noel Watson: Yes. And on the brand side, we've been very happy with some of the changes we made throughout 2025, the new assets that we created, the messaging has worked really well. And what we saw is as we increase brand as a percentage of our total CAM spend, we really still saw a strong ROAS without some of that deferred realization of value that you would otherwise would expect. And so we're leaning further into that, in particular, in Q1, which we think is well timed, and that's through connected TV, YouTube, social channels, we're trying to stay very diversified with the places that we post our brand messaging. And we expect that to pay dividends in a relatively short period of time. As a reminder, with the heavy subscription orientation of the business from a revenue standpoint, if you generate bookings in Q1, you'll realize some of that revenue throughout the year. But that's why we're making a... Jeffrey Stibel: And the final piece, and this speaks to the spend that we're doing in brand right now is this also drives forward into our partner strategy. As we show the brand strength and the quality of our human-in-the-loop strategy intertwined with that trust that comes with an answer and a service that comes from LegalZoom, that helps drive that partner strategy forward as well. Operator: Next question will come from the line of Stephen Ju from UBS. Stephen Ju: If I heard you guys correctly on the prepared remarks section, it seems like Formation Nation is driving growth in subscription units as well. So can you talk about the success that you might be having in moving that customer base from what was probably historically, the one-and-done transaction to upselling them other products from the broader sort of LegalZoom portfolio? Jeffrey Stibel: Sure. And look, the success is similar to what we have done in LegalZoom proper. I would argue that if anything, it is slower than what we would like. And I think that there is even more to be done. But remember, this is our value price service offering. So we have been driving more and more of the lower cost or lower propensity to purchase customers towards those brands, particularly Inc Authority. But they continue to have strong success both converting in general and then shifting to subscription where appropriate. So I actually suspect there'll be more to come. Operator: All right. Thank you. I'm not showing any further questions at this time. With that, this concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Hello, and welcome to Newmont Fourth quarter 2025 Results and 2026 Guidance Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Newmont's Group Head of Treasury and Investor Relations, Neil Backhouse. Please go ahead. Neil Backhouse: Hello, everyone, and thank you for joining Newmont's Fourth Quarter 2025 Results and 2026 Guidance Conference Call. Joining me today are Natascha Viljoen, our President and Chief Executive Officer; Peter Wexler, our Interim Chief Financial Officer and Chief Legal Officer; and Francois Hardy, our Chief Technical Officer. They will all be available today to answer your questions at the end of the call. Before we begin, please take a moment to review our cautionary statements shown here and refer to our SEC filings, which can be found on our website. With that, I'll turn the call over to Natascha. Natascha Viljoen: Thank you, Neil, and thank you all for joining today's call. At the beginning of this year, I transitioned into my new role as Chief Executive Officer of Newmont. And I want to be clear that the priorities that guided me as Chief Operating Officer and that contributed to Newmont's success in 2025 remain firmly in place. As CEO, I will continue to focus on the following key areas. Firstly, ensuring that safety remains the highest priority across the organization, embedding efficiency, including cost and capital discipline into everything that we do, demonstrating that we are the best owners and operators of our assets by driving continuous improvement and greater operational consistency; developing the highest return projects in our portfolio, ensuring our business has the runway to operate for decades to come; and enhancing shareholder returns by improving our per share metrics and returning capital to shareholders in a predictable manner, which we believe will support stronger price performance over time. Together, these priorities position us to strengthen our business, enhance returns and building gearing value for all of our stakeholders. Turning now to our results. The fourth quarter of 2025 marked a strong finish to a year of continued progress at Newmont. We achieved our full year guidance, improved our operational performance and strengthened our financial position, reflecting disciplined execution across the business. Our consistent focus on operational delivery, combined with a deliberate and patient approach to balance sheet management has positioned us to continue returning capital to shareholders while improving our financial resilience. Building on that momentum, today, we are introducing an enhanced capital allocation framework structured to be sustainable through the cycle. At its core is a dividend designed to grow on a per share basis, supporting by ongoing share repurchases that permanently reduce our overall share count. As the first step, we have increased our quarterly common dividend by 4%, with predictable future growth potential. With that in mind, on today's call, we will review our full year 2025 results, and then walk through Newmont's 2026 guidance and the enhanced capital allocation framework. But first, I want to take a moment to acknowledge the tragic loss of one of our team members, Matthew Middlebrook, following a fatal incident at our Tanami operation earlier this month. Our thoughts and deepest sympathies go out to his family, friends and colleagues, and we are focused on supporting them however we can during this very difficult time. An investigation into the circumstances that led to the incident is underway, and we are committed to fully understanding what happened and taking the necessary actions to strengthen the systems and controls we have in place to ensure that everyone who walks through our gate go home safely every day. Turning now to our operational performance in 2025. We successfully achieved our production and cost guidance for the year. We produced 5.7 million ounces of gold from our core portfolio as well as 28 million ounces of silver and 135,000 tonnes of copper. We benefited from the cost savings and productivity initiatives implemented last year which helped us mitigate pressures associated with a higher gold price environment and supported further margin expansion. In addition to achieving our absolute and unit cost guidance for 2025, we were able to meaningfully improve our G&A guidance for 2026 by $100 million, which equates to a 21% improvement. This operational and cost discipline contributed to record earnings and free cash flow on both the quarterly and annual basis, generating $2.8 billion in free cash flow in the fourth quarter and $7.3 billion for the full year. We also generated $4.5 billion in proceeds to date from the successful completion of our noncore divestiture program. And notably, we returned $3.4 billion to shareholders through dividends and share repurchases. Finally, at the end of 2025, we achieved commercial production at Ahafo North, bringing over 300,000 ounces of gold production into the portfolio this year. Over the last few years, Newmont has been on a transformational journey aimed at curating a world-class portfolio of operations with complementary gold and copper growth opportunities. In 2024, that transformation accelerated as we integrated new assays, began divesting noncore operations and improved our understanding of the potential of our portfolio. And in 2025, this focus shifted to stabilization and optimization with a deliberate emphasis on cost control, productivity improvements, project execution and expanded exploration activities. At the beginning of last year, we indicated that Newmont would benefit from a more stable production profile, and that is exactly what we delivered, demonstrating both the strength of our underlying portfolio and the capability of our people. And as I'll discuss in a moment, we continue to advance value-accretive growth options including the initiation of a mine life extension program at Lihir and the expected completion of Newmont's feasibility study for the Red Chris block cave in the second half of the year. Underpinning this portfolio is the industry's strongest reserve and resource base, providing long-term visibility and confidence. And with this, I will turn it over to Francois to review our 2025 reserves and recent exploration success. Francois Hardy: Thank you, Natascha, and hello, everyone. Today, we announced that our gold reserve base stands at 118 million ounces, supported by an additional 149 million ounces of gold resource, together, representing approximately 40 years of production life with meaningful near mine upside potential at many of our operations. In addition to holding the industry's largest gold reserve and resource base, Newmont also has one of the largest copper endowments within the gold industry, providing significant organic optionality to further diversify the portfolio over time. Following a thorough review, we have increased our reserve price assumption for 2025 from $1,700 per ounce to $2,000 per ounce. Even with this increase, our reserve price assumption remains conservative at more than 20% below the 3-year trailing average and well below spot. And our reserve grade remained unchanged year-over-year when adjusted for the assets divested in 2025. It is worth noting that while our reserve price assumption may not change every year, we conduct a disciplined annual review process to ensure it remains appropriate and reflective of evolving views on near- and long-term price. While the divestment of noncore assets was the primary driver of the year-over-year change in reserves, there are a few additional movements worth highlighting. At Yanacocha, we reclassified approximately 4.5 million ounces from reserve back to resource following the decision to indefinitely defer the Yanacocha Sulfides project, better aligning the reserve base with our updated development strategy, as we prioritize other opportunities at and around the sites and continue advancing closure activities in nonoperational areas. This was partially offset by several meaningful reserve additions unrelated to gold price or cost escalation, including at Tanami and Lihir. And in the Brucejack, where we are seeing significant exploration success, converting approximately 740,000 ounces from resource to reserve. Our exploration activities also delivered promising results at Ahafo South, where we added approximately 2 million ounces to resource in 2025. Exploration remains one of the most strategic levers to extend mine life, grow reserves and create long-term value, which I'll expand upon as we turn to the next slide. Newmont's exploration program is tightly integrated across our 12 managed operations with approximately 80% of activity focused on near-mine and brownfields programs, which are designed to replace reserves, extend mine life and leverage our deep ore body knowledge to unlock future upside. The remaining effort is targeted at select greenfield opportunities that provide longer-term optionality for Newmont. While we're seeing encouraging results across the portfolio, I'll focus today on Brucejack and Ahafo South, where the work underway clearly demonstrates the strength of our approach. At Brucejack, our focused near-mine drilling guided by extensive ore body knowledge delivered a meaningful result in 2025. So in addition to the reserves I mentioned earlier, drilling activities also delivered new resources adjacent to where we're currently mining. And importantly, we have made a new discovery in the Dozer zone as highlighted on the slide, with several significant intercepts, including 20.9 meters at 154 grams per tonne downhole, representing another potential high-grade mineral zone and a key focus of our 2026 growth program. Together, these results reinforce the value of targeted exploration around existing infrastructure. They increase our confidence in Brucejack's longer-term potential and highlight the broader district scale opportunity within the golden triangle. Shifting now to Ahafo South, exploration beneath the Subika and the Apensu open pit continues to point to the next phase of high-grade underground growth. Based on current results, which are indicating grades higher than the current mine average, we anticipate exploration activities will deliver approximately 4 million to 5 million ounces of new gold reserves in 2026. This would meaningfully extend the life of Subika underground mine and support the potential development of a new underground mine at Apensu, both leveraging the existing surface infrastructure and processing capacity at Ahafo South. Looking at our broader portfolio, we're also seeing encouraging exploration developments at Merian, which we plan to provide a more comprehensive update on later this year. I'll now turn the call back to Natascha. Natascha Viljoen: Thank you, Francois. 2025 was a milestone year for projects, punctuated by the successful commissioning of Ahafo North, a major achievement that now enables the mine to begin delivering an average of 300,000 ounces per year, and we are pleased to report that the total capital spend for the project is expected to come in at the lower end of our estimated range at approximately $950 million. Building on this strong momentum, we continue to advance our 2 other major projects in execution towards completion. Beginning with the second expansion at Tanami, with the 1.5 kilometer concrete shaft lining now complete, we are shifting focus to equipping the shaft and completing construction of the underground crushing and associated materials handling system. Construction for the headframe and mechanical work is expected to be completed in late 2026 with full project completion still on track for the second half of 2027. At Cadia, development for both panel caves continues, and we are progressing towards cave completion at PC2-3 in the fourth quarter of this year as planned. In addition, I'm pleased to announce that in December, we fired the first drawbell at PC1-2, making an important milestone for this project and initiating the next critical phase of cave development. And we continue to advance tailings work at Cadia while progressing the necessary government approvals to support continued operations beyond the current facilities for decades to come. In addition to these major projects in execution, we received full funds approval for the nearshore barrier mine life extension at Lihir, which involves the construction of an in-ground concrete water seepage barrier, unlocking access to over 5 million ounces of low-cost ounces from the Kapit ore body and extending Lihir's mine life to beyond 2040. And we continue to advance the feasibility study at Red Chris for the block cave expansion project with full funds approval targeted in the second half of 2026 when we plan to provide a more fulsome update. With the strong progress made in 2025, we are well positioned to continue delivering value from our world-class portfolio in 2026. Now I want to take a look now at 2026. And as with 2025, we are providing high confidence 1-year guidance within a plus or minus 5% range, along with a few of the key drivers supporting longer-term production growth. Beginning with production. Our 2026 guidance remains consistent with the indications provided on our third quarter call with total attributable production of 5.3 million ounces, including 3.9 million ounces from managed operations and 1.4 million ounces from non-managed operations. This outlook reflects the year-on-year changes from the planned mine sequencing at Ahafo South, Pe asquito and Cadia as well as the production impact from the Boddington bushfires in December. But we are pleased to report that the recovery following the fires is going well, and our team has successfully repaired the critical water supply infrastructure and processing operations have now restarted at full levels. This guidance also incorporates lower-than-expected ounces from Nevada Gold Mines and Pueblo Viejo as indicated by the managing partner. And importantly, through a careful assessment of our mine plan at Yanacocha and in light of the current gold price environment, we have identified a highly capital-efficient plan, which leverages current infrastructure to continue mining operations through 2026 and into early 2027, adding additional low-cost ounces that are expected to benefit our production profile in early '27 with further potential upside. For the full portfolio, we expect production to be relatively evenly weighted throughout the year with a modest second half weighting of about 52%. And as previously indicated, 2026 represents a trough in our production cycle due to planned mine sequencing across several operations as we position the portfolio to return to production growth in 2027 and beyond, maintaining our longer-term outlook of approximately 6 million ounces of gold and 150,000 tonnes of copper annually. Turning now to our cost outlook. As mentioned at the start of the call, we have made great strides towards improving and managing the cost within our control, and this will remain a key priority in 2026, especially when operating in a volatile macroeconomic environment. Last year, we committed to measuring the success of our cost and productivity program by our ability to control absolute cost. And in 2026, the only expected increases to our cost applicable to sales are those directly linked to timing impacts and higher gold prices, including production taxes, working participation costs and third-party royalties. Importantly, even with these price-linked impacts, all-in sustaining costs are expected to be more than $100 per ounce lower than they would have been without the cost savings initiatives launched last year, demonstrating the structural improvements we've made to our cost base. As previously indicated, we are providing guidance on a byproduct basis going forward, consistent with our industry peers while continuing to report both by-product and co-product cost for comparability. On that basis, 2026 all-in sustaining costs are expected to be approximately $1,680 per ounce. This assumes a $4,500 per ounce gold price, a $60 per ounce silver price and a $5 per pound copper price. And for every $100 increase in gold price, we expect a $6 increase in our all-in sustaining costs due to taxes, royalties and profit-sharing payments. Beyond the macroeconomic impacts, the year-over-year change is primarily driven by the reasons we addressed on our third quarter call, including lower gold production from planned mine sequencing, changing in inventory at multiple sites and the timing shift of sustaining capital from 2025 to 2026. But without the $150 million shifting from 2025, we now expect sustaining capital of about $1.95 billion in 2026. Of that, roughly 52% is weighted to the second half of the year, primarily related to tailings work at Boddington and Cadia to support production capacity and future mine life as well as the advancement of the ventilation work at Tanami, which is expected to be completed this year. Turning to development capital. We expect to invest about $1.4 billion in 2026 as we advance our major projects in execution, continue the feasibility study work at Red Chris and progress the mine life extensions at Lihir and Cerro Negro. We expect 55% of total spend to be weighted to the second half of the year, primarily due to the start of the work on the Lihir nearshore barrier. We also expect a modest step-up in exploration and advanced project spend to about $525 million this year as we continue to invest in value creating near our existing assets, including Brucejack, Ahafo South and Merian, as Francois previously touched on. Reclamation spend for 2026 is expected to be around $850 million, in line with 2025, primarily related to the construction of water treatment plants at Yanacocha, which are expected to be completed in 2027. Once complete, we expect total reclamation spend to return to more normal levels of between $300 million and $400 million in 2028. In the first quarter of 2026, we expect to make over $1 billion of tax payments, primarily due to accruals made in 2025. As a result and in addition to normal working capital seasonality, we expect first quarter free cash flow to be lower than the fourth quarter of 2025. Looking ahead, our longer-term production growth profile is supported by several clear and executable drivers. The continued ramp-up of Ahafo North, delivering new low-cost ounces beginning this year, the completion of the Boddington stripping campaign in 2026, enabling access to higher gold and copper grades beginning in 2027, the completion of Tanami Expansion 2 in the second half of 2027 as planned, the ongoing development of the Cadia panel caves extending mine life into the middle of this century and access to low-cost ounces at Lihir following the completion of the nearshore barrier, extending mine life well into the 2040s. Together, these opportunities provide a clear path to renewed production growth, supported by disciplined capital allocation and a portfolio designed to deliver value through the cycle. I will now turn the call over to Peter Wexler to walk through our enhanced capital allocation framework. Thank you, Peter. Peter Wexler: Thank you, Natascha, and hello, everyone. Our capital allocation priorities and commitment to discipline remain unchanged and supported by our focus on maintaining financial strength and flexibility, reinvesting in our business to ensure long-term sustainable free cash flow growth on a per share basis and returning capital to shareholders in a consistent and predictable manner. With that in mind, our enhanced capital allocation framework begins with net cash from operations and then prioritizes that cash be allocated first to sustaining capital and our dividend, which are intended to be commitments that will remain consistent throughout the commodity and investment cycle. Second, cash will be allocated to development capital and our balance sheet targets, which may flex based on our needs and priorities. Third, excess cash available after these priorities are met will be allocated to share repurchases. Starting with the two priorities designed to be consistent through the cycle. We will continue to allocate free cash flow to strengthen the longevity and integrity of our portfolio through targeted investments in critical infrastructure, which may entail elevated sustaining capital over the next few years as we work to maximize the long-term value of our portfolio. We will also pay a sustainable cash dividend of $1.1 billion per year, creating significant per share growth potential for multiple metrics as ongoing share repurchases continue to reduce our overall share count. For the fourth quarter 2025, we have declared a dividend of $0.26 per share, reflecting the per share growth potential embedded in this new approach. Following these consistent commitments, development capital spend and our net cash position may vary over time to reflect portfolio needs and broader macroeconomic conditions. We will invest development capital to advance our current projects and prepare for the next phase of growth with a clear focus on responsibly advancing our highest return opportunities while maintaining strict capital discipline and a clear commitment to value creation. At the same time, we will maintain a resilient balance sheet, anchored by a $1 billion net cash target plus or minus $2 billion and underpinned by a minimum cash balance of $5 billion. This provides the flexibility to return capital to shareholders while funding our capital programs through the commodity price cycles and driving sustainable production growth and operational efficiency. Once these priorities are achieved, we intend to deploy excess cash on a ratable basis to share repurchases. This approach is expected to drive sustained per share growth in our dividend and provide shareholders with greater exposure to the strong free cash flow generated from our portfolio, even with the recent increase in our share price. Our shares represent an exceptional value given our world-class portfolio of long-life operations and our deep pipeline of gold and copper projects. With that, I'll turn it back to Natascha for closing remarks. Natascha Viljoen: Thank you, Peter. In closing, 2025 was a year of execution and follow-through as we achieved our full year guidance, finished the year strong with a strong financial position, optimized our cost structure, advanced project capability, delivered meaningful exploration success and returned capital to shareholders, reinforcing the solid foundation we have built and the potential of this organization. Building on that, we are well positioned to drive margin expansion and generate robust free cash flow from our world-class portfolio of operations, projects and exploration opportunities. Our scale, asset quality and project optionality allows us to capture upside in favorable markets while remaining flexible through the commodity cycle. And finally, we are anchored by a resilient balance sheet and a disciplined capital allocation framework, which has enabled us to implement our enhanced approach to return capital, delivering predictable and sustainable returns to shareholders with a clear path to per share growth. As we look ahead to the rest of 2026, while we are operating in a rapidly evolving geopolitical and macroeconomic environment, our confidence comes from a clear understanding of our portfolio, a disciplined, responsible approach to investment, focused on delivering results and long-term value for our shareholders. Just before I turn to Q&A, I want to briefly address the recent announcement by our Nevada Gold Mines joint venture partner. At this time, the only information available to us is what has been publicly disclosed and as stated in our recent press release. Our primary focus remains on working with a managing partner to improve performance of these assets and generate long-term value for Newmont shareholders. As disclosed in our 10-K, we have issued a notice of default to our joint venture partner related to operational performance and management of Nevada Gold Mines. We do not have any additional information to share at this time and confidentiality provisions in the joint venture agreement prevent further comment on the notice of default. With that said, we look forward to addressing any questions about Newmont's operational and financial performance. I will now hand it back to the operator to open the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Lawson Winder with Bank of America Securities. Lawson Winder: Very solid result. Nice to see for the end of the year to wrap it up strongly. If I could ask about CapEx and the -- and I apologize for that siren in the background. Just the CapEx as it sounds like there could be some potential upside through Red Chris and Merian. Could you just talk to those two projects and the update that we're going to be getting on those later in the year and whether that could lead to higher CapEx than what's currently been guided? Natascha Viljoen: Lawson, it was a little bit noisy, so I'm going to just reframe your -- repeat your question to make sure. You're asking about CapEx and whether CapEx would increase with the Red Chris project and Merian. Is that what you asked? Lawson Winder: Exactly. Natascha Viljoen: Thank you, Lawson. Firstly, Lawson, we are on track to talk a little bit more in detail on Red Chris project towards the second half of the year. Our capital guidance, as we have stated it, is on average, the $1.8 billion on sustaining capital, $1.3 billion on development capital. And we did say that, that would be average over a period of time. The capital allocation framework also allows us to -- within the context of setting that guidance, allowing us to make decisions on value-accretive projects as they come along, and we will be disciplined in how we allocate any capital to further development projects. The Merian example that Francois has spoken about is certainly a future opportunity that we will be able to share more information upon later in the year. Lawson Winder: Okay. I look forward to that. And then if I could, just on a separate issue with your JV partner, Nevada Gold Mines, Barrick. Have the two entities had any further discussion on Fourmile and a potential mechanism for vending that into the joint venture? Where does that currently stand? Natascha Viljoen: Lawson, our current discussions have been predominantly around the improvement of the performance of Nevada. And I think a very constructive relationship to work together to improve that performance and -- which we believe would be in the best interest of all of our shareholders. Operator: Our next question comes from the line of Josh Wolfson with RBC. Joshua Wolfson: Just going back to the long-term growth targets of 6 million ounces. Is there any time frame that can be disclosed on when that target is expected to be achieved? And maybe what are the larger drivers for that? Natascha Viljoen: Josh, thank you for that question. As I think as we've indicated over the last while is that we'll continue to give you 1-year guidance. We have completed our asset reviews. We just completed all of our long-term plans. And as we conclude this work and it builds to maturity, we will be able to give you a better guidance of what that profile would look like. And we certainly expect to be able to do that towards the end of this year. Joshua Wolfson: Got it. And I guess I can't ask about NGM directly, but maybe indirectly related to some of the speculation in the media about M&A. Could you clarify maybe what the company's views are on M&A today and maybe just how this plays into the current gold price environment? Natascha Viljoen: Josh, a really good question. Firstly, we're really happy with our portfolio of assets and our pipeline of projects. And as we do the work with -- on the back of all of our asset reviews, certainly enough potential in our own portfolio. We continue to evaluate our portfolio of assets, and that's just the right thing. We believe it's the right thing to do. It's part of the continuous work that we need to do. And as we find value-accretive opportunities to make any changes to our portfolio, we will do that, but it will happen in a disciplined way and within the context of our capital allocation framework. Operator: Our next question comes from the line of Daniel Major with UBS. Daniel Major: First one, just to be clear on the capital allocation waterfall that you provided, should we be reading that in terms of the commitment to the buyback that if you were to go above the threshold, so $1 billion plus or minus, you would -- we should assume in our models that 100% of free cash flow would be returned to shareholders through buybacks? And if that is the case, would that be done during a quarterly period or an annual period? Natascha Viljoen: Thank you for that question, Daniel. So your assumption is accurate, and I think that's why we -- in the cash flow waterfall, we've set it out with clear expectations of where we want our cash to be, all driven to a resilient balance sheet. As noted as a reminder, share buybacks will be ratable. And as we come to the end of a program, and you would know that at the moment, we still have $2.4 billion left on our $6 billion approved program, we will go back to our Board for approval for any additional buyback. Daniel Major: Okay. That's clear. And then a follow-up on the cost guidance, and you've changed the sort of headline guidance from co-product to byproduct. So on a like-for-like basis, your $1,935 co-product guidance for AISC. First, is it -- what is the like-for-like for CAS as well? Natascha Viljoen: We don't guide CAS, Daniel, but it is -- would be in the order of $1,430. Daniel Major: Okay. And then maybe just a follow-up on that cost dynamic. On Slide 16, you provided the drivers of the inflation through the year. If we look at those buckets, inventory change, working capital and volumes, would it be fair to assume those would reverse in the subsequent 1, 2 years? Natascha Viljoen: Yes, Daniel, probably worthwhile to just quickly step through that. In the prepared remarks, we spoke about volume, and I've given you the underlying drivers that will reverse the volume. Sustaining capital, you remember that a portion of that is sustaining capital that we've moved from 2025 into 2026. And we will see an elevated level of sustaining capital whilst we're still busy with Cadia and Boddington tailings. The changes in inventory, you are right, it's predominantly driven this year by the fact that we are treating stockpile material at Pe asquito and that we are not adding any stockpile material at Lihir. And then we will see a change at Yanacocha going forward as well, where we're not mining anymore and putting material. So those changes of inventory are purely just a factor of where we are on our normal mining cycle. I think what is important, I want to highlight that our cost applicable to sales has stayed constant year-on-year. And I just want to direct you towards that as well and the work that we've done last year on making sure that we can keep what is in our control on cost stable year-on-year. Operator: Our next question comes from the line of Tanya Jakisonik with Scotiabank. Tanya Jakusconek: I'm going to start, Natascha, just on Nevada Gold Mines. I'm interested in your views on -- as you've had time to spend time on the property and look at what needs to be done to maximize shareholder value. Can you review with us what you think we need to tackle to maximize shareholder value and how long that's going to take? Natascha Viljoen: Tanya, thank you for that question. I will kick off the question, and I will ask Francois, who led the team who was there to add anything as he sees fit. Firstly, we have -- we welcome the approach that we've seen from our JV partners with the change in leadership to work together to improve the Nevada Gold Mines' performance. And to that extent, we used the same kind of methodology that we've used for our own operations by really understanding district potential and working our way through opportunities, really thinking about the entire Nevada operations as a district and working it back all the way to near-term and short-term productivity improvements. And so it's exactly the same that we've done at Nevada. Francois? Francois Hardy: Sure. Thank you, Natascha, and thank you, Tanya, for the question. I think just to build on what Natascha said, the opportunity is to fill the mill effectively and use a portfolio approach to how we do that and also to blend the different types of material that is available there. I think there's also some short-term opportunity in terms of optimizing plans across the portfolio rather than on a site-by-site basis. But those are probably the main drivers for our potential there at NGM. Tanya Jakusconek: And sorry, the implementation, how long do you think all of this takes? Francois Hardy: Yes. Look, it's an ongoing partnership at the moment with our JV partners. We did a review in December, and we continue to work through the action plan accordingly. Tanya Jakusconek: Okay. And then my second question on still on Nevada Gold Mines. Just want to confirm, I understand that you have on, I guess, February 3, notice of default to Barrick. Can you just provide us just the process from this default and how we go forward and if it's not resolved? I just want to know the proceedings of what happens. I know there's a time period of where you try to resolve it. And if not, there's a court. I'm just trying to understand the timing of that and if the court is in Nevada, if there's no resolution. Natascha Viljoen: Thank you, Tanya. I'm going to hand that question over to Peter Wexler. Peter Wexler: Thank you, Tanya, for your question. I think you're absolutely right and you have access to the agreement, which was publicly filed, and it sets out detailed time lines for both how any disputes between the partners are resolved as well as the jurisdictional where it would be decided. So -- or if it ever gets to that stage, but you have that all right in front of you, actually. Operator: Our next question comes from the line of Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: Two questions from me, please. Look, the first one, I appreciate the emphasis on share repurchases as the key use of excess operational cash flow, but it appears that some of the more medium- to longer-term growth projects seem to have lost their emphasis a little bit such as the Red Chris cave and indefinitely deferring Yanacocha sulfides and some of the other resources like NovaUni n, Norte Abierto, Galore Creek, Conga, Laurentina, Wafi-Golpu, to name a few, they don't seem to be priorities for this decade. Do you see room for further divestments of resources from the portfolio? Or conversely, should we take the comment that you're exploring more opportunities in the region around Yanacocha that you're actually still acquisitive from here? Natascha Viljoen: Yes. Hugo, there's lots in that question. So let me just see how I can unpack that. Firstly, we've built -- deliberately built this portfolio of assets with the intent to develop and grow it, first point. Second point, we will do that in the disciplined manner that we set out in our development -- in our capital allocation framework. So important to note. Your question around Peru. Peru remains centered to and key to our portfolio. You shouldn't read the fact that we have walked away from the Yanacocha Sulfides project as any indication to the potential that we have in the [indiscernible] project and the Conga project in Peru. As we've concluded -- as I mentioned earlier, and we've concluded the asset reviews and developing the profile going forward, all of these projects are under review. We've got a very clear framework in which we review these projects to sequence them appropriately in the project. The Red Chris project specifically benefited from the unfortunate incident that we had last year when we had the failure in the decline, but it benefited us in highlighting just the areas of opportunity to improve design. And there's no other indication than just an opportunity to improve design at Red Chris. Hugo Nicolaci: Got it. And then a follow-up then maybe on costs. Great to see the cost savings initiatives you worked on last year coming through. Are you able to just provide some more detail on the magnitude of those cost savings that are hitting that 2026 outlook number? And then any further cost-out targets you're looking to try and deliver this year? Natascha Viljoen: Yes. Probably a couple of ways that you can look at that, Hugo. The first thing is, as I said earlier, cost attributable to sales stayed constant year-on-year. So we've basically offset inflation. Another way that you can think about it is that savings allowed us to reduce $100 per ounce from our cost. So that is a good other way of doing it. So our all-in sustaining cost would have been $100 per ounce higher if we didn't have that. I also want you to point you to the G&A reduction. In the prepared remarks, we've spoken about a 21% reduction in G&A from guidance to guidance, and you will see that our G&A is well aligned last year with this year. So just a couple of markers that you can look at. We also -- as we've done -- as we've retired debt and repurchased shares, we've also seen a reduction in cost of about $230 million between those two elements. As we go forward, some of those -- we had two focus areas for cost reduction, headcount and non-headcount reduction. The headcount reduction has been completed and the future continuous work that we have through operational productivity and discipline, all goes back to the continuous non-headcount reduction, and we've made some significant progress to embed our savings in our cost structure. Operator: Our next question comes from the line of Anita Soni with CIBC. Anita Soni: I just wanted to ask about the Tanami expansion too. Just seeing the total spend to date is about $1.3 billion, and you're spending about $3.5 -- sorry, $350 million, $330 million this year. And the project total is $1.7 billion to $1.8 billion with still a significant amount of time to go. So will you hit that $1.7 billion to $1.8 billion? Or will you be near the upper end or slightly above that? Natascha Viljoen: We are right on track to hit those targets, Anita. Anita Soni: Okay. My other one is a somewhat quick one. On the capital allocation framework, you said plus the net cash position of $1 billion, but I see plus or minus $2 billion. I think maybe someone else mentioned plus or minus $1 billion. I want to clarify that, but -- and then also ask, it seems like a pretty wide range. Like how do you make that decision that we're going to keep an extra $2 billion of cash instead of buying back shares at this point? Peter Wexler: Anita, that's a very good question. That was a very disciplined approach by the Board to take a look at the ability for the company to withstand volatility across commodity cycles and ensure that our fixed dividend is always payable and we can meet our commitments. It can flex up and down depending on where we are in both the cost cycle, the price cycle as well as the other needs for some of the nearshore projects that we might want to execute on that would be cost accretive with our financial discipline fully in focus. So that's how it was arrived. It was a very thoughtful process with the Board of Directors and -- to ensure the long-term resiliency of the company. Natascha Viljoen: And Anita, it is $1 billion plus or minus $2 billion. So it is clearly set out in Slide 10. So the detail is really set out there for your reference. Anita Soni: Yes. I just thought I heard someone say $1 billion plus or minus $1 billion. So I just want to clarify that. But I did see the slide, it says plus or minus $2 billion. Operator: Our next question comes from the line of Daniel Morgan with Barrenjoey. Daniel Morgan: My question is gold and copper at all-time highs, you have some of the best assets in the industry. Is there an opportunity to do a bit more on debottlenecking, brownfield expansion? Is this something that should be worthy of greater consideration? I mean if I look at a lot of the messages today, you've got a new capital allocation strategy, which appears to speak to a focus on returning cash rather than growth. Can you just talk about that? Natascha Viljoen: Thank you, Daniel, and a really relevant question and something we continuously evaluate. So Daniel, firstly, we make sure that the baseline of our production remains sustainable through the cycle. I think that's an important evaluation. So that is [indiscernible]. Then we continue to look at short-term opportunities. In my prepared remarks, I referred to Yanacocha specifically, where we have seen an additional cut in the pits that we will be taking. So the really near-term opportunities we are focusing on are those where we have low capital investment because the moment you start to talk about capital investment, there's time associated with it. So low capital investment means quick to market. It considers constraints like tailings dam capacity because we do need to consider the cost and the time to ensure that we've got long-term tailings capacity. So that needs to be considered as part of the economic evaluation. And then the next constraint would be our processing plant. So we have no constraints, and we can make sure that it comes to market quickly with low risk, we are absolutely pursuing every opportunity. So a very good point. Daniel Morgan: And are there -- I know you've got Red Chris this year, but I mean, maybe you can just cast the market's eyes to potential assets across the portfolio, which have those opportunities for debottlenecking where there's a plant that has very capital-efficient expansion or ample tailings? Or what are the assets where if we thought creatively about growth beyond, say, Red Chris that we should be thinking about? Natascha Viljoen: Daniel, you're now talking just brownfield expansion, right? Daniel Morgan: Correct, correct. Natascha Viljoen: Yes. Okay. So a couple. Ahafo South, we definitely -- and Francois mentioned in his prepared remarks on -- and we're actively pursuing that development, underground development that goes hand-in-hand with the exploration work that we're doing. Ahafo North as a brownfields expansion, there's a potential for us to basically duplicate what we've done at Ahafo North to date. So that's a definite opportunity for us. If we look across and we look across to Lihir, we've just concluded 14A. So we will have access to high-grade ore there and the nearshore barrier will give us access to further high-grade material. If we go to Tanami, as we complete Tanami, there's certainly opportunities there for us. I'm just thinking through -- I think I've touched on all of the main ones. Brucejack, of course, Francois just reminded me here of Brucejack. Brucejack, there's two opportunities. The one would be that we are looking at stope sizes that is easy to -- easy for us to do to develop our stope sizes slightly larger, capturing the value of just what the ring around the current stope sizes, slightly lower grade, but we do have the capacity in both the plant and in the tailings dam. And then I'm going to quickly jump over to Argentina at Cerro Negro. We are pursuing an open pit that we should be able to access and start mining on towards the end of the year. And then at Cadia, just a reminder that PC2-3 basically will be up and full -- up and running by the end of the year and PC1-2 following closely after that. So a number of opportunities for us, some of which we've touched on already, but some of them not necessarily remarked on. Operator: Our next question comes from the line of Martin Pradier with Veritas Investment Research. Martin Pradier: My first question is related to Newmont and the relationship with Barrick. So there is this news about you having a Right of First Refusal. Could you confirm that you have that Right of First Refusal? And what does it mean? Can Barrick do an IPO without your consent? Or that will be violating the agreement? Natascha Viljoen: Thanks, Martin. Peter Wexler will take your call. Peter Wexler: Thank you, Martin, for the question. The rights for both parties are spelled out in the agreement. We don't have any other information than you do on the IPO and anything else would be a theoretical exercise. So we'll let you and as I noted to Anita to review the agreement and make that determination for yourself. Martin Pradier: Okay. And in terms of Yanacocha, how much is in book value of Yanacocha still there? I mean I know you're stopping the development and you did some impairment, but I'm assuming there is quite a bit more there in the book value. Natascha Viljoen: So on sulfides, book value was in the order of $78 million, Martin, and Conga is in the order of about $900 million. Martin Pradier: So $900 million in Conga and how much in the other one? Natascha Viljoen: $78 million. And yes, the $78 million in sulfide is predominantly in the equipment that's still there that we will be putting up for sale. Operator: Our next question comes from the line of Levi Spry with UBS. Levi Spry: Just one quick one back to Tanami. Can you just confirm the status there currently? And what's imputed in your guidance for this year and the rest of the ramp-up? Natascha Viljoen: Sorry, Levi, I don't think we've heard you properly. Would you mind repeating? Levi Spry: What's happening right now on site at the Tanami and what's imputed in your guidance this year and next? Natascha Viljoen: Okay. And Levi, I assume you are asking in relation to the fatality that we had? Levi Spry: Yes. Is it currently operating? And when will it turn back on? Or when do you expect it to turn back on? Natascha Viljoen: All right. Thanks for that, Martin -- Levi. I just want to make sure I'm clear on your question. The operational side of Tanami has been up and running within about four days after the incident. After the incident, we shut down the entire site. We made sure that all of our colleagues are looked after and that everybody is getting assistance through our EAP process, and we wanted to make sure that people's focus is on operations so that it can be safe and didn't want to distract their attention. So operation is fully up and running. The project other than the shaft infrastructure. So we stopped all work on the shaft infrastructure, but development for the ventilation underground infrastructure is back to normal operations. And the shaft infrastructure, we will start up as soon as we've completed our internal investigation and make sure that we understand the root cause of the incident and make sure that it doesn't happen again. So what has been included is our normal production at Tanami. That's what's been included in our guidance. Operator: Our final question for today will come from the line of Adam Baker with Macquarie. Adam Baker: I'm just wondering from a corporate perspective, how you considered to lift your reserve and resource assumptions, noting that your resource gold price assumption is now $2,000 an ounce and your reserves at $1,700 an ounce. Why did you determine to do this? Do you think this is still too conservative? And I guess, how did the team land on that number? Natascha Viljoen: Thank you, Adam. I'll ask Francois Hardy to answer that question. Francois Hardy: Yes. Thanks for your question, Adam. I think we go through quite a rigorous process in terms of how we define our gold price assumptions. And we look at many different market assumptions and direction. And the one we tend to align with reasonably closely is the 3-year trailing average. And at the time of setting our 2026 gold price assumption for reserves, we were just above 80% of the 3-year trailing average, which is typically we like to be in the low 80s -- low to mid-80% of the 3-year trailing average. And obviously, it shot up since then. We don't believe it's too conservative. We have a rigorous process that we look at our total portfolio and we look at how we structure and look at our long-term mine plans and the like. So at this stage, the $2,000 is the right number for us, but we continue to evaluate short-term opportunities and the like. And I'll just point to reminding you that the mine plan assumptions and the reserve and resource assumptions that we make are two different numbers that we optimize against. Operator: This concludes the question-and-answer session. I would now like to turn the conference back over to Tom Palmer for any closing remarks. Natascha Viljoen: Thank you so much, operator, and it's still Natascha Viljoen here. And thank you for everybody for joining our call today and looking forward to our next quarterly call. Thank you. Operator: That concludes today's call. Thank you for your participation, and you may now disconnect your lines.
Operator: I would like to welcome everyone to the FTG Fourth Quarter 2025 Analyst Call. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the call over to Mr. Brad Bourne, President and Chief Executive Officer of FTG. Mr. Bourne, you may proceed. Bradley Bourne: Thank you. Good morning. I'm Brad Bourne, President and CEO of Firan Technology Group Corporation, or FTG. Also on the call today is Drew Knight, our Chief Financial Officer. Before we go any further, I must caution you that this call may contain forward-looking statements. Such statements are based on the current expectations of management of the company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors in the company's industry generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the company. The listener is cautioned to consider these and other factors carefully when making decisions with respect to the company and not place undue reliance on forward-looking statements. The company does not undertake and has no specific intention to update any forward-looking statements written or oral that may be made from time to time by or on its behalf, whether as a result of new information, future events or otherwise. 2025 was another successful year for FTG. We had record revenues, EBITDA and earnings, and we made great progress in integrating FLYHT into FTG and positioning it for future success. More specifically, in 2025, FTG accomplished many financial goals, including our bookings were $209.9 million in the year, marking a 14% increase over 2024. Our backlog at year-end was $148.5 million, a 21% increase from last year. Our revenue was $191 million, an 18% increase over 2024. Our adjusted EBITDA was $32.7 million in 2025, up 27% from $25.8 million last year. Our adjusted net earnings were $13.5 million in 2025, an increase of 31% from 2024. Our operating cash flow less lease payments were $13.7 million in the year. And we maintained a strong balance sheet with net debt of $8.3 million or 0.3x trailing 12-month EBITDA, including $11.2 million of government loans. Other accomplishments in 2025 included we took steps to grow our defense business. FTG Circuits recently qualified for two significant classified defense programs. Delivery is expected to start in 2026 and ramp up through 2027. FTG overall will also benefit from increasing customer demand on legacy defense programs. We diversified our revenue sources to reduce our exposure to U.S. tariff risks for our non-U.S. sites. During the year, we ramped up deliveries in support of the C919, China's first domestic single-aisle passenger jet. Also during the year, De Havilland Aircraft of Canada selected FTG to provide updated cockpit control panel assemblies for the new Canadair 515 aerial water bomber. FTG completed first deliveries of some units to De Havilland on this program in late 2025. We took steps to create value from the FLYHT acquisition. We obtained supplemental type certificates or STCs for the AFIRS Edge+ program for Boeing 737 in Canada, the U.S. and China and for Airbus A320 in Canada, Europe and China. The transition of AFIRS Edge to in-house production is now underway, and FTG recently delivered its first units to an airline in Asia, marking a key milestone in value creation from the FLYHT acquisition. And we strengthened the FTG leadership team. We continue to bolster our leadership team, including appointing a new CFO, Drew, who's with us today; Executive Vice Presidents for both the Circuits and Aerospace segments as well as some key site leaders due to retirements and other organizational growth. Also during the year, FTG appointed Russell David and Christine Forget to the FTG Board of Directors. Russell has served as a Board member and Senior Executive of corporations and as a senior partner at Deloitte in Corporate Finance and M&A advisory. Christine has served as a Board member and senior executive at several corporations, including as VP Global Procurement at Bombardier. Drew will provide more details on our 2025 and Q4 results shortly. Let me turn to some external items. Our end market demand remains strong. Airbus delivered 793 aircraft in 2025. But more importantly, they're looking to ramp to over 1,000 aircraft annually in the next few years. Airbus has a backlog of over 8,000 orders, which is over a decade worth of production at current production rates. At Boeing, they shipped 600 planes in 2025, up from 384 in 2024. 2024 was low due in part to the safety incident on the Alaska Air 737 as well as the machinist strike they had later in the year. But looking forward, Boeing has plans to ramp their production to over 800 planes annually in the next few years. Boeing's backlog is almost 6,000 planes, so also over a decade's worth of orders at current production rates. While 2024 might have been a low point for Boeing, it has become clear that Airbus is outperforming Boeing in the air transport market in terms of aircraft shipped, and they hold a 60% market share based on order backlog. This has implications for FTG's plans going forward. In the business jet market, Bombardier reported a high single-digit shipment increase for 2025. They shipped 157 aircraft in the year. They are also pushing hard to add a defense component to their business, and they've had some success to date in selling their business jets for defense applications. In the helicopter market, Bell Helicopter reported a 20% revenue increase in 2025, driven by increased defense programs. All of this bodes well for us as we look to future demand in the coming years. We also looked at results from some key defense contractors. For instance, Lockheed Martin reported a 6% revenue growth in 2025. And also related to defense, Boeing was selected to develop and produce the next-generation air dominance fighter. This is good news for them. And based on the supply chain approach on the previous air superiority fighter, the F-22, I would expect the sourcing for this will be U.S.-only suppliers. We did have content on the F-22 when it was in production through our Chatsworth facility. We are better positioned now to increase our content on U.S.-only procurements with our 5 U.S.-based sites. Also importantly, there are new commitments from all NATO members, including Canada, to ramp defense spending to 3.5% of GDP with another 1.5% for defense infrastructure. And Canada has said they will increase defense spending in 2025-'26 to 2% of GDP. All of this indicates significant increases in defense budgets for all European countries and Canada. The recent creation of a defense investment agency in Canada to accelerate and streamline future procurement activity is positive for the industry here. And the U.S. is also looking to increase defense spending next year. Looking at the longer term, Boeing's most recent 20-year forecast for commercial aerospace shows significant long-term industry growth, and it continued to show 20% of all new aircraft deliveries going to China, close to 40% to Asia, as has been the case in the recent forecast. Business jet market has already seen traffic recover. A recent business jet market forecast from Honeywell similarly predicts growth in this market of 5% in 2026 and 3% annually over the next decade. So as we have said for many years, FTG's goal is to participate in all segments of the aerospace and defense markets as each moves through their independent business cycles. It is not often all segments are growing, as seems to be the case now. Beyond this, let me give you a quick update on some key metrics for FTG for our fourth quarter and full year. First, as already noted, the leading indicator of business is our bookings or new orders. Our bookings were $210 million in the year. This resulted in a backlog of $148 million at year-end. Full year sales were $191 million, which is up 18% over last year. 2/3 of this growth is driven by the acquisition of FLYHT earlier this year and the balance from organic growth. In our Aerospace business, sales were up 43% in 2025 compared to last year. The increase is about 90% due to the acquisition of FLYHT. Sales in Toronto and Tianjin were up, while activity in Chatsworth was down in the year due to timing of some orders. There was a significant ramp-up in C919 shipments in the year as well as assemblies for both Boeing and Airbus aircraft in Q4. The C919 shipments benefited both Toronto and Tianjin, while other shipments benefited Toronto. On the circuit side of our business, sales were up 6% over last year. All of this is organic growth. Our strongest growth in the year was in our joint venture in China, followed by our Haverhill and Chatsworth sites. Minnetonka had strong demand, but our ability to ramp production was constrained by adding and training new production staff. Overall, at FTG, our top 5 customers accounted for 51.7% of total revenue in the year. This compares to 58.4% last year. It's great to see the drop in customer concentration as we add sites and expand our customer base, partly through the acquisition of FLYHT. Airlines were 2 of our top 20 customers in the year due to the FLYHT acquisition. Also interesting to note of the top 10 customers, 6 are customers shared between Circuits and Aerospace. We like to see the shared customers as it means we are maximizing our penetration of these customers by selling both cockpit products and circuit boards. Given the actions of the new administration in the U.S. of implementing tariffs, it's also good to see that one of our top customers is outside of the U.S., and this is in China, and another 8 have operations outside of the U.S. While on this topic, 69.9% of FTG sales are to U.S.-based customers. This includes sales by U.S. sites as well as sales from FTG sites in Canada or China. This compares to 78.3% last year. While the sales grew by 5% in the U.S., they grew by 46% in Asia, 140% in Europe and by 35% in Canada as we benefited from previous efforts to expand globally, including things like our content on the C919 aircraft in China and acquiring FLYHT sales globally. The increase in sales outside the U.S. are helpful in the event of any tariffs that might impose on our non-U.S.-based sites. Our goal is to continue to grow our non-U.S. revenue for our non-U.S. sites. In 2025, 36% of total revenues came from our Aerospace business compared to 29% last year. Aerospace business share increased due to the acquisition of FLYHT. I'd now like to turn the call over to Drew, who will summarize our financial results for 2025. And afterwards, I will talk about some key priorities we are working on. Drew? R. Knight: Thanks, Brad. Good morning, everyone. I would like to provide some additional detail on our financial performance for 2025 and Q4. On sales of $191 million, FTG achieved a gross margin of $60.6 million or 31.7% in 2025 compared to $44.2 million or 27.3% on sales of $162 million in 2024. As such, gross margin in 2025 was a substantial improvement and up 430 basis points. The increase in gross margin dollars and the gross margin rate is the result of increased scale on our fixed cost base, operational improvements, the addition of our new Aero-Calgary business and favorable foreign exchange rates. Revenue per employee was $254,000 in 2025 as compared to $240,000 in 2024, which is a 6% increase. Q4 2025 on sales of $51.7 million, FTG achieved a gross margin of $15.8 million or 30.6% compared to $12.8 million or 28.3% on sales of $45.2 million in Q4 2024. The increase in gross margin dollars for Q4 2025 as compared to Q4 2024 is a result of increased sales volumes in the Aerospace segment, including the new Aero-Calgary business, operational improvements and favorable exchange rates. From a geographical standpoint, FTG's sales growth was global, as Brad noted earlier. Diversification improved as 70% of FTG's revenues were derived from customers in the U.S. in 2025 compared to 78% in 2024. SG&A expenses were $26.7 million or 14% of sales in 2025 as compared to $20.4 million or 12.6% of sales in the prior year. The increase of $6.4 million during fiscal 2025 was primarily due to the acquisition impact of $4.7 million at Aero-Calgary. The remaining increase included Hyderabad, India start-up expenses, restructuring costs and acquisition expenses. Q4 2025 SG&A expense was 13.3% of sales, which is up from 12.7% in Q4 2024. Similar to the full year, this is mostly due to the Aero-Calgary business, which has high margins and high SG&A as well as restructuring costs and some India costs in 2025. R&D costs for 2025 were $10.9 million or 5.7% of sales compared to $7 million or 4.3% of revenue in 2024. R&D efforts included product and process improvements at the Circuits segment as well as Aerospace segment process improvements and product development. FTG is exposed to currency risk through transactions, assets and liabilities in foreign currencies, primarily U.S. dollars. The average exchange rate experienced in 2025 was 1.39 as compared to 1.36 in 2024, which equates to a weakening of the Canadian dollar of 2.2%. We estimate that for each 1% of weakening of the Canadian dollar, FTG would experience an increase in pretax earnings of $0.8 million, absent of any hedging countermeasures. Adjusted EBITDA, as detailed in the MD&A, was $32.7 million for 2025 or 17.1% of sales compared to $25.8 million or 15.9% of sales for 2024. Adjusted EBITDA is up 27% over 2024 as a result of growing the top line organically and via the acquisition, operational improvements and managing expenses. Adjusted EBITDA for Q4 2025 was $7.9 million or 15.4% of sales as compared to $7.6 million or 16.7% of sales in Q4 2024. While adjusted EBITDA dollars grew somewhat, the percentage of sales declined due to the new Aero-Calgary business, which added top line and gross margin that essentially broke even. We expect this business to scale up with new revenues on a fixed cost base to become profitable in the near future. In 2025, FTG recorded net earnings of $13.1 million or $0.52 per diluted share as compared to $10.8 million or $0.45 per diluted share in 2024 for an increase of 15.6%. For Q4 2025, net earnings were $3.7 million or $4.4 million in Q4 versus $4.4 million in Q4 2024, while adjusted net earnings were $3.9 million in Q4 2024 as this is adjusted for $0.8 million of reduction in contingent consideration related to the Minnetonka acquisition, which was booked as profit in Q4 2024. Q4 2025 adjusted net earnings showed a decline of $0.2 million versus prior year as reported. However, 2025 was burdened by $0.3 million of intangible amortization from the FLYHT acquisition, and there was $0.8 million of FX change from a gain in 2024 to a loss in 2025. Normalizing for these differences for an apples-to-apples comparison, then Q4 2025 is $0.9 million better than Q4 2024. The 2025 effective income tax rate was approximately 27.8% as compared to 27% in 2024. I would like to remind everyone that FTG continues to have substantial tax losses available to offset future income and the accounting benefits of these losses has not been recognized in our financial statements. These tax loss carryforwards are located in both the U.S.A. and Canada with the Canadian losses recently acquired in the acquisition of FLYHT in December 2024. Our net debt position as of Q4 2025 is $8.3 million as compared to a net debt position of $0.7 million as of Q4 2024. The debt increase resulted from the acquisition of FLYHT. Cash flow from operating activities in 2025 was $18.1 million as compared to $14.5 million in 2024. Full year cash flow from operating activities increased by $3.6 million. Cash used for lease liability payments was $4.3 million in 2025 as compared to $3.7 million in 2024. Capital expenditures were $4.6 million as compared to $7.2 million in 2024. Going forward, we expect CapEx to be closer to FTG's long-term target of 3% of revenue, notwithstanding any significant capacity increases. As at 2025 year-end, the corporation's primary sources of liquidity totaled $78 million, consisting of working capital of $58 million and $20 million of unused credit facilities. Accounts receivable days outstanding were 55 at the 2025 year-end, down from 70 in the prior year. Inventory days were 105 at 2025 year-end, up from 96 in 2024. And accounts payable days outstanding were 58 at the end of 2025 as compared to 68 in 2024. On to the outlook. We entered Q1 2026 with a record level of backlog of $148.5 million, of which approximately 80% is expected to be converted to revenue in 2026. The new business activities in both the aerospace and defense industries are strong and continue to accelerate. Both the circuits business and aerospace business are winning their share of new customer RFPs, including a couple of substantial classified defense programs, as Brad mentioned. We are focused on managing cash flow and improving operational efficiency and continuing with the FLYHT integration, which will bear fruit. Our complete set of year-end and quarterly filings are now available on SEDAR. With that, I would like to turn things back over to Brad. Bradley Bourne: Thanks, Drew. Let me delve into some other important items for the future of FTG that will continue to build on our accomplishments from 2025. We will continue to pursue growth in the defense market. As noted previously, we expect defense spending to continue to grow in Canada, the U.S. and NATO. We've had some good success on some new programs in the U.S. last year, and we're pursuing more new programs in 2026. Beyond this, we will look for opportunities outside of the U.S. as well. The NATO budget was about 1/3 of the U.S. budget a decade ago, and it is 2/3 its size today. So it's definitely a market of interest to us. As Canada ramps its defense spending and its commitment to NATO, we are hopeful that it will create new opportunities for FTG sites outside the U.S. After the U.S. and NATO, the next biggest defense market is India. And as we get our site established there, we will look to capture some market share in this market as well. We will look to capture more work in the commercial aerospace market and grow as volumes ramp up. As part of this, we will look for ways to increase our activity with Airbus as they are the stronger performer right now. To do this, we will leverage our Canadian and China sites, and we will continue to investigate establishing a footprint in Europe. Given the uncertainty regarding tariffs from the U.S., we will look to continue to diversify our revenue streams for our non-U.S. sites. Some of the items I already mentioned will assist in this, but it will remain a priority action for us in 2025. In 2025, about $58 million of sales from our Canadian sites were to the U.S. customers. The site did increase their non-U.S. sales, but more will be done in 2026. Across FTG, sales outside the U.S. grew from $35 million in 2024 to over $57 million in 2025. We will increase our sales staff outside the U.S. in 2026 to help drive this growth. Tariffs are now impacting input costs in our circuits business. This is because a lot of materials used in our manufacturing processes originate outside of North America. The impact is highest for our U.S. sites, but Toronto is also impacted when materials shipped via the U.S. to Canada. We estimate the overall cost impact to be in the millions of dollars in 2026. We have started to work with customers to pass on these increased costs to them and their end users. And we will continue to take steps to create value from our acquisition of FLYHT. As of December 1, 2025, we have renamed the business, FTG Aerospace Calgary, as we amalgamated it legally into FTG. The amalgamation was done to possibly enable us to use FLYHT tax losses beyond just our operation in Calgary. But to be clear, we do not have certainty that this will be possible. In the Calgary business itself, we believe we are now well positioned to have a strong year as a result of our product certification and STC efforts last year. We are seeing strong demand for all three products, and our pipelines look robust. The licensing revenue on our SATCOM radio product has returned and should be consistent going forward. The licensed product ends up on Airbus aircraft, so we know the demand is strong. The Edge+ WQAR has lots of STCs in place. And with our first delivery behind us, we are quoting many new opportunities in a number of geographic jurisdictions. And we are starting to manufacture this product in our Tianjin plant to enable us to capture this margin as well. We expect sales of their weather product to ramp up in 2026 as well with contracts in place with both NOAA in the U.S. and U.K. Met in England. We are looking to manufacture both our SATCOM radio and the WVSS weather product in our Chatsworth facility in 2026. These actions should enable FTG Aerospace Calgary to be a positive addition to FTG and further mitigate risk from the U.S. tariffs. We will also open our aerospace facility in Hyderabad, India in 2026. Our decision to expand geographically was partly to look for an insurance policy against anything negative happening to our China operations, but was also partly to expand into new regions with growth potential. As we analyze options, we concluded India is a very cost-effective place for manufacturing, and with Prime Minister Modi's Make in India policy, coupled with significant defense spending, it will be an ideal place to operate. We selected Hyderabad as it has an aerospace hub primarily focused on manufacturing. Our facility is under construction. It now looks like Q2 2026 for its completion. In the meantime, we will be sourcing the necessary equipment to be ready to go. Our estimated total investment is forecast to be approximately $2 million. As we enter 2026, we see continued strong demand across most sites. All of our $148 million backlog, 80% of that is due in the year. We continue to assess possible corporate development opportunities that could fit with either of our businesses. We have a few areas of interest, including establishing a footprint in Europe, growing our presence in India or expanding our technology in a few areas. With a focus on operational excellence in all parts of FTG, our strong financial performance in 2025, our recent acquisitions, our key sales wins, we are confident we are on a strong long-term growth trajectory. This concludes our presentation. I thank you for your attention. I would now like to open the phones for any questions. Jenny? Operator: [Operator Instructions] Your first question is from [ Ben Asuncion ] from Haywood Securities. Unknown Analyst: Ben dialing in for Gianluca here. Congrats on the quarter. Could you perhaps give us a qualitative snapshot of how the backlog looks from a defense perspective? The Fed's here just announced a nice package on Tuesday, and we were wondering if you have any preliminary thoughts on how you might be looking about pursuing this and grabbing a piece of the bigger pie. Bradley Bourne: Well, sure. I guess, first, -- to answer your question specifically? No, I actually don't know how my backlog splits out in terms of defense activity. What I would say is historically, we're running at about 40% defense, 60% commercial with some of the wins that we talked about on some classified programs, so I'm not going to name names of them, but that should increase our defense percentage a little bit, but I don't have an exact number. And then with regard to Canada, we're looking at it from a couple of perspectives. For sure, defense spending is going up. Canada just issued a defense industrial strategy, which is good for -- it's going to be great for the industry. I think it's something we've all been looking for and waiting for and asking for, for a number of years. The fact that's out is great. And it talks about build, partner, buy. So they're looking for ways to have the defense spending in Canada benefit the industry and build the industry. So I think that's going to be good for us. And then beyond that, as part of this, they are looking to make investments in companies or assist companies in making investments is a better way to put it. And we're definitely looking at that as well to see if there's funding sources to assist in investment activities we might be planning in the future. Unknown Analyst: That's great. And I guess just for my follow-up here, are you starting to see any incremental quoting activity or program acceleration specifically in Canada for these defense initiatives? Or is it too early in the cycle? Bradley Bourne: Yes. For us, it's early in the cycle. We -- our activity in Canada historically has been remarkably small. We went from 5% of sales to 6% of sales last year. But we're putting effort into it. Definitely, we're having lots of discussions with more Canadian companies about opportunities, but I wouldn't say it's converted into quoting activities yet. Operator: Your next question is from Steve Hansen from Raymond James. Steven Hansen: Brad, just on the new defense programs, it sounds like they're going to remain unnamed. That's fine. It does sound like delivery is expected to start later this year, though, and then ramp up next year. What kind of capacity capabilities do you have right now? I think you referenced Minnetonka still having some constraints. So I'm just trying to get a sense for how that capacity plan looks relative to the ramping new programs. Bradley Bourne: Right. Sure. So capacity growth in FTG for all but one site is really about adding people and training people and getting them contributing. And so for Minnetonka, specifically, we have tons of capacity in terms of plant and equipment. So that one is all about adding people, training people. I've said this in the past, and I'd say it again here that adding people -- getting people is easy, but the way I'd describe it these days is if I add 10 people, 3 of them are going to leave because they don't like it. 3 of them are going to leave because we don't like them. And then you have a few left over that get through that training process, which is going to be at least 6 months, and then they're contributing to the business. So ramping capacity is constrained or the rate of ramp is constrained by that process of adding and training people. And that goes for all sites except one. My Circuits Toronto facility, for sure, to grow that capacity, I need to add plant and equipment as well as some people. But we have added that or included that in our plan for 2026. We have a capital investment plan for that site that should add at least 30% capacity to it. So the good news is when a plant hits capacity, it generally is not at every process in the building. There's 1 or 2 bottlenecks. So if you can add capacity in those bottleneck areas, you increase the capacity across the whole plant. So that's what we're doing in Toronto. We're committing to it. And as I say, at least a 30% growth in capacity is planned in that site for the end of the year. Steven Hansen: Okay. That's helpful. And just, I mean, rough magnitude, is there any ability to give rough magnitude on these new defense programs and what they mean for '26 and '27? I presume they're relatively low rate production to start with, but just wanted to get a sense for what the opportunity set is there. Bradley Bourne: Yes. And I guess activity started last year, to be fair. Now some of that was qualification build or initial deliveries. We're expecting it to be material amounts this year. It's going to be in the millions of dollars. Beyond that, I just -- I don't know is my honest answer exactly how much we'll ramp this year. But for sure, the overall demand on these programs is crazy big in the tens of millions of dollars. But whether we will be able to support all of that is not clear yet and whether it would be -- the production allocation is not 100% set. So we'll see how much of that we get and how much of it we can support. But the demand is huge on these programs. Steven Hansen: Okay. That's good context. And then just one last follow-up for me, if I may, is just on the COMAC program. You've had some good success there. They did stumble a little bit in their own delivery profile last year, but my understanding is they expect to ramp again next year. Just relative to the initial contract that you signed, it looks like there's just under $10 million of value left there. How do you think about sort of that residual piece relative to what you delivered in '25 and whether or not you need to renegotiate or re-up the program? And how does that outlook stand for COMAC? Bradley Bourne: Yes. A whole bunch of comments on that. I guess, first one, you're right, their deliveries were a little bit lower than their expectations last year, but that has not impacted our production rates or the demand for our deliveries to them. So their build rate still seems to be strong. The contract we signed a few years ago is complete at some point later in 2026. I have every expectation that there will be a follow-on -- it's not even a contract, a follow-on purchase order against the existing contract at some point this year that will carry production into the next few years. And then in addition to that, two other things going on of great interest. First one, in our contract, we also supply spares to them. And so we signed a spares contract with them just a few months ago that will be delivered in 2026. So it's a little bit of additional revenue. And then not a huge revenue impact for us in the year, but they're looking at a handful of design changes on our product and other products in the plane. The good news and the interesting news on this is they're doing this as part of their effort to get certified by EASA in Europe for enabling that plane to be sold and flown in Europe. So I don't know, not sure how they're going to do on that, but I think it's interesting. And definitely, EASA is engaged with them to go through the certification process. So that might create additional demand for that aircraft beyond what you see in China and the Far East. Operator: Your next question is from Russell Stanley from Beacon Securities. Russell Stanley: I guess, first, just on the orders look particularly high in Q4. Wondering how much the new defense programs may have contributed there or if there's anything else you would call out behind that beyond just ordinary demand. I know simulator-related demand has contributed in the past. But I'm wondering if there's any lumpiness there that you would call out? Or should we just look at this as a particularly strong quarter? Bradley Bourne: Yes. I guess, first of all, specifically on the simulator, there was no big lumps of simulator orders in Q4, so that did not drive it. Our simulator activity is pretty constant right now. I'd love to see a lump one day, but right now, I don't see that. Beyond that, I am just -- I going to say it's mostly just strong demand across the business in Q4. No significant single contracts of big value in the quarter and definitely nothing of significant value in the quarter related to the two defense programs I talked about either. So the -- yes, it's just strong demand across the business. Russell Stanley: Great. And how should we think about R&D spending relative to sales going forward? It looked a little elevated in Q4. I'm wondering, can you provide any more color as to what you're working on there? And to what extent maybe the Q4 number reflected work on those two defense wins? Bradley Bourne: Right. Yes, it was up a little bit in the quarter. I agree with you on that. We again, nothing significant. We're definitely -- we spend a lot of time every quarter in driving process improvements, capability improvements in our circuits business. Definitely, some of that related to the defense programs, but not some -- not a material amount, but definitely, we are doing some development to support those programs and some other activities in other sites in the quarter. So -- but that's definitely the game for our circuits business to just keep driving capability improvements and be able to support the new technologies that generally are what we see on new programs. On the aerospace side, we did some -- continue to do development work on some of the products we sell. We show it in R&D. Some cases, it's customer funded, some cases it's not. The R&D we did in FLYHT in the year, generally, we did some development on the weather WVSS-II that was expensed in our R&D numbers in the year. We did a lot of work around STCs in the year. That was -- that's on our balance sheet as deferred development because for sure, it has future value. So that's not in the R&D number. Hopefully, that helps. Operator: Your next question is from Nick Corcoran from Acumen. Nick Corcoran: Congrats on the strong year. Just the first question, margins were down a bit in the quarter despite higher revenue. Can you maybe talk about what the drivers are and what we should expect for margins going forward? Bradley Bourne: Sure. I assume you're talking EBITDA margin. But assuming I got that right, let me start on that. So first one, I think as Drew reported, our gross margin in Q4 was up, as you would expect. So as revenue goes up, margins go up -- gross margin goes up. But for sure, below gross margin, a couple of things to comment on. Also, Drew already mentioned this, but we had a basically revaluation of assets on the balance sheet in the quarter that was -- showed up in the P&L as an FX impact. It was a $600,000 hit in the quarter, $800,000 variance compared to last year. So that definitely hurt. If you were going down to net income, we have higher intangible asset amortization this year because of the FLYHT acquisition. So that when you're trying to compare Q4 last year to this year, that hurts on net income, doesn't hurt on EBITDA. And I guess the last one, which we didn't really talk about, but we do live in the real world. We definitely had a production or operational challenge in our Circuits Toronto facility in the quarter. We basically had our production -- or part of our production shut down for almost 2 weeks. It impacted revenue a little bit. And I think if you looked at it, you'd see our Circuits revenue was down in Q4, and it definitely impacted profitability. I don't -- it's hard to have an exact number on this because you don't know what it could have been if we had not had this challenge. But definitely, it impacted revenue and gross margins and therefore, EBITDA margins in the quarter as well. Good news is it was kind of in the middle of the quarter and the challenge was around. We had some contamination in our water that hurt some processes. But for sure, by November and by the end of the year, that issue was behind us. So it happens. As I say, we live in the real world. We dealt with it. I think the people at the site dealt with it really well, and it was back under control for year-end. Nick Corcoran: That's helpful. And maybe can you talk about how much of it might be driven by mix just between aerospace and defense? Bradley Bourne: Yes. I mean it's -- I'm not sure how that impacted profitability. Definitely, it impacted revenue that if you see our revenue was up dramatically in our cockpit product business in Q4. That increase was 100% driven by commercial aerospace. We had large deliveries of cockpit products for the China C919 aircraft to end the year and we had large deliveries of some cockpit assemblies we delivered to one of the Tier 1 avionics companies in the U.S., but these assemblies end up on both Boeing and Airbus aircraft. Those deliveries ramped up in Q4. But again, on the commercial aerospace side. So that drove the revenue growth. I think our margin and our profit is not really driven significantly based on whether it's commercial aerospace or defense. Nick Corcoran: That's fair. And then maybe moving on to FLYHT. With the business amalgamated, what opportunities are there to improve the margins in the business? Bradley Bourne: Yes. It's just -- we got to -- we have to have sales of the three products. We got to get them delivered, and it's got to -- if we have revenue, we will have margins and profit. And I think we will have good revenue. The SATCOM radio is an existing product. There's three ways we generate revenue from that. We sell hardware, and we have some good orders on that. So I think we're going to have some good SATCOM radio sales in 2026. We sell data where we basically resell Iridium data for people who use the radio. So that becomes another revenue stream. And then the third one is we license the design to a company who then sells the radio into Airbus, and that licensing revenue kicked in, in Q4, and I expect it to be kind of a regular amount each quarter going forward. So that product looks good. So I think we'll have revenue, therefore, we'll have margin. The WQAR or Edge+ product, we're seeing huge opportunities for us. We're working hard to establish a market position. So there's going to be a combination. We have to win some orders, but I think we also have to have a plan to ramp margins as we go forward and capture market share, but I do expect that's going to happen in the year. And then lastly, on the WVSS-II, the weather sensor that we sell, we have contracts in place. We need to get through some certification processes. We're trying to get that product certified on a 737 and on the Embraer 145. That's just because the airlines that are planning to fly this product. If we get those certifications done in 2026, which I'm sure we will, then we'll start to see some hardware sales from that product. And there's also a data or recurring revenue stream from that product. So as we get more units installed, the data sales will go up. And so I don't know all indications to me are that we are going to see some good revenue from that business in 2026. And for sure, that will just drive good margins as well. Nick Corcoran: Great. And maybe one last question for me. I believe the Toronto union contract is coming up for renewal. Any comment on that? Bradley Bourne: I can comment that you are correct. It is coming up for renewal middle of this year. There has been no discussions yet, no negotiations. They haven't started. Typically, we do it kind of towards the end of the contract because you never settle this until the end. But for sure, that's a bit of a risk in 2026. But other than our one instance a couple of years ago, we've been pretty successful in getting through contracts without any disruption. So hopefully, we can do that again this year. Operator: Your next question is from [ Sebastian Sharlin ] from Agave Capital. Unknown Analyst: Following up on the FLYHT amalgamation that happened in December, I know you said the key there is to increase the sales, and I think I see the paths that are open for this. Wondering on the SG&A side because sales and gross margins have been great there. On the SG&A with the amalgamation, should we expect more restructuring in terms of the sales team perhaps combining together or even just the admin side? I think Drew mentioned something about not being sure you can amalgamate them with the Calgary operation. Bradley Bourne: Yes. Let me start with the sales part of it. So I really don't see a path to integrate the sales teams of FTG with FLYHT. And the reason I say that is FTG, we sell basically into original equipment manufacturers. We sell into the Honeywells, Collins, GEs, Boeings, Bombardiers. The FLYHT products are for the aftermarket, and we sell to the airlines. So it's definitely a very different sales channel. The FTG guys are good at what they do. The FLYHT sales guys are good at what they do. So we're not going to integrate the teams, I guess, with one exception that Peter Dimopoulos runs sales and -- has run sales at FTG for a number of years. He's definitely also running sales at FLYHT or running the FLYHT sales team. That's really just to bring the FTG mindset to the FLYHT sales process. But beyond that, not really. And then on the rest of the SG&A on the admin side, we took a lot of cost out last year because they were public before we acquired them and a lot of public company costs. I don't see a lot -- I don't see any real opportunity for SG&A savings going forward. So the key really is to grow the revenue number, and that will bring down the SG&A percent of sales. Unknown Analyst: Great. Super color. I get. So it's more going to be a referral kind of way of working together with the sales teams than integrating. And perhaps the next one is a little more technical for Drew. You mentioned there are -- you guys have a bunch of tax loss carryforwards, especially since you acquired FLYHT, I think it's north of $42 million in Canada, if I'm not mistaken. You mentioned that you will benefit from them, but they're not as a tax asset on the balance sheet yet. Should we expect those to be at some point considered on the balance sheet? I know the condition they need to be likely -- more likely than not to be, I'd say, harvest in the future? Or is that something that's never going to happen? R. Knight: No. So I guess it's a couple of steps. So step one, obviously, was the amalgamation. And the one certainty is as FLYHT becomes profitable, that should be tax-free profit. So that's certainly a good thing. But now that we have the amalgamation done, we've got some work to do just to prove that FLYHT is a same or similar business to FTG, which it's in the ballpark, but it's not exactly the same. So we've got to document that and get a pre-ruling from CRA on the fact that it's a similar business and we can utilize and access those tax losses. Unknown Analyst: Makes sense. And yes, the amalgamation was December 1, which is in the new fiscal year. Would it be reasonable to believe that work would be done by the end of this fiscal year? R. Knight: It's reasonable to believe that the work will start in this fiscal year. It's just starting now. So we're certainly targeting to get it done by the end of the year, but it could bleed into early 2027. But I would say that FLYHT broke even or was slightly profitable in 2025. And the plans for 2026, as Brad mentioned, there's a bunch of sales opportunities and growing the top line there. We expect FLYHT to be profitable, and that should be tax-free profit. Unknown Analyst: Great. That's helpful. Perhaps the last one for Brad. You mentioned input costs sometimes because of crossing the border, input costs coming from the U.S., for example, increasing the product cost and then that you are already discussing to pass on through those to customers. More out of curiosity, do your products, especially the circuit boards use RAM, the memory chips, which have been on a tear recently in terms of price increase? Or are they not in your product? Bradley Bourne: No. We don't. So that's not our issue at all for sure. It's just -- it really is most of the circuit boards in the world are made in Asia. So the supply chain really is mostly in Asia. So when we make them here, we're importing products. Obviously, for our U.S. sites, we import it into the U.S., but even for Canada, sometimes the product comes from Asia to the U.S. and Canada. So we are purely seeing tariff cost impacts on a lot of the raw materials for circuit boards. So we are yes, working with customers to pass it on. They don't like it, but we don't like it either. So we're just trying to find a way to be fair. We didn't cause it. They didn't cause it. We just got to work together to manage our business. Unknown Analyst: Okay. So no RAM memory chips kind of included in the product need to be to worry about. Great. Operator: Your next question is from Steve Hansen from Raymond James. Steven Hansen: Just a quick follow-up. I know you referenced the India facility to be done in 2Q and you've got equipment on order. How should we think about the ramp of that facility through the back half of '26 and into '27? Bradley Bourne: Yes. So a couple of things. It's partly what I said on for my other side. So for India, today, we have 2 employees. We are just starting the process to staff up. There's going along with building the building, getting equipment, we got to hire the people and train the people. The revenue impact in 2026 is negligible. We're going to be spending our time training people, building product, going through government or industry certifications like AS9100, that type of thing, customer approvals. So negligible revenue this year. Hopefully, in 2027, we start to see some benefit from that. But I honestly have not tried to put a number on it for 2027 yet. Steven Hansen: Okay. That's helpful. And then just lastly, on the corp dev, you referenced you're looking at a number of different opportunities. I think you cited sort of three buckets. Is there one in particular that you're focused on or that you think has the best opportunity set for you guys? I think you referenced Airbus exposure being one in particular. But just how do you think about that set of opportunities as they stand today? Bradley Bourne: Yes. I mean I'm always interested and always looking. Definitely, as I've said a million times, my plan for FTG is always try to find a way to double the business every 5 years. To do that, I go to have organic growth plus I could do some acquisitions. So it's always on the table, something we're looking at. Definitely, FLYHT's well under control. So we're not focused on trying to integrate that. So we can look forward into what's next. Yes, Europe is of interest to me. I've said that for a bunch of reasons, it's of interest to me because of Airbus. It's of interest to me because NATO defense spending is ramping so much. It's of interest to me because it's a jurisdiction with no real risk of tariffs. So lots of reasons why I'm interested in it. And so that's probably top of my list. But beyond that, certain technologies, if the right deal became available, I'd be interested in those. And so the only thing I would say, I'm not looking to expand beyond my current product base, whatever we do would still be focused in circuits or cockpit products. And that won't change because I, for sure, believe we can do another couple of doubles at FTG, still staying focused in these product areas. Steven Hansen: Okay. Great. And actually, just one last one then, if I may, and it dovetails on your last remark is just how do you think about the new platform developments out there? The DOD down South has got a big new push towards new modernized technology and warfare. And just trying to think about how you decide to leverage that theme or get involved with that theme over time, recognizing that the volumes are still relatively low today. Bradley Bourne: Yes. It's an important topic for us for sure that my belief is the best way for FTG to change or grow our market share is to get involved in new platforms when they're in development. And so there's lots of new platforms in development in the U.S., and it could be helicopters, it's fighters, it's drones, there's just everywhere. There's lots of new developments going on. So we are doing whatever we can to try to secure a position on these and then ride them into production in the coming years. None of this happens quickly. But you have to be there at the beginning if you want a shot at that production revenue stream. So we definitely do that, and we will continue to do it. And I'd say, particularly on the defense side right now, there's a lot of opportunities. Operator: [Operator Instructions] And your next question is from Russell Stanley from Beacon Securities. Russell Stanley: Just a question on the circuits business. Wondering if you can talk about space, how much of a share that is now of revenue and maybe what opportunities you're seeing there given the growth potential? Bradley Bourne: Yes. Well, we're interested in. And I guess I don't talk about it a lot. I always say I want to be in all these different market segments because they all go through their own cycles. And then I don't talk about space, but we definitely do circuit boards for space. And interestingly enough, we do cockpit products for space, too. And -- now we have products on the Orion spacecraft that hopefully will be flying shortly. It almost took off in February, but maybe in March. But back on the circuit board side, it's of interest to us. I'd say our history is we're not involved -- we haven't been involved in the crazy high-volume programs like Starlink and that. But it's of interest to us as a -- I can say, a relatively small percentage of our overall business. We do some work with MDA in Canada. We do some work in the U.S. We do work with Honeywell Space. So yes, but it's a small percentage of our overall business. Operator: There are no further questions at this time. Please proceed. Bradley Bourne: Okay. Thank you. A replay of the call will be available until Thursday, March 19, at the numbers on our press release. The replay will also be available on our website in a few days. I thank you all for your interest and participation. Thank you. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.
Operator: Hello, and thank you for standing by. Welcome to QBE Fiscal Year 2025 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Andrew Horton, Group Chief Financial Officer (sic) [ Chief Executive Officer]. Sir, you may begin. Andrew Horton: Good morning, everyone, and let's begin. I'm here with Chris Killourhy, our new group CFO. Hopefully, you've had a chance to take a look at our release this morning. We've had a great year with an ROE just shy of 20%. And we're very proud of these results. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters and culture. I pay my respects to the elders past and present, and I extend this respect to any First Nations people joining us today. Moving to Slide 4 with a snapshot of our results. This is a great summary of our performance. We exceeded all our key guidance and targets this year. Headline GWP growth picked up to 7% and tracked ahead of our guidance for mid-single-digit growth. We beat our combined ratio guidance again this year with an excellent result of 91.9%. Our catastrophe experience and an improvement in our crop business drove the majority of the upside relative to the 92.5% we reiterated in November. Profitability is attractive across the majority of portfolios, and we're confident of sustaining strong underwriting performance. We had an exceptional investment result this year. Our high-quality investment portfolio returned 4.9%, driving another record year of income. Collectively, both post-tax profit of USD 2.1 billion and earnings per share were up around 25% for the year. And our return on equity at around 20% is excellent. Capital improved to 1.87x and remains comfortably above our targets. This leaves us with valuable flexibility to support growth alongside active capital management. In November, we announced our first buyback in several years and we wasted no time in getting started through late December. The final dividend of $0.78 takes a full year dividend to $1.09, which is a 50% payout. It's clear the business is in fantastic health with strength across the board from growth to underwriting investments to capital. Moving on to Slide 5. This is a simple summary of our progress in recent years. It's been roughly 4 years since we refreshed our strategy in late 2021. Since then, we've executed well, driving steady improvement in both financial performance and also the key metrics we track around people, culture and customer. This year, we've extended a strong and consistent track record of growth. Underlying organic volume growth continued at 7%, and we have a business that can confidently sustain this trend. We have strong messages on catastrophe costs and reserving. This year, catastrophe costs were $400 million below budget, marking the third consecutive year below allowance. These have not been light cat years by any means, with '23 and '24 amongst the costliest years on record for the industry. And the $130 billion of insured losses in 2025 was only modestly below last year. I'd also remind you that these aggregate figures mask the fact that the insurance industry is picking up a greater share of industry losses as reinsurers have moved further away from the action. We had a favorable reserve development this year, and we've spoken about our confidence in more stable and predictable reserving outcomes. Piecing these elements together, the end outcome is a simple picture. Our combined operating ratio steadily improved, volatility is down and ROE is up. This is driving strong returns for shareholders. Our TSR is roughly double the local market since we launched our strategy, and we see great opportunity ahead. Before passing to Chris to unpack the results in more detail, for the next few moments, I want to take a step back and share how we're thinking about performance over the medium term. So turning to Slide 6. This is a summary of how we think about the industry outlook and the 5 medium-term aspirations since we have for QBE. The audience -- this audience will appreciate the increasing complexity in the world, which is resulting in a risk landscape for our customers, which is highly complex. Risk awareness is elevated and the role commercial P&C has to play has never been more important. With this complexity, the industry is needed to become more mature and sophisticated, but ultimately, those in the industry, you truly understand risk, plus of scale, diversified operations are going to be in the driver's seat over coming years. We have great breadth and diversification in the business with capacity to deploy across all our key markets, spanning insurance and reinsurance. I do think this point is underappreciated, but is going to become more obvious and valued asset for QBE as we continue to execute around these aspirations. Delivering durable growth while sustaining strong margins and returns. So turning to Slide 7 on growth. The great breadth in our portfolio means there will always be classes we can grow. Looking out over the medium term, there are 3 overarching pillars to how we think about growth. Firstly, we remain in supportive market conditions. While rates are softening in parts of the portfolio, this is coming from a starting point of very strong rate adequacy. As we look to 2026, over 90% of our portfolio is expected to be at or above rate adequacy, defined by the pricing we need to achieve target returns. This foundation of strong and broadly distributed profitability is an excellent starting point as we look to grow the business. This picture may not be present every year, though with a diversified business, we'll always have flexibility to navigate various product cycles. Touching on some of the structural opportunities over the coming decade. Many of the global investment megatrends on this graphic will give rise to new risks and in some cases, rapid growth in insurance value pools. We have broad expertise across most specialty and commercial lines with leading underwriters and strong relationships. It's hard for many in the market to match our capacity to deploy collaboratively across 3 divisions, multiple classes of business covering both insurance and reinsurance. We'll continue to work with our major trading partners to provide innovative solutions and position into these fastest-growing economic megatrends. I'll leave you with a handful of data points. We have a leading energy and renewables presence who truly shine when brokers are looking for innovation. Investment in clean energy will be substantial, resulting in insurance premiums in the tens of billions of dollars. We're finding our strong position in these segments dovetail nicely into the growing energy requirements supporting artificial intelligence. Alongside this, the construction of data centers will drive significant growth in premium across multiple classes over the next few years. And as the world continues to digitize, cybersecurity moves higher as a risk for companies of all sizes, while AI liability will be of increasing focus. Cyber premiums around $15 billion today are expected to increase towards $30 billion at the end of this decade. Growing mobility demands will result in more boats, planes and trucks, while infrastructure investments support growing and urbanizing populations will be substantial. So plenty of areas where premium growth will substantially outpace the general economy, and we're well placed to capture a sensible share in the context of a well-balanced portfolio. The final pillar speaks to some topical trends in the industry. Firstly, surrounding the structural increase in market facilitization. We have a leading portfolio solutions franchise, which has been around for roughly 2 decades. We've seen and participated in the complete journey of this burgeoning market and learned a lot along the way. Today, our Portfolio Solutions team manage about 20 different facilities, and we lead two of the world's largest. Facilitization is only going to increase as it represents a more efficient option for the customer and broker and if structured correctly, strong performance for the carrier. In and around each of the investment megatrends just touched on, there are facilities already being developed. And as a market leader, we'll get the first look. As more business gets facilitized, it will come at the expense of those without a strong market proposition or genuine underwriting expertise. This will ultimately consolidate capacity toward market leaders. Finally, on AI, we continue to build, deploy and partner to enhance many aspects of our business. AI will allow us to boost underwriter productivity, unlock sharper risk insights and become a more efficient and effective business. We have a significant amount of proprietary data and market insights, which have been built through market-leading franchises in operation for many decades. AI can help us to better unlock and leverage these data assets and further enhance our market position. So let's turn to Slide 8. This slide brings many of these points together, detailing our new medium-term outlook. Our financial outlook has been primarily based around a single year ahead with both premium growth and the combined ratio. With where we stand today, having restored performance and pivoted the business as an organization, our strategic focus is much longer dated. The quality of our earnings is substantially improved with better breadth, stability and visibility. Our planning is more medium term, and we organize ourselves around a much clearer view of value creation for the enterprise. So we want to start sharing some of that with you and begin translating our medium-term plans into our guidance. To get ahead of the obvious question, medium term for us here means the next 3 years. So starting with growth, we see a continuation of mid-single-digit GWP growth over the medium term. Where we can do better and deploy capital at strong returns, we'll always hold a preference to grow the business. Over the medium term, we see our Group ROE trending in the 15% plus range. This assumes an effective tax rate of around 25% and an investment return sustain in the 3% plus range, which is essentially what futures predict today. Underpinning the outlook is a view that combined ratios are fairly sustainable around current levels. We spoke in August about the breadth in our business with 50-plus sales, which aggregate up to around 14 underwriting pools. Each have different P&L characteristics, different claims drivers, different capital requirements and different dimensions across combined ratio and investment income. How effective we are as capital allocators will be a key driver of our performance as we look to deploy our capital to optimize risk-adjusted returns and drive value. With 2025 marking QBE's fourth consecutive double-digit ROE, on the right-hand side, you can see the extent to which we've driven compelling value for our shareholders. As we continue to execute over the medium term, we should be able to extend this picture where a 15% plus ROE profile will continue to deliver great value for shareholders. Before moving on, I want to emphasize that this is not signaling any relaxation of our focus on combined ratio. It will always be a key metric for QBE. Now ultimately, we manage the business to a view of return on equity, and the combined ratio is really an output of our portfolio mix. So moving to Slide 9. Having discussed growth and returns, this slide gives some color on how capital fits into the picture. We shared our capital allocation framework last year. It's relatively straightforward. We have an aspiration to grow the business, provided we can achieve adequate returns. All our pricing models and view of rate adequacy is calibrated to an ROE hurdle, which works out to roughly 1.5x our Weighted Average Cost of Capital. This is a hurdle, not a ceiling, which many parts of the portfolio are comfortably clearing. We just delivered an ROE of almost 20% and see returns holding over the hurdle over the medium term. We have a 40% to 60% dividend payout ratio, which should be highly dependable through market and economic cycles. And finally, we have additional levers to distribute surplus capital beyond the dividend as needed, as we recently highlighted with the buyback announcement. Had a small window in December to start buying before the close period and completed around $90 million of the total. I want to build a track record of following through on these announcements and moving through them with some pace. So looking ahead, the simple outlook of mid-single-digit growth alongside returns of 15% plus ROE suggests a very healthy picture for capital. We have ample flexibility to support growth and likely see ongoing surplus capital generation on top. To ensure we optimize returns, we'll look to return any surplus. This will be an annual assessment as we exit the year where we have full visibility of our current period profits and growth plans for the year ahead. The final message on this slide relates to alternative capital. We've historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost of capital and capital efficiency perspective. This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships. I'm going to stop here and pass to Chris to take you through the financials and should take a moment to welcome him this morning. As you know, we placed a great deal of emphasis on consistency and stability of management in recent years. We've been focused on building greater talent depth and genuine succession pathways. I'm proud that we've been able to announce Chris into his new role in such a quick time. He's a highly experienced and talented executive and having operated through a number of key roles for QBE in the past decade, will no doubt settle him well and become a great asset for us. So over to you, Chris. Christopher Killourhy: Thank you, Andrew, and good morning, everyone. It really is a privilege for me to be speaking for the first time today as Group CFO. As Andrew mentioned, I've been lucky enough to be with QBE for around 12 years now across actuarial leadership, divisional CFO roles and most recently leading QBE Re. Across those roles, 2 things have consistently stood out, the depth of our talent and the strength of our culture. And it's that foundation that I believe that underpins the performance we're sharing with you today. Turning first to Slide 11. 2025 was an excellent year. We exceeded plans and delivered QBE's strongest Return on Equity in many years. Gross written premium grew 7% to $24 billion, around 8% if we exclude crop and exit. The combined ratio improved to 91.9%. That's more than a better -- that's more than 1 point better than last year and comfortably ahead of our outlook of 92.5%. This result is underpinned by both prudent reserving and a continued focus on portfolio optimization. Investment income was around $1.6 billion, delivering a return of 4.9%. The net impact from ALM activities was again broadly neutral, and our tax rate for the year was 24%, modestly better than an actual tax rate of around 25%, and that's driven by the mix of our earnings tilting towards our North American tax group. Profit for the year was a record $2.1 billion. Earnings per share grew around 25% and our ROE has increased to 19.8%. Our capital position also remains very strong with a PCA multiple of 1.87. Our final dividend of AUD 0.78 takes the full-year dividend to AUD 1.09, up 25%. The payout ratio remains at 50%, a level we see as sustainable. Above this level, it's likely that we will continue to use buybacks to distribute surplus capital. We've also increased the franking rate of the final dividend to 30%, which we expect to maintain going forward. Turning now to Slide 12. Headline GWP growth of 7% exceeds our mid-single-digit outlook with underlying growth close to 8% if we exclude exits. This is a full 4 points higher than headline growth in 2024 and highlights the impressive momentum we continue to see across the business. Growth continues to be skewed to the Northern Hemisphere led by reinsurance, Accident and Health, portfolio solutions and targeted adjacencies in North America. Australia Pacific was broadly stable, but the story here is momentum, which improved through the second half with a return to ex-rate growth that we expect to continue into 2026. We entered 2025 with a clear set of initiatives to restore growth in ASPAC, including new partnerships, distribution improvements and a more dynamic approach to pricing. It's been great to see the outcome of execution as these actions gain traction. A brief comment on our crop business and its impact on Net Insurance Revenue. Crop GWP increased 11% to $4.3 billion. However, given our focus on portfolio optimization, Net Insurance Revenue actually declined by 6% over the period. This is because we've increased sessions to the federal reinsurance pool, materially reducing exposure to those states we regard as underperforming, including California and Texas. This does, however, weigh on Group Net Insurance Revenue growth in 2025. But in 2026, I'm pleased to say that Group GWP growth and Net Insurance Revenue growth should be much more closely aligned. Before moving on, it's worth remembering that our ex-rate growth here includes both volume and exposure adjustments. And these exposure adjustments play an important role in managing inflation. Our underwriters generally adjust on sums insured for property lines on wage rolls or turnover for workers' compensation and liability lines. And in the case of energy and marine lines, premiums often adjust off commodity prices. Turning to Slide 13 for a little more on the group's underwriting performance. Underwriting performance was excellent with a combined ratio of 91.9%. Catastrophe costs were around $750 million, which is well below allowance, but this is a pleasing outcome in a year where industry losses have been pegged at $130 billion, including a challenging year here in Australia and the devastating California wildfires. We shared catastrophe costs at our November update and losses have increased only modestly from this level. I do think that highlights the quality of the portfolio given the challenges observed here through the Australian summer. I'd also remind you that if we cast the mind back to the first half, we were comfortable with our catastrophe budget then in what was actually the most expensive first half on record for the insurance industry. Turning now [Audio Gap] to reserving. I do believe we're now starting to see the impact of our more prudent reserving strategy that Andrew and Inder have outlined over recent years. During 2025, we recognized a modest central estimate release of $40 million, and that's our first full year [Audio Gap] in several years driven by short-tail lines plus LMI and CTP [Audio Gap] while retaining prudence against more uncertain longer-tail lines. Our reserve strength and resilience has steadily improved over recent years, and I'm confident we're exiting 2025 with group reserves in the strongest position we've held for many years [Audio Gap] needed. Importantly, these charts also highlight the extent to which we're managing to multiple pricing cycles. This diversification provides a meaningful lever through which QBE can manage the overall underwriting cycle. This picture results in an overall rate increase of around 1% for the year. If we exclude Property business and Lloyd's, the rate increase is actually closer to 4%, which have been fairly steady throughout the year. Premium rate adequacy remains comfortably in excess of targets across the group, and as Andrew touched on, is broadly distributed across the business as we look to 2026. The expense ratio was 12.4%, while absorbing an elevated investment envelope of around $300 million. These investments are supporting modernization, including the migration of Australia Pacific portfolios onto our new cloud-based Guidewire platform. Importantly, expense growth has moderated meaningfully now at 5% from closer to 10% over the past few periods as we're starting to drive greater efficiencies. Highlighted another way, in 2025, headline GWP growth was 7%, which contrasts favorably with a headcount reduction of 1% over the same period. Efficiency, along with capital allocation is going to be a major focus for me, and we've got a meaningful opportunity as we drive greater benefits from recent investments embed the deployment of AI and work ruthlessly to eradicate process inefficiency. Looking ahead, we expect an expense ratio of around 12% in 2026 and for that to guide lower over the medium term. Turning now to Slide 14 with some more information on the performance of each of our divisions. Pleasingly, all 3 divisions have delivered margin expansion. Under Julie's leadership, North America improved by over 1 point despite pressure in Accident & Health and Aviation. Starting with our crop business, this business delivered a result of 88%. That's our strongest performance in 7 years. The positive performance reflects in part the early benefits of the strategic overhaul we've highlighted throughout the year. We reset our leadership team, recalibrated our utilization of the federal fund and repositioned our private products portfolio. Further benefit from these actions is anticipated in 2026. Alongside the benefits from internal actions, the portfolio was supported by better-than-average yields in a number of our key Midwest states, including the Dakotas, Iowa, Illinois, and Nebraska. Our Commercial Lines business in North America has also performed well. However, as flagged earlier, our specialty business has been impacted by claims activity in A&H and Aviation, resulting in a combined operating ratio of over 100% for our U.S. specialty business. I'd like to say some more on Accident & Health. This is an excellent business in a growing sector of the economy with strong market position, good track record and a highly attractive through-cycle return on capital. We write close to $1 billion in premium. And this year, we did see a lift in claims severity on account of rising treatment costs, medical advancements and the demand for new drugs. The team has responded quickly through rate, policy terms, and attachment points. Around 70% of the book renews at 1 January, and we achieved a rate increase north of 20% in addition to tightening terms. We'll continue to monitor loss trend, and we'll take whatever action necessary to return this book to profitability. Moving now to International. It's been another year of impressive performance for Jason's business with growth across all segments and a combined ratio of 88.5%. We did benefit from cat running below allowance, which offset some reserve strengthening in certain liability and marine portfolios as called out at the half. Given 2 of our more cycle-exposed segments, namely Lloyd's and Reinsurance, reside in International, it's sensible to say a little more on rate here. Rate for International was fairly flat for the year, where our U.K., Europe and reinsurance businesses saw rates in the low to mid-single digits, this was partly offset by some softening in our Lloyd's portfolio. Putting this in some context, however, since 2018, our Lloyd's business has benefited from cumulative rate change to 2025 of around 60%. This contrasts with the rate reduction of around 3% at the 1/1 renewals last month. Similarly, for QBE Re, rates were down 1% at 1/1, where we renew over half the book, but that contrasts with cumulative rate increases of around 65% since 2017. We do see it as a positive that competition is largely restricted to rate, while discipline remains around terms and conditions. For both QBE Re and Lloyd's, terms and conditions, attachment points, how we selectively deploy capital year-on-year and how we leverage facultative reinsurance are frequently more important than rate when it comes to delivering performance. Finally, on Australia Pacific, SES business had an excellent year with the combined ratio improving significantly, supported by favorable reserve development across 15 of our 20 sales, along with easing inflation. The impressive performance is despite catastrophe costs running modestly over budget in what we know was an active catastrophe year. Overall, rate increases tracked in the low single digits, fairly stable on what we reported at the half year. And looking ahead, we'll benefit from substantial CTP rate increases put through in recent months, including around 15% in New South Wales. Turning now to our investment results on Slide 15. Our investment portfolio delivered another record result with income of around $1.63 billion, representing a return of around 4.9%. Risk assets returned almost 10%, while fixed income yields exited the year at approximately 3.7%. And for reference, futures markets currently imply the fixed income yield will exit 2026 at around 3.8%. Investment FUM increased by 17% this year, with roughly 1/3 of that attributable to the weakening U.S. dollar. Our assets and liabilities are, however, well insulated from FX. And while funds under management have increased, so too have our claims reserves. Similarly, the increased prescribed capital amount associated with higher FUM and reserves is absorbed by an increase in available capital, resulting in negligible impact on the PCA multiple. There remains a modest FX gain of $24 million in the group P&L, and that's reported within the expenses and other line shown here in this table. Investment mix shifted slightly with risk assets of 15% of the portfolio. The OCI fixed income book now stands at around $3.5 billion or 12% of our overall core fixed income portfolio. Moving now to Slide 16 and an update on reinsurance. We achieved another strong and importantly, sustainable reinsurance outcome. Our diversification by region and class of business means we have a highly sought-after proposition in the market. Given the support of our strong reinsurer relationships, we were again able to reduce the attachment point of our CAP program now to $250 million. That's a reduction of almost 40% in just 2 years. And this is at a time where in the market more generally, attachment points and terms and conditions are rarely moving. Ultimately, we see this as strong external validation of our approach to portfolio management and the initiatives we've executed to reduce problematic exposures. The lower cat retentions have allowed us to modestly reduce the cat budget to $1.13 billion, whilst maintaining sufficiency around the 80th percentile. Whilst the allowance has been trending lower, group property premiums have been fairly stable. And the chart here summarizes catastrophe experience for our North American division and helps illustrate the improvements in our catastrophe portfolio. You may recall that historically, this division had driven much of our cat volatility. It's a simple picture, highlighting the impact of portfolio remediation led by Peter and Julie, including the exit of multiple programs, the middle market business and our consumer portfolios. Despite these exits, our share of regional property premium is down only modestly in contrast to a much more significant fall in our share of property losses. Finally, on reinsurance, I did want to expand on Andrew's earlier comments about alternative capital. Following the launch of QB Re's first Cat Bonds in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity whilst also reducing our overall cost of capital. We also launched the casualty sidecar on the QB Re casualty portfolio. As you know, you can think of the mechanics of the sidecar is similar to that of a quota share. And we've effectively quota shared around 1/3 of the casualty reinsurance portfolio for the 2025 underwriting year. In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk and ultimately support more capital-efficient growth. These are early transactions as we build our profile in these markets, but I do see this space as important as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns. Turning now to my final slide, Slide 17. I'm fortunate to be inheriting a balance sheet in excellent health. We received credit rating upgrades from both S&P and Fitch moving to AA- for the first time. The year-end PCA multiple has increased to 1.87. And following payment of the final dividend and adjusting for the buyback, the pro forma PCA reduces to 1.73. Alongside our 50% payout ratio, the buyback brings our total shareholder distributions to around 65% of this year's profits. And turning finally to funding. We retired our Tier 1 notes effectively replacing this funding with Tier 2 issuance. This reduces our cost of capital and leaves us with significant flexibility to engage these markets opportunistically if we need to in the future. This does mean that our debt to capital increased by around 4 points to 24%, but we expect gearing will glide back toward the middle of our target range over the medium term. It's been a pleasure to have the opportunity to present what I believe are a very positive set of results today. But before passing back to Andrew, I wanted to briefly touch on a small transaction we announced earlier in the day. We've agreed terms to sell and exit our global trade credit and surety business, chiefly composed of our Australian and U.K. trade credit operations. While this business has performed well over an extended period underpinned by an excellent team, we recognize its leverage to macroeconomic settings. The exit will allow us to recycle capital into our core focus areas where we see a greater opportunity for long-term growth. Total premiums under consideration around $200 million, and we're planning to close later in the year. The modest upfront proceeds and capital release will add to today's messages around capital strength. I'll pause here and hand back to Andrew. Andrew Horton: Thanks, Chris. We gave our 2026 outlook back in November, and there's no change today. We see growth continuing in the mid-single digits and a combined ratio of around 92.5%. We expect the pace of growth will sustain over the medium term and see a solid 15% plus outlook for ROE. We've included a quick bridge here of our 2025 underwriting result to this year's guidance of 92.5%. I appreciate many will adjust our reported result of 91.9% for the favorable catastrophe experience and this leaves you in the early 94% range. Consistent with what we flagged in November, there were 3 categories driving the bridge to our outlook. Firstly, reinsurance spend and our cat budget. We achieved quite significant savings on the new program and our cat budget will be a touch lower year-over-year. Secondly, on expenses, we had an expense ratio of around 12.4% this year and should be able to land at 12% or better in 2026. And finally, on ex-cat claims. We see support from pricing initiatives. Chris spoke to the substantive 20-plus increase at 1/1 in A&H. While small, our U.S. Aviation portfolio recently saw rate increases of over 40% for the large airline segment. And closer to home, we've now put through mid-teen increases in New South Wales CTP. Where there's claims activity the industry is showing discipline and pushing for rate. Our performance management agenda has plenty of remaining upside, particularly as we work through remaining underperforming cells. And finally, we've spoken about the elevated level of large claim costs where we expect some normalization. Through the recent reinsurance renewal, we're also able to lower the retention for our risk excess of loss cover. The coverage were generally attached for non-cat large claims of $50 million previously and in many instances, that is now just $25 million. This will help manage large claim volatility. So I hope that gives you a bit more clarity on how we're seeing things into 2026. We'll hold our usual first quarter update alongside our AGM on May 8. Before wrapping up, I do want to thank our 13,000 people for their contribution to these outstanding results, which we can all be proud of. With that, I want to thank you for joining us. And before passing to the operator, I want to remind you, we'll be taking just 2 questions per analyst. Thank you once again. Operator: [Operator Instructions] Our first question comes from the line of Andrew Buncombe with Macquarie. Andrew Buncombe: Congratulations on a great result. Just the first one for me. In previous years, there's been some surprise around how you pay out the first half dividend, just to set us off on the right track for next year. Can you just remind everybody how you think about the payout in the first half results for dividends? Andrew Horton: Yes, exactly. I think we're paying it, Andrew, on a 1/3, 2/3 basis. I was just getting confirmation before I made that comment. So we're just seeing 1/3, 2/3 rather than 50% of the first half profit. And that sort of takes out the volatility. So we look at 1/3 of where we're forecasting to be at the end of the year rather than 50% of where we are at the half year. Andrew Buncombe: Excellent. And then the other one from me was just can you remind us whether there's any benefit to the FY '26 combined ratio from the tail of any of the roll-off of the North American portfolio, the noncore portfolios? Andrew Horton: No. So we're expecting not to talk about the roll-off of the North American book anymore. It's just an all-inclusive number. So no expected benefit, no expected negativity from it. It's relatively small at this point in time, so we can absorb it within the North American numbers. Andrew Buncombe: My congratulations again. Andrew Horton: Thanks, Andrew. Operator: Our next question comes from the line of Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the casualty sidecar? I think you mentioned reinsuring about 1/3 of the risk. But can you remind us the dollar figures involved? Because I thought this sounded relatively meaningful. Andrew Horton: Yes. Chris, can I hand to you as you were running that business when we did it. Christopher Killourhy: Sure. I mean the size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get. It's roughly -- the ratio is roughly sort of 1:3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up and we bring more years in? Andrei Stadnik: For my second question, you've spoken a lot about all facilities and how you've been growing that. Can you talk a little bit more maybe about some of the efficiency benefits? Are you seeing anything on the cost there, particularly in the context where there's some really heavy criticism about the cost of operating in the Lloyd's market and how long they're taking to replatform. So the way you run a facility, is that a way to maybe help with that? Andrew Horton: Yes. So I mean, the great beauty about them is the facilities are both Lloyd's and some that are non-Lloyd's. From our point of view, we write about $1.5 billion of premium with a group of around 20 people. So our own costs of doing it are low. For brokers, it's very efficient for them because they have a preplaced amount, so they don't need to open broke that amount within the facility. So the brokers costs go down, and they pass some of that on to the clients or some cost to the clients. So the clients benefit from a lower price. The brokers have lower costs, and we have relatively low cost to actually write it. So generally, it works out well for the buyer of insurance, the intermediary and ourselves. And that's why I believe these are things that are going to stay. The market did have a facilitization 25, 30 years ago. And I don't think there was that balance of dividing up the economic benefit, particularly well. And therefore, they generally collapsed in the late 90s. These are much larger, much more structural and the client and buyer benefits quite a lot. Operator: Our next question comes from the line of Kieren Chidgey with UBS. Kieren Chidgey: Andrew and Chris, just first question on the North American combined ratio detail. you've provided today on Slide 14, just sort of 97.7% at a divisional level, obviously, including crop. And I think you're flagging a profit in noncore this period. So it does imply the core business, excluding crop and that noncore is well into the 100% level. And I appreciate Accident & Health, you've already flagged as an issue in aviation, but just keen if you can give us an idea around how the rest of the U.S. business was tracking last year ex those 2 areas, particularly given it was a benign [ cat year ] and it looks like you had a bit of PYD support there as well. Andrew Horton: Yes. So I have a go at starting on that. So as it breaks down into crop, commercial and specialty, the crop business obviously had a very good year as we've talked about. The commercial also had a good year. That's broken down between the property programs, which not surprisingly performed well. You made the comment about having a few [ cat ] percentage of losses also dropped. So the activity we've taken to rebound that portfolio has worked well. A commercial casualty within that business was also good, a bit of stress in workers' comp in that division. But overall, the commercial performed well. So the challenge, I think, as Chris just mentioned, was almost all in the specialty and had a combination of factors. It has the A&H book, does have aviation, which had 1 or 2 large losses. We did pick up some prior year negative in transaction liability, which the market has recognized in the U.S., and we've seen rate increase quite considerably in transaction liability, particularly in the U.S. on the back of it. And 1 or 2 of the financial lines programs did not perform well. So you're right. I think the overall combined ratio, excluding crop, is close to 100% year-on-year, but we see the potential improvement in the A&H. We think we're on top of the transaction liability in the market moving. Financial lines programs have either dropped or changed. So we see that as a positive, although it's negative in 2025, positive for the potential performance of the business in 2026. Kieren Chidgey: Andrew, the ex rate growth in the U.S. in the year ahead, sort of outside obviously, the repricing in A&H and aviation, are you actually growing in those specialty areas have been quite weak in the past year? Andrew Horton: So I think that's a great question. I don't think there'll be any ex rate growth, particularly in A&H. We'll probably be looking at the rate and ensuring we've got the right clients and the right portfolio. I think there will be some extra growth in aviation. We've been working on that team for a number of years now. It's a great team. So we do want to build on that. And then within the U.S., most other lines will be looking for ex rate growth in 2026. Kieren Chidgey: My second question is just on reinsurance you flagging significant reinsurance savings in the year ahead, I guess, not out of line with sort of double-digit renewal reductions we've heard sort of globally at 1 January, but there's quite a bit that goes on in your reinsurance line with the crop quota share and the like. Can you give us a better feel for how much cat reinsurance spend is and roughly how meaningful this rate reduction on the cat cover is into 2026. I know it's complicated as well with some of the reinsurance transactions, Chris has probably talked about earlier. Andrew Horton: Yes, it's not going to be an easy one to answer on this call. We may have to come back to it. And as you say, we saw the reductions in the property cat reinsurance, which is in line with what people have been talking about. And it seems to vary between 10% and 20% depending on who you talk to and whether you've changed your retention or not. So we're definitely in the mid-teens in terms of price savings on the cat reinsurance. I think we'll have to come back to you on the mix because you're right, there's some in our reinsurance spend. There's always going to be some complexity of how much we reinsure in the crop world, and we're looking at how do we balance what we retain and what we reinsure. And we do this reinsurance to the federal funds in the U.S., but we also buy some external reinsurance. And if we're comfortable about the crop performance, we may lower our external reinsurance. It's not a simple one to work out exactly what percentage of our gross premiums we're going to reinsure out. Chris, I don't know if you have a better answer than that, but we may need to come back to you and give you a bit more depth on that outside this call. Christopher Killourhy: Yes. I think on the breakdown, we can come back with more detail. I think to Andrew's point that we hugely value the relationships we have with our reinsurers. So we don't want to go into too much of exactly where we got to on the final negotiation. But to Andrew's point, we see the -- you'd have seen ranges between 15% to 20%, and we'd like to think we came out towards the better side of that. But I think most meaningfully for us is the fact that we're able to secure the reduction in attachment point and also the cat bond we placed this year has just helped us a little bit with bringing down the overall cost of the program. Kieren Chidgey: Okay. You can't sort of give us a rough feel for that combined cat budget reinsurance building block on your core waterfall, how you're viewing that from a materiality point of view next year? You've been quite clear on the expense ratio improvement. Andrew Horton: Yes. Well, on the waterfall, it's obviously not coming from crop. It's coming from the cat mainly because that is the one where we're seeing rate reductions. I don't know, we obviously give it in size on the waterfall. So let's come back to you and we can come up something on that. Christopher Killourhy: It's approaching a point improvement, maybe in the region of 80 basis points for both the cat, the combined benefit of the reduction in the cat allowance and also the reduction in the cost of the program. So in the aggregate, it's around about 80 basis points. Operator: Our next question comes from the line of Julian Braganza with Goldman Sachs. Julian Braganza: Just the first one, just looking at your initial estimate of ultimate claims for 2025. You sort of alluded to that. It's looking very strong and improved materially just over the last few years, particularly from 2024. Just want to understand, one, how much of that improvement is due to mix versus resilience? What are your expectations here for leases over the medium term? And also just what's baked in your ROE guidance for reserve releases as well over the medium term? That's the first question. Andrew Horton: So I mean part of it is what we've been talking about in a number of years of ensuring we are reserving well for claims, especially medium and long-term claims, and we do think that's building up, which is a positive sign for us. I don't know whether you've got anything else to add to. Christopher Killourhy: Yes. I mean I think in terms of as we look forward, we're not sort of factoring anything in specifically for reserve releases in the -- in our guidance. But if you -- exactly to Andrew's point, if we just think of the math that we're holding on to long tail -- on our long tail portfolio, we're holding on to the loss ratios for a period of 3 years. So by definition, you would expect that to all things being equal to translate into some releases, but we haven't factored that explicitly into the guidance we've given today. Julian Braganza: Okay. And just to clarify as well, your ROE guidance assumes 80% POA on the cat budget similar to what you've structured this year and last year? Just the clarification. Andrew Horton: No, definitely Yes. Julian Braganza: Awesome. Okay. And then just a second question. In terms of just your cat loading, 5% to 6% of NEP, is there an opportunity to bring that down further as you think about derisking your business from a cat perspective, look at some of your global peers, they're around the low single-digit mark. We've seen your MERs come off. We've seen noncore losses run off as well. So just wondering how you're thinking about that over the medium term? Andrew Horton: Yes, I don't think we necessarily think about lowering it. What we've spent a reasonable amount of time over the past few years was taking out the cat losses, which were too large. In other words, it wasn't in good balance. So I think writing property business in catastrophe zones is fine as long as you're in control of the balance of it, you don't have too much of it, you're comfortable with the reinsurance program you have, and you keep back testing that against various catastrophic losses that you haven't got an outsized share. So we haven't really thought in bringing it down to a lower level. And while it delivers a good ROE and we can cope with that volatility within the rest of the book. We have not set ourselves a target of getting the 5% to 6% down to 4% to 5% to 3% to 4%. So we actually quite like it at the pricing it is, complements everything else we do. It makes us important to brokers and clients when we can do both. So no, we're not thinking of lowering it. Operator: Our next question comes from the line of Nigel Pittaway with Citi. Nigel Pittaway: First of all, a question on growth. I mean, Andrew, you mentioned that, obviously, at the moment, you're still seeing supportive market conditions with competition confined to rates and where necessary, people are disciplined in pushing for rate. I mean do you see any risk to that? And then in that context, do you expect your sort of GWP growth in '26 to be in similar areas to '25, obviously, taking into account the fact you've said there'll be no unit growth in A&H and a bit of pickup in growth in Australia. Andrew Horton: So I think it's a great point. So I feel comfortable in the medium term of looking at the growth. So 2026, definitely, with the breadth of the book and the support we're getting in pricing and the areas we're focusing on, feel pretty comfortable about that. We do believe QBE Re and the portfolio solutions and cyber will continue to grow into 2026, and those were 3 good growth areas for us in 2025. We're trying to think of other areas. There are new areas, and we touched on earlier on about as renewables going to grow or the energy world going to grow and data centers, a lot of talk about insurance and data centers, and I'm sure we'll get a share of that. So I feel pretty comfortable about the 2026 growth. We're also trying to balance it of not putting too much stress into the system, and I've talked about this before, it growing mid-single digit is not trying to overstress us. We're not forced into growth in any way, shape or form because fundamentally, margin is by far the most important thing. And we're trying to get this margin under as much control as possible and manage the volatility around that margin. So yes, I feel pretty good about 2026 where the rating environment is. Just as a touch point, rates on Jan 1, where we write a reasonable amount of the international business virtually in line -- almost exactly in line with where we thought they were going to be. So we haven't seen anything in the first 1.5 months that takes us away from this potential growth for 2026. Nigel Pittaway: And then I mean in terms of the rate rises and terms and condition changes you've put through in A&H, I mean at 3Q, you sounded pretty confident competitors were going to follow suit. I mean the latest intelligence is that that's what you've done is pretty much in line with the market? Or have you been sort of stricter than the rest of the market in your reaction to the losses that occurred this year? Andrew Horton: I think, Nigel, we're in line with the market. As you say, there's been a lot of talk about this. So that's a good thing because it means the market needs to resolve it and it's obviously nothing unique to us, and it's much easier to resolve when the market is accepting the issue rather than we're the only ones who think we need a rate of x and the market is happy with half x or 75% of x. So it's definitely a market-wide issue and numbers are similar. I'm sure we're going to find some people who are further ahead of it, and some people aren't as up speed in it, and the portfolio is going to vary a bit. But fundamentally, I feel good that it's a market-wide issue and rate is holding. Operator: [Operator Instructions] Our next question comes from the line of Siddharth with JPMorgan. Siddharth Parameswaran: Couple of questions. Just firstly, on the ex-cat claims ratio bridge that you've flagged the improvement that you're flagging from '25 into '26. I was just hoping you could help us understand what's happening on the inflation versus rate side. In terms of what I saw in the fourth quarter, it seemed like rates were slightly negative, and I know you're flagging some rate increases since 1 Jan, but just wanted to get a perspective, one would think that six months ago, you flagged that rate was behind inflation and rate has got lower. So just keen to make sure that we understand where that improvement is coming from? Andrew Horton: Yes. I mean if we just do it at a completely macro level, I think the rate increase across the whole portfolio in '26 is going to be a low number. And what we're planning for is inflation being 2 or 3 points higher than that. So we definitely have that. And that means if we did nothing and just renewed everything and nothing actually changed, margin would potentially shrink. But that's not what we'll be doing. And some of the rate increases built into the exposure you charge anyway. So the rate is always a bit of a -- this is a headline premium adjustment as opposed to that inflation being built into the exposure on which you charge the same rate. So it's a very simple number. We're changing the portfolio on the back of it. You try and focus not surprising on core clients that have a better, better rating and you drop the ones that are worse in an environment where you potentially are being squeezed. That could be property or A&H and therefore, you can end up with a similar outturn despite apparently having this difference between inflation and rate. The other thing I'd say is inflation is always an estimate, and generally, you don't really know what it's going to be like until a few years down the track while rate is what it is, and it's just purely based on a premium number. Christopher Killourhy: I think another point I'd add. I mean, Andrew mentioned earlier about we see circa 90% of our portfolio as being above adequate. And actually, it's interesting when we look at rate movements that the 10% of the portfolio that, therefore, is inadequate is where we're still seeing rate strengthening come through. So I think it again goes to evidence that the market is still behaving pretty rationally. Siddharth Parameswaran: I guess the question was just around the 2 components. What is your view on rate and what is your view on inflation? Andrew Horton: Yes. So I'd say in total, the view on the rate is, it's going to net to a small single digit, but the spread is obviously large because we talked about A&H getting 20% plus, and they are going to be 1 or 2 that go negative. And then the inflation assumptions are going to average to 3%, but some of them are going to have inflation of 10% to 20%, and some are going to have none. And overall, net-net-net, those are the 2 numbers. But there's so much more to the group than those 2 numbers. So I'm not sure what to do with them because I don't see 1:3 meaning margins should go down by 2 because that just assumes we don't do anything, and we will be. And that's what Chris was trying to pick up on. When you got it well rated, you're relatively comfortable to continue with it. And when you -- it's not well rated, you're not. Operator: Our next question comes from the line of Simon Fitzgerald with Jefferies. Simon Fitzgerald: Just quickly, Andrew, you talked about rate adequacy. I just wanted to explore that a little bit more in the context of property. I recall that you said, I think, at the half that property could fall by 25% in terms of rate adequacy before you would lose interest in that segment. In some pockets of property, property core, for example, we are getting a little bit close to that. And I noticed in terms of the graph on Page 21, property forms 33% of GWP. I was just hoping you could maybe break that down a little bit more in terms of the ones that are exposed to that sort of 10% to 15% as you described or more and ones that aren't. Maybe you could just sort of describe that property portfolio in a little bit more detail. Andrew Horton: Yes. I haven't necessarily got the quantum of it all, but I'll have a go at it. So we write catastrophically exposed property and non-cat exposed property. So what we're finding is the specifically U.S. cat exposed property is taking the largest decrease. So that's starting with the largest decrease or planned was in 2025, probably will be in 2026. And that's often what's driven the reinsurance, the cat reinsurance. It's been the reduction in the U.S. property cat reinsurance going down. Elsewhere in the world, it is less than that. Going to -- if your non-cat European property, of which we write a reasonable amount, we're probably seeing no rate decrease, rates holding and it's fine. So you've got that big spread. So within the 30-odd percent, there is a big spread between the U.S. cat and, let's say, European non-cat. And everything else is plotted in between on that. So of course, when we're looking at rate adequacy, we're trying to break it down by portfolio, by country, by type and determining what is rate adequate and what isn't. So I'd expect this year, potentially the most stress could be the U.S. cat. That said, of course, it was the one that went up the most in the 4 years prior to it. So its rate adequacy went up over shot. I mean this is what the insurance industry can do with a volatile classes. We find myself inadequate, we overshoot and then we start coming back to where we could have been the whole time if we've known exactly what everything was going to happen. So that's why we tried to show these cumulative rate change charts, just to remind people where we've actually come from in each of the lines business. I'm not sure I've answered it as precisely as you would like. What I'm trying to flag is we've got a lot of different types of property geographically cat, non-cat within the portfolio and trying to manage those to deliver the best risk-adjusted return. Again... Simon Fitzgerald: Maybe a question -- just in regards to the change in the reinsurance structures and so forth, can you just give us a little bit of guidance in terms of '26 about how we should be thinking about that reinsurance expenses line and will it be broadly similar to '25 or what sort of decrease should we expect given the new change? Andrew Horton: Yes. I mean the property cat reinsurance is definitely coming down. And we just -- I think we were saying earlier on, we probably need to do some analysis of that and share that with you because it's quite hard to determine what the net position of that reinsurance line is going to be based on it having property and casualty and some quota share and crop in it. And so we need to do that rather than me try and estimate it now. So let's come back to you on that. Operator: Our next question comes from the line of Freya Kong with Bank of America. Freya Kong: Providing the bridge to 92.5% for this year. Just as a follow-up to Sid's question about 1% rate versus 3% inflation. Are there any business mix shifts that are being assumed in getting us to 92.5%, i.e., shift towards lower combined ratio lines next year? Andrew Horton: Yes. I mean, obviously, when we were talking earlier on about trying to grow the QBE Re and QBS and cyber, potentially those at this point in time have good margin, and therefore, we're trying to push those. So that's it -- I mean, that's a really important point that we're forever rebalancing the portfolio, and therefore, it's not stable. So the math just doesn't work that we just take these 2 numbers and assume everything is going to come down on that basis because we're not at all sitting in a consistent position year-on-year. So we're doing exactly what you're suggesting of -- and it's pretty obvious, isn't it, remediate the ones which are under pressure and really grow the ones where the margins are good. And that's what I think we're getting better at and why the results are improving as we've done more and more of that. And what we've done is let go some of the businesses that historically gave us combined ratios greater than 100% and also drove quite a lot of the volatility around it. So that's why we feel comfortable. So in that ex cat element, there is a reasonable amount of rebalancing and is also looking at some of the portfolios that truly need to change and how do we change those and that can be re-underwriting, going back to our core shrinking, there could be a number of things in it. That's why we feel comfortable about it. Sorry, Chris. Christopher Killourhy: I think it's a great question because I think one of the things we do want to be really respected for is how we move capital between portfolios across cycles. And we just see that as good underwriting, good sort of running an insurance company. So absolutely, there will be sort of change in the portfolio in terms of rebalancing the business we see as being more adequate or performing better. What I would say, however, is there is sort of a fundamental mix shift in terms of, for example, increasing our weighting to property cat because it runs at a lower combined ratio, that would then bring in some additional volatility. So we are -- the mix will change as we just look to keep rebalancing towards the business we see is more adequate, but we're certainly not relying on a shift to sort of more volatile business to bring the combined ratio down. Freya Kong: Okay. Great. That's really helpful. And can I just ask on Accident & Health, what's the impact been on retention in the book, given you push through 20-plus percent price increases? And is this still an area for growth in the medium term, assuming remediation this year go as well? Andrew Horton: So the latter part, definitely. I mean we've been involved in this group or the team since 2001, and I think we acquired the company in the late -- around 2010. So it's been with us a long time. They've got a lot of tenure. They manage all sorts of different types of events that have taken place. So definitely want to grow it. I think in the short term, we've don't really want to grow too much this year. We've been able to retain almost everything we wanted to retain. I think that just shows stress in the market, the fact that people are shopping around and struggling to get a move and have come back to us on the back of trying to do that. It's generally a relatively low retention business. So these companies do move on a regular basis. So I think the average retention normally is around 70%, which is considerably lower than our average, which is in the 80s on average. So generally, it is a shopping around business, and I think more has taken place this year. And therefore, we've been able to retain everything we wanted to retain. Christopher Killourhy: Yes. And I think we do see, as Andrew says, this is a portfolio that, I guess, does have lower in general retention rates than we'd see elsewhere. And one of the things we do all see generally over time is that the renewed business tends to perform better than the new business because it does sort of take that one cycle just to sort of harvest the business. And so there is an element of while it was growing, you will just get a little bit of strain in there. So that's part of what we're just managing going forward as well. Operator: Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Andrew for closing remarks. Andrew Horton: I'd just like to thank everyone for joining us today, and I'm sure we're going to be seeing a number of you over the next week or two. Thank you very much.
Operator: Good day, ladies and gentlemen, and welcome to the GRAIL Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin. Unknown Executive: Thank you, operator, and thank you all for joining us today. On the call are Bob Ragusa, our Chief Executive Officer; Aaron Freidin, our Chief Financial Officer; Josh Ofman, President; Sir Harpal Kumar, Chief Scientific Officer and President, International; and Andy Partridge, Chief Commercial Officer. Before we get underway, I'll remind you that we'll be making forward-looking statements based on current expectations. It's our intent that all statements other than statements of historical fact, including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements under federal securities laws. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon currently available information, and GRAIL assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that GRAIL files with the SEC, including GRAIL's most recent quarterly report and upcoming annual report. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which exclude certain specified items. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the non-GAAP measures to most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, we turn to Bob. Robert Ragusa: Good afternoon, everyone, and thank you for joining us to review results for the fourth quarter and full year 2025 and discuss recent business updates. 2025 was a year of significant commercial growth for GRAIL, and we have shared a number of exciting developments so far in 2026. We issued a press release this afternoon with top line results from our NHS-Galleri trial. We observed a substantial reduction in Stage IV cancer diagnosis, increased Stage I and II detection of deadly cancers and a fourfold higher cancer detection rate, outcomes that matter for patient care. While there was a trend towards reduction in combined Stage III and IV, the trial did not meet the primary endpoint of statistically significant reduction. These data show the benefit of multi-cancer screening with Galleri and provide the strongest evidence for the recommended annual screening interval. Harpal will talk through the top line NHS-Galleri trial results shortly. In our earnings press release, we also noted full results from all 35,000 participants in PATHFINDER 2 and were consistent with data presented from the first 25,000 participants presented at ESMO last year. We anticipate presenting full data from both NHS-Galleri and PATHFINDER 2 in mid-2026. Based on strong results from the NHS-Galleri and the PATHFINDER 2 study, we also announced today that we are moving forward with a planned expansion of our field sales and medical team. We believe this expanded engagement will enable us to continue to drive commercial momentum. To recap quickly on the strong commercial performance for Galleri in 2025, which we shared in January, the U.S. Galleri test volume grew 36% to more than 185,000 Galleri tests and U.S. Galleri revenue grew by 26%. Our prescriber base is now approximately 17,000 providers, up 30% from prior year. Galleri's growth in 2025 was driven by both breadth and depth of prescribing. We have been in the market with the Galleri test now for more than 4 years. And from the launch of Galleri through December 31, we have sold almost 0.5 million Galleri tests. We remain on track for continued commercial growth in 2026 with new and expanding partnerships, including digital health opportunities and further integration into health systems. We are focused on expanding awareness of multi-cancer early detection and Galleri's important performance and capability differentiation. We anticipate growing patient, provider and employer conviction in Galleri as other performance, safety and clinical utility data sets are read out. A few weeks ago, we announced that we completed our PMA submission with the FDA. The PMA marks a critical step forward, making Galleri available to more people and advancing early detection to provide a significant public health benefit. The submission represents years of focus, disciplined work to achieve design, development and validation of Galleri in large, diverse screening populations. Josh will share more about our PMA later in this call. Additionally, earlier this month, the Nancy Gardner Sewell Medicare Multi-Cancer Early Detection Screening Coverage Act became federal law. This establishes a Medicare coverage pathway for FDA-approved multi-cancer early detection tests. As a leading MCED developer, it is our privilege to stand with legislators, patient advocates, clinicians and researchers who have championed the cause. I'll now hand it over to Harpal to discuss top line results from the NHS-Galleri study. Harpal Kumar: Thank you, Bob. We're very pleased to share top line results from the NHS-Galleri trial. I want to begin with a huge thank you to the more than 142,000 participants who took part in this study as well as to NHS England, the cancer prevention trials unit at Queen Mary University of London, cancer alliances, investigators and the clinical teams whose dedication made this landmark trial possible. Detailed results from the NHS-Galleri trial will be submitted for presentation at the upcoming ASCO meeting in Chicago in late May. The design of the NHS-Galleri trial was informed by a large body of evidence showing that across multiple cancer types, reductions in late-stage disease are strongly associated with reductions in cancer mortality. While we did not observe a statistically significant reduction in combined Stage III and IV cancers through the trial, which was the primary endpoint of the study, there was a favorable trend after the prevalent screening round, and we saw compelling evidence of Galleri's benefit. Comparing the two arms of the study, Stage IV diagnoses in the prespecified group of 12 deadly cancers decreased with each year of sequential Galleri screening, with a greater than 20% reduction in the second and third rounds. Similar reductions were observed across all cancers. The reduction in Stage IV cancer diagnoses is a critically important outcome, which we believe can lead to more effective intervention for patients, particularly given the substantial and growing arsenal of effective treatments for many Stage III cancers. In fact, there is a dramatic improvement in survival for many types of cancer at Stage III as compared with Stage IV. These results are the first time a multi-cancer early detection test has demonstrated population scale stage shift and reduction in metastatic disease in a randomized trial. Screening with Galleri increased the overall cancer detection rate fourfold compared to standard of care and identified substantially more Stage I and II cancers in types that are typically detected at late stage. Screening with the Galleri test also resulted in a substantial reduction in the number of cancers detected clinically through emergency presentation, which are associated with significantly higher mortality and health care costs. And these benefits came with a strong safety profile. No serious safety concerns were reported in any of the approximately 70,000 participants who received the Galleri test across 3 rounds of testing. This is the first randomized multi-cancer early detection data set and is unprecedented in scale. Additional analyses are underway to better understand these rich data. As with any study, it's important to evaluate the results in the context of the design and execution. One observation is that we saw higher-than-anticipated incidence of Stage II cancers in this trial as compared with prior study experience. The number and distribution of cancer stages across screening rounds suggests the potential for a stronger effect with longer follow-up as data matures. And so we're planning to extend data collection by 6 to 12 months, and we'll reevaluate the impact with more mature data. In both the U.S. and the NHS data, the time to diagnostic resolution appears to improve over time as physicians gain experience with the Galleri test and diagnostic workup. Our learnings from this trial enrich our understanding of cancer biology, multi-cancer screening and the importance of implementation, particularly in ensuring rapid and thorough diagnostic investigation after a positive test result. Our mission is to detect cancer early when it can be cured. And we're delighted that these results show the potential for more patients to receive treatment with curative intent and have more time with their family and friends. We believe this is the best chance to bend the cancer mortality curve at population scale. As a reminder, the data we're sharing today is limited to our top line analysis. We plan to submit the detailed results for presentation at ASCO later in the year. I'll now pass it to Josh Ofman to review more about our recently completed PMA application. Joshua Ofman: Thank you, Harpal. At the end of January, we completed the submission of the final module of our PMA application to the FDA for Galleri. We're extremely proud of this pivotal milestone in advancing early cancer detection and addressing unmet needs in cancer screening. From the beginning, GRAIL has been completely committed to rigorous scientific and clinical evaluation to ensure that multi-cancer early detection testing is supported by strong data. The PMA submission is focused on test performance and safety results from 2 large registrational studies, including the first 25,000 participants in the U.S.-based PATHFINDER 2 study with 1-year follow-up and data from the prevalence screening round or the first year of the NHS-Galleri trial, the largest and only randomized controlled intended use trial of any MCED test. The PMA submission is also supported by a bridging analysis to compare performance of the version of Galleri used in our registrational trials to the updated version that has been submitted to the FDA for premarket approval. The results from the first 25,000 participants enrolled in PATHFINDER 2 were presented in October at the ESMO Congress. And we've now completed the analysis of the full 35,000 participants and the results are consistent. The performance data from the prevalent screening round of the NHS-Galleri study, including metrics focused on test performance, clinical validation and the clinical benefit of detection at Stages I through III, including a reduction in Stage IV were also included to further enhance the data set and provide additional data on more cancers to the FDA. As a reminder, the FDA designated the test as a breakthrough device in 2018. The PMA was submitted at the end of January, and we are anticipating about a 12-month review period. To discuss our fourth quarter financial results, I'll pass it off to Aaron. Aaron Freidin: Thanks, Josh, and good afternoon, everyone. I'm pleased to present our results for the fourth quarter and the full year of 2025. Fourth quarter results were strong with revenue of $43.6 million, up $5.3 million or 14% as compared to Q4 2024. Total revenue for the quarter is comprised of $42.3 million of screening revenue and $1.3 million of development services revenue. Development services revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research and therapy development. Full year total revenue was $147.2 million, up 17% from full year revenue in 2024. Full year 2025 revenue was comprised of $138.6 million of screening revenue, up 28% over full year 2024. U.S. Galleri revenue in 2025 was $136.8 million, up 26% over 2024 and in line with our guidance of 20% to 30% growth. Revenue also included $8.6 million of development services revenue, a decrease of 49% from 2024. We are seeing continued demand for the Galleri test, and we sold more than 57,000 tests in the fourth quarter and more than 185,000 tests for the year. Screening revenue of $42.3 million in the fourth quarter was up 34% as compared with the fourth quarter of 2024, primarily based on an increase in sales volume. In 2025, we began leaning into the price elasticity we see in the market and are finding success in expanding access with our discounting programs. Development service revenue in the fourth quarter of 2025 was $1.3 million. Net loss for the fourth quarter of 2025 was $99.2 million, an increase of 2% as compared to Q4 2024. Net loss for the full year was $408.4 million, an improvement of 80% as compared to the full year 2024. Net loss in 2024 included goodwill and intangible asset impairment of $1.4 billion. In addition, net loss for 2025 and 2024 included amortization of Illumina acquisition-related intangible assets of $138.3 million. Non-GAAP adjusted gross profit for the fourth quarter of 2025 was $23.1 million, an increase of $5.2 million or 29% as compared with Q4 2024. Full year non-GAAP adjusted gross profit was $73.6 million, an increase of $15.8 million or 27% as compared with the full year of 2024. Primary drivers of the increased margin were revenue mix and efficiencies of scale related to increased Galleri volume. Adjusted EBITDA for the fourth quarter of 2025 was a negative $71.8 million, representing an improvement of $12.2 million or 15% as compared to Q4 2024. Adjusted EBITDA for the full year 2025 was a negative $320.6 million, an improvement of $163 million or 34% as compared to the full year 2024. We ended the quarter with a cash position of $904.4 million. This balance included $436 million in proceeds from both our private placement of equity in October as well as our ATM equity issuance program in November and December. As a reminder, we have shared in the past our long-term gross margin target of 50% to 60% at scale. We are making good progress on attaining these margin targets. And as we saw in the third quarter, volume efficiencies make a big difference. In connection with our supply agreement with Illumina, we are obligated to pay them a royalty on revenues. Those royalty payments are suspended until December of 2026. When resumed, we expect to pay Illumina a royalty in the high single digits, subject to certain terms and perpetuity on net sales generated by our products on revenues in oncology. We expect that these payments will make an impact on our gross margins beginning in 2027. Given strong performance in the self-pay market and the momentum we are seeing with positive data readouts, we are reiterating the guidance we shared in January today of Galleri sales growth of 22% to 32% and cash burn for the full year of 2026 to be no more than $300 million. Our cash runway extends into 2030, and we are well positioned to navigate growth over the next several years as we pursue critical milestones toward broad access. Bob, back to you for concluding remarks. Robert Ragusa: Thanks, Aaron. To close, our teams at GRAIL continue to do great work advancing towards our vision of population scale multi-cancer early detection. We are approaching our 10th anniversary as a company this March, and we are energized by recent milestones and achievements, including the consistently strong performance we are seeing for Galleri across our studies. We presented positive registrational clinical study results for the first 25,000 participants in the PATHFINDER 2 study in October and today shared top line results for the NHS-Galleri trial and the full 35,000 participant PATHFINDER 2 study. We're looking forward to data presentations for both studies later in the year. The business continues to grow, and we are excited about expanding our partnerships with digital health companies and health systems to continue to expand access to Galleri. We have now completed our PMA submission with the FDA and new federal law provides the pathway for Medicare to cover FDA-approved multi-cancer early detection tests. We're in a strong financial position with more than $900 million in cash as of December 31st. I'd like to thank each of our employees for their incredible commitment and dedication to our mission to detect cancer early when it can be cured. We'll now turn the call over to question and answer. Operator, please go ahead. Operator: [Operator Instructions] Our first question will come from Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Can you confirm that you don't expect the FDA approval decision to be impacted by the miss of the stage shift endpoint? We know the FDA PMA package only included the prevalent screening round of NHS, but reasonably reviewers at the FDA will see this outcome, right? Robert Ragusa: Yes. Thanks for the question, Subbu. So as you know, the FDA will look at the effectiveness and safety of our submission. And so with the data that we have both from PATHFINDER 2 as well as the current -- the prevalent round of the NHS-Galleri, they'll be looking at that data. So there's not an obvious correlation or obvious impact between the final results of the NHS-Galleri study and the FDA's view on the test. Subhalaxmi Nambi: And one follow-up. Is there any read-through from missing the NHS-Galleri stage shift endpoint to the Medicare REACH study, which has a primary endpoint of incidence rates of Stage IV cancers, right? And does that have any impact as Medicare -- as you look to getting some coverage? Robert Ragusa: Yes. Thanks again. Josh, do you want to take that? Joshua Ofman: Sure. Yes. No, you're absolutely correct. So the primary endpoint of the REACH study is a Stage IV reduction, which is what was observed quite strongly in the NHS-Galleri trial. So I think the only read-through is that we believe that it's critically important and clinically important to reduce the incidence of metastatic disease in Stage IV cancer, and that's a really important clinical endpoint, and we're looking forward to assessing that in the REACH trial. Subhalaxmi Nambi: And Josh, what if we don't reach the statistical significance there, would that have any impact? Or you're saying because it's 50,000, the study is not powered enough? Joshua Ofman: Yes. No, we believe the study is properly powered. It will have a control group, and we believe it is properly powered for that type of study, given the effect size that we know and the cancer detection rate that we're seeing. So we're very optimistic about observing that effect, but we need the study, obviously, to read out, and that's going to take some time. Operator: Your next question will come from Kyle Mikson with Canaccord Genuity. Kyle Mikson: Hopefully, you can hear me. I guess first one would be, how does the results here kind of impact your strategy to expand Galleri to other countries in terms of data generation and rollout plans? How would that differ now? And then maybe you could just touch on what are next steps in the U.K. Have you had any discussions with them so far? Or is that later on? Robert Ragusa: Yes. Thanks for that, Kyle. So we do think as we outlined in the releases that strong reduction that we saw in Stage IV cancer, the fourfold improvement in cancer detection rate compared to standard of care, the absolute number of Stage I and II cancers increasing and the reduction in emergency presentation. We think all of those will be important as we go to other countries and the discussions with them. Obviously, other countries will -- each one will evaluate those elements independently. But we do think that's going to be a strong data set to go out there. So I think that's going to be very useful. Maybe I'll pass it over to Harpal to comment on the U.K. and the impact there. Harpal Kumar: Yes. Thanks, Bob. I mean just adding to what Bob said first, I mean, we think this is a really strong data set that demonstrates compelling clinical benefit. We know that there is now a growing arsenal of very effective treatments for many types of stage -- many types of cancer at Stage III. And so the potential benefits that we're talking about here from the NHS-Galleri study are going to be applicable worldwide. And so I don't think it has any -- certainly no negative bearing on our international approach. Indeed, I would hope it has a positive bearing on our international approach. So we feel really, really very pleased with the overall set of results. With respect to the U.K. specifically and the NHS, yes, look, we've just got these data. We haven't started having those conversations yet. My anticipation would be that they would want to see the full results before engaging in meaningful conversations, and we expect to have those at ASCO. Kyle Mikson: And then I hate to nitpick, but if you're expanding the sales force, if the results didn't meet the endpoint, I guess, like what's the thought process there. You're very bullish on the future here. I'm just curious what's driving that. Robert Ragusa: Yes. So again, if you think about the things we saw in terms of reduction in Stage I and II, the -- excuse me, the increased Stage I and II cancers, and the reduction in Stage IV cancers, those are things that we've looked at within the U.S. that are very, very relevant to clinicians. And maybe to give a little more color, I'll pass it over to Andy, our Chief Commercial Officer. Andrew Partridge: Yes. Thanks, Bob. Based on the market research studies that we've done and also consistent customer feedback that we've received from early adopting customers, the NHS-Galleri results that we've released today, we believe, based on everything we've heard and done will be both compelling and meaningful to our customers in terms of the magnitude of both the Stage IV reduction that we've disclosed and also the increased cancer detection rates of fourfold. And we believe that's going to increase both the depth and breadth of prescribing. Hence, we're expanding the provider sales force territories in the U.S. Operator: Your next question will come from Doug Schenkel with Wolfe Research. Douglas Schenkel: I'll try to get them all out there upfront and then listen. So first, really a follow-up to the very first question, and I think it's the most important question tonight given the stock reaction in the aftermarket. So I want us to be airtight on this. Is the probability of FDA approval unchanged as a result of the NHS-Galleri readout? Because if the answer is, the probability is unchanged, it would mean the value associated with FDA approval and by extension, CMS reimbursement is also unchanged. So that's the first question. Yes or no, has the probability not changed? The second question is on NHS coverage in the U.K. I know, again, you just got a question on this, but I'm curious if there are any examples you can point to where a diagnostic has been reimbursed after missing a primary endpoint. And then my third question is, has your analysis of NHS-Galleri results led you to any explanation regarding why you came up short of the primary endpoint? Are there potential design issues or population SKUs, anything like that? Robert Ragusa: Yes. Thanks, Doug. Maybe, Josh, I'll hand over to the FDA questions to you. Joshua Ofman: Yes. Thanks for the question, Doug. Everything we've learned from the FDA, their history with us, our conversations has been, their focus is going to be on clinical performance and safety. And the data set that we are -- that we have submitted includes the full PATHFINDER 2 study of the first 25,000 participants and the first year, which is the performance period of the NHS Galleri trial. In their advisory board meetings and their public comments, they have been quite clear that their focus is on clinical validation and not clinical utility. And what we've tried to demonstrate in the NHS trial is a population level effect well beyond clinical validation and clinical performance. And we were able to demonstrate a really important finding of a substantial reduction in Stage IV cancers and a fourfold improvement in the cancer detection rate. But those are things that are not part of our submission right now to the FDA. And based on their own comments, they're going to be focused on clinical validation. Robert Ragusa: And maybe Harpal, you want to maybe just comment... Harpal Kumar: So I think -- Doug, I think your second question was around endpoints on diagnostic studies. I think it's just worth pointing out that it's extremely rare for any diagnostic to go through a randomized controlled trial. It's very common for drugs to go through randomized controlled trials, but you actually very rarely see a diagnostic test evaluated in as rigorous a way as we have done through the NHS-Galleri trial. I just think it's really important to make that point. Not only have we rigorously assessed it through an RCT, but it's enormously large trial, 142,000 people. So we have a data set the likes of which I am not aware any other diagnostic has been through other than sort of really significant interventional diagnostic type products. So I think that's the first thing to say. The second thing to say is this is an enormously rich data set, and it has a large number of components to it, and we've shared those with you today. It's absolutely right to say we didn't hit the primary endpoint. But what we did see was a very compelling clinical benefit here. And I think that story stands in terms of generating excitement out there in the clinical community around what's possible with a test like this. Being able to reduce Stage IV cancers gives clinicians the opportunity to use curative treatments that they otherwise wouldn't have the opportunity to use. So I think that's really very compelling. And then your third question, I think, was about what are we learning looking at the data. And just a couple of comments on that. First of all, it's -- we've not had this data for very long. We're looking into it. There's a lot of data to work through. One of the things we've seen is that -- and if I break apart the primary endpoint, it's a combined Stage III and IV reduction. And so when you break that apart, we did see a Stage IV reduction. But as we've commented on, we saw an increase in Stage II cancers. And one of the things that looks to be the case when we look at the data is that we expect to see a stronger effect if we were to continue to follow up this cohort for a longer period of time. And that's why we're saying we want to extend the follow-up for a further 6 to 12 months, and that's why we'll be doing that. So that's one of the things that we've seen when we're looking at the data, but there's a lot more to learn. Operator: [Operator Instructions] your next question will come from Catherine Schulte with Baird. Catherine Ramsey: I guess, first, just on that last point of extending the trial follow-up by 6 to 12 months. Is that something that you and NHS have already agreed on? And I guess, what is the goal of what you will see in that 6 to 12 months? Is it to push more on the Stage III reduction? Or is there something else that NHS is hoping to see? Robert Ragusa: Yes... Harpal Kumar: Yes. Thanks, Catherine. We haven't discussed it in any detail with the NHS yet, but I think it's -- I really can't see any obstacles in being able to do that. What it requires is not going back to participants or clinicians. It would be a continuation of passive data collection, which is already being recorded. And so it's just about the passage of time and agreeing with the NHS team that we can get access to that data. I think that will -- I don't foresee any significant obstacles in that regard. And in answer to your second question, yes, what we want to see is particularly the control arm data maturing more than we've been able to see. And perhaps if I just elaborate a little bit on that, what you tend to see in a screening trial -- in any screening trial is that you're finding cancers that would have been detected later. And so if you think about what that means in practice, you're pulling forward into your intervention arm cancers from the future. For a control arm of the study, those cancers may not yet have manifested. So when you're comparing 2 arms of the study, what you'd like to have is long enough follow-up that you can compare the 2 arms really, really well together. And what we've concluded looking at the data is we probably need a longer follow-up time to be able to do that adequately. Catherine Ramsey: And then for the NHS, I know they put out their National Cancer Plan earlier this month and still reiterated their commitment to and interest in multi-cancer early detection. We've got OLS closed an application process for what sounds kind of like a AdAC-related study using multi-cancer tests in primary care to triage patients with nonspecific abdominal symptoms. Is that something that you guys are involved in? And maybe just talk to the broader relationship with NHS. Harpal Kumar: Yes, happy to do so. So we've been having ongoing conversations with the NHS really over the last 5 or 6 years. Those conversations continue very actively and certainly will continue here on in. Of course, we were very pleased to see in the NHS Cancer Plan a couple of weeks ago, a number of references to multi-cancer early detection and indeed, the excitement within the NHS and the Department of Health in England for the possibilities that this new technology offers for really transforming the landscape for cancer patients. So the multiple references in the Cancer Plan, I don't think it's an exaggeration to say, comes from the conversations and relationships we've been having with the NHS over the last 5 or 6 years. With respect to the second part of your question, yes, there is a process underway to further evaluate the role of multi-cancer detection in a symptomatic context. And this is a follow-up from our SYMPLIFY study that we reported a couple of years ago. Necessarily, the Department of Health has to go through a competitive application process. It doesn't -- it can't just offer that opportunity to GRAIL. So that application process is underway. And as you might expect, we are applying to be part of that process and are hopeful that, that will move forward. Certainly, we believe our data from the SYMPLIFY study is very strong and very encouraging in that context. Operator: Our next question will come from Dan Brennan with TD Cowen. [Operator Instructions] Daniel Brennan: Maybe just one on Medicare. So assuming you're successful with FDA, I'm just wondering, I know Medicare, you have the favorable pathway, obviously, and FDA approval, assuming you get that, that would be terrific. But we're under the impression that Medicare does consider clinical utility. So how do you think they would look at the NHS trial? And how would that potentially impact the Medicare decision? Robert Ragusa: Josh, do you want to take that? Joshua Ofman: Great. Yes. Obviously, Medicare is going to -- upon FDA approval now has the statutory authority to provide coverage for multi-cancer early detection tests and we'll initiate a national coverage analysis and really look very carefully at the data. And we believe we're going to have a very robust package of data to submit to CMS, including all of our registrational trials, everything about NHS-Galleri, including the substantial Stage IV reduction, the fourfold increase in the population cancer detection rate, the increase in detection of Stage I and II cancers and also very strong clinical performance overall. And so we think that, that combined with our real-world evidence, our clinical surveillance program and the REACH study in Medicare patients at the time of the NCD will be a very robust package for them to evaluate. Again, Medicare has never evaluated a multi-cancer early detection test before. There is no known bar that has been set. And so we feel like we're going to be able to provide them an incredibly robust package of evidence to consider coverage for Galleri. Daniel Brennan: Okay. And then maybe just on -- I appreciate the Stage IV is down, which is terrific, but the III, given some of the anomalies you discussed was up. Like collectively across Stage III and Stage IV, can you say if there was a decrease and kind of what the level of that decrease was? Harpal Kumar: Yes. I can't really comment any further at the moment. There was not a statistically significant reduction. But what we did see was a trend towards a reduction over time, and that was a favorable trend. I think that's as much as I can say at the moment, but we are planning to present the full results at ASCO later in the year. Daniel Brennan: And I mean if I can sneak in one final one. So the trial was set up for 3 years. Obviously, it was going to be a surrogate for mortality because mortality would just take too long. So I think that was pretty well established. Was there a decision when you set it up for 3 years as opposed to maybe setting it up with a longer follow-up period, kind of how that decision was made? Obviously, it sounds like now you're hoping, obviously, the longer follow-up will still prove out the study. But I'm just wondering when you went into it, how was that decision made? Harpal Kumar: Yes. I mean, look, as with any study, it's designed and sized and powered with the best information you have at the time. And at the time, we felt that 3 rounds of screening followed by a year of follow-up would be sufficient. I think with the benefit of hindsight, we probably should have allowed for a longer follow-up period. There have interestingly been a number of publications over the last couple of years about screening studies in general, not just about NHS-Galleri, which make this exact point that the trial should be followed up for longer than 12 months post the last appointment. As I say, this trial was designed 6 years ago, and that was the best information we had at the time. But as I've already touched on, on this call, we have the ability to continue follow-up. So that's what we're going to be doing. Joshua Ofman: And it's probably just worth noting that most screening trials have gone on for decades, at least 1 decade, if not 2. And so this was a very -- in the context of screening trials, this was actually a very short trial with a very ambitious endpoint. And that's part of the story here. But it is the first time that an MCED test has shown the ability to shift the stage diagnosis for the population in a randomized clinical trial. And I don't think we should let that kind of go by. Operator: For our next question, we'll return to Kyle Mikson with Canaccord Genuity. Kyle Mikson: So just given you see these results now, at this point, can you go to the FDA kind of narrow or adjust, let's say, your label maybe to the 12 cancers that you performed the best in or maybe like an older patients, like an older subset perhaps? And just generally, like how does this impact your thoughts on the -- like a potential advisory committee meeting based on there was an -- there was an AdCom back in '23 already? Joshua Ofman: Yes, sure. Again, we don't think that this finding is going to impact the approvability of Galleri with the FDA. The FDA is clearly going to be focused on clinical performance and safety and the profile of data that was delivered to them. And in that context, we will work through labeling with the agency. Should they seek clarification on the intended use, and narrowing of the indication to the things that you suggest, we'll be negotiating that with them in due time. But we feel like we have a very strong and compelling evidence package for our current intended use, which is adults at elevated risk for cancer such as adults over the age of 50 and with additional risk factors if they are younger than the age of 50. So we feel like we have a robust package, and we'll see where the labeling ends up. Robert Ragusa: Yes. And maybe just to add to that, the -- it's also we haven't really brought up this across the 3 rounds of the large participants in NHS-Galleri as well as the 35,000 in PATHFINDER 2, there was no serious adverse events across the entire trials. So those are really large numbers. So from a safety perspective, it was really good showing up. Joshua Ofman: And we think the benefit risk profile is quite compelling as a result of that. Harpal Kumar: And just to add something that Josh said, in relation to your point about the 12 cancers, the reason we specify this group of 12 cancers is because it represents 2/3 of all cancer mortality. So if you can make a difference in that group, you really are making a dramatic impact at population scale. But I would draw your attention to something that's in our press release, which is when we talk about the Stage IV reduction and the fact that it's more than 20% in the second and third rounds of screening, yes, it's true for the 12 cancers, but it's also true for all cancers. And so I don't think there's any reason at this stage to think that we should be narrowing our claims only to the 12 cancer types. Joshua Ofman: That's a great point, Harpal. Thank you for making that. And just to your last question about the AdCom. It's certainly possible that there can be an AdCom. The FDA has already held an AdCom. And so we are not sure whether that's going to happen. We will wait and see. But we've made the case to the FDA that based on their prior AdCom that they've already held and the fact that we've addressed all of those issues in our submission, which was just completed recently, that there's likely no need for one. But we'll see what the FDA decides. Kyle Mikson: All right. Super helpful. Just a quick follow-up. Obviously, the NHS-Galleri results are pretty relevant to the FDA submission, but I don't believe there's much read-through to USPSTF inclusion. So in a worst-case scenario, you don't get FDA approval, which again is not the -- you guys expect that. You could get a USPSTF inclusion, get into -- or get Medicare coverage according to the legislation and so forth. Are your thoughts on guideline inclusion unchanged? Or is that -- you still don't think that's the necessary milestone for you guys that FDA is most likely going to happen? Joshua Ofman: Well, I'm not sure I'm fully following your question, but let me try to take a stab at it. We think the first most important milestone is to get an FDA approval. And we think that, that is going to be an incredible moment for patients and provide amazing amounts of conviction in the clinical community and the payer community. Many of the payers have told us that, that would be the gating step for them. They would like to see an FDA approval before they would provide coverage or consider Galleri for coverage. And then obviously, there will be a CMS, NCA, National Coverage Analysis decision as we've discussed already. So we think those are the most critical things. And USPSTF evaluation would then come after that. And obviously, that was -- that is important if you don't have a coverage pathway within CMS. And that's why the USPSTF pathway was put into place because the CMS had no statutory authority to provide coverage for preventive services. But the CMS does have statutory authority now. So we see the USPSTF as being supplemental to that. But in terms of guidelines, we think the FDA approval is going to be one of the most critical parts and then the very strong and robust evidence base we have about all the clinical benefits that Harpal has described. Kyle Mikson: Yes. Just to clarify, I was just saying like if the USPSTF committee if they're going to take this data into account, but it's -- we're talking [indiscernible] in the future probably. So maybe it's not relevant. But anyway, thanks for the time. Operator: There are no further questions at this time. I will now turn the call back to GRAIL for closing remarks. Unknown Executive: We look forward to presenting full data from our 2 registrational studies in mid-2026, a longitudinal randomized controlled NHS-Galleri trial, including clinical utility and performance and the full 35,000 participant PATHFINDER 2 study. So we look forward to providing future updates, and thanks, everyone, for joining the call. Operator: Ladies and gentlemen, this concludes the call. You may now disconnect.
Operator: Good day, everyone. Welcome to Altus Group's Q4 and Full Year 2025 Financial Results Conference Call. At this time, I would like to hand things over to Camilla. Please go ahead. Camilla Bartosiewicz: Thank you, Lisa. Hi, everyone, and welcome to the conference call and webcast discussing Altus Group's fourth quarter and year-end financial results for the period ended December 31, 2025. Our press release, MD&A, financial statements and the slides accompanying our prepared remarks are all available on our website and as required, have been filed to SEDAR+ after market close this afternoon. I'm joined today by our CEO, Mike Gordon; and our CFO, Pawan Chhabra. Before we get started, I wanted to point out a couple of things. As discussed at our Investor Day, beginning with our Q4 results, we have rolled out some of our new disclosures. To help investors and analysts rebuild their models under our new reporting format, we have published a supplemental document that shows a representation of our historic results, posted on the Investors section of our website along with the other materials I referenced. Earlier this week, we announced the sale of our appraisal business to Newmark. This business has been moved under discontinued operations for our results. And accordingly, our results for continuing operations exclude the Appraisals business revenue and adjusted EBITDA contribution. Also of note, we plan to eliminate the corporate cost line in our reporting at some point in 2026. Turning to our disclaimer slide. Some of our remarks on this call and in our disclosures may contain forward-looking information based on certain assumptions and are therefore subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking information disclaimer in today's materials. We also use certain non-GAAP financial measures, ratios, total segment measures, capital management measures and supplementary and other financial measures as defined in National Instrument 52-112. We believe these measures provide useful additional insight into our performance, and they may assist investors in evaluating our shares. However, they are not standardized under the measures of IFRS and may differ from similarly titled measures used by other issuers and may not be comparable. They should not be considered in isolation or as a substitute for IFRS measures. Further details are provided in our IR materials as well. And finally, unless otherwise noted, all percentage and basis point growth rates discussed on today's call are presented on a constant currency basis relative to the comparable period in '24. I would also like to point out that the supplemental document includes the majority of those numbers on an as-reported basis. And with that, I'll now turn it over to Mike. Michael Gordon: Thanks, Camilla, and hello, everyone. Before we begin, there's been a lot of market discussion around how AI may reshape the software landscape. Let me take a moment to address how we view this at Altus and why we believe our position is well protected. From our perspective, AI reinforces our strategic direction and strengthens the advantages that already differentiate our business. In commercial real estate, valuation, accuracy, auditability and trusted data are nonnegotiable. These decisions influence significant capital deployment and involve robust scrutiny and fiduciary responsibility. Outcomes must be explainable, defensible and grounded in high-quality data. That's precisely where Altus stands apart. So first, our solutions are trusted in CRE valuation to the point where "ARGUS it" is commonly used as a verb in the industry. When a product becomes shorthand for the task itself, it signals our position in critical client workflows and market trust that goes well beyond the software features. Second, our strength is amplified by our network effects arising from significant value provided to our customers. Our valuation solutions are core to the valuation collaboration across investors, lenders, owners, appraisers, asset managers and auditors. We are not just a tool used by one stakeholder. We serve as a platform that facilitates the creation, review and use of valuation information by multiple stakeholders in the CRE industry. Every additional participant in this ecosystem reinforces the value of the platform for all others, and this is not something that can be easily replicated. Third, as AI evolves, our role becomes even more strategic. We are enhancing our agentic capabilities to do more than just generate insights but rather perform critical actions within the valuation workflow. From data ingestion and validation to scenario analysis and recommendation engines, our platform will increasingly act as the orchestration layer that connects and coordinates every stakeholder in the valuation process. And finally, across the CRE ecosystem, ARGUS is the system of record for valuations. We support tens of thousands of users globally, stewarding valuations on portfolios and funds worth millions and billions of dollars in value. That scale creates proprietary data sets, historical context and benchmarking depth that is extremely difficult to replicate via AI. So when we at Altus think about AI, we don't see disruption to our model, but we see acceleration. AI systems are only as powerful as the data, the context and the workflow integration behind them. Those are precisely our advantages. Additionally, with our strategic shift to asset-based pricing, we see ourselves as less vulnerable to the disruption risks associated with seat-based models. We also believe that our increasing use of AI internally has potential to unlock tremendous efficiencies. As we demonstrated at our Investor Day, the internal use of our valuation agent capabilities will free up our VMS experts' time and significantly reduce manual work and focus on higher-value tasks. We demonstrated how automating the valuation process can decrease the time to valuation by up to 90%. This is on top of AI deployment within our R&D teams where increased use of AI coding will further optimize our R&D expenses, increase our speed of innovation, rapidly increase the value and the delivery of our products to our customers. Again, we see AI as the accelerator to our strategic efforts, not a threat. Now turning to our full year financial results. 2025 was a year where steady revenue growth and excellent retention reinforced the strategic importance of our solutions. Even in the softer market, we demonstrated that demand for our solutions remains resilient and driven by client needs, not market cycles. The team also demonstrated strong cost discipline and operating leverage, driving a 310 basis point improvement in consolidated margins. As you'll hear from Pawan shortly, we see more opportunity to drive margin improvements in this coming fiscal year. We are also beginning to see the cash generation potential of the business come through, which gives us confidence as we look to enhance our capital return plans. The team executed well against our strategic initiatives, driving value for clients, delivering innovation and optimizing our corporate structure and capital allocation to unlock shareholder value. Upgrading ARGUS Enterprise clients to ARGUS Intelligence remained a major focus for us. We closed the year with the vast majority of our clients recontracted and are now turning our attention to driving deeper engagement on the platform and adoption of our add-on capabilities. On the innovation front, we bolstered ARGUS Intelligence with Benchmark Manager and advanced Valuation Agent. For those of you who missed the demo, we have advanced our AI capabilities to make the valuation process faster, more accurate and insightful. This is already being tested internally with our VMS professionals. AI complements the professional judgment of our valuation experts, helping reduce their effort while at the same time increasing the amount of information used to reach conclusions. Our AI capabilities are quickly evolving from optimization and information analysis to more complex agent-led workflows for decisioning. We have a deep road map on continuing to enhance both agentic and decision-making AI and see a significant opportunity to drive efficiency and value for clients. We also delivered numerous feature enhancements throughout the year. As of note, we have been approved for a patent on the Altus Knowledge Graph, reinforcing the R&D investments over the past years. The Altus Knowledge Graph, which is built on our AI, enables us to connect disparate asset-level data to form a common golden record using an Altus ID. It is a foundational component of ARGUS Intelligence, as we help our customers collaborate with each other and collate their data. Strategically, we're doubling down on the simplification of Altus, both through portfolio and organizational optimization, as we enhanced our capital allocation framework with a higher weighting towards capital returns. We kept the momentum going starting the year at an accelerated pace. We opened the year on a high note with some client announcements. I'm pleased to share that we now have big brokers upgraded to ARGUS Intelligence, including JLL, Newmark and Cushman, and we are currently migrating their data to the platforms using our integration data solutions. We are also making meaningful progress on our portfolio rationalization. We announced the sale of the Canadian Appraisal business and have a couple of additional divestitures underway that we anticipate could close in the first half of 2026, including having recently signed an LOI for the Canadian Development Advisory business. In addition to the AD&A (sic) [ A&DA ] segment, we have identified select noncore Analytics businesses for potential divestiture. Our objective is to sharpen our focus and simplify the portfolio as we continue our transformation and prepare for a U.S. listing in 2027. On the cost side, we took decisive steps to streamline operations, reduce unnecessary layers and align our cost structure with our future direction. Earlier this month, we initiated a restructuring program and other cost actions that will deliver millions of dollars in annualized savings. Alongside this, we implemented targeted go-to-market refinements designed to better support client needs and drive growth. These decisions are never taken lightly, but they are important to ensure we operate with focus and discipline. And then finally, we remain committed to returning capital to shareholders and announced that the Board approved an increase to our annual plans, giving us the flexibility to deploy up to $800 million this year. We can do this through a combination of various methods, including our NCIB and potential SIB tenders. We're evaluating methods to return up to an additional $450 million to shareholders within the first half of 2026. Our plan is to be in the market over the next 100 days, returning that capital. We believe the current market environment presents an opportunity to allocate capital at attractive return levels, and our best investment continues to be on Altus itself. It's certainly been a busy period, but that pace reflects our ambition. We are moving with urgency and discipline because we see the real opportunity to create value. I'll now turn things over to Pawan to dive into our quarterly results. Pawan? Pawan Chhabra: Thank you, Mike. We closed the year with momentum and disciplined execution. Recurring revenue continued to grow steadily, and we delivered our sixth consecutive quarter of margin expansion as operating leverage strengthened across the business. Turning to the Analytics segment. We delivered another quarter of steady revenue growth and margin expansion. Performance was led by our flagship solutions, ARGUS Intelligence and VMS, which continue to drive strong customer adoption and renewal activity. Overall, software revenue grew 5.4% with ARGUS Intelligence delivering double-digit growth. As Mike noted, our portfolio optimization efforts will streamline noncore products that are dilutive to growth and retention, strengthening the long-term profile of the segment. Quarter also included a heavier renewal mix toward the end of Q4, which can affect quarterly comparability but doesn't change the segment's trajectory. VMS grew at 9.8% in the quarter. That result includes a onetime benefit from an operational efficiency that allowed us to complete the valuation work earlier than usual, shifting that revenue into Q4 on a go-forward basis. Excluding that shift, underlying growth was in the 5% range. Our margins expanded by 360 basis points in the quarter and 270 basis points for the full year. We finished at 33% adjusted EBITDA margins, reflecting the discipline in how we operate and the leverage we're unlocking as we scale, putting us in strong position as we work towards Rule of 40 by end of 2027. The margin expansion reflects a combination of factors: revenue growth, ongoing portfolio optimization, enhanced delivery efficiency through our global service center, benefits from restructuring initiatives and disciplined expense management. Turning to some of our recently introduced operating metrics for the Analytics segment. All of our KPIs are trending in the right direction. Recurring revenue was up, software and VMS ARR were up and our retention metrics remain strong. This reflects the durable high-quality nature of our key recurring revenue streams. This quarter, we also rolled out our new disclosures across the P&L to better align our reporting with other technology companies. We're steadily progressing towards our target model, and the improvements we saw in Q4 are encouraging. In particular, we're benefiting from the optimization of R&D and G&A, which will increasingly reflect the impact of our restructuring activities, product portfolio rationalization and third-party cost optimization. This quarter continued our pattern of strong cash generation with double-digit growth driven by record conversion. As Mike mentioned, we're seeing the cash generation strength of this business come through consistently, which reinforces our confidence in our capital return plans. We ended the year with a very strong balance sheet, giving us the flexibility to execute those plans while maintaining financial strength. As discussed at our Investor Day, we believe the business can comfortably operate with modest incremental leverage over time, and we intend to progress towards our funded debt-to-EBITDA target of roughly 2.5x to support those returns. And finally, I'll wrap with an overview of our business outlook, which we're presenting on an organic basis for continuing operations only without the Appraisal business. As you can see on this slide, we're expecting steady top line growth and sustained margin expansion. To be very clear, the constant currency growth rates represented our guidance, but we've also presented the indicative dollar range for easier comparison. The implied dollar ranges are based on our January FX assumptions, which are subject to fluctuations and will cause the dollar figures to differ from what we ultimately report. Our expectations are based on our target growth algorithm, which expects roughly 80% of the growth to be driven by volume and pricing and 20% by new logos. Adjusted EBITDA margin expansion is expected to be driven primarily by improved operating efficiencies and expense management, reflecting the actions we took this past month that Mike just discussed. Within that framework, we expect software to remain our strongest grower, maintaining solid high single-digit growth. For VMS, we're not underwriting a market rebound. Our outlook assumes sustained growth consistent with current market conditions. And in data, we see opportunities to improve growth, and we expect that progress to build over the next couple of quarters. Given the ongoing plans for other divestitures, we'll update our guidance throughout the year as additional transactions get completed. With that, Lisa, let's open up the line for questions now. Operator: [Operator Instructions] Your first question comes from Erin Kyle, CIBC. Erin Kyle: I first wanted to just ask on the guidance here. I just want to get some help comparing apples to apples. And maybe for the full year guidance, I understand it excludes Appraisals. But maybe can you help us understand where you expect the Development Advisory business to land from a revenue and EBITDA standpoint for 2026? I think most estimates at this point still include both Appraisals and Development Advisory. Pawan Chhabra: Yes. It's a fair question, Erin, and great hearing from you. So as you noted, our guidance now has flipped to recurring and continued operations. The continued operations drops out the Analytics guide, which we moved to discontinued operations. Post the divestitures that Mike outlined in terms of the noncore businesses and DA, we're essentially going to be an analytics company. So we're just getting ahead of it in regards to how we're formulating our guidance. As it relates to the Development Advisory business, historically, you've seen that as a combined segment. Appraisals represented about 30% of that number. Development Advisory was about 70% of that number. And then when you break apart Development Advisory, it was -- it's about 70% North America and about 30% APAC. So hopefully, that gives you a little bit of clarity in regards to how to compare it to how you guys have modeled it in the past in regards to just the overall revenue contribution to the total number. Our plan in regards to guidance is, as we sign definitive LOIs, we'll start moving these businesses over to discontinued operations, which will lead us to then recast our guidance to just help you guys continue to drive that level of clarity. Erin Kyle: Okay. And is that 70-30 split on both a revenue and EBITDA basis or just revenue? Pawan Chhabra: Yes, so the numbers that I gave you were on the revenue component. Erin Kyle: Okay. And then on the adjusted EBITDA side, I just wanted to ask about some add-backs in the quarter. There were $17.5 million in other operating expenses added back. Can you maybe just clarify what's included in there? I see $12 million allocated to corporate initiatives and strategic projects in the quarter, so maybe that specifically, if you could just expand on what's in there. Pawan Chhabra: I'm sorry, Erin, did you say in the other operating category? Erin Kyle: Yes, the other operating expenses in the adjusted EBITDA. Pawan Chhabra: Yes. So the other operating, as you mentioned, includes a host of different elements in it. Give me a second. So we've got the -- some degree of transitional costs in that $18.5 million related to some of our onetime corporate initiatives and strategic projects that we've run. We also benefited from about $6.5 million of realized and unrealized FX gains in Q4 of last year, and so that is obviously part of that $18.5 million higher on a year-over-year basis. Erin Kyle: Okay. That's helpful. And I'll squeeze one more in here, maybe for Mike. Just on the AI disruption risk, I appreciate you touched on it earlier on the call. I just wanted to expand on it a little bit in terms of some of the commentary we maybe heard out of some of the larger real estate brokerages last week just discussing ways to leverage their own proprietary data internally with AI. And I realize we did just see -- you signed a licensing agreement with Newmark for Portfolio Manager and Benchmark Manager as well. So maybe just how are you thinking about, yes, some of your customers looking to go in-house with their own data? Michael Gordon: So I think from the standpoint, we're not seeing that trend per se, Erin. What we're being pushed on by our customers is with the value that they see in ARGUS Intelligence is that they are wanting to get their data loaded into ARGUS Intelligence so that they can collaborate with others more quickly. I think that as we have very good data protection rights for our customers, we do a very good job of curating their data. And from the perspective of them leveraging the solution, I think that they look at us as an extension of what they would see as in-house as well. So where you have like alignment is that we see that our customers, especially the ones that I mentioned, are eager to use the new concepts that we have and use some of the tools that we have, the AI tools, and we have a number of like what we would call white box and gray box AI tools that they can go ahead and leverage going forward as well. So we -- I think we're looking as an extension to them versus just being in competition with them. Operator: The next question comes from Paul Treiber, RBC Capital Markets. Paul Treiber: I was hoping you can dig a bit further into 2026 guidance. Just for the 4% to 6% revenue growth, you mentioned a couple of moving parts there with VMS versus ARGUS Intelligence. Can you just elaborate further on the growth that you expect for ARGUS Intelligence and the drivers of that, particularly with ARR was quite healthy this quarter, up 11%? How do you see that translating into ARGUS Intelligence growth in '26? Pawan Chhabra: Yes. It's great hearing from you. Hope all is well. Just it's a great question. As you know, externally, we've created the categories of software, data services and VMS. Software includes all of our software components, and so when I talk about high single-digit revenue growth, we're talking about all of the software categories, including ARGUS Intelligence and our other software categories. But if you were to break that apart and look at ARGUS Intelligence specifically, we are seeing great traction on there. You see that from the ARR growth rates, particularly high from a full year perspective. It was very strong in quarter as well, too. And so within the software category, we expect ARGUS Intelligence to be double-digit growth within that paradigm with some headwinds from the other software categories as we continue to resolve those onto the platform over time but very bullish in regards to the progress that we've seen in ARGUS Intelligence, both in terms of the ARR growth in the quarter as well as the continued strong retention metrics, both on a gross and on a net basis. So very, very pleased with that progress. We have, I would say, at this point, 80% of our ARGUS Enterprise ARR is sitting on ARGUS Intelligence, and we continue to move the needle in regards to moving more and more of our business to asset base. So roughly 40% of our business in ARGUS Intelligence is sitting on asset base. And when you look at that from a total segment perspective, keep in mind, VMS is all asset-based. So the percentage of our business that's sitting on asset base now is the lion's share of our revenue. Paul Treiber: That's helpful. The second question is just on -- previously disclosed the proportion of customers that have contracted to use the cloud, and I think it was the vast majority. The -- what proportion of those have actually migrated over to the cloud and where you can start mining or using some of that data for your analytics products? Pawan Chhabra: Yes. So the majority of our clients are now sitting on ARGUS Intelligence, and we're working very closely with our delivery teams, our services teams and the clients to provision those models that they've migrated over to be able to leverage the tools and technologies that are available to them through Benchmark Manager, Portfolio Manager. There is a degree of data cleansing that has to happen. It's really a change in user behavior in regards to hardening the data so that it can become referenceable and something that we can benchmark. And so there's a lot of effort in regards to working with our clients to resolve kind of this last mile element of getting their models ready for full benchmarking. Michael Gordon: Yes, Paul, one other thing that we've done and just the -- when we talk about the patent that we just got. As we leverage the customers' information for them on ARGUS Intelligence, we're now doing it by asset versus by valuation. And so we're now building out probably a fuller view of that asset for those customers and as a result, a view that is not only greater in the intensity of the data looking at things but also goes horizontally with time so that they can start looking at time series as well. So from this perspective, we think we're giving them like a better 360-degree view of what that has done not only today, but where it has been and where it's going. Operator: Gavin Fairweather from ATB Cormark has the next question. Gavin Fairweather: Maybe we can just dig in on the go-to-market refinements that you referenced, Mike. I remember back in 2020 or 2021, the last time you did a bit of a go-to-market overhaul, it led to a pretty meaningful increase in sales productivity. So maybe you can just discuss the changes that you're making and what impact you'd expect that to make? Michael Gordon: Sure. I think -- and thanks for remembering that. It makes me feel good. The thing that we have is we've had historically a business that -- even in Analytics, the different parts of the business went together separately. So our VMS team, our software sales team, our data sales teams, while they try to coordinate, they did go and separately do things, and their quotas and how we would pay them were really set up on their own opportunities. What we've changed and with us putting Rich Sarkis into the role of Chief Commercial Officer, our entire suite of valuation solutions now go to market in one motion. Now there's work to be done to make sure that, that motion works in a consistent, coherent way. But what we believe is what we have is now, instead of having maybe 60 software sales guys and a few guys looking at VMS and data, we have probably over 600 people in our organization focusing on the customer every day, while they're acting either in the sales function, a customer support or a customer success function or just an account management function or delivery function. And so as we've done that, we've also focused on making them focus on the customer first, whether it's for their product or their solution or something else. And so what we've seen -- and we just ran our sales kickoff. What we've seen is, as we've been training these guys around it, it's not only talking about the value that their solutions bring but how they can bring total solutions as customers are asking for it. And we're starting to see good pickup in executive sessions with our customers. Just like everything's happened to everybody over the last 4 to 6 weeks, we're seeing a lot of them ask questions on where we can fit in and how we can help them solve some of the problems with their internal staff. So I would look at it as we are -- it's easy to say that we're doing a consultative or value-based sell, but we see those things really driving pretty well. And we have our Connect conference happening in about -- maybe about just under 2 months from now, and we'll be pulling that together even further for that conference. Gavin Fairweather: Appreciate that color. And then maybe just on ARGUS Intelligence, can you discuss the shape of the renewal book through kind of '26 and '27 and where those renewals are stacked up? Pawan Chhabra: Yes. It's a great question. As you know, we went through a heavy renewal cycle last year, and we purposely -- prior to last year, we're signing up clients to 1-year contracts, so we can move them from seat-based to asset-based pricing. Majority of those clients now that have moved to asset-based pricing are now on 3-year contracts, and so we have a smaller cohort this year of renewals than we did last year. And so a lot of that focus from a sales effort is really focused now on, a, moving the seat-based asset base; and two, ensuring that we can continue very strong motions on our cross-sell and upsell opportunities into those clients. Michael Gordon: If I added on to that, where we -- when we were doing the analysis earlier this year, the -- our expected renewals this year will be down about 20%, not because we're losing anything because, as Pawan said, they've gone to 3-year contracts, and we would expect that to be down and like average out next year as well. So getting back to the go-to-market motion that I was talking about, the team's got more time focusing on cross-sell or upsell opportunities with them, especially around the different product sets that we have. Gavin Fairweather: Appreciate that. And then just lastly for me, thanks for the new disclosures. I guess the problem with putting out gross retention, net retention is that it opens up questions about churn. So maybe can you just discuss the primary reasons for churn? And maybe you could talk about like what gross retention looks like if you just focus on the ARGUS business and then how you think ARGUS Intelligence could influence churn going forward as the customers take a broader suite of your solutions. Michael Gordon: If I start, if I go to the churn on the ARGUS business, the ARGUS business has very little churn. Typically, we see gross retention in and around or above 95%. And where we get any churn is when you get down into like if you think about our very long-tail customers, where we get funds that come and go and they go and they leave, but we're very sticky with that, so that's pretty strong for us. Where we actually -- in some areas, around data last year, we saw a little bit more churn, and part of that is like -- and this was -- we have a strategy to fix that. That business has typically been the feed the beast business. It's very much market to the customers, do work around them. We're starting to see good impacts on net retention. And then if you get into the VAS retention, well, we talked about that at Investor Day. That's incredibly high retention and keeping current customers. That business, though, tends to have a lot of what we look at. We look at net upsell and downsell in that business. We rarely have any churn. Does that help? Gavin Fairweather: That's great. Operator: Next up is John Shao, TD Cowen. John Shao: So could you tell us the pace of your margin expansion throughout 2026? Because it looks like you're going to start with 18% to 19% in Q1, and we'll finish the year with 25% to 26%. So that basically implies a much higher EBITDA margin close to 30% by Q4. Is that a correct thinking? Pawan Chhabra: Yes. Look, so that is correct. Again, as we talked about our guidance from a kind of midterm perspective at Investor Day, we talked about it in the form of Rule of 40, and that Rule of 40 was a combination of high single-digit revenue growth which would then imply margins by the end of 2027 to get us to that Rule of 40, so low to mid-30s in that range. And so the point of what we're doing here is just we're building a steady pace of improvement. Our revenue is going to continue to steadily improve, and we're taking direct actions to make sure that we're scaling our business appropriately with our growth to drive that margin expansion. And so we have a lot of confidence in regards to our margin expansion capabilities. Mike referenced the fact that we did do some actions in regards to just making sure that we continue to remain in fighting shape as we rightsize the business. It's just good hygiene work for us, but we're going to get the full year benefit of the work that we've done in 2025 into 2026, which will help us get to those measures that you're talking about. So you're thinking about it in the right way. We should see a steady progress throughout 2026 to get us to what we talked about at Investor Day for 2027. John Shao: Got it. And back to the Rule of 40, how much of your Rule of 40 target by '27 is dependent on a broader market recovery in terms of the macro? Any update since last Investor Day? Do you still think 2026 will be a key year for some recoveries? Pawan Chhabra: Yes. As I mentioned, our guide is not underwriting a market recovery, and Mike refers to this often with the Board. We're going to have good growth in a down market, and we're going to have great growth in an up market. And so as we think about our guide and its correlation to the market, investment decisions are being highly selective now. While dry powder is up, transaction activity is up. We're seeing a greater degree of selectivity, and that plays right into our strength in regards to helping our clients ensure that they are managing risk appropriately and driving performance and investing in the most profitable and highest return assets. And so we built a plan, and we're executing around the plan where we're going to continue to see steady growth in any market. And if the market has significant tailwinds, then we should have great growth. But we're confident in our path right now in any market. John Shao: Maybe one last question for me on AI. So if you're going to roll out more agentic AI features, how should we think about -- number one, is the pricing of these additional features. And maybe number two, could you talk about the impact on your margin profile? Because my understanding is the tokens from some of the frontier models can be quite expensive. Michael Gordon: That's a fair question. So there's 2 ways that we look to do this and just in some of the experience I've had with it. We'll roll it out in a method that it is -- it runs by itself or it runs alongside human intelligence. And so depending on how they will use it, they can use it to support or they can use it to provide reports on that. The key thing that we need to make sure is when we run this is we need to understand the cost to run that based off of the compute power that we have. So as we've looked at this, we've looked at what those costs look like and what those loads look like. So we have a pretty good sense of how those things will run. And we feel like those will be, from a gross margin perspective, as profitable as some of our other lines of business when it comes to ARGUS Intelligence. Operator: We'll take the next question today from Richard Tse, National Bank Capital Markets. Richard Tse: In the outlook section, you sort of talked about 80-20 sort of growth from volume pricing and then new logos. How does that mix change under different market conditions for commercial real estate? Pawan Chhabra: Yes. Look, we've got a tremendous opportunity from a cross-sell and upsell perspective as we continue to roll out new features and functionalities in our product suite, which gives us that opportunity both from a pricing perspective. New logo, [ we were certain ] about 20% of our growth in new logo. There's a lot of efficiencies that we've built within the business to be able to deliver our solution at a better cost point for us, particularly in VMS as we're leveraging a lot of the technology that we're rolling out to the clients where the beta customers internally to adopt those solutions. And so that is giving us the opportunity to expand our VMS from Tier 1 into Tier 2 opportunities to continue to capture the new logo opportunity. But we've got a large base of clients. We've got a whole new suite of offers that we can bring to those clients, and that's going to give us that opportunity from a pricing perspective and from a volume perspective to be able to drive more into existing relationships. Plus, the team selling the full portfolio of solutions plus our scalability from a cost perspective allows us to go after white space and new clients as well. Richard Tse: And just your perspective kind of on the market in general. Like if you had to sort of rate it on a scale of 1 today in terms of the market conditions for Altus specifically, like where do you think we are right now? Pawan Chhabra: Yes. Look, I can give you kind of my thoughts on market sentiment, but there are views that people can talk both sides of the coin on. We've seen rate volatility has eased, but trade policy, regulatory uncertainty continues to weigh on the sentiment. Transaction activity, we did see improvement through 2025, and it's fully expected that the transaction activity is going to continue to be good in 2026. But the recovery is uneven across asset types. You're seeing multifamily and industrial continue to lead. Retail is stable, and office is bifurcated between prime space leasing and some of the older commodity stock that continues to reprice. I mentioned we've got near record levels of dry powder that continues to build. But there's going to be a lot of selectivity in regards to how that capital is deployed in the markets, and that's where it's a tailwind for us. It's a very strong opportunity for us to really help the CRE industry maximize the performance and effectively manage the risk and make better and more informed decisions. And so this market environment plays to the strength of exactly the value proposition that we're selling to our clients. Richard Tse: Great. And just one last quick one for me. With respect to other potential noncore divestitures, specifically in Analytics, can you maybe help us understand a little bit what may be considered noncore? Because in terms of trying to value the stock, we sort of want to see what a run rate business looks like here going forward. Michael Gordon: Yes. I think, listen, there's not a lot where we would have this in Analytics. But just to be very straightforward, we are in the valuation space. And so as we look at like what we do, anything seen -- any of the products that we have Argus branded to or some of the new products that we've had and we're putting out there or the analytics-based products and our workflow, those are all very much in the valuation space and helps in that platform. That also includes the data that we include and ingest into that platform as well as clearly our VMS team. We look at them as the guys who really get a lot of activity on that platform. If it's a couple of steps removed, it starts to be something that we will be looking at and deciding does it make a lot of sense to keep it. But it's -- there's not going to be a lot of things there. But we just are -- as part of like the review that we started when we talked about at Investor Day, we're still continuing on that, and there'll probably be a couple of small items that we'll move on. Operator: [Operator Instructions] We'll go to Stephen MacLeod from BMO. Stephen MacLeod: I just had a couple of questions just regarding the guide given the new reporting and some of the changes to the reportable segments. Just quickly first on the Development Advisory business. So you've signed an LOI, but it's not -- but it's still included in the guidance. Is that right? Michael Gordon: Yes. Let me answer that. That's right. That is actually -- and it got -- as we talked about, it's in italics. We just got that done. So as we were announcing things, Stephen, I think we wanted to be a little conservative on that. But our belief is that, that will be done, hopefully, more or less by the next 60 to 70 days. Stephen MacLeod: Right. Okay. Okay. That's helpful. And then just on the advisory -- or sorry, the Appraisals business breakdown, Pawan, did you say it was -- it's roughly 30% of the underlying AD&A business? Pawan Chhabra: Yes, that's correct. About 70% of the previous development -- the AD&A number was about 70% Appraisals -- I'm sorry, 30% Appraisals, 70% Development Advisory. And within Development Advisory, North America represents about 70% and APAC represents 30%. Yes, so you were correct. Stephen MacLeod: Okay. That's helpful. Camilla Bartosiewicz: Put another way, Appraisals did $31 million in revenue last year, if that helps. Stephen MacLeod: Okay. I saw that in your disclosure. That's helpful. And then maybe just finally, just on now the pre-IFRS 16 basis that you're reporting EBITDA, is -- would you expect your occupancy costs to change much heading into 2026 given some of the cost-saving measures that you've began implementing in 2025? Pawan Chhabra: Yes. Look, I mean, as we stated on numerous occasions, we do have a wide real estate footprint that we're rationalizing as we continue to simplify the business. So we would expect that to continue to lower as well, too. Stephen MacLeod: Right. Right. Okay. Okay. That's great. A lot of my other questions have been answered. Lots of great color. Operator: We'll now take a follow-up from Gavin Fairweather, ATB Cormark. Gavin Fairweather: Just on capital allocation, you indicated an amount that you'll look to deploy in the first half above and beyond what you've already done. With $800 million, you've left yourself with some additional kind of capacity and room for the back half. I guess I'm just curious kind of under what conditions you'd look to become more aggressive in the back half of the year and increase the amount of capital returns. Michael Gordon: I think for us, it's going to be something that as we -- we'll continue to watch the market. We'll continue to watch the sentiment. And we believe we have good value in what we're doing, and we will get there fairly quickly. I think that, as we said, we're going to deploy a good portion of that in the first half. I think depending on how the instruments that we use are taken up, that will be dependent upon how we start to deploy in the second half and when we deploy. I think if the market remains a little choppy in -- or similar to as we've seen it, we'll start -- we think that that's still a great buying opportunity for us, and so then we'll continue to leverage that. Operator: And everyone, at this time, there are no further questions. I'd like to hand the conference back to Mr. Mike Gordon for any additional or closing remarks. Michael Gordon: Well, I would just want to thank everybody for getting on the call. It's been a pleasure to talk to all of you, and thank you for the questions. As we talked as a team here, we're excited about the opportunities for this year, and we're getting to work. So looking forward to talking to you all coming forward in the next couple of months. Have a good night. Operator: Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.
Operator: Greetings and welcome to the Gentherm Incorporated Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Gregory Blanchette, Senior Director, Investor Relations. Please go ahead. Thank you, and good morning, everyone. And thanks for joining us today. Gentherm Incorporated’s earnings results were released earlier this morning, and I Gregory Blanchette: copy of the release is available at gentherm.com. Additionally, a webcast replay of today’s call will be available later today on the Investor Relations section of Gentherm Incorporated’s website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance and actual results may differ materially. We undertake no obligation to update them except as required by law. Please see Gentherm Incorporated’s earnings release and SEC filings, including the latest 10-Ks and subsequent reports, for discussions of our risk factors and other significant assumptions, risks, and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are William T. Presley, President and Chief Executive Officer, and Jonathan C. Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we have made available on the Investors section of Gentherm Incorporated’s website. After the prepared remarks, we would be pleased to take your questions. I will now turn the call over to William T. Presley. Thank you, Greg, and good morning, everyone. Let us begin on slide three. During the year, we made significant progress on our long-term strategic initiatives while executing against our 2025 financial and operational priorities. To drive strategic growth, we provided a thesis early last year on the broad applicability of our technology beyond automotive. We purposefully broke out our technologies into four platforms: thermal management, air moving devices, pneumatic solutions, and valve systems, so that our commercial team could go out and kind of wet business with the technology in other markets. We provided updates on wins throughout the year to validate our hypothesis, and continue to believe this will drive growth going forward. William T. Presley: Operationally, Gregory Blanchette: we continued our work to strategically realign our footprint, which will continue through 2026, and despite the near-term headwinds, these actions will play a significant role in our margin expansion over time. During the year, we began laying the foundation to drive improved efficiency and performance across the organization through business process standardization, and the global rollout of our company operating system. We are starting to gain traction and reap benefits from stronger operational rigor. These improvements will drive better financial performance and cash generation, allowing us to deploy capital aligned with our strategic framework. To be clear, 2025 financial results are not of what Gentherm Incorporated can deliver as a business. We remain focused on executing our plans to grow and increase margins. As we enter 2026, we are confident that we have the right plan established to drive performance. We are executing our strategic priorities to build a more resilient gender. Let us turn to slide four. I took this role with a strong belief that Gentherm Incorporated was at an inflection point to enter its next phase of growth by scaling its core technologies beyond its existing applications. And we have proven that ability in a short period of time. The team is focused on reigniting a profitable growth trajectory through both organic and inorganic opportunities. In January, we announced a key part of transforming Gentherm Incorporated into a precision flow management company that serves diverse markets through our planned combination with Modine Performance Technologies, which is expected to close by the end of the year. This combination creates a $2,600,000,000 market leader positioned to grow to over $3,500,000,000 with a compelling financial profile and end-market diversification. I am confident that this is the right transaction at the right time for Gentherm Incorporated, and we will talk more about the benefits later in the deck. Turning to organic. When I first joined Gentherm Incorporated, I was impressed by the portability and scalability of our four core platforms. We saw great growth potential in scaling our existing products and technologies with new markets, new applications, and nontraditional customers. We tested that thesis very quickly in 2025, and validated that Gentherm Incorporated products have broad applicability. Within months, we generated a commercial funnel totaling over $300,000,000 of lifetime revenue in markets outside of light vehicle. That funnel enabled us to successfully expand into commercial vehicles, powersports, and home and office. Beyond just winning awards, Genther began supplying product in rapid time to revenue markets. During the fourth quarter, we were selected by another leading global furniture brand supply our climate and comfort products, our momentum in this market is accelerated. Our first discussions in this market began in 2025. We have already started manufacturing and delivery components in January, demonstrating shorter development cycles and rapid time to revenue compared to our automotive business. For our customers, these represent innovative, next-generation product offerings William T. Presley: centered on wellness Gregory Blanchette: a major and growing trend across these markets. For Gentherm Incorporated, we are leveraging our existing assets and core technologies to drive this incremental revenue growth with accretive margins. In Medical, we have prioritized reinvigorating our product life cycle roadmap. Refreshing the product portfolio remains a key focus and we are advancing these efforts by leveraging existing automotive intellectual property to accelerate innovation, improve time to market, and support sustainable growth within the segment. Earlier this month, announced our FDA 510(k) submission for a new innovative product. The way surgeries are performed is changing. Robotic positioning, which allows the surgeon to move the patient for better access, is becoming more common. Our first-of-its-kind solution, the ThermoFix system, combines conductive, air-free patient warming with securement technology to help prevent both hypothermia and patient movement during procedures. Given our strong relationships and deep engineering capabilities, medical professionals came to us to help solve this unmet gap in the markets. The ThermoFix system will begin generating revenue later this year, and we expect this product to be a key contributor that accelerates Medical’s annual revenue growth into the high teens. This is the first new product on our roadmap, and we will continue to leverage Gentherm Incorporated’s core technologies to develop solutions for the medical market. These are just a few examples of how we are executing against our plans. We said we would reposition the company for growth by taking our technology outside of light vehicle, and we provided several proof points in 2025. We are just getting started, and the combination with Modine Performance Technologies will play a key role going forward. We are taking bold, decisive actions that will position Gentherm Incorporated for sustainable, profitable growth. Turning to slide five. I am very confident in our path to improved financial performance. Though revenue has plateaued over the last few years, we have one high level of visibility to growth accelerating driven by strong automotive launch activity, and our pursuits in adjacent medical markets. We have said before that we expect Gender’s growth trajectory to be mid-single-digit growth over market, and our belief in that has only strengthened. On margins, we consistently shared our views on the major levers driving future margin expansion. We are investing in footprint optimization, we are launching lumbar and massage comfort solutions at improved margins, and we will be able to leverage scale as growth accelerates. Our roadmap to delivering improved financial performance is clear. We are now well-positioned to deliver meaningful revenue growth and margin expansion. I will now turn the call over to Jonathan C. Douyard to review some business highlights and our outlook. John? Thanks, Bill. Now turning to slide six. Our team delivered another strong year of automotive new business awards, finishing 2025 with $2,200,000,000, including $485,000,000 in the fourth quarter. For the year, these awards were highlighted by the Ford F-Series, high-volume platforms with Mercedes-Benz, and further adoption of our innovative pulse-based solution. These wins demonstrate the strength of our industry-leading technology. We defend existing business, launch innovative new products, and create new market opportunities. We generated record revenue of $1,500,000,000 in the year, which increased 2.9% compared to prior year, or 1.8% when excluding foreign currency translation. Automotive Climate and Comfort Solutions revenue increased 5.8% ex-FX, which was offset by declines in other automotive products of $28,000,000 driven by our previously discussed planned exits. We continue to see strong growth of our market as we ended 2025, with fourth-quarter Climate and Comfort Solutions revenue outgrowing light vehicle by 820 basis points, excluding FX, with strong performance globally and across product categories. Turning to profitability, we delivered $175,000,000 of adjusted EBITDA in 2025, or 11.7% of sales, compared to 12.6% last year. The decrease was primarily driven by higher material costs, including unfavorable mix, as well as expenses related to our footprint realignment, partially offset by operating leverage. We generated $117,000,000 of operating cash flow, an increase of 7% compared to 2025. This was despite the fact that we were building inventory throughout the year to support the ongoing program transitions. Capital expenditures for the year were $56,000,000, down from $73,000,000 in the prior year, as our team did a nice job focusing on assay utilization, Jonathan C. Douyard: scrutinizing new capital expenditures. Jonathan C. Douyard: As a result of our team’s efforts, we further strengthened our balance sheet and ended the year with net leverage Jonathan C. Douyard: of 0.2 turns. Jonathan C. Douyard: We continue to emphasize capital as a key business priority and believe we are well-positioned to generate increased levels going forward. I am confident that our increased financial rigor will drive improved results into 2026. Please turn to slide seven for a discussion on our guidance for 2026 and a preliminary revenue outlook for 2027. At this time, we have not factored in any impact regarding our planned combination with Modine Performance Technologies, which is expected to close by the end of 2026. We will provide better visibility on timing and impact as the year progresses. For 2026, we expect revenue to be between $1,500,000,000 and $1,600,000,000, which is up approximately 3% at the midpoint when excluding slight year-over-year FX tailwinds. According to S&P Global Mobility’s mid-February 2026 report, light vehicle production in our key markets is expected to decrease approximately 1% for the year. This positions us to grow above market by mid-single digits in the year, consistent with our long-term view. We expect the impact of strategically exited businesses to decline to approximately $10,000,000 year-over-year. On margins, we expect adjusted EBITDA for 2026 to be in the range of $175,000,000 to $195,000,000, which implies a midpoint adjusted EBITDA margin of approximately 12%, or 30 basis points expansion year-over-year. The ongoing footprint transitions will continue to be a profit drag, which we expect to be approximately 60 basis points for 2026. As we think about the 2026 cadence, we expect the second half revenue to be slightly stronger than the first half, driven by new program launches. On margins, we expect first quarter will be similar to prior year, with expected improvement throughout the year as the impact of contractual price downs is offset by material savings and productivity actions as the year progresses. We estimate that adjusted free cash flow will be in the range of $80,000,000 to $100,000,000, assuming CapEx is in the range of $45,000,000 to $55,000,000, or approximately 3% of sales. This results in an adjusted free cash flow conversion rate of approximately 50%. While this marks an improvement from the last few years, we continue to believe there are opportunities to increase conversion to 60% or higher moving forward. In addition to 2026 guidance, we are also introducing a preliminary 2027 revenue outlook. Based on current visibility, we expect 2027 revenue of $1,700,000,000, up approximately 10% versus the 2026 midpoint guidance. This growth is supported by strong launch activities and adjacent market pursuits. While we continue to believe that our Automotive New Business Award is a leading indicator of the long-term revenue of the business, we appreciate the challenge in connecting these awards to a near- to mid-term outlook given the lag in start of production and the varying program lives. In order to provide additional visibility to the revenue trajectory, we believe it is important to communicate revenue projections beyond the current year at this time, and we will continue to look for other opportunities to increase transparency moving forward. Overall, we believe that the strategic actions we are taking to accelerate growth and drive operating discipline provide us a clear roadmap for value creation as we move forward. I will now hand it back to Bill for some further color on our recent announcement to combine with Modine Performance Technologies. Thanks, John. Moving to slide eight. Our combination with Modine Performance Technologies accelerates the execution of our strategic framework by expanding our technologies and capabilities in thermal and precision flow management. The combined company will have an attractive financial profile with revenue of approximately $2,600,000,000, pro forma synergy-adjusted EBITDA of 13%, and a strong balance sheet. We believe Gentherm Incorporated is the ideal home for Performance Technologies and will provide it with a renewed focus to drive growth in attractive markets, including power generation, heavy-duty equipment, and commercial vehicle. This is a well-run organization that has a high-performing culture and a strong industrial leadership team in place. We expect continued strong execution upon closing. William T. Presley: The team Gregory Blanchette: brings a continuous improvement and lean mindset that Gentherm Incorporated is excited to leverage. Now, let us turn to slide nine. As we talked about on our January call, there are significant value creation opportunities with this transaction. First, we have identified actionable near-term run-rate cost synergies of approximately $25,000,000 through efficiencies in direct materials, indirect purchasing and logistics, as well as supported costs related to the overall company operating model. As we work closely with the team, we are looking to introduce additional cost savings initiatives that could increase the run rate over time. That said, we believe the real power of this combination is in the product and end-market opportunities that are unlocked, and we have strong conviction that together we can greatly accelerate our growth path. This is an area where I have personally spent a significant amount of time, and I want to highlight a few specific examples. First, Modine brings established commercial relationships in industries that Gentherm Incorporated has not historically participated in, including commercial vehicle and heavy-duty equipment. Based on early discussions, we expect this will accelerate Gentherm Incorporated’s progress as we pursue these markets. Furthermore, Modine has footprint in regions like India, which Gentherm Incorporated has been evaluating over the past year as an area of potential expansion. As one company, we will now be able to sell directly into these geographies without the need for incremental footprint investment. While we have high levels of confidence in those areas, the most value creation opportunities relate to product integration, particularly where Gentherm Incorporated’s valve technology has applicability. To be more specific, in markets such as power generation—and power generation for data centers specifically—Modine Performance Technologies has a leading position supporting the thermal needs of customers as they build out necessary infrastructure. As part of their solution, valves are required to regulate the flow of fluids and air through the thermal management systems of the power generation architecture, which Gentherm Incorporated, as a premier valves manufacturer, is able to supply. In addition to supporting power generation needs, Gentherm Incorporated valves are mission-critical components with applications inside the data center as well. These are tangible and sizable opportunities that we will continue to develop together post closing. Merging Gentherm Incorporated and Modine Performance Technologies opens key new markets for Gentherm Incorporated’s product, including one experiencing significant growth. Together, our combined capabilities put us in position to capitalize on this expanding opportunity and rapidly scale our highly attractive valves business. On our January call, I highlighted that in a very short period of time, our collective team identified a commercial synergy funnel of over $100,000,000. It is important to note that valves made up more than half of that number given their broad applicability, mission-critical nature, close adjacency to, and integration with the products that Modine Performance Technologies produces today. These are just a few examples from the initial work we have done, and we expect to significantly increase the funnel size once we close the transaction and are able to work together as one company. These product integration efforts will strengthen our ability to meet the rising demand for our combined mission-critical offerings. It is important to remember that none of these commercial opportunities were factored into our base assumptions and represent incremental upside to the transaction. Together, we can accelerate each other’s growth path and margin improvement beyond what either could accomplish as a standalone business. We summarized the growth of Gentherm Incorporated and the power of bringing these two companies together on slide 10. We are charting a new course by creating a company that can grow substantially with differentiated and scalable core technologies. We see a clear path to generating $3,500,000,000 in revenue and more than a half billion of earnings by 2030, driven by our disciplined commercial strategies and continued focus on operational excellence. We are on a relentless pursuit to build a more resilient company. Wrapping up on slide 11, I want to reiterate my excitement about Genatherm’s future. We remain confident in our growth trajectory and look forward to welcoming Modine Performance Technologies later this year. We are focused on closing the transaction, ensuring we hit the ground running on day one. We will update you on our progress throughout the year. As we enter 2026, our team is invigorated and operating with a clear focus on strategic priorities. We are acting with a strong sense of urgency to build on the momentum achieved in our adjacent market initiatives and margin expansion efforts. We are taking decisive actions to position Gentherm Incorporated for sustainable, William T. Presley: profitable growth Gregory Blanchette: and long-term value creation. With that, I will turn the call back to the operator to begin the Q&A session. Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing 1. One moment, please, while we poll for questions. Our first question today is coming from Ryan Ronald Sigdahl from Craig-Hallum Capital Group. Your line is now live. Appreciate Pardon, man. Ryan Ronald Sigdahl: Appreciate all the commentary on the current business this year, but also going out to 2030. It is helpful from a pro forma standpoint. Want to start with the adjacent end markets, curious, knowing that there is a lot of synergy potential with the merger combination, but kind of how you view the next couple quarters, if you guys are continuing to lean in there, or if there is a better, more opportunistic wait-and-see on certain end markets once you are combined. And then second to that, if you are able to quantify the percentage of revenue in 2026 and 2027 for the expectations you gave that are representative of those adjacent markets? William T. Presley: Yes. So I will start. Look, we will continue to lean into the adjacent markets. I would say home and office, which we previously called Motion Furniture—we are calling home and office as we are getting a lot of pull in that market—driven by trends in health and wellness. So we will continue to lean into that market and just put a little color on that. With the pipeline we have, with the engagements we have, we would expect that home and office would be contributing somewhere between $50,000,000 and $100,000,000 in revenue by 2028. So very rapid time to revenue, and margins are, as we have discussed before, not quite at Medical, but above what we have in light vehicle. So accretive there. We will continue to lean into Medical. We announced the new product introduction this quarter and submitted the 510(k)s. We anticipate that that product will begin contributing revenue this year. But look, that product is going to be a leading contributor, we believe, to doubling the size of the Medical William T. Presley: business William T. Presley: before 2030. And then we continue to see some traction in the other adjacent markets with our and comfort solutions for what we would call other mobility. So really around commercial vehicle. We are not slowing anything down, Ryan. The attractive part for us with the Modine Performance Technologies merger is it is a true, what I would say, accelerator for our plans to grow our valve business. Our valve business is very attractive to us. It is above company margins, and we want to scale that. And Modine Performance Technologies gives us a really nice runway to scale valves. John, anything else you want to add? Just that we have historically said, I think, that the adjacent markets will bring one to two points of growth year-over-year. I think Bill’s comments are consistent with that. And so we are certainly not taking the focus off that as we look to close the Modine transaction. Helpful. Then on the Ryan Ronald Sigdahl: footprint realignment, last quarter, it was substantially by 2026. Now it is completion in 2027. I guess, has there been a shift out from any of your expectations, from a timing standpoint and what all doing from an alignment standpoint? And then second point to that, as I look to 2027, you gave revenue, but not EBITDA expectations. I get a lot of moving pieces. But are you at least willing to say if margin expansion is expected to accelerate with that revenue growth acceleration, as a lot of this alignment and cost efficiencies start to flow through? Jonathan C. Douyard: Yeah, Ryan. I would say no change to the timing of footprint transitions. And so we may not track to be done in 2026, with benefits coming in 2027. So if you look at the $1,700,000,000 number next year, which is 10% growth at the midpoint, we did not put out an EBITDA number, but we do expect to see the benefits of the footprint transition flow through, as well as the benefits of more favorable mix, both from pneumatics pricing as well as the adjacent market becoming a bigger piece. And so we would expect to see a bit of a step-function change in 2027 from a margin perspective. Ryan Ronald Sigdahl: Bill, John, appreciate it. Thanks. Good luck, guys. Jonathan C. Douyard: Thank you. Operator: Thank you. Next question is coming from Matthew Butler Koranda from Roth Capital. Your line is now live. Jonathan C. Douyard: Good morning, guys. This is Joseph on for Matt. Just thank you again for taking my questions. Just want to hop back on a previous clip. Question asked. You know, flow-through, I guess, for 2026 on the sales outlook coming in a little bit lower than expected. Just outside of the realignment on your footprint, is there any other incremental investments we are kind of factoring in for this year? Know, as we look at 2026, just to walk through it, right, I think the growth from a top line perspective being in the mid-single digit over the automotive industry volumes. I think if you look at it from a productivity and gross margin perspective, we continue to make progress within the plans in terms of driving operational rigor. We continue to make progress in driving material savings to offset pricing. We do have the footprint headwind in the year, which will be relatively consistent with last year, but we did see that start to increase a little bit towards the end of the year and expect that to continue into 2026. I would say the only other dynamic out there would just be from an FX perspective. We do see some headwinds from the peso in particular, just how that has moved in the last couple months. Other than that, we are not expecting any sort of incremental investments beyond the footprint piece and our continued focus on the adjacent market, which has really just been reallocating internal spend. Got it. Okay. Thank you. And then as you guys provided the 2027 guide, given majority of the core revenue is coming from automotive, where is the confidence coming from if you can just kind of highlight any key line items that you want to highlight for 2027. Excuse me. Yeah. Look, I would say we continue to have strong launch activity. So we are confident in our core automotive business, as we have been. So we continue to see adoption and penetration of both our Climate Solutions and our pneumatic solutions. So we are confident there. Matthew Butler Koranda: And then we are also Jonathan C. Douyard: starting to see just some traction in the adjacent markets. Right? We will start getting contribution, as we said, from new product launches in Medical. We will start getting contribution more from home and office and the other things we have been working on. So we have very strong visibility. We are very confident in the 2027 revenue number. Okay. Thank you, Bill. We will go ahead and take the rest of ours offline. Thank you. Operator: Thank you. Our next question is coming from Luke Junk from Baird. Your line is now live. Jonathan C. Douyard: Good morning. Thanks for taking the questions. I wanted to start with maybe backwards looking in terms of China specifically. You cited strength across geographies in the quarter, just hoping we could double click on China and maybe back up and talk about just broadly your China positioning exiting 2025 and then in the near term, you know, just some turbulence from a production standpoint in China, just how you are thinking about it in terms of the setup for Gentherm Incorporated? Thank you. You want to take the first part? Yeah. I mean, we saw, I would say, really strong growth from a China perspective and really across Asia in the fourth quarter. You know, I think the interesting thing, and I think we talked about this on a prior call, we actually saw strength with the global OEMs in China in the quarter as they increased take rates to expand to not just the passenger seat, but the Luke Junk: the second row as well. Jonathan C. Douyard: And so that changed some of the dynamics there. So we really saw very strong growth above market with both local and global OEMs. And I think we expect that to continue at least through the first half of this year. Yep. I would agree with that. And we did remain focused on rebalancing our mix to represent more domestic OEMs in China. We finished the year with about 60% of our awards in China were domestic. So good progress there. But, again, we remain focused on winning with the right business. We are not interested in buying top line growth. We will stay focused on shifting the mix. As John said, we saw a big pickup from the global OEMs in China that was really driven by the China market having a high level of adoption of our products. So that will slow the mix-adjusted down a little bit, but does not change anything strategically that we are focused on. Yeah. And then just trying to near term, does that contribute at all to your comment that revenue may be a little more back half weighted? Or is that just really launch cadence? I would say that is more launch cadence. Luke Junk: Okay. Jonathan C. Douyard: Second, Bill, just hoping to dig into the ThermoFix patient safety system a little bit more. And, you know, assuming you do get FDA approval in the first half, just how quickly you can start to build out that business? I do not know to what extent you have kind of got potential awards in hand or now you have got a license to hunt. And then, you know, looking over the next few years, your comment that this is the bridge to Medical doubling by 2030, should we assume that there is more launches like this that are coming that kind of build to that expectation? Yeah. So I would say we have already started the voice of customer and clinical work with the ThermoFix system. So we are already, what I would say, priming the pipeline, Luke, which is why we anticipate revenue starting this year. So, again, this will be a big driver towards us doubling the business by 2030. Adoption curves in Medical take a little longer, but we are already out there in front of that as feeling we will push that. You absolutely can expect more new product introductions. We anticipate another significant announcement sometime early 2027, and it will once again leverage technology that we have been utilizing in the automotive industry for 30 years. So, again, it will be another minimal investment leveraging existing technology Luke Junk: But, yeah, we will continue to refresh that product line. Jonathan C. Douyard: Yeah. And then lastly, you mentioned opportunities within data center for valves and yeah. Just something to expand on that. Would that be liquid cooling, or just what would the application there be? Yeah. The application would be liquid cooling. That is an area we have to explore. I would just say in our work with Modine Performance Technologies on the power gen side, that was a market that we gained visibility into. It is not one we have been traditionally in. It is one that we are early in understanding. But Modine Performance Technologies gives us a lens and an avenue in, but there are true liquid cooling applications that require valve technology in data centers. Got it. I will leave it there. Thank you. Thanks, Luke. Thanks, Luke. Operator: Thank you. We have reached the end of our question and answer session. Ladies and gentlemen, that does conclude today’s teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation today.
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Kinross Gold Corporation Fourth Quarter and Year End 2025 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to David C. Shaver, Senior Vice President. Please go ahead. Thank you, and good morning. With us today, we have J. Paul Rollinson, CEO, and from the Kinross senior leadership team, David C. Shaver: Andrea Susan Freeborough, Claude J. Schimper, William D. Dunford, and Geoffrey P. Gold. For a complete discussion of the risks and uncertainties which may lead to actual results differing from estimates contained in our forward-looking information, please refer to page 3 of this presentation, our news release dated February 18, 2026, the MD&A for the period ended 12/31/2025, and our most recently filed AIF, all of which are available on our website. I will now turn the call over to J. Paul Rollinson. Thanks, David, and thank you all for joining us. This morning, I will provide an overview of our fourth quarter and full-year results, highlight our operations and projects, discuss our outlook for the business going forward, and review our achievements in sustainability. I will then hand the call over to the team to provide more detail. Looking back, 2025 was another strong year for our business, underpinned by consistent operational and financial performance. We produced just over 2,000,000 ounces and achieved our cost guidance, demonstrating a rigorous focus on cost control. As a result, our margins increased by 66% compared to a 43% increase in the gold price. This margin expansion resulted in record free cash flow generation for our business, with $769,000,000 generated in Q4 and $2,500,000,000 for the full year. This free cash flow strengthened our balance sheet and allowed us to return significant capital in 2025. In addition to returning approximately $1,500,000,000 of capital to debt and equity holders, we also ended the year with approximately $1,000,000,000 of net cash. With respect to operations, Tasiast and Paracatu continued to anchor the portfolio in 2025. Together, they accounted for approximately 1,100,000 ounces for the full year, more than half of our production, at strong margins. At Paracatu, full-year production of over 600,000 ounces exceeded the midpoint of guidance, with production exceeding 500,000 ounces for the eighth consecutive year. At Tasiast, full-year production also exceeded the midpoint of guidance and the mine was once again our highest-margin operation in the portfolio. In La Coipa, we delivered on full-year production guidance and saw strong performance in the fourth quarter. In the U.S., our assets delivered another solid year of operations, with full-year guidance achieved. Turning now to our projects. In 2025, we continued to make excellent progress across our attractive pipeline. In mid-January, we announced that we are proceeding with construction of three high-quality organic growth projects, which will extend mine life and benefit the long-term costs of our U.S. portfolio. Each of these projects demonstrates compelling economics at a range of gold prices and represents a strong case to invest capital to grow the overall value of the business. We also saw notable progress across our broader resource base, with resource additions at several assets enhancing our strong resource optionality and long-term production outlook. We also continue to advance our two world-class development projects, Great Bear and Lobo Marte. At Great Bear, surface construction for the AEX is well advanced and we look forward to starting construction of the exploration decline later this year. I am very pleased to report that we were just designated under the Ontario One Project One Process, which Geoff will elaborate more on. For the main project, detailed engineering and permitting continues to advance as we work with the Ontario and federal authorities, including the Impact Assessment Agency of Canada. The third and final phase of the impact statement submission remains on schedule to be filed at the end of this quarter. At Lobo Marte, we are progressing baseline studies and plan to submit an EIA by Q2, and we look forward to providing a project update later this year. With respect to our outlook, we are reaffirming our stable multiyear production profile. Production of 2,000,000 ounces for 2026 and 2027 remains consistent with our previous guidance. And we are introducing a new year of production of 2,000,000 ounces for 2028, at which time our new higher-grade U.S. projects are expected to come online, coinciding with higher-grade mining at Tasiast. Together, we expect this will provide an organic offset to cost inflation through grade enhancement within the mine plan. Looking further ahead, we expect production to remain around the 2,000,000-ounce level through the end of the decade, supported by the higher-grade mining at Tasiast, U.S. projects, open-pit extensions at La Coipa, and the start-up of Great Bear. As with everyone in the industry, costs are expected to increase compared to 2025, primarily on higher royalties and inflation. However, I want to stress that we are holding the line on what we can control through continued cost discipline. With respect to future capital allocation plans, we will continue to remain disciplined to ensure that we are investing in our operations to maintain a reliable low-risk business, growing net asset value through continued pipeline development and strengthening our balance sheet while also returning meaningful capital to shareholders. The outlook for our business remains very robust, and Andrea will speak more on our plans to return capital to shareholders later. Turning to sustainability. In 2025, we continued to advance several priorities across this important area. In Q2, we will publish our annual sustainability report, which will provide a detailed review on our sustainability performance and initiatives throughout 2025. Some highlights from the past year include: under the heading of environment, we completed an energy efficiency program delivering an estimated 1.5% reduction in greenhouse gas emissions through the implementation of more than 30 projects across our sites. Under the heading of social, in Mauritania, we donated medical supplies to our longstanding partnership with Project C.U.R.E. and Mauritania’s Ministry of Health. To date, the program has supported more than 70 health clinics. And under the heading of governance, we were once again named the top-scoring mining company in the Globe and Mail’s annual corporate governance ranking, including maintaining placement in the top 15% of companies overall. With that, I will now turn the call over to Andrea. Thanks, Paul. Andrea Susan Freeborough: This morning, I will review our financial highlights from the quarter and full year, provide an overview of our balance sheet and our capital allocation plan, and discuss our outlook Andrea Susan Freeborough: and guidance. Andrea Susan Freeborough: We finished the year producing just over 2,000,000 ounces, in line with guidance, with 484,000 ounces produced in the fourth quarter. Cost of sales of $12.89 per ounce and all-in sustaining cost of $18.25 per ounce in the fourth quarter were higher compared to the prior quarter Andrea Susan Freeborough: as expected, Andrea Susan Freeborough: due to higher gold prices and lower planned production related to mine sequencing. Full-year cost of sales of $11.35 per ounce and full-year all-in sustaining cost of $1,571 per ounce were in line with guidance despite the impact from higher royalties. Margins were strong at $2,847 per ounce sold in Q4 and $2,283 per ounce for the full year. Our adjusted earnings were $0.67 per share in Q4 and $1.84 per share for the full year. Adjusted operating cash flow was a record $1,100,000,000 in Q4 and a record $3,600,000,000 for the full year. Attributable CapEx was $362,000,000 in Q4 and $1,180,000,000 for the full year, in line with our full-year guidance. Attributable free cash flow was a record $769,000,000 in Q4 and a record $2,500,000,000 for the full year. Turning to the balance sheet. We continue to strengthen our financial position with significant cash flow generation in 2025, $700,000,000 of debt repayments, and significant growth in our cash position. In Q1, we repaid the remaining $200,000,000 on the term loan we used to fund the acquisition of Great Bear. And after redeeming our 05/2027 senior notes in December, we ended the year with $1,700,000,000 in cash, approximately $3,500,000,000 of total liquidity, and net cash of approximately $1,000,000,000. We now have no near-term debt maturities, with $500,000,000 due in 2033 and $250,000,000 due in 2041. In December, we received a credit rating upgrade, Moody’s Investors Service upgrading our rating Andrea Susan Freeborough: to Baa2 from Baa3. Andrea Susan Freeborough: Also in December, we renewed our $1,500,000,000 revolving credit facility, restoring the five-year term. Turning to our guidance and outlook. We are forecasting production in the range of 2,000,000 ounces for 2026, remaining consistent with previous guidance. Production is expected to be relatively evenly split across the year at approximately 490,000 to 510,000 ounces each quarter. With respect to cost this year, we are guiding $13.60 per ounce for cost of sales and $17.30 per ounce for all-in sustaining costs Andrea Susan Freeborough: at a gold price of $4,500 per ounce. Andrea Susan Freeborough: The expected increase of 10% for all-in sustaining costs compared to 2025 is driven by three factors: Andrea Susan Freeborough: First, Andrea Susan Freeborough: higher royalty cost due to higher gold prices, resulting in an approximate impact of 4% or $55 per ounce. Second, overall cost inflation of 5% or $75 per ounce. And the remaining 1% is primarily related to mine plan sequencing across the portfolio. With the increase in costs largely related to noncontrollable factors, our cost guidance continues to demonstrate our effective cost management strategy. Our capital expenditure guidance of $1,500,000,000 for 2026 reflects annual inflation and planned higher capital investment as we reinvest more in our business to extend mine lives and increase production in the late 2020s and 2030. Approximately $1,050,000,000 of our total CapEx is expected to be non-sustaining, with the remaining $450,000,000 expected to be sustaining capital. Looking ahead, our production guidance of 2,000,000 ounces remains unchanged for 2027. And we have now added another year, 2028, to our stable 2,000,000-ounce Andrea Susan Freeborough: profile. Andrea Susan Freeborough: Capital expenditures for 2027 and 2028 are expected to be approximately in line with 2026, subject to ongoing inflation and potential other project opportunities for the 2030s that are currently under study. Andrea Susan Freeborough: As Paul noted, Andrea Susan Freeborough: we will maintain our disciplined capital allocation strategy, which includes reinvesting in our business, where we have chosen to increase capital expenditures by $350,000,000 this year, continuing to strengthen our investment-grade balance sheet, and returning meaningful capital to shareholders. This year, we are targeting to return approximately 40% of our free cash flow back to shareholders through both dividends and share repurchases. Our shares remain a strong return on invested capital, considering our attractive valuation and free cash flow yield. With respect to dividends, we are further increasing our dividend by $0.02 per share annually, or 14%, following a 17% increase we announced in Q4, for a total increase of 33%. Also, as a reminder, as typical for us, we expect Q1 to be a higher cash outflow quarter due to annual tax payments in Brazil and Mauritania and semiannual interest payments on the remaining senior notes. We expect to start executing our share buyback program next week. I will now turn the call over to Claude to discuss our operations. Claude J. Schimper: Thank you, Andrea. I would like to start with our safety culture. In the fourth quarter, our risk management practices continued to be strengthened across all the assets, ensuring that our highest-risk activities are consistently and effectively controlled in the field. Building on our safety excellence programs, we continue to enhance capability at the frontline by investing in our field supervisors, equipping them with practical tools, targeted training, and visible leadership expectations to improve the quality of our critical control verifications. In December, we signed a five-year collective labor agreement at Tasiast and a two-year CLA at La Coipa. Claude J. Schimper: Reflecting our ongoing partnership with our employees and ensuring stability for both the local workforce and our businesses in Mauritania and Chile. Our culture of operational excellence, which is backed by dedicated site teams, continues to drive strong performance from our operations. Beginning with Paracatu, the mine delivered another strong year of production, exceeding 600,000 ounces, resulting in significant cash flow. Full-year production of 601,000 ounces exceeded the midpoint of guidance. Cost of sales of $978 per ounce were below the midpoint of guidance. Production of 155,000 ounces in the fourth quarter increased over the prior quarter due to timing of ounces processed through the mill, partially offsetting lower planned throughput. Paracatu is expected to produce 600,000 ounces at a cost of sales of $12.40 per ounce in 2026. Tasiast delivered another strong year of operations with full-year production of 503,000 ounces at a cost of sales of $884 per ounce, both meeting guidance. Tasiast was once again our lowest-cost operation in 2025, delivering robust cash flow. In the first quarter, the site delivered 126,000 ounces at a cost of sales of $1,002 per ounce. Production was higher over the prior quarter due to higher grades and stronger throughput. Tasiast is expected to be slightly higher in 2026 and 2027 compared to the technical report due to ongoing mine plan optimization. The site is expected to maintain production at around the 500,000-ounce level until we are back into higher grades in 2028. Claude J. Schimper: In 2026, Claude J. Schimper: Tasiast is expected to deliver 505,000 ounces with a target cost of sales of $1,050 per ounce and is expected to be our lowest-cost operation once again this year. La Coipa delivered a strong final quarter with production of 67,000 ounces, improving over the prior quarter on higher mill throughput. Full-year production of 232,000 ounces was in line with guidance. In 2026, mining at La Coipa will continue to take place at the two open pits, Phase 7 and Puren, and blend the ore feed into the process plant. La Coipa is anticipated to produce 210,000 ounces at a cost of sales of $1,320 per ounce in 2026. Our U.S. assets collectively delivered full-year production of 676,000 ounces at a cost of sales of $1,426 per ounce, in line with guidance. Production of 136,000 ounces in the final quarter was on plan. In Alaska, fourth-quarter production of 65,000 ounces was lower compared to the prior quarter, and cost of sales of $16.73 per ounce was higher as a result of planned mine sequencing, including lower contributions from Manh Choh. At Bald Mountain, we produced 38,000 ounces at a cost of sales of $1,192 per ounce, and production was lower over the prior quarter while costs were higher due to planned mining of lower-grade areas at the Galaxy and Royal pits. At Round Mountain, production of 32,000 ounces was lower compared to the prior quarter as Phase S continued to transition into initial ore while processing from lower-grade stockpiles, resulting in a higher cost per ounce sold. With that, I will now pass the call over to William to discuss our resource update and projects. Thanks, Claude. I will start by providing an update William D. Dunford: on our year-end reserve and resource. For this year, we have updated our reserve price to $2,000 per ounce and our resource price to $2,500 per ounce. The intention was to be more reflective of the recent gold price environment while still maintaining discipline and a focus on strong margins. Starting with reserves, I am pleased to report that we added 1,200,000 ounces of reserve before depletion. At Paracatu, we saw a 700,000-ounce addition, Claude J. Schimper: largely offsetting depletion through mine design optimization and successful near-mine exploration. William D. Dunford: At Bald Mountain, we added 200,000 ounces before depletion, Claude J. Schimper: primarily through conversion of resources to reserves at the five satellite pits that were approved as part of the Redbird 2 project. William D. Dunford: At Tasiast, we added 200,000 ounces before depletion, Claude J. Schimper: with additions both at West Branch in the existing pit design and at the Fennec satellite pit. William D. Dunford: At Round Mountain, the transition to underground replaced just over 1,000,000 ounces of lower-margin, Claude J. Schimper: lower-grade open pit reserves, William D. Dunford: with approximately 1,200,000 ounces of higher-grade, higher-margin underground reserves, fully offsetting our depletion. We are pleased to continue to see this type of progress in our reserve base, Claude J. Schimper: extending mine life as we advance exploration, optimizations, and project studies across the portfolio. William D. Dunford: We have also grown our resource base by 1,600,000 ounces of M&I William D. Dunford: and 3,400,000 ounces of inferred. These resource additions were spread across our portfolio and were reflective of both exploration success and the impact of higher gold prices as we continue to hold the line on cost. Claude J. Schimper: Increasing the size of potential future open pit laybacks at some assets. William D. Dunford: Just as we are holding the line on costs, we are also holding the line on our cutoff grades to ensure we maintain the margin and quality of our resource, Claude J. Schimper: and only saw a small resource addition William D. Dunford: from additional mill feed at the end of mine life Claude J. Schimper: at the higher gold price. William D. Dunford: We are pleased to see these strong additions to enhance our long-term resource optionality. You can see on this slide a summary of that significant resource optionality, which now includes 27,000,000 ounces of M&I and approximately 17,000,000 ounces of inferred. These resources, which include a number of projects across our operating and development sites, form the pipeline of potential opportunities that we are progressing to support our production profile through the end of the decade and into the 2030s. Our January announcement of progression to construction across three high-return projects in the U.S. is a great example, demonstrating the depth and quality of the significant resource base and how we are progressing these projects into our business plan. Phase S at Round Mountain is a low-cost, bulk-tonnage, underground opportunity that extends operation through 2038, with average annual production of approximately 140,000 ounces. Claude J. Schimper: Curlew is a high-grade underground William D. Dunford: that leverages existing infrastructure at the Kettle River mill, Claude J. Schimper: and at the historic Curlew Mine to bring online an additional high-margin mine William D. Dunford: that produces up to 100,000 ounces per year. And the Redbird 2 project is a highly efficient extension of mining at Bald Mountain, providing the next anchor pits alongside five satellite pits that combined deliver 640,000 ounces. We have progressed the construction across these three projects on the back of strong margins, with an average AISC of $1,660 per ounce, quick paybacks of less than two years, Claude J. Schimper: a combined NPV of $4,300,000,000, William D. Dunford: and combined IRR of 59% at $4,500 gold. Together, they are expected to add over 3,000,000 ounces of production, just based on the initial resource and mine plan inventory Claude J. Schimper: we have drilled to date. William D. Dunford: We are excited to be moving ahead with three high-quality projects as we continue to execute our portfolio grade-enhancement strategy. Beyond our initial life-of-mine at Phase S and Curlew, to go out to 2038, both projects have significant potential for mine life extension Claude J. Schimper: down dip William D. Dunford: and further enhance our return on asset value. Claude J. Schimper: At Phase S, William D. Dunford: we have recently completed drilling 220 meters down dip, which has demonstrated mineralization continues, with similar strong width and grade, providing further confirmation of our hypothesis that the system extends significantly down dip. This mineralization provides potential for both mine life extensions and for mining rate increases, through opening of more mining horizons, potentially increasing the production rate. At Curlew, Stealth and Roadrunner exploration development completed last year has provided drilling access to target wide high-grade resource extensions in these areas to augment our production profile in the mid-30s, and drilling is now underway. As you can see on the slide, we have seen strong intercepts outside of the current resource and mine plan inventory. Claude J. Schimper: In both of these zones. Good width, William D. Dunford: and grades that have potential to extend the mine life and enhance the margins of the asset. Exploration will continue to be a priority for these two sites, and we look forward to providing further drilling updates through 2026. With these three projects now progressing to construction, expected to come online in 2028, Claude J. Schimper: our focus is now shifting to adding value-accretive production in the 2030s. This slide shows a summary of some of the longer-term projects in that extensive resource William D. Dunford: base that are our next focus to progress. I will come back to an update on Great Bear, which is next in line, shortly. Moving across to Chile, Claude J. Schimper: at Lobo Marte, the project team continues to advance technical work William D. Dunford: as well as baseline studies to support our upcoming EIA submission, and we look forward to providing a project update later this year. Claude J. Schimper: At Tasiast, William D. Dunford: we continue to see positive results down dip at West Branch and are studying both open pit and underground optionality there for mine life extensions in the 30s. At Paracatu, this year, we will be progressing technical and baseline studies and refreshing the mine plan to refine our view given the extent of resource base. Beyond these projects, we are continuing to progress exploration and studies for pit layback opportunities that you can see in our resource base across our portfolio, with a strong focus on Paracatu, Fort Knox, and La Coipa Extension. Now moving to Great Bear. Both the AEX program and main project are progressing well, with the main project on schedule for first production later in 2029, subject to permitting. Claude J. Schimper: Starting with updates on AEX, we made strong progress on-site William D. Dunford: construction. Surface construction for AEX is 80% complete. As Paul noted, we look forward to construction of the exploration decline later this year pending receipt of provincial permits, which Geoff will comment on shortly. With respect to the main project, Claude J. Schimper: which remains on track, William D. Dunford: detailed engineering and technical work continue to advance well. Detailed engineering is now approximately 35% complete. Initial major equipment procurement for process plant and surface infrastructure is already underway, with contract awards in progress. Manufacturing of selected long-lead items is anticipated to commence later this year. With respect to exploration at Great Bear, in 2025, our efforts shifted to focus on regional exploration across a 120-square-kilometer land package. Claude J. Schimper: Deep drilling completed up to 1.8 kilometers along strike William D. Dunford: of the main LP Fault, returned encouraging results, indicating high-grade mineralization beyond the current resource base. Drilling on the broader land package outside of the main LP trend also returned encouraging results. We will progress additional drilling to follow up on these results along trend and on the broader land package this year. I will now hand it over to Geoff to discuss the permitting progress at Great Bear. Thanks, Will. Permitting of the AEX program and the main project continue to advance as we work hand in hand with the Ontario and federal authorities. Focusing on AEX, we continue to work with the Ontario Ministry of the Environment, Conservation and Parks to finalize the two remaining AEX permits. We anticipate receiving these permits and to commence construction of the decline by Q2 of this year. Turning to the main project, which remains on schedule, work has commenced on both federal and provincial permits. Geoffrey P. Gold: Federally, Geoffrey P. Gold: we continue to work with the Impact Assessment Agency of Canada, IAAC, to advance the project impact statement. The first two of three phase submissions for the project’s impact statement were filed on time in September and December respectively. The third and final phase is scheduled to be submitted at the end of Q1 of this year, as previously noted. As a reminder, finalizing the impact statement and receiving the final impact assessment report from IAAC is the critical first step to obtaining the other federal and provincial permits we require to construct and operate the Great Bear mine. Work has also commenced on other main project federal permits, with technical documents submitted to Fisheries and Oceans Canada and Environment and Climate Change Canada during the quarter. Provincially, we were pleased that the main project was recently designated for the One Project One Process permitting framework by the Ontario Minister of Energy and Mines, Steven Lecce. This helpful initiative aims to better coordinate, integrate, and streamline Ontario mining project authorizations, permitting, and Indigenous community consultation, which we support. We expect this more coordinated framework will facilitate the Ontario component of Great Bear permitting and targeted first gold production later in 2029. Respecting Indigenous communities, we continue to advance the negotiation of benefits agreements Andrea Susan Freeborough: dollar budget in 2026. We had a strong year of brownfields exploration, driving both the significant reserve additions we spoke about earlier and identification of additional resource potential across a number of projects, a few of which I will now highlight. First, at Tasiast, we have continued to see positive results at West Branch. With 2025 deep drilling demonstrating that mineralization continues at least 1.8 kilometers down plunge of our existing underground resource. Next, in Alaska, the team spent 2025 building on our knowledge of the Gil satellite deposit at Fort Knox, alongside opportunity drilling near the Fort Knox pit to enhance the optionality of our next layback. Results at Gil were encouraging, with a few highlight intercepts shown on the slide, strong grades and widths, including a 15.2 gram per tonne intercept over more than four meters. Gil is a satellite opportunity with potential to augment production in future phases of the Fort Knox main pit. And as a last highlight, at Bald Mountain, efforts have continued to explore our large land package at the site, and we were successful at bringing in the 200,000-ounce reserve add I mentioned earlier, primarily through satellite pit extension. We have also seen strong results outside of those satellite pits that were added to reserves as part of the Redbird 2 project. One highlight was the drilling at the Rat satellite pit. We saw intercepts with significant grades and widths, including 10 grams per tonne over 16 meters. Rat is one of more than 40 historic mining areas on the property and will be a focus to explore and study for potential to complement our next anticipated anchor pit at Bald Mountain, the Top pit. You can find more details on the strong results from our 2025 brownfield program and our plans for 2026 in our press release. Moving to our greenfields program, we completed approximately 40 kilometers of drilling across targets in Canada, the U.S., and Finland. In Canada, exploration was primarily focused in Manitoba, New Brunswick, and Ontario. At Snow Lake in Manitoba, we saw exciting new results both from our first drill program on the McCafferty property, including an intercept of four meters at 34 grams per tonne, and from grab sampling on the SLG property, which returned a number of results with strong gold grades. These properties further complement the high-grade vein system we have outlined at Laguna North, providing critical mass to support further exploration work in the area. In New Brunswick, work consisted of mapping and drilling in the Williams Brook JV property, where gold-rich quartz veins were identified at the Lynx Hill. At Red Lake North in Ontario, fieldwork also identified several high-grade quartz veins, and rock grab samples returned numerous strong grades, the highest assay returning 65 grams per tonne. In Nevada, we completed two drill holes at the PWC JV project to test for lower-plate, Carlin-type host rocks. The program returned a 149-meter mineralized intercept, confirming the presence of Carlin-type disseminated gold. Our work this year will focus on following up on this exciting result. We continue to be encouraged by our success identifying earlier-stage brownfields and greenfields opportunities to progress into our resource base and projects pipeline. We plan to build on this success in 2026. I will now turn it back to Paul for closing remarks. Thanks, Will. After delivering on our commitments in 2025, we are well positioned for a strong 2026. Our business is in great shape both operationally and financially. J. Paul Rollinson: With a number of upcoming catalysts for the year ahead, including ongoing return of capital through our dividend and share repurchases, continued strengthening of our balance sheet supported by strong operational performance and cash flow generation, advancing our projects pipeline, including the U.S. projects discussed in January, as well as Great Bear and Lobo Marte, which we intend to provide a project update on later this year, and continued exploration intended to bring in new projects and mine life extensions. Looking forward, we are excited about our future. We have a strong production profile. We are generating significant free cash flow. We have an excellent balance sheet. We have an attractive return of capital. We have an exciting pipeline of both exploration and development opportunities. And we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability. With that, operator, I would like to open up the line for questions. At this time, I would like to remind everyone, in order to Operator: ask a question, please press star then the number one on your telephone keypad. First question comes from the line of Fahad Tariq with Jefferies. Your line is open. Fahad Tariq: Hi. Thanks for taking my question. On Great Bear, the One Project, One Process designation, I believe Kinross is the first major mining company to receive that. Can you maybe talk about the relationship with the provincial government and whether this could help get Great Bear into the Major Projects Office designation at the federal level? Thanks. Geoffrey P. Gold: Yeah, sure. I will take that question. Let me start by saying that we were pleased by the Ontario Ministry of Energy and Mines’ decision to designate the Great Bear project for inclusion in the One Project One Process, and we believe this designation represents an important milestone. I am going to talk about both processes. At the One Project One Process level, the main benefit of the designation is a more streamlined and integrated approach for the provincial component of main project permitting, and it gives us a single point of contact at the Ontario Ministry of Energy and Mines to coordinate all required provincial authorizations, permitting, Geoffrey P. Gold: and First Nations consultation. And so as a result, we expect that will help facilitate Geoffrey P. Gold: the provincial piece of main project permitting and targeted first gold production in late 2029. Fahad Tariq: And Geoffrey P. Gold: we have worked hand in hand through this process with the Ministry of Mines and other provincial permitting agencies, and we are pleased with the relationship. It is a strong relationship as we continue to work together to develop the project. On your federal piece of the question, I can tell you that we have been in touch with the federal Major Projects Office, and they, along with other federal agencies, are aware of the Great Bear project and its potential significant Geoffrey P. Gold: economic and sustainable benefits for predominantly Ontario, but Canada and Indigenous communities. Geoffrey P. Gold: And it is absolutely possible to obtain designations under both the One Project One Process permitting framework that I talked about previously and the federal National Project of Interest framework, but we have elected at this juncture to not apply for that federal designation. We believe that with the benefit of the One Project One Process designation that we currently have, along with the fact, as Paul noted, that Geoffrey P. Gold: we are far enough along with the federal impact assessment process overseen by IAAC. As we told the markets, we will be filing the third and final phase of our impact statement at the end of Q1, so we believe we are well positioned for our targeted first gold production in late 2029. Great. Appreciate the detailed response. That is very clear. And then maybe just switching gears to 2026 cost guidance. Can you just break out the impact of the royalties, the higher royalties because of the higher gold price, and underlying cost inflation? Thanks. Andrea Susan Freeborough: Sure. I can take that. It is Andrea. I will start with talking about all-in sustaining costs. Our total all-in sustaining cost guidance is up about 10% over 2025, and most of that is related to those two items, inflation and higher royalties on gold price. So, of the 10% increase, 5% is inflation and 4% is royalties from using the $4,500 gold price versus where we were for 2025. And then there is about a 1% increase that is left, and that is really puts and takes across the portfolio on that mine plan sequencing. When we look at cash cost, there is a bigger increase, so the increase looks like 20% year over year. Half of that 20% is the inflation and royalties. And the other half is sequencing as well. There is a bit of a different impact there that is kind of accounting characterization of our stripping costs. We started to see this starting in the second half of last year where stripping costs moved from being characterized as sustaining capital at some of our assets into operating costs. So we see the increase in cash costs but the offset of that is in sustaining capital. That is why there is no impact or a very small impact on the all-in sustaining cost guidance. I would say overall, we are moving the same spend; it is just the characterization of cost shows up differently. Fahad Tariq: Okay. Great. Thank you very much. Operator: Your next question comes from the line of Daniel Major with UBS. Your line is open. Daniel Major: Hi, and thanks so much for the presentation. First question Daniel Major: just on the capital allocation and cash returns going forward. I think it is great that you are anchoring a capital return to free cash flow going forward. But I suppose two parts to the question. Is there a preference or can you comment on the split between ongoing buybacks and potential special dividends to get to the 40% of free cash capital return? And then 40% of free cash flow with a $1,000,000,000 net cash position implies you are going to continue to build net cash. What are you going to use that for? And is there a maximum limit above which you would pay it all out to shareholders? J. Paul Rollinson: I will start, and Andrea can jump in. The first part of the question, we have a baseline dividend that is meant to be there forever, and the bulk of the return of capital really comes in the form of the buyback. We like the buyback. We think a lot of our investors prefer the buyback. One of the things we like about the buyback is it does come with that benefit of reducing our share count and therefore improving our per-share metrics. We reduced our share count last year, and our intention is to do that again this year. So in terms of the preference between dividend and buyback, we will do both, but the greater volume or total of cash will be returned through the form of the buyback. Looking forward, I think our focus is to get the appropriate return of capital, and that is why, as you acknowledged, we focused on a percentage of free cash flow. That is the focal point. We do realize that in the context of current prices, there will be more cash flow and, therefore, more returns than we had last year. So we are increasing. But at the same time, we are reinvesting in our business. We do expect in the context of spot that our balance sheet will continue to strengthen. But the point there is we also have to look at the other side of it. With these higher gold prices, as we have already seen, we expect higher royalties, higher taxes. We just demonstrated with the announcement on the U.S. projects, we have lots of optionality in our pipeline. And we will take a steady-as-she-goes approach with the balance sheet, while reinvesting in our business with the appropriate return of capital, expecting that we may have higher taxes, royalties, and opportunities to reinvest in our business. Daniel Major: Okay. Daniel Major: Thanks. Then a follow-on to that. In terms of the inorganic options, are you actively looking at many opportunities at this point? J. Paul Rollinson: I would say we get the question reasonably frequently. We do have a very strong internal technical team. We do look at opportunities, particularly if there is a process. But I would say we are hard markers. We are not under any pressure. When you look at our reserve-resource—really more of our resource optionality—we have lots of depth in our organic portfolio. We have given good visibility on our guidance for three years and beyond. So we do not feel under any pressure. What that means is if we saw the right thing and we felt it created value, we would have a look at it. We certainly do not feel under any pressure, and we are quite happy with the organic profile as it looks today. As I said, our objective really with the free cash flow is to continue to grow our per-share metrics. Daniel Major: Great. Thanks. And then last one for me. I think I see you slowly changed the way of the accounting for the tax payables. But just on that, in terms of Q1 now we are past the year-end, what we should be expecting in terms of the cash outflow. And you have obviously given the guidance for cash for the full year. And then with respect to the run rate, the capital return free cash flow will be lower in Q1 because of the tax payments. Should we read that you will slow the buyback? Or will you just look to distribute that at a similar rate through the year? Andrea Susan Freeborough: We, as I noted in my remarks, have not started the buyback yet just because of the more significant cash outflows in Q1, largely related to tax, and I will come back to that. But we are planning to get on the buyback next week. So, on the whole, Q1 may be lower than the rest of the year. But given we are targeting the 40% of free cash flow for total return of capital, it will be a bit of a calibrate-as-we-go throughout the year. And then we will report back each quarter. Like last year, we do expect to be in the market systematically, sort of daily throughout the year, repurchasing our shares. In terms of the tax payments, in Q1, we expect to be paying over $400,000,000, and that is largely related to 2025. And then we gave the guidance for the full year, but $500,000,000 of that is related to 2025. Daniel Major: Alright. Probably closer to $600,000,000. So $400,000,000 in the first Daniel Major: the first quarter and then the remainder of the $1.25. So $1.25 over the year. Okay. Andrea Susan Freeborough: Great. For Andrea Susan Freeborough: tax, we sort of have the lowest payment in Q3, Q1 the highest, then Q2. Daniel Major: So Andrea Susan Freeborough: more weighted to the first half and Q1 being the highest. Okay. Great. Daniel Major: Thanks a lot. Operator: Your next question comes from the line of Carey MacRury with Canaccord Genuity. Your line is open. Carey MacRury: Congrats on the strong year. Carey MacRury: Just going back to the 40% target, just to clarify that is for 2026, and that is a number that you will revisit, I guess, in 2027? Andrea Susan Freeborough: That is right. Carey MacRury: Okay. And then just in terms of the 2,000,000 ounces, is there a Carey MacRury: quarterly progression we should be expecting or pretty flat quarter to quarter like last year? Andrea Susan Freeborough: Pretty flat quarter to quarter. J. Paul Rollinson: Okay. Yeah. As Andrea noted in her comments, we like to arrange sort of consistency, but obviously, 2,000,000 divided by four, that is 500,000, but you have ups and downs. So we think anything 485,000 to 515,000—490,000 to 510,000—that is kind of the average. Carey MacRury: Okay. Great. That is it for me. Thanks. J. Paul Rollinson: Thanks. Operator: Your next question comes from the line of Tanya M. Jakusconek with Scotiabank. Your line is open. Great. Good morning, everyone. Hello? Can you hear me? J. Paul Rollinson: You cut out, Tanya. I can hear you now again. Can you hear me now? Operator: Hello? Carey MacRury: No. J. Paul Rollinson: Yep. Yep. Okay. Perfect. Great. Thank you for taking my questions. Tanya M. Jakusconek: Some have been asked, but I just wanted to follow back on the contract renewals. Are there any other ones that are coming up for renewal this year for your labor contracts that we should be aware of? Claude J. Schimper: Yes, Tanya. There is. We are currently busy working through the Brazil Paracatu contract negotiations. Those are pretty standard. We do them almost annually or every eighteen months. It is slightly different to the other sites. A bit more legislative as well. So it is just a bit more of a process, and that is why it has taken on into this year. But for the rest of the sites, as you know, our U.S. sites have them, and then it is Tasiast and Mauritania. Generally, we completed, so we are J. Paul Rollinson: You know what I thought? And I should be thinking about labor Claude J. Schimper: the inflation and wage inflation in that 4% to 5%. Would that be fair? Claude J. Schimper: Yeah. It is really relative to the country. Inflation in Mauritania was, it is like, 10%. Brazil, it is about 8%. So relative to each country. And then overall for us as a portfolio, it is in the 4% to 5% range. Tanya M. Jakusconek: Okay. So it is not out of line. Okay. Thank you for that. My second question is on Great Bear. And thank you for the information on the permitting side. Hopefully, we get that permit in Q2. That will be good to see. But I read that you are going to give us an update later in the year on the Great Bear. What exactly are we getting in terms of an update? Is it a new technical study? Maybe just some clarity on what is coming. J. Paul Rollinson: Yeah. It may have come out a little bit on the script. The update we are going to provide is on Lobo Marte. We were talking about Great Bear and Lobo at the same time. Tanya M. Jakusconek: Is J. Paul Rollinson: I do not know that there is a specific update that we are planning. It is just continued milestones J. Paul Rollinson: in the case of Great Bear, J. Paul Rollinson: getting those two remaining permits, starting the decline, filing the third and final impact assessment filing. So there is not a specific deliverable that I think we are thinking about with Great Bear. In the case of Lobo, we will be filing the EIA and plan to give a project update Tanya M. Jakusconek: on economics. Tanya M. Jakusconek: Right. Okay. Tanya M. Jakusconek: Now that makes more sense because I was just like, what is coming on Great Bear that needs an update? But okay. Thank you for that clarity. And then my final question is there is a slide that we talked about—you talked about on some mine life extensions—and Paracatu was there. I am just wondering, years ago, there was a potential to do a layback that would add quite a bit of ounces on Paracatu. Is that what you are still thinking about? Is that something that is practical and makes sense? William D. Dunford: Yeah. You can see that there is a variety of layback optionality both in reserve and resource at Paracatu. You can see that we put about 700,000 ounces into the reserve this year as it converts. That is material that is now in our strategic business plan. And that is a further redesign of the layback. So that full reserve is now approved and part of our business case. An easy way to think about the direct business case is laybacks that sit in the reserve. Then there is also a significant multimillion-ounce resource that we are looking at for the next stage of optionality there. Okay. Tanya M. Jakusconek: Okay. Perfect. Thank you so much. Those are all my questions. I will turn the call back over to J. Paul Rollinson for closing remarks. J. Paul Rollinson: Great. Thank you, operator, and thanks, everyone, for joining us this morning. We look forward to catching up with you all in person in the coming weeks. Thank you for dialing in. Operator: Ladies and gentlemen, that concludes today’s call. Thank you for joining. You may now disconnect.
Operator: Welcome to Group ADP 2025 Full Year Results Presentation. [Operator Instructions] Now, I will hand the conference over to Cecile Combeau, Head of Investor Relations, to begin today's conference. Please go ahead. Cecile Combeau: Thank you, and good morning, everyone. Thank you for joining us for our 2025 full year results presentation. I am here with Philippe Pascal, our Chairman and CEO; and Christelle de Robillard, Executive VP for Finance, Strategy and Development, who will first go through prepared remarks for about 20 minutes before the Q&A session, for which we will aim for 40-minute duration. Before we start, and as usual, I remind you that certain information to be discussed today during this call is forward-looking and is subject to risks and uncertainties that could cause actual revenue and results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on Slide 46 of our presentation. I will now leave the floor to our Chairman and CEO, Philippe Pascal. Philippe Pascal: Thank you, Cecile, and good morning, ladies and gentlemen. Thank you for joining us to discuss our 2025 full year results. Let me first turn to Slide 3 for our key highlights. 2025 has been a strong year for the group and a key step in preparing our next strategic cycle. When I took office as Chairman and CEO a year ago, I set clear priorities: reinforcing our economic model in Paris through an economic regulation contract; deliver the best possible quality of service and accelerate the rollout of the Extime model; secure the contribution of our international activities; and support all this with more agile and engaged corporate culture. With the new management team, we made solid progress on each of these priorities. We launched a very successful employee shareholder plan and modernized our compensation structure at ADP SA level. We improved quality of service day after day, started the Connect France partnership with Air France in June, and announced the renaming of Paris-Charles de Gaulle's infrastructure by 2027. We delivered key projects, our international assets and resumed dividend payment from TAV. And of course, we submitted our proposal for 8 years' Economic Regulation Agreement, now awaiting the regulator's first opinion. These achievements are combined with a strong operating performance in 2025 with all of our financial targets met, allowing the Board to propose a dividend of EUR 3 per share to the next general meeting after our dividend policy. About our financial performance on Slide 4. Revenue reached EUR 6.7 billion, up nearly 9%. This reflects strong [ project ] traffic during the year and the continued development of our service businesses, included the scope effect from the acquisition of P/S and Paris Experience Group at the end of 2024. EBITDA also showed solid growth, up 12%. This performance comes from higher revenue and from disciplined cost execution, leading to further margin expansion. Finally, net result came at EUR 382 million. It was affected by FX noncash item and tax impact in 2025, but remains 12% compared with 2024. Let me now move to Slide 5 about our employee-related achievements, which are a key driver of long-term value creation. Our employee shareholding operation was a clear success with 3 out of 4 employees subscribing. Employee ownership now represents almost 2% of the company's capital, showing strong internal alignment and confidence in the group's trajectory. It also creates collective incentive by sharing future value creation. Just a few weeks ago, we also reached an agreement with trade unions to modernize our compensation framework and employee status. The goal is to build a more consistent, financially sustainable and performance-driven model. The impact of this reform is already reflected in our 2026 outlook. This measure will support our long-term cost trajectory, the same that was underlying our cost discipline, Economic Regulation Agreement proposal. A quick word now on Slide 6 about the simplification and renaming plan for Paris-Charles de Gaulle Airport announced at the end of 2025. Our objective is simple: make the passenger journey clearer and smoother, especially for connecting travelers. In March 2027, when the CDG Express high-speed link opens, all terminals will adapt a single numbering system, and boarding area will be renamed using specific letters. This will bring Paris back in line with the best standards of major international hubs. This renaming is a visible step, but it is only one of the main projects we will continue to roll out to reinforce the attractiveness of Paris hub and other initiatives such as the ones included in our Connect France partnership with Air France. On Slide 7 now, still on the performance of our Paris assets, we continue to support it with several infrastructure projects delivered in 2025. First, the refurbishment of Runway 1 at Paris-Charles de Gaulle, which now meets best-in-class industry standards. Second, the commissioning of our geothermal plant for Paris-Charles de Gaulle Airport, a key milestone in our decarbonization road map. Third, the restructuring and extension of airside area at Paris-Orly, unlocking additional aircraft capacity and improving operational fluidity. And finally, the upgrade of baggage handling system in [ Terminal 2E ] and 2C at Charles de Gaulle, enhancing reliability. This project illustrates our ongoing efforts to maintain the high-performing and reliant Paris hub. Finally, let me turn to Slide 8 and highlight the key achievements in our international assets. We delivered several major infrastructure projects in 2025, including the expansion of Antalya Airport in Turkey and the expansion of Delhi Airport in India. Both platforms are now ready to support further traffic growth and to capture more retail potential, thanks to new commercial areas. Both Antalya and GMR Airport secured refinancing operation. At the same time, TAV Airports successfully negotiated a 5-year concession extension for Tbilisi airport, which is a highly contributive asset. And on the back of solid performance and deleveraging, TAV announced it will resume dividend payments this year, TRY 3.61 per share, or roughly EUR 10 million for ADP SA, to be paid in 2026. Overall, 2025 has been a year of strong execution and reinforced our foundation for the next strategic cycle. I will now hand over to Christelle, who will take you through the 2025 financial performance in detail. Christelle Robillard: Thank you, Philippe, and good morning, everyone. Let's jump to Slide 10 and dive into our 2025 results. In 2025, we delivered continued solid traffic growth overall with different trends across our platforms. In Paris, traffic grew by 3.4%, fully in line with our annual assumption. Growth was driven by international passengers, while domestic traffic continued to decline. Looking at the group, TAV Airports delivered a solid 6% traffic increase, supported by its international assets. GMR Airports showed 3% growth, reflecting a resilient underlying profile despite some challenges during the year. AIG, specifically Amman Airport, recorded 11% growth even in a tense geographical context. Overall, these trends confirm the strength of our portfolio and the resilience of our geographically diversified model. Now, turning to retail trends on Slide 11. Extime standard packs stand at EUR 31.7 in 2025, up 3.6% compared to 2023, but down 1.2% compared to 2024. After an outstanding first quarter, we saw a downturn in Q2, driven by several factors. First, a number of ADP-specific elements, which were largely anticipated: works in Terminal 2EK, the full year impact of the reopening of Terminal 2AC and the reallocation of some airlines there, but also a negative comparison base compared to 2024 due to lower advertising and the end of Olympic merchandise sales. In addition to these internal factors, broader external trends also weighed on performance. First, the slowdown in the luxury sector, but also significantly less attractive FX conditions since Q2 with stronger euro, while pricing strategy from luxury brands do not compensate for this effect. Despite these headwinds, we remain confident in the strength of Extime model. Underlying trends in most activities continue to support our long-term strategy. Moving to Slide 12 about consolidated revenues. As said earlier, it reached EUR 6.7 billion, up 9% this year, reflecting a solid momentum across all our main segments. In Aviation, the revenue increase was primarily driven by the continued growth in international flows, as well as the 4.5% airport fees increase implemented in 2025. In Retail and Services, despite the headwinds I just explained, contribution to revenue growth was strong, benefiting from the international traffic growth and positive scope effect from recent acquisitions, which serve the development of our model. Abroad, TAV Airports' international assets and services companies were the biggest driver, while growth in Turkey was more moderate due to macroeconomics. AIG showed a remarkable rebound, showing resilience despite the geopolitical context. Moving to Slide 13 to focus on our EBITDA. For 2025, EBITDA is up more than 12%, driven by revenue growth and good cost control. Excluding the integration of P/S and PEG, EBITDA is up 11.3%, above our EBITDA guidance of at least 7%. This strong performance reflects several factors: tight cost discipline in itself at ADP SA and retail subsidiaries, as well as at TAV. Parisian infrastructure is now fully open, which provides some operational leverage. We also benefited from positive base effects linked to Olympics-related expenses, which disappeared in 2025, and also the postponement of Exit/Entry System deployment to late 2025 and with a progressive rollout. 2026 OpEx are expected to increase due to this EES deployment. Slide 14 now to look at our net income standing at EUR 382 million, up EUR 40 million. This figure reflects strong EBITDA growth, as well as the base effect from the 2024 accounting impact linked to the GIL and GAL merger. However, they are largely offset by other effects worth reminding: in D&A, the negative base effect from last year impairment reversal at AIG; in taxes, the exceptional tax surplus on large corporations in France for EUR 92 million; and as was the case in H1, all through the P&L, we recorded impact from the abnormal variations in FX rates in 2025, affecting notably the contribution of TAV and GMR Airports for a total net loss of EUR 130 million at the net income level. Overall, this all resulted in a net income attributable to the group of EUR 382 million. The cash position of the group is nevertheless solid, as apart from the tax impact, these negative impacts are mainly noncash ones. So turning to the group debt on Slide 15. You can see net debt stood at EUR 8.6 billion at the end of 2025. Net debt-to-EBITDA ratio is improving to 3.7x EBITDA, in line with our 2025 target of 3.5x to 4x EBITDA. This deleveraging has been driven by the strong EBITDA growth, as well as the disciplined CapEx execution, both in Paris and at group level. Moving to Slide 16 to conclude this financial part, I will focus on the regulated activities. As you can see on the left part, regulated ROCE for 2025 stands at 4.3%, up 0.3 points compared to 2024. The strong growth from traffic and increase in airport charges was notably offset by the higher tax rate applicable in France for 2025. Let's look now at the right side of the slide, which summarizes the situation regarding 2026 tariffs. Our initial proposal, which included a 1.5% increase, was rejected in December, mainly due to divergencies on analytical accounting rules used to allocate costs and assets to the regulated perimeter. We then submitted a second proposal with flat tariffs on average. This proposal was also rejected on February 10, which means that airport charges will remain at 2025 levels from April 1, 2026. This is already reflected in our 2026 financial guidance, which Philippe will comment in just a moment. Now, importantly, the regulator explicitly stated in their decision that the ERA is the right framework to address structural topics such as allocation keys and that our envisaged timing remains valid. Our priority is to work through the regulatory process constructively, while protecting the interest of the company and its shareholders. With that, I will now hand it back to Philippe, who will now comment on our outlook and our strategic priorities. Philippe Pascal: Thank you, Christelle. Let's now turn to the financial outlook for 2026. Our 2026 guidance is built with discipline with 3 factors explaining the calibrated EBITDA outlook: flat regulated tariff in Paris; higher-than-usual staff cost increase linked to the reform in wage structure at ADP SA level; retail revenue dynamic in a still challenging context and continuing works in Terminal 2E Hall K. All in all, we expect EBITDA growth to be driven by international assets, TAV in particular, to reach above EUR 2.35 billion EBITDA at group level. We will continue to invest to prepare the future around EUR 1.45 billion at group level, on which, around EUR 1 billion at ADP SA with a gradual increase compared to actual 2025 CapEx, in line with the program set out in our proposed Economic Regulation Agreement. Our dividend policy remains unchanged, 60% payout with a floor of EUR 3 per share. Our proposal for Economic Regulation Agreement for '27-'34 will be negotiated over the course of 2026. Slide 20 shows the key parameters of our proposal, which are designed to secure a fair remuneration of the investments included in our plan. Slide 20 shows the timeline for the elaboration of this new Economic Regulation Agreement. And I want to highlight that despite the non-validation of the 2026 tariff, the process is fully on track. We are fully committed to deliver a good agreement, ensuring fair remuneration of investment. We have the support of airlines. We can see on the slide that we started the year with a positive constructive vote from airlines, both on the duration and on the industrial plans, which confirm the quality of our proposal and their support. We also have the support of the French State, which asked the regulator to issue a nonbinding opinion on our proposal, which is then expected by April 11. We anticipate that the regulator will make some negative comments on allocation key because the analytical accounting keys underlying our proposal are similar to those used for the 2026 projected tariff. We work through the process constructively, and the Economic Regulation Agreement is an appropriate framework to address such structural topic. And during the rest of 2026, we will continue negotiation with the State and hold the second round of user consultation in September. The objective remains unchanged: to obtain the binding approval of the ART in Q4 2026, followed by the signature of the Economic Regulation Agreement so that it comes into force on January 1, 2027. Overall, the timeline is progressing as planned with no deviation versus the schedule we shared in December. Moving to Slide 21, which illustrates how 2026 will be a year dedicated to preparing our next strategic plan for '27 -- 2027 and 2030. We will focus on 4 main pillars. First, economic regulation elaboration. With the negotiation of the new Economic Regulation Agreement, its signature will bring clarity and long-term [ visible ] on the financial trajectory of our regulated activities. Second, cultural transformation, continuing to build a more agile and performance-driven organization, while strengthening the employee engagement. Third, corporate social responsibility, ensuring our road map stays aligned with long-term environmental and climate ambition and accelerating our commitments. And fourth, the portfolio review, focusing on nonregulated activities to refine our strategic priority and management focus and to optimize our portfolio for long-term value creation. Together, these 4 pillars will shape the foundation of the group's next strategy ambition. With that, let's open the line for Q&A. Thank you. Operator: [Operator Instructions] The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: The first one on this allocation of cost between regulated and nonregulated. [ ART ] concluded that there's a differential of 50 to 100 basis points on your returns due to the different views on cost allocation. Could you give us a bit more details? What are the arguments on your side that you believe the way you approach cost allocation is the correct one? Do you see reasonable chances to convince them to drop this claim going forward? And secondly, considering a more conservative view from ART in terms of your actual regulated returns, at least from my side, it seems that CapEx and a multiyear regulatory framework are the only things that could avoid cutting your tariffs in 2027. So in this sense, what is the minimum level of WACC that you're willing to accept in order to deploy this CapEx plan that you presented for ERA going forward? Philippe Pascal: So thank you for your question. So perhaps just to have a view about the debate with the regulator, there are 2 main areas of misalignment in the view of the regulators, the WACC and the allocation key, as you say. Perhaps to start on the regulated WACC, main takeaway from last week's decision is that the regulator clearly stated that the WACC will be higher in case of multiyear agreements. And we will have more insight when this -- issue their nonbinding opinion of the economic regulation proposal, which is expected in -- by April. So it's not possible to give you a minimum of WACC. The key element is to have a global balance and a fair remuneration at the end of the day for our Economic Regulation Agreement, but also if we don't have an Economic Regulation Agreement. We are very confident that Economic Regulation Agreement, it's a good vehicle to find a very fair remuneration for us due to the fact that the head of ART said clearly that we can discuss about that through this process, and the fact that in the methodology of the French regulator, we can have a higher WACC when we have a multiyear agreement. So, in line with this element, we are convinced that in the process, we can find a good balance. On allocation keys, in fact, the regulator estimates that we should implement analytical accounting correction that could increase the ROCE, the regulated ROCE by around 0.5 to 1 point. Among the pushbacks from the regulator on allocation keys, the most material are the space allocation key to allocate costs between scope regulated to share space in our terminals, in the boarding area, near the shops and so on. The key related to access to allocate the cost related to our airport shuttle system -- airport shuttle is a key element also -- we will resume discussion with airline and work through the regulatory process constructively, while protecting the interest of the company and its shareholders. That is very important for us and very clear. It's the fact that the French State, the decision of the government is to have a dual-till system with a regulated scope and a nonregulated scope. So we can obviously discuss about the cost allocation key if we respect this dual-till system. So we have -- obviously, we have to find the good rules and the good [ team ]. We have to work with the airlines. We have to work with the French regulator, and this work is on track with both airlines and the regulator. But at the end of the day, you have to respect the dual-till system. And I know that for the French State, it's vital because it's at the end of the French State, not at the end of the regulators. So globally, to answer your question, in fact, we have this key question of WACC and of allocation key, but we are very confident that the Economic Regulation Agreement and the process to elaborate this agreement, it's a good process to success, and we are confident to do that. It's the reason why we are not so worried about the decision of 2026 tariff. Operator: The next question comes from Tobias Fromme from Bernstein. Tobias Fromme: I'm trying to understand your traffic growth guidance in a little bit more detail. On Slide 7, you elaborate on the 2026 investment projects. What's the estimated impact of those projects on traffic growth, especially looking at sort of the runway renovation at CDG and capacity extension at Orly. If you will sort of not have to implement those projects, would the sort of guidance be very similar? Like, can you effectively shift the impact a little bit by having more aircraft flying into CDG, for instance? And then, on retail, when I look specifically at the different quarters, the performance of the businesses in the different quarters, I see that duty free has obviously gotten a lot worse over the quarters, about 8% Q1, Q2, flat in Q3, and then minus 2% in Q4. Is that the trajectory we should keep in mind for 2026 as well? And have you maybe seen anything on duty free in the first 2 months -- first 1.5 months of 2026? And that's it. Christelle Robillard: Thank you for your question. So regarding the first one in terms of traffic, so as you've seen, we've posted a guidance of traffic expected growth between 1.5% to 2.5% in Paris, mostly driven by international. Just to remind you that it's totally in line with the assumption taken in the Economic Regulation Agreement, and there have been no change since then. So globally, we expect in 2026 to see similar trends as in 2025, continued dynamic growth of international traffic with Middle East and Asia notably, as other destinations have already more than recovered, but also a steady and lower growth for the Schengen area traffic, where traffic is now [ mature ] and above 2019 levels, and finally, French domestic traffic to remain structurally lower. Regarding your specific question between CDG and Orly, indeed, the traffic in 2026 will be affected by temporary airside works at Orly that will constrain operations from April to December 2026. There will be, to be very precise, 2 work phases impact operation: April to early August, works on some taxiway; and from mid-August to early December, works on the runway itself. Some airlines can have chosen to proactively adjust their programs, reducing flights, transferring some activity to CDG and to reshape schedule. Some indeed chose to frontload reduction early in the season to smooth operational adjustments. But crucially, what you have to have in mind is that airlines will keep their early slots. And so, these cuts are just tactical, not structural. And all these elements of traffic in Orly are fully embedded in our 2026 traffic assumption. Regarding your second question in terms of retail performance, so indeed, the performance was quite different quarter-by-quarter. There was more an outstanding performance in Q1, and then a gradual decrease. Clearly, that began when the euro appreciated a lot. So, as you understand, our performance has been impacted by all those FX tailwinds. Regarding 2026, our assumption is broadly a stable FX rate with no reversal of the 2025 currency impact. There was also this trend regarding the slowdown on luxury categories, which have also affected once again due to this sensitive FX competitiveness. So this is something on which we will pay attention for sure. But our assumption takes into account, as I said, a broadly stable FX. You saw that we posted a hypothesis above EUR 32 in 2026. We have some levers to drive this [indiscernible] in 2026 and the [indiscernible] strength, the traffic mix improvement, so all this should contribute to stabilize our retail performance. Operator: [Operator Instructions] The next question comes from Dario Maglione from BNP Paribas. Dario Maglione: Two questions around the long-term regulatory agreement. I'm quite intrigued. You mentioned that you have support by the airlines for this agreement. Can you elaborate? And then, second question on this OpEx allocation and projection on regulated revenue. To what extent you're trying to find a compromise with ART or actually try to bring on board what ART said and just implement it? Philippe Pascal: Thank you for your first question about the support of airlines. In the formal process of the negotiation of an Economic Regulation Agreement, the starting point is the publication of the proposal in December. And the first step is a dedicated vote in a specific committee that we -- all the main airlines and representative organizations of airlines. So we executed this first step at the end of January in 2 elements. The first element, it's a specific for duration, and we obtained the full support of the main part of the airlines. And the second vote, it's about the proposal. That is clear. It's the fact that we have a favorable vote, positive vote due to the fact that all the airlines, and in particular, the main airlines in Paris support the industrial plan, the fact that we can develop and we have to develop the platform in Paris-Orly, but mainly in Paris-Charles de Gaulle. We have to develop the hub of SkyTeam. And we manage well this process because it's the industrial process. It's the result of a strong discussion with airlines and also the consultation of our main stakeholders during the consultation in 2025. So our proposal, it's a result of the first informal consultation and negotiation with the airlines. So -- but the good success is the fact that officially, when you consult the airlines, all the airlines adopt this project with a favorable vote. It's a good thing to try to convince the French regulator that it's a good Economic Regulation Agreement and well balanced. That is -- for your second question about the allocation keys, the ART requested an analytical accounting adjustment, but we have just said, it's to increase the [indiscernible]. The main pushback related to space allocation key, as I say, it's the number of square meter in the regulated and in the nonregulated scope, and also the key related to access. These topics require structural formalized work with airline, which are resuming immediately. So we work a lot, and the ERA is precisely the appropriate framework to solve this technical point. We have -- with the French regulator, we have a discussion, regular discussion, technical discussion, professional discussion. The regulator demonstrates a good understanding of airport infrastructure constraints. But we do not prejudge decision, but the tone is forward-looking. And ART confirmed that the ERA is the right avenue to [ track ] long-term topics. So, for the moment, we have a positive discussion. In fact, we are a little bit surprised about the decision of -- in December that is not in line with all the work that we executed with airlines and also with the regulators. So, a little bit surprised, but it's not the same tone before than after the decision, perhaps due to some claims about some airlines. But all in all, we have to continue the discussion and remind that the question of cost allocation key, it's also the question of the dual-till system. So it's not just the regulator, but it's also the French State. And we are very confident about that because our industrial project is vital for the development of the airport sector in France. So it's -- we have the full support of the French State. Operator: The next question comes from Jose Arroyas from Santander. José Arroyas: I wanted to ask you about your plans to review the company's portfolio. I think this is also something you talked about in December. But what do you exactly mean by a strategic review of nonregulated assets? Are you looking to sell some of the assets you already own partially or fully? Or are you looking to buy more of the assets you own? And if it is the latter, what type of businesses would you be considering adding? Christelle Robillard: Thank you for your question. So indeed, we announced in mid-December last time that we were going to conduct a portfolio review. So this is, of course, still our expectation. So the 2026 portfolio review will cover all nonregulated activities with the aim of clarifying long-term value drivers and the strategic role of each asset. We assess indeed every asset based on long-term value creation, strategic relevance and capital efficiency. At the end of the day, this review is not designed to trigger a major disposal. Having said that, we apply a clear discipline to cost allocation. We consider both disposal or acquisition only when they reinforce our long-term industrial and financial profile. So this is the way we will conduct this work. Thank you. Operator: The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: Could I kindly ask on the OpEx side? You talked about the new compensation structure reform. Could you give a bit more detail on the actual wage increases in '26 and then the long-term savings associated with this new compensation structure? And maybe on this topic, could you talk, for ADP SA, the other OpEx components, what type of inflationary pressure would you expect in '26 versus '25? And the second one, if I may, coming back to the allowed return, I think ART proposed a 5.3%, 5.4% WACC for Toulouse and Marseille airports. And I know these are different assets with different considerations. But I'm just trying to take a step back if, at the end of the day, ART believes today, you're earning somewhere between 4.5% to 5.5% regulated return, you're not too far away from this 5.3%, 5.4% WACC. So what I'm trying to think conceptually, in my eyes, from here to grow your tariff, effectively, it's all underpinned by your regulated asset base growth or by your CapEx because if the WACC indeed ends up being 5.3%, there doesn't seem to be a lot of tariff increase. So could you help us a bit -- am I missing something? Are you still confident in a healthy tariff increase above the inflation levels in France over the next years? And what are the arguments in that regard? Christelle Robillard: So I'll comment on your first question regarding the staff cost reform. So, as you have understood during the presentation, this is a comprehensive renovation of ADP SA remuneration structure for both nonexecutive and executive, aimed at making salary progression more predictable, more individualized and structurally more sustainable. As mentioned, this reform will generate a significant impact in 2026 as we implement salary increases to compensate for the withdrawal of certain future benefits, especially the automaticity of salary increases. This will create a onetime larger step-up compared to our usual staff cost trajectory. In practical terms, the 2026 wage increase will be roughly twice the normal annual run rate. But clearly, all this impact is fully included in our 2026 guidance for recurring EBITDA above EUR 2.350 billion. Clearly, this will -- the aim of this reform is to rebalance the compensation structure and to make it more sustainable over the long-term period. So it will also help secure the assumption we took in the Economic Regulation Agreement of wage inflation at CPI plus 0.6 points. Regarding other OpEx evolution assumptions, so on your question about the inflation, we are expecting some classical inflation hypothesis, so between -- I would say, close to 1.5%. So, no specific element on that. Maybe just keep in mind that our OpEx base will be impacted, but like usual -- as usual, on consumable, by the trends with our level of activity and sales; on external services, as I mentioned in my presentation, by the deployment of Exit/Entry System, which was postponed in 2025; and on staff expenses, by this wage reform. And maybe just worth to say that, as you saw also, there was no significant move on the tax front. Philippe Pascal: So about the WACC, so what is clear for us is the fact that it's not possible to sign an Economic Regulation Agreement if we don't have a fair remuneration. The fair remuneration, we have 2 aspects of the fair remuneration. It's a level of WACC, but it's also the fact that we have to assume a pure convergence between the regulated ROCE and the regulated WACC. So about the regulated WACC, in fact, we can compare the situation of ADP with the situation of a regional airport. It's, as you say, not really the same airport, the same risk. That is a key element. the specificity of ADP, the fact that we propose an Economic Regulation Agreement for 8 years with EUR 8 billion. When you compare with Toulouse, it's not comparable because we have just a CapEx plan for EUR 130 million for 5 years, and we propose in ADP EUR 8 billion for 8 years. So globally, in terms of risk, we have a higher risk in ADP compared to the regional airport. And we are very optimistic for this real environmental economic view and the fact that, in the methodology of the French regulator, we have in line -- the fact that we have to assume a part of risk. We are globally confident at the methodology of the regulator that is -- it seems the level of regulated WACC is higher in case of this multiyear agreement, higher so probably in the high part of the range, perhaps a little bit higher. We have to assume that. So, in terms of CapEx program, for me, the question of the level of CapEx, it's not in line with the level of WACC. We have to -- we need a fair remuneration for a low CapEx program or high CapEx program. It's the same thing. So in fact, if we don't have an Economic Regulation Agreement, mechanically, we -- it's not possible to deliver an industrial project as we plan. But we are globally confident due to the fact that it's vital to launch this plan and to compete with our main competitors like Istanbul, [indiscernible] and so on. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. The next question comes from Nicolas Mora from Morgan Stanley. Nicolas Mora: Just wanted to come back on the cost allocation and just the support of airlines. Obviously, they are on board on the industrial plan. I don't think anybody questions that. From the ART documents, they're not really on board on the cost allocation. I mean, they're talking about north of EUR 200 million of cost they would like to be put into the unregulated perimeter. They would like a cut in RAB. So is there for you a point where you just walk away because you just can't -- just basically can't [indiscernible] a 3-digit number of costs being switched into the unregulated perimeter? That's the first question. Then on -- if we can come back on the results and just on the retail, just in '25, can you explain a bit why the operating leverage is so good? I mean, the step-up in EBITDA is quite impressive versus the revenue rise. Just wanted to know if there were any special elements there or what you're doing to actually squeeze a little bit more from the revenue? And thinking about retail in '26, just a confirmation. So we're going to start the year with tough comps, still some FX headwinds, still some construction headwind. So the year is pretty dramatically back-end loaded in terms of improvement in performance and spend per pax. And last one, sorry, on '26 guidance. Can you help us understand what you've put for TAV in your EUR 2.350 billion EBITDA kind of minimum guidance? Are you at the midpoint? Are you at the low point, the high point? Because TAV range is quite wide. Just trying to understand what you've got in there for TAV and imply what you've got for Paris Airport. Philippe Pascal: So thank you, Nicolas. So about your first question and the fact that we have to discuss with the airlines about the cost allocation key, in fact, we have the support of the airlines to execute the industrial project but also to execute this project through an Economic Regulation Agreement. It's support in principle, but we have to discuss about the details. We have to discuss about the global economic balance. So it includes the cost allocation key. It includes also the level of WACC. It includes the level of CapEx, of OpEx and so on. So -- but in principle, it's a result of first discussion that is appreciated from the airlines. In terms of cost allocation key, we discuss a lot with the airlines. We execute all the guidelines of the French regulator. And it's quite a surprise for us to have a negative decision of the French regulator due to the we take account for all the elements that the French regulator wants to study. So, after that, in terms of cost allocation key, as I say, it's a global balance with all the other factors, first. And the second point, specifically for the allocation key, the question is perhaps to discuss about the key in terms of square meter for the regulated scope or not. But it's also the fact that we have some red line, and the red line is to assume the fact that the decision of the French State is the dual-till system of ADP. So, that is the red line, and it's red line for ADP, but it's mainly a red line for the French State. For the other question, Christelle? Christelle Robillard: Yes. So regarding your second question in terms of retail performance, so indeed, Retail and Services outperformed despite the SPP headwinds we just mentioned in our presentation. So this solid growth was attributable to 2 main elements. First, a solid cost discipline. This was the case at all the group level, as you can see, because we outperformed on every segment, but this was particularly the case on the retail segment. We also had a cautious stock management and purchasing policy. So this is the first reason. And the second reason is the Extime model, which clearly continues to drive higher-margin categories such as beauty. Maybe just to mention one figure, interesting figure, on Beauty, we made a plus 6% performance compared to a minus 2.6% on the national market. So it shows the robustness of our strategy and model. So this performance is partly structural, as you can understand. Extime has clearly raised the operational and commercial productivity of our retail ecosystem despite the FX and luxury cycle headwinds that remain in the near term. More generally, once again, when you look at our 2025 financial performance, we were well above our guided at least plus 7% EBITDA, but with strong double-digit increase all across our segments, both in aviation, retail and international. Maybe concerning your third question, the assumption we are taking in our EBITDA guidance for TAV, so the guidance we take at the group level above EUR 2.350 billion is totally in line with the EBITDA guidance disclosed by TAV, which is guiding for EUR 590 million -- for a range between, sorry, EUR 590 million and EUR 650 million EBITDA in 2026. That means EUR 30 million to EUR 90 million EBITDA growth. So this is the underlying assumption for TAV. And bear in mind that the rest of the performance of the group will be impacted by flat regulated tariff in Paris, by the higher-than-usual staff cost increase that I mentioned previously, and this retail revenue dynamics in a still challenging context and the continuing works in Terminal 2E Hall K. Thank you. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Cecile Combeau: Yes. No more questions this time indeed. And so, it's time to close today's call. Thank you, everyone, for having logged into this conference. The next planned quarterly publication will be on April 28 with the 2026 first quarter [ review ]. And in the meantime, of course, feel free to get in touch with Eliott or myself in the Investor Relations team for any follow-up questions. Enjoy the rest of the day. Thank you. Operator: Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the Cushman & Wakefield plc Fourth Quarter and Full Year 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. To ask a question, you may press star then 1. After today's presentation, there will be an opportunity to ask questions on a touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Megan McGrath, Head of Investor Relations. Please go ahead. Megan McGrath: Thank you, and welcome to Cushman & Wakefield plc's Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our Investor Relations website at ir.cushmanwakefield.com. Please turn to the page in our presentation labeled “Cautionary Note on Forward Looking.” Today's presentation contains forward-looking statements based on our current forecast and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures, and other related information are found within the financial tables of our earnings release and in the appendix of today's presentation. Also, please note that throughout the presentation, comparisons and growth rates are to the comparable periods of 2024 and in local currency unless otherwise stated. All revenue figures refer to fee revenue unless otherwise noted. I will now turn the call over to Michelle MacKay. Thank you, Megan. I want to start by saying I am excited. I am excited because of the exceptional results we delivered in 2025. I am excited because of the three-year financial targets and strategy we laid out at Investor Day. And I am excited because of the transformational evolution we are seeing with AI. Starting with our 2025 results, we consistently and successfully executed against our targets, outperforming on many fronts. In 2025, we delivered 34% adjusted earnings per share growth, the highest total revenue and highest leasing revenue in company history, more than 100% free cash flow conversion, and we ended the year at a net leverage ratio of 2.9 times, nearly a full year ahead of our original expectations. In addition to this, we exited the year with momentum, especially in capital markets where we delivered 15% growth in the fourth quarter. Our leasing business continued its consistent and solid performance, contributing to our strong free cash flow. And our services businesses continue to make strides on new business wins, retention, and moving up the value chain. I am also excited about the three-year financial targets we presented to you at Investor Day in December, including 15% to 20% annual adjusted EPS growth. We have confidence in these targets and the strategic growth priorities we outlined. We already see early indicators of success in these high-growth areas, particularly in The Americas, and multi-market leasing grew where capital markets was up 19% in Q4, 33% in 2025. We also spoke about how our organization shows up as an enterprise for our clients. Let me highlight an example of this work. We recently won an integrated portfolio management mandate from a large international corporation. But why did we win? During the RFP process, we showed up as a team, not just a group of individuals. We worked with the client not to just win their business, but to provide integrated execution across all of their locations. Michelle MacKay: We displaced the incumbent, Unknown: Now Michelle MacKay: let us talk about the transformational evolution we are seeing in AI. Make no mistake. AI will create winners and losers. Winners will be trusted partners that provide advisory-led, relationship-driven solutions to their clients for complex problems. They will have large platforms and global execution capabilities. They will have flat organizational structures with change makers in leadership roles. Winners will have embedded a culture of change, not constrained by traditional operating models and ways of working. They will be de-siloed, integrated enterprises with open data and information flow. And most importantly, they will have proprietary data at scale that crosses both the advisory and services businesses. As we discussed at Investor Day, we have already broken down every silo of every department, every data source, every technology. We are already deploying technologies that bring together our thought leadership, our data assets, and our AI capabilities to create digital workflows that extend to every single one of our clients and our colleagues. The work that we have done structurally, operationally, and most important, culturally, underpinned by a strategy to move up the value chain, is exactly what this moment requires. I will now turn the call over to Neil Johnston to discuss our financial results in more detail. Neil Johnston: Thank you, Michelle, and good morning, everyone. Before I get started, a quick reminder. Neil O. Johnston: All comparisons are to the prior year and in local currency. Unless otherwise noted, all revenue figures refer to fee revenue. We exited 2025 with strong momentum, capping off a year of meaningful improvements. For the full year 2025, we achieved top line growth in every service line and every reporting region. We expanded adjusted EBITDA margin by 46 basis points while continuing to invest for organic growth. We generated over $290 million in free cash flow, well exceeding our targeted free cash flow conversion rate. And we entered the fourth quarter below three times net leverage for the first time since 2022, after prepaying $300 million in principal during the year. Looking at the year in more detail, revenue of $7.1 billion increased 7% and adjusted EBITDA grew 11% to $656 million. Adjusted EPS was $1.22, up 34% from last year and at the high end of our guidance range. We delivered $293 million in free cash flow for the year, representing a 103% conversion rate and a $126 million improvement versus 2024. The key drivers of our cash flow performance were strong earnings growth, continued prudent working capital management, higher accrued commissions, and reduced interest costs. We believe this strength in free cash flow gives us ample flexibility to continue to balance our organic growth investments without deleveraging targets. We closed the year with approximately $800 million in cash and cash equivalents and $1.8 billion in total liquidity. Our leverage ratio improved to 2.9 times from 3.8 times at the end of 2024. Moving on to our quarterly results. Fourth quarter revenue of $2 billion increased by 7%. Capital markets revenue was up 15% globally as transaction markets remained healthy. Our leasing business delivered another strong quarter, growing 5% and reaching the highest quarterly level ever for Cushman & Wakefield plc. Adjusted EBITDA of $239 million increased 5% as revenue growth was balanced against our ongoing ramp up in strategic investments and higher annual health care costs, which were weighted towards the fourth quarter. Before moving on, I want to address two non-cash items we incurred during the fourth quarter. We recorded a $177 million impairment to our Greystone joint venture as a result of lower future earnings expectations relative to when we made the acquisition. Unknown: acquisition. Neil O. Johnston: As you recall, we made the Greystone acquisition in 2021, when market conditions and interest rates were much different. We continue to expect Greystone to be a solid contributor to earnings going forward, just at a slower pace than we originally forecasted. For 2025, Greystone contributed $36 million of adjusted EBITDA, which we believe is a reasonable run rate going forward. Secondly, we recorded a roughly $27 million gain included in other income, which primarily represents our investments in an international facilities management company that went public in Q4. Both of these items are non-cash and excluded from adjusted EBITDA and adjusted net income. Moving to service line performance for the quarter. In The Americas, leasing grew 5% with continued strength in office and industrial, driven by higher deal count and increased revenue per lease as clients continue to prioritize a high-quality employee experience. In industrial, demand remains centered on large modern facilities, and the market is seeing substantial demand for sites over 500,000 square feet that can support automation and higher power requirements. Across both office and industrial asset classes, we continue to see opportunities for our project management businesses, as occupiers and investors seek to elevate the quality of their properties to meet evolving market demand, particularly as new construction activity declines. Unknown: In APAC, Neil O. Johnston: leasing revenue increased 5% driven by strength in India and improvements in Greater China. In EMEA, leasing grew 7% driven by strength in Netherlands, Belgium, and Poland. Turning to capital markets. Our efforts to expand our platform continue to drive positive results. In the quarter, we achieved 15% growth globally following 36% growth in the fourth quarter of the prior year. This sustained momentum reflects our ongoing investments in hiring top talent and strengthening our platform, which continue to enhance our competitive positioning. The Americas Capital Markets grew 19% with particular strength in office and retail. EMEA grew 9% led by the UK, Belgium, and Spain. APAC capital markets declined 5% primarily due to a difficult prior year comparison in Japan. Finally, turning to services. Fourth quarter Services revenue grew 6% globally, as we drove strong project management revenues across our global platform. We continue to prioritize steady, profitable growth in the segment as we move up the value chain with our clients. Moving now to our 2026 outlook. In line with the three-year targets we provided at our Investor Day, we anticipate 2026 revenue growth of 6% to 8%, with full-year service line growth trends similar to 2025. We anticipate adjusted EPS growth of 15% to 20% with expected free cash flow conversion in the 60% to 80% range. We also plan to continue delevering consistent with our three-year target of reaching two times leverage in 2028. Unknown: In closing, Neil O. Johnston: our teams executed exceptionally well in 2025, driving strong growth across our global platform, meaningfully improving free cash flow, and investing in the business while also reducing our leverage. This strong performance gives us confidence in our 2026 and three-year targets as we focus on continuing to deliver long-term value to our shareholders. I will now turn the call back over to Michelle. Unknown: Thank you, Neil. Michelle MacKay: We have entered 2026 with confidence and momentum, supported by a defined set of strategic priorities, a stronger balance sheet, and operating leverage embedded across our platform. As we stated in December, our opportunity is undeniable and our path is clear. Our model aligns client success with our success, and we have compelling financial targets that we believe will generate long-term shareholder value. Unknown: We are meeting the AI transformation with insight and Michelle MacKay: advice on how this will shape the built world. We invite you to join us on Monday on a webcast hosted by our think tank where they will be presenting the first phase in a body of work focused on answering the most critical questions around AI and its impact on the commercial real estate industry. A big thank you to all of our employees who are change makers, enterprise-first thinkers, and who focus on value creation for our clients and shareholders every day. I will now turn the call over to the operator for questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. Michelle MacKay: At this time, can go here. Momentarily to some more roster. Operator: The first question comes from Julien Blouin with Goldman Sachs. Please go ahead. Neil O. Johnston: Yes. Thank you for taking my question this morning. Operator: Michelle, I appreciate your comments on AI creating winners and losers. One of the topics or debates that is out there is related to fears that one of the losers could be mid-market or smaller deal size brokerage businesses given less complexity of deals, greater standardization, greater prevalence of buyers. When we look at your average transaction size, it does seem to skew lower than some of your other peers. Wondering, do you think that that is a real potential risk within the business? Michelle MacKay: Good morning, Julien. Thank you for your question. We believe the concerns about AI disintermediating the commercial real estate brokerage on the whole are materially overstated. This is not the residential sector. Unknown: And Michelle MacKay: yes, there are commercial real estate transactions that are large, complex, negotiation-driven decisions, but there are also the mid-sized deals that are complex and negotiation-driven, and in each case, there is significant financial and operational risk to those individuals signing those leases. So we believe that AI is absolutely going to enhance underwriting or market intelligence efficiency, but it is far more likely to augment a trusted adviser than replace them. Think about making a five- to ten-year decision. Think about the financial impact of that on a company and as to whether or not they would turn that decision over to AI. We do not believe that will be the case. Operator: No. Thank you. That is really helpful. And, Neil, maybe on the EMEA side, top line results were strong, but the margin came in a little lower year over year. Just wondering, are you still confident of driving margin growth in EMEA after the services business restructuring you effected? Neil O. Johnston: Yes, absolutely, Julien. I think the way to look at EMEA is really to look at it on an annual basis. And as one looks at the full year, we saw very, very nice improvement in margin overall. We are particularly pleased with what we are seeing on the services side, both in property management and in project management. In the fourth quarter, we did have a little bit of a decline in margin. That was really just driven by the timing of certain one-time expenses. Still very confident as we look forward. Operator: The next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead. Great. Just staying with the AI theme, if you think about Ronald Kamdem: we talked about large, mid, and small, but there are also different types, whether it is office, industrial, and retail. And as you are re-underwriting the business, how do you think about the risk to the end markets across those subsectors and does that make you want to position differently? Michelle MacKay: Yes. Great question, Ron. Thank you. The call that I mentioned that we are hosting on Monday that you are all welcome to attend is the conversation and is presenting the answers to the question that you are answering because most of the dialogue in our industry has, you know, rightfully been focused around data centers and AI, but this goes much further. When you talk about industrial, what are the needs for an industrial asset going forward? What makes an office building Unknown: compelling? Our researchers and experts have been studying AI's impact to GDP, employment, demand, vacancy, rent, values, and has implications to your point across nearly every sector and office class. So I would encourage you to attend our call on Monday because we are going to be creating practical tools for our clients. They will get a first look at our new AI impact barometer, which is the first-of-its-kind framework to help both real estate investment and our occupier clients make better long-term real estate decisions by understanding the trend lines of AI's impact as it unfolds. Great. Ronald Kamdem: And then my quick follow-up, just wanted to double click on the guidance a little bit. I appreciate you gave three-year targets. And I think you said in your opening comments that services revenue growth would be comparable in 2026 to 2025. But wondering if you could comment on leasing revenue growth, capital markets revenue growth, and just margin trajectory for the year. Neil O. Johnston: Yes, absolutely, Ron. So in my prepared remarks, I did say that we expect 2026 to unfold in a very similar fashion to what we saw in 2025. And that not only applies to overall revenue, but also the revenue growth of each of our service lines. So we are very pleased. You asked specifically about leasing. Very pleased with what we are seeing in leasing. We hit the highest numbers Cushman & Wakefield plc ever has in the fourth quarter, and we see that continued growth moving into 2026. Certainly, economic indicators are strong. Pipelines look good. So we feel pretty good about 2026. In terms of margin, we gave a three-year guide on margin, but we do not give full-year guidance on margin. And so I would focus on our EPS guide of 15% to 20%, and then the other color around each of the service lines. Operator: The next question comes from Stephen Hardy Sheldon with William Blair. Please go ahead. Stephen Hardy Sheldon: Maybe starting with Michelle, I think one of the things you talked about in the Investor Day quite a bit was trying to drive even more cross-selling motions between business lines. So can you talk about some of the things you are working on as an organization as we think about 2026 to support better cross-selling activity this year? What are some of the big initiatives that you are trying to push through? Unknown: Yeah. Certainly. Push through certain events. Watch this Unknown: yeah. Thank you. You have watched us shift around our senior level leadership Michelle MacKay: You have watched us reorganize to get ourselves set up for what we call the spine. Unknown: But I think equally as important and where AI comes into this conversation again is how AI is driving that flow of data and information. So if you think about de-siloing an organization, it is one thing to do structurally and organizationally. It is something else to have the data flow freely throughout the organization. So a big piece of what we are doing, aside from tracking the cross-selling and adjusting people's compensation going forward as it relates to that, is that in capital markets, we have a capital markets CRM. In legal, we have contract and obligation management using AI, and in services we have a proprietary platform with guided insights. In leasing, we are using OneAdvise, which helps automate digital tour books, lease negotiation, benchmarks, and GOS. We have space planning, etcetera, etcetera, etcetera. And what that does is that really creates a very strong data lake for us to work with as we are cross-selling to our clients. Got it. That is really helpful. Operator: And maybe just on Stephen Hardy Sheldon: capital deployment, really nice to see Cushman & Wakefield plc end the year below three turns of leverage. So I know you have the goal of reaching two times by 2028. How aggressive do you plan to be in 2026 in terms of focusing on delevering? Is that still the big priority, or could you be more aggressive in other areas such as continued organic reinvestment and potentially M&A? How are you generally thinking about it? Neil O. Johnston: Yes. Certainly very pleased with how leverage has come down and the $300 million prepayment. As we look to 2026, we expect to maintain a balanced approach to how we think about capital allocation. So certainly, we will be looking at organic growth. As you mentioned, that is a key component of our growth in our three-year plan. But we will also continue to reduce debt. As we said at our Investor Day, our plan is to get to two times in 2028, and so that will involve additional debt repayment. But I think balance is the best way to think about it. Operator: The next question comes from Seth Eugene Bergey with Citi. Please go ahead. Seth Eugene Bergey: Hey, thanks for taking my question. First off, could you provide a bit more color on what your exposure is to office? I think that has come up as a sector that is viewed as more likely to be disrupted by AI. Neil O. Johnston: Yes. Sure. Office for us overall, if one looks at leasing in particular, our mix is roughly 55%. And then on the capital markets side, it is around 21%. So overall, Operator: Class B office space, and that is the space that we feel is going to be the most impacted. By this transition. Again, I reflect you back to joining the call on Monday for further discussion around that. And as there are increasing delinquencies in real estate, I want you to understand we do not own any real estate. And the most important driver of our results is really velocity. So if the increase in delinquencies leads to more buildings changing hands and a bit more price discovery, that is net positive not only for our brokerage business, but also for our services business as this means we have the opportunity to manage buildings as they change hands. Michelle MacKay: Great. Thank you. And then maybe just sticking a little bit with the AI topic, does it change the way you think about headcount needs for different parts of the organization? Operator: We think a lot about AI as a tool to empower our employees. Remember, we have combinations of people who are deep experts, a lot of skilled labor out there that is on-site. We do not anticipate a massive reduction in our labor force, in our workforce, in our white collar jobs. We actually see this as a great opportunity for us to build and grow the platform without necessarily adding people. And so that is a great operating leverage point for us, using AI in combination with the employee. Michelle MacKay: The next question comes from Anthony Paolone with JPMorgan. Please go ahead. Great. Thanks. My first question relates to your 2026 guidance relative to your three-year outlook. If I look at your revenue growth, it is basically the same thing you expect for 2026 as you laid out for your three-year goal. And if I step back and think about the transactional businesses having been bouncing off of lower levels, I would think that those comps get tougher. As you look out over the next three years, maybe that growth slows. So do you foresee that in the future and thus have other parts of the business that you think accelerate while those maybe come back down to more normalized levels? Or do you think your system will be more steady than what the market might deliver the next few years? Operator: Hi, Tony. Thanks for the question. The capital markets recovery is certainly underway, but we believe it is still in the early stages. So pricing has largely reset. Capital has returned. And the recovery has room to run. We have always spoken about how we think this is going to be a very steady uplift in capital markets over a couple of years. We have all the elements that are really shaping up to be healthy for these markets. And we do not think a 25 basis point move by the Fed in one direction or another really changes this. Industrial leasing demand has reaccelerated. Operator: Of the 83 markets that we tracked, 55 have already registered positive net absorption in 2025, and we think that is going to continue. Part of this is also in balance to the fact that there has been such a limited amount of new construction, Tony, over the last several years that those assets of higher quality are going to continue to gain value, and we think there is still momentum at the higher quality level in most of these asset classes. Michelle MacKay: Okay. And then just follow-up on the capital allocation side. Any thoughts on stock buyback just given what has happened to the stocks with this AI-driven downturn? Operator: Look. We are certainly evaluating share buybacks, especially given where the stock has been trading recently. We believe our share price right now is holding extraordinary value. However, in terms of capital allocation, our main priority is investing for organic growth and deleveraging the company. In the longer term, share buybacks will certainly be on the table. Michelle MacKay: The next question comes from Peter Dylan Abramowitz with UBS. Please go ahead. Yes. Hey. Good morning, everyone. Maybe this is a follow-up from the 2026 guidance. And Neil, can you be a little bit more specific on the services side? Because you said same as last year, but there were a lot of moving pieces, organic, non-organic, a couple of business shut down. So maybe just help us specifically there. And while you are on that topic of services, maybe just flesh out where you are the most excited. It sounds like project management is an area of strength, but maybe talk about what you are expecting in some of these other businesses in services. Michelle MacKay: Sure, Alex. In terms of the guide, Neil O. Johnston: I provided high-level ranges for the full year and each of the service lines we expect to be very similar to what we saw this year. So do not really have much more color there other than that guidance. Your question on services is a good one. I think we had a very, very strong year in services. Essentially, we moved from flat services growth the year before to 6% organic growth in 2025, and that really is the number that we are pegging to. We have said all along that we expect services to be in the mid- to high-single growth rate, and we feel very good about what we did in that business and what we expect to see. We had some great new wins in the year. And we have seen some real momentum. As you mentioned, we saw a strong improvement in project management in the back half of the year, especially outside the US and in EMEA and APAC. And we believe this was driven by confidence in the economy and confidence in people doing work and strong real estate fundamentals. In asset services, we have a growing pipeline. Asset managers and investors are reevaluating who is managing their buildings and how to manage that property, and we have a very, very strong presence there. So I think across all of our services lines, we expect some good momentum as we go into 2026. Unknown: K. No. That is helpful. Thank you. And then just maybe very quickly on the margin side, understand no specific guidance here, but maybe flesh out a little bit the biggest areas of investing maybe by business line. But then also, you have been looking at efficiencies. I assume that is ongoing. Any areas that you are looking in particular, or do you think heavy lifting has been done here? Neil O. Johnston: Alex, I think most of the heavy lifting on the cost side has been done, but we are maintaining our cost discipline. And that is a key part of everything we do. Looking at profitability in our services business, looking at how we are driving growth in a profitable way. So cost has become part of our culture, but it is not the key focus. The key focus is on growth as we go into 2026. Michelle MacKay: The next question comes from Mitchell Bradley Germain with Citizens Bank. Please go ahead. Neil O. Johnston: Good morning, guys. Greystone, it just seems like the inputs in your calculation changed a bit because of the backdrop. Is that the way to consider the write down? Neil O. Johnston: That is exactly right. When we look at our assumptions for that acquisition as we look out, compared to the original assumptions when we made the investment in 2021, we felt like adjusting the value of that joint venture was appropriate. Unknown: Gotcha. It seems like a different Michelle MacKay: press release almost daily from you on new hiring. I am curious about how the company is approaching hiring in 2026. Do you think it is going to be greater than what you accomplished in 2025? Some thoughts around that and maybe where the emphasis is in terms of where you are looking to add people. Operator: Great. Thank you for the question. Yes. We will continue on pace. We have a substantial budget for recruiting going into 2026. You will continue to see us hire both in institutional capital markets globally and leasing as well. So no slowdown from us. Unknown: The next question Michelle MacKay: comes from Brendan Lynch with Neil O. Johnston: Barclays. Michelle MacKay: Please go ahead. Great. Thank you for taking my question. Michelle, I wanted to follow up on your comment about capital markets still having room to run. What, if anything, needs to change to keep things going at this level and get back to the levels seen in past cycles? Or is it just a matter of avoiding a recession that could sustain the recent pace of growth? Operator: Yes. I think to your point, avoiding any dramatic economic event, we will continue on pace here. And when you see the ten-year bumping around 4% to 4.5%, as most of us on this call know, the market likes that. You can transact in those zones, and we think that is most likely what is going to be happening over the next year plus. We continue to, as I have said many times, we do not think there is going to be the kind of peak-ish recovery you saw in something like 2022 coming off a market that was totally shut down. We think there is just going to be continued growth. Asset values are going to increase. And transaction volume over time is going to increase as well. Michelle MacKay: Great. Thanks. That is helpful. And, Neil, to follow up on one of your comments about industrial demand being strong, particularly for sites that are greater than 500,000 square feet. Maybe you could talk a little bit more about how the customer base has evolved and what is driving the strength in demand for that particular size of asset? Neil O. Johnston: Yes. That reference is really particularly focused on The Americas. In The Americas, our industrial leasing was very strong, up 10%. And I think the key thing is that we are continuing to benefit from flight to quality. The sector has been very resilient. We certainly remain very optimistic about what we are seeing in the industrial space. Strong e-commerce last-mile delivery trends support these large industrial facilities. And so that certainly has been an area of strength for us and one that we see continuing into 2026. Operator: And just to add a little more context there, large users often seeking modern logistics facilities to support automation and higher Neil O. Johnston: power. Operator: requirements were the primary drivers of demand, and we think that is what is going to keep industrial leasing on track. The overall vacancy rate has held steady for the past three quarters, and construction is down 62% from 2017. So you have a really healthy formula here for driving growth in industrial. Michelle MacKay: The next question comes from Patrick O'Shaughnessy with Raymond James. Please go ahead. Hey, good morning. Just one question from me. A bigger picture question on your multifamily origination strategy. Given some of the headwinds facing the Greystone JV, is there potential for you to change up how you approach that multifamily origination business? And is a JV still the right structure versus owning the business outright? Mhmm. That is a really interesting question and something we are certainly considering. I would not say that we are going to change the way we do business. That business is pretty structured in the way that it operates. But let us just say we are being a little more hands on in the JV with the operations and really helping to guide that management team to a more profitable business model. Great. Thank you. Operator: Yep. This concludes our question and answer session. Michelle MacKay: I would like to turn the conference back over to Michelle MacKay for closing remarks. Operator: Thank you, everyone, and we hope to see you at our webcast on Monday where we already have more than 2,000 clients registered to attend. Megan McGrath: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Allie Summers: Prepared remarks. We will open the line for questions. I will now turn the call over to Allie Summers, Senior Director of Investor Relations. Good morning, and thank you for joining us. Before we begin, please note that today's discussion includes forward-looking statements as defined under U.S. securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information, please refer to our filings with the SEC, including our most recent Forms 10-K and 10-Q. These statements speak only as of today, and we undertake no obligation. Joining me this morning are Patrick S. Pacious, our President and Chief Executive Officer, and Scott E. Oaksmith, our Chief Financial Officer. Patrick will discuss our business performance and strategic progress, and Scott will review our financial results and outlook. I will turn the call over to Patrick. With that, Patrick S. Pacious: Thank you, Allie, and good morning, everyone. We appreciate you joining us today. In 2025, we delivered adjusted EBITDA of $626,000,000, up 4% year over year, and grew adjusted earnings per share, both in line with our expectations. These results reflect the continued strength of our higher-revenue brand mix, accelerating earnings contribution from our international portfolio, robust group demand, business travel growth, and sustained momentum across our partnership revenue streams. 2025 was also a year of meaningful progress in advancing our long-term growth strategy. We delivered 14% year-over-year growth in global hotel openings, expanded our international footprint at a double-digit pace, and further strengthened our leadership position in the attractive extended stay segment, achieving record U.S. openings. When we look at our existing hotels, the success of our overall strategy to improve product quality and strengthen franchisee economics can best be seen in the higher average royalty rate we were able to achieve across the U.S. portfolio, which increased eight basis points in 2025 and ten basis points in the fourth quarter. On the consumer front, we are particularly excited by the recent launch of the next evolution of our Choice Privileges loyalty platform, and the launch next quarter of a dedicated digital platform for small and midsized businesses. Our hotel development pipeline remains a powerful engine for future earnings growth supported by strong developer interest, with global franchise agreements awarded up 22% year over year in 2025. Today, 97% of rooms in our global pipeline are in higher-revenue brands, and these projects are expected to be roughly 1.7 times more accretive than our current portfolio, driven by RevPAR premiums, higher average royalty rates, and larger average room counts. Importantly, our advantage is not only pipeline quality, but execution speed. Our conversion-led model accelerates openings and revenue realization with certain hotels opening without ever appearing in quarter-end pipeline metrics. That execution strength is especially evident in the U.S., where pipeline conversion rooms increased 12% sequentially from 09/30/2025. Our conversion engine remains a key differentiator for Choice Hotels International, Inc., enabling those hotels to open about five times faster than new construction hotels. In the fourth quarter, U.S. conversion franchise agreements increased 12% year over year, and we expect conversion activity to be a core driver of improving U.S. net room growth in 2026. As we indicated on our last call, we have been actively optimizing our U.S. portfolio throughout the year. With developer demand remaining constructive, including full-year U.S. midscale and economy franchise agreements up 5% year over year, we accelerated the selective exit of underperforming hotels in the fourth quarter. These properties generated royalties well below our portfolio average, and ranked predominantly in the bottom quartile of guest satisfaction within their brands. This improving portfolio mix strengthens the system's earnings profile, and positions us to backfill those markets with higher-quality hotels that deliver stronger unit economics for owners and more durable long-term growth for shareholders. With a larger hotel conversion pipeline, and a higher volume of conversions expected to open in 2026, and based on current year-to-date trends, we believe U.S. net rooms growth is positioned to return to positive territory this year. Looking ahead, increasingly constructive on U.S. lodging demand in our segments. Our core customer continues to prioritize travel within their overall spend with a clear focus on affordability. Choice has long been strategically positioned at the center of value-driven travel, and in the current environment, that consumer recognition supports our ability to capture incremental share within the segment. As gas prices have declined to their lowest level in five years, bringing them back within pre-pandemic ranges, road trips are becoming more budget friendly for our consumers. In addition, tax relief expected to reach middle income households this year has historically provided significant stimulus for travel within our segments. Importantly, the timing of the relief aligns with the start of the summer travel season, the most meaningful period for our owners. Furthermore, upcoming national events, the 2026 FIFA World Cup, the U.S. 250th anniversary, and the Route 66 Centennial provide additional demand catalysts. More broadly, we are benefiting from a limited new supply industry backdrop and steady workforce-based travel demand tied to infrastructure, manufacturing, and data center investment alongside favorable long-term demographic trends. With expected continued demand growth in several of our strong consumer segments, including retirees, road trippers, and America's blue- and gray-collar workforce, combined with an improved portfolio of purpose-built hotels to serve them, we believe Choice is well positioned to capture this demand and deliver durable long-term growth. Turning to our business outside the U.S., we view specific international markets as an increasingly driver of our growth. And in 2025, our international business delivered exceptional results. Over the past several years, we have deliberately built the foundation for scalable, high-return international growth. Today, directly franchised rooms represent more than 40% of our international portfolio. That number is up over 20 percentage points over the past three years, materially enhancing earnings per unit and overall economics. With that foundation in place, momentum accelerated in 2025. We delivered 37% growth in international revenues, driven by portfolio expansion and positive RevPAR growth across every region. We expanded our international system by 13% year over year to approximately 160,000 rooms, outpacing our prior growth assumptions supported by an 82% increase in hotel openings. In the Americas outside the U.S., RevPAR increased 5.4% year over year in 2025. Within that region, Canada remains a key focus with the rooms pipeline growing 49% year over year. As we continue to enhance the Choice value proposition in Canada, under a direct franchising model, we see a meaningful opportunity to drive both system growth and stronger franchise economics over time. In EMEA, rooms increased 13% year over year to approximately 70,000, including nearly doubling our footprint in France through direct franchising. Taken together, our international business is entering its next phase, with greater scale, stronger unit economics, and a meaningful runway for sustained growth. Another important growth engine for us is the U.S. extended stay segment. In the fourth quarter, we delivered our tenth consecutive quarter of double-digit system growth. Today, the extended stay segment represents more than 40% of our U.S. pipeline, and is characterized by longer average stays, higher margins for owners, and greater earnings stability across cycles. In 2025, we achieved a record number of U.S. extended stay hotel openings, up 8% year over year driven by our Everhome Suites brand. Despite a challenging construction environment, we ended the year with approximately 57,000 extended stay rooms in the United States. With continued investment in manufacturing capacity and data center infrastructure nationwide, and the largest under-construction hotel pipeline in the economy and midscale extended stay segments, we believe Choice is well positioned to extend its leadership in this structurally resilient category. Our portfolio strategy is also strengthening our economy brands. Our guest satisfaction scores improved significantly across the segment, and as quality improvements take hold, we are replacing lower performing assets with higher-quality, more profitable hotels, enhancing brand equity across the category. As a result, our economy transient hotels outperformed their chain scales in RevPAR, and gained RevPAR index share versus competitors in 2025. That performance reinforced developer confidence, with our U.S. economy transient rooms pipeline expanding 6% quarter over quarter and U.S. franchise agreements awarded up 13% year over year in 2025. These trends are expected to drive improvement in the segment's net room growth trajectory. In our midscale segment, developer interest remains strong with global franchise agreements awarded up 14% year over year in 2025. The redesigned Country Inn & Suites by Radisson prototype, optimized for cost efficiency and conversion flexibility, has reinvigorated the brand, driving a 50% increase in U.S. franchise agreements in 2025, and expanding the U.S. pipeline by 18% year over year. With that momentum, and a compelling owner value proposition, we believe the brand is well positioned for growth in 2026. Let me now turn to the efforts we are focused on that are strengthening franchisee economics and driving higher customer lifetime value. Among our targeted investments, two key areas are business travel and guest loyalty. In business travel, we have expanded our global sales capabilities and deepened relationships with corporate accounts. Business travelers now represent roughly 40% of total stays, supporting a balanced mix across cycles. In 2025, group revenue increased 35% year over year, and small and mid-sized business revenue grew 13%, led by resilient sectors such as construction, utilities, and high-tech manufacturing. Our AI-enabled RFP tools are accelerating hotel responsiveness and driving high-value bookings. And next quarter, we expect to launch a dedicated digital platform for small and midsized businesses targeting an estimated $13,000,000,000 addressable We also continue to elevate the lifetime value of the guests we serve. Today, half of our U.S. guests have household incomes above $100,000, and one in five exceeds $200,000, an increasingly attractive customer base for our franchisees and partners. Loyalty remains a powerful driver of customer lifetime value. Choice Privileges now exceeds 74,000,000 members, up 7% year over year. With international enrollment up 11% in 2025, our strongest year internationally. Our most loyal members stay nearly twice as often, spend more per stay, and are significantly more likely to book direct. In January 2026, we launched the next evolution of Choice Privileges, broadening how members earn and engage. We introduced a faster path to status by reducing night thresholds and added a spend-based pathway that allows co-brand card usage to contribute toward elite qualification. We also introduced a new top-tier status and added return-and-earn bonuses to encourage additional stays within the same year, reflecting research that shows our travelers value more frequent and attainable recognition. Together, these enhancements are designed to increase repeat frequency and deepen co-brand card engagement, enabling Choice to capture a greater share of demand within our core customer base. Early indicators are encouraging, with post-launch enrollment trending at a faster rate than last year. We are also actively expanding how travelers discover and book our hotels by partnering with leading technology platforms as AI reshapes travel search and booking behavior. We and remain highly visible as consumer search behavior continues to evolve. As we look ahead, Choice is well positioned for continued growth. Our disciplined execution, technology-forward strategy, and asset-light, fee-based model continue to generate substantial free cash flow, enabling us to reinvest in high-return initiatives while delivering value to shareholders. With a higher-quality portfolio, a more accretive development pipeline, expanding international business, and targeted investments that strengthen franchisee economics and guest lifetime value, we believe Choice is positioned to grow market share and deliver durable earnings expansion. With that, I will turn the call over to our CFO. Scott? Thanks, Pat, and good morning, everyone. I will cover three areas this morning: our fourth quarter and full year 2025 financial results, our balance sheet and capital allocation priorities, and our outlook for full year 2026. For full year 2025, we we delivered adjusted EBITDA of $626,000,000, up 4% year over year and in line with the midpoint of our guidance range. Adjusted earnings per share for the full year $6.94 per share, also in line with the midpoint of our guidance range. Growth was driven by our continued leadership in the higher-revenue extended stay segment, robust average royalty rate, significant expansion of our international business, and strong partnership revenue performance. These results reflect the strength of our diversified revenue streams and the early returns from our targeted strategic investments. In fourth quarter 2025, revenues, excluding reimbursable revenue from franchised and managed properties, increased 2% year over year to $234,000,000. Adjusted EBITDA was $141,000,000, and adjusted earnings per share rose 3% year over year to $1.6 Let us turn to the three key drivers of our royalty fees: rooms growth, RevPAR performance, and average royalty rate. In the fourth quarter, we grew our global rooms a half a percent year over year, led by 1.2% growth in our higher-revenue segments and highlighted by a 42% increase in hotel openings. In the U.S., we opened more than 22,000 gross rooms during the year, and our conversion pipeline increased 7% year over year as of December 31. This healthy level of openings and development activity provided us flexibility to accelerate select hotel exits. From an economic standpoint, the trade-off is clear. In 2025, hotels that exited the system generated U.S. RevPAR more than 20% below the company average. Improving portfolio mix enhances long-term earnings quality, and positions U.S. net rooms growth to return to positive territory in 2026. We also saw continued strength in franchisee retention, Scott E. Oaksmith: with U.S. contract renewal activity in 2025 matching prior all-time highs, reflecting sustained confidence in the Choice brands. Across our focus segments in the fourth quarter, developer interest for our extended stay brands remained robust with 26% growth in global extended stay franchise agreements year over year. As of today, we have 27 Everhome Suites hotels opened in the U.S., including 18 opened during 2025, with 38 additional projects in the U.S. pipeline. In midscale, we increased global hotel openings by 47%. We also executed 18% more global midscale franchise agreements year over year, driven by our Quality Inn, Country Inn & Suites by Radisson, and Sleep brands. In the upscale segment, we expanded our global roofs portfolio by 7% year over year, highlighted by 48% more global upscale hotel openings. Our Ascend Collection hotel openings increased 58% year over year, and the brand now exceeds 75,000 rooms worldwide. In the U.S., we more than doubled Radisson franchise agreements year over year, and grew rooms pipeline by 32% quarter over quarter. I also want to recognize our teams for completing the integration of our Canadian operations in just six months. We transitioned the business to a direct franchising model, enabling franchisees to fully leverage Choice's commercial platform while enhancing our effective franchise agreement economics over time. We are already seeing early momentum on the development front, including a recent multi-unit agreement for approximately 700 upscale Ascend Collection rooms in Quebec. Turning to RevPAR performance. Our global RevPAR declined 4.6% year over year in the fourth quarter on a currency-neutral basis. As discussed on the prior call, this was driven by the tougher hurricane comparison in the U.S. Southeast from the prior year. International performance remained strong, with RevPAR up 3.2% year over year on a currency-neutral basis. The Asia Pacific region led with 11% growth. In the U.S., we lapped a 540 basis point hurricane-related benefit from the prior year. Excluding that impact, U.S. RevPAR declined 2.2% year over year, representing a modest sequential improvement from the prior February. Results were also affected by the government shutdown and continued softness in international inbound travel. Despite these pressures, we achieved occupancy share index gains versus our competitors on a full-year basis. Excluding hurricane-related distortions, our U.S. extended stay segment outperformed the industry RevPAR by 30 basis points, and our U.S. transient economy segment outperformed its chain scale RevPAR by 80 basis points, while gaining RevPAR index share versus competitors in 2025. Moving to royalty rate, our third driver of royalty fee growth. In 2025, we exceeded our full-year U.S. average royalty rate guidance, finishing the year up eight basis points, including a 10 basis point increase year over year in the fourth quarter. This expansion reflects our success in growing higher-revenue brands and the continued improvement in our franchisee value proposition. We remain confident in the upward trajectory of system-wide royalty rates, supported by sustained demand generation investments and a development pipeline characterized by higher contracted royalty rates and stronger unit economics. Turning to our partnership business, which remains a key priority. In 2025, we delivered a 14% year-over-year growth in partnership revenues, including 16% growth in the fourth quarter. Performance was driven primarily by co-brand fees, increased supplier and strategic partnership fees. As we enhance our franchisee-facing service offerings, adoption remains strong, supporting durable growth in our non-RevPAR franchise fees across the broad range of services we provide. Together, these revenue streams meaningfully diversify our earnings base and represent an attractive, high-margin growth opportunity going forward. At the same time, we remain focused on margins through improved productivity and operational efficiency. Adjusted SG&A increased approximately 3% for the full year, in line with our guidance, to $283,000,000, reflecting cost discipline while continuing to invest in strategic initiatives. Now turning to the balance sheet and capital allocation. We ended the year with total liquidity of $571,000,000, and net debt to trailing twelve-month EBITDA of 3.0x, and we are comfortably within our targeted gross leverage range of 3.0x to 4.0x. For full year 2025, we generated more than $270,000,000 of operating cash flow, including nearly $86,000,000 in the fourth quarter. This cash generation combined with our strong balance sheet provides meaningful financial flexibility. Our capital allocation framework remains consistent and disciplined. We prioritize high-return organic investments that strengthen our brands and drive long-term growth, evaluate selective acquisitions where returns are compelling, and return excess capital to shareholders. Our dividend reflects a stable During the year, we were approximately 1,000,000 shares representing more than 2% of our shares outstanding and ended the year with approximately two to scale Cambria Hotels and Everhome Suites while recycling capital at the appropriate time. In 2025, we generated $32,000,000 in net proceeds from recycling activities, and our hotel development-related net outlays and lending declined $46,000,000 year over year a $103,000,000 Looking ahead, as both brands approach critical scale milestones, we expect hotel development net capital outlays to continue to decline significantly. This reflects the delivery of our final company-developed Cambria in the 2026, and our planned tapering of new ever growth to return to positive territory alongside continued international expansion consistent with the normal timing of same-year conversion openings U.S. net rooms growth is expected to be more heavily weighted towards the latter part of the year. Global RevPAR in the range of negative 2% to positive 1% year over year in constant currency, with U.S. RevPAR between negative 2% and positive 1%. Average royalty rate growth in the mid-single digits year over year and adjusted SG&A increasing in the mid-single digits. Our outlook excludes the impact of any additional M&A or other capital markets activity, share repurchases completed after December 31, We remained focused on investing in high-return initiatives that enhance our long-term growth Patrick S. Pacious: trajectory. Scott E. Oaksmith: Improve returns for our franchisees and drive meaningful shareholder value. With that, Pat and I are happy to take your questions. Operator? Thank you. Patrick S. Pacious: Ladies and gentlemen, we will now open for questions. Should you have a question, Scott E. Oaksmith: please Operator: Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Michael Joseph Bellisario from Baird. Please go ahead. Michael Joseph Bellisario: Thanks. Good morning, everyone. First question, just for Scott, just one more on the spending outlook. Maybe you could just walk us through expectations for key money spending, CapEx, and also JV investments in 2026 as well. Scott E. Oaksmith: Sure, Michael. Michael Joseph Bellisario: Thank you. Scott E. Oaksmith: Thanks for the question. So in terms of t money, as you saw in our release, we did some less key money in 2025 than we did in 2024. We were about net $83,000,000 compared to 1 and $12,000,000 in the prior year. So we were pleased to see that our average key money check size for our domestic system was down year over year, as well as the number of deals that needed key money to be signed. For 2026, we do think we will see an acceleration of openings. So do expect key money to increase off that base. $83,000,000 did include some recovery. So our net out our gross outlays key money were about $92,000,000 We would expect for 2026 for that number to be somewhere between $105,000,000 and 1 and $10,000,000 for 2026 in terms of key money. In the recyclable capital, we had really, really good success of continuing to pull down that use of capital there. Capital for 2025 was about $103,000,000 net, 30% lower than it was in the prior year. And as I said in the prepared remarks, we are tapering down the use of that key of that recyclable capital. So we expect that to drop another 70%. So we are guiding to a net use of capital of about $20,000,000 to $45,000,000 next year. So that will be a decline from the $103,000,000 we spent this year. So as we have been talking to the street the last couple of several years been, that that real capital is really around launching the growth of both the Cambria and the Everhome Suites brand. We have been very pleased with how those brands have grown with Cambria now over 75 hotels and Everhome really with a strong start. We feel we are in the place now if we can start tapering that capital And as we taper the outlays, we also expect to see recycling improve here over the next couple of years as a transaction mark. Market improves in the overall U.S. hospitality industry. Patrick S. Pacious: Yeah, Mike, I would just add that, you know, the strategy underlying it all is as the value proposition for our franchisees has gotten better, the amount of key money per deal to attract new new entrants is is declining. And as Scott said, obviously, as more hotels open and that key money actually gets used, that that is a positive sign. And then just back on the on the capital for both Cambria and Everhome, you know, the final chapter in all of this is to recycle it back to back to either higher investment initiatives or return it to shareholders. So we are really entering that phase with Cambria, and we will be doing that this year with Everhome. Michael Joseph Bellisario: Got it. That is helpful. And then one related question, just sort of on the buyback front there. Just where does the balance sheet need to get to in order for you guys to be more aggressive or more programmatic with buybacks going forward? That is all for me. Thank you. I think when you look Patrick S. Pacious: yeah, when you look at last year, you know, we we took kind of a pause after we bought the other half of the Canadian JV. I mean that was a basically, about a $100,000,000 worth of of money going out to to acquire that business. A market we have been in for seventy years, thirty years of that in a joint venture. And we have seen a really fantastic early results in that. As Scott mentioned, we we got the integration of that done at the end of 2025. So we took a strategic pause during the summer months and then resumed it in Q4. I think when we look at it, we are always doing our normal investment prioritization and looking at ways to invest back in the business, looking at M&A as an opportunity. And then as those things provide additional capital, we look for share returns and dividends. So, that is kind of the way we look at it. You have seen our net debt to EBITDA ratios, are in the range where we feel very comfortable. So that that is how we will be thinking about it as we move forward in 2026. Operator: Thank you. Your next question comes from Elizabeth Dove from Goldman Sachs. Please go ahead. Hi, good morning. Thanks for taking the question. Elizabeth Dove: I wanted to ask about your commentary around U.S. rooms growth returning to positive this year, just given that would be quite an improvement from where it was at least organically in 2025. Any more color on that or specific brands that you think will drive that? Patrick S. Pacious: Yeah, Lindsay. It is a it is a great question. As we mentioned in the in the remarks, we saw an increase in our both midscale and economy franchises awarded. They were both up 5%. That coupled with our conversion pipeline increasing by 12% in the fourth quarter And then as we mentioned, you know, we are seeing improvement in guest scores as well. So the brand quality is getting better. That gave us the confidence in the fourth quarter to take some very targeted, deliberate and ultimately value accretive exits, which was really the story towards the 2025. We look at 2026, there is a lot of constructive things that we see both in our pipeline today with regard to the brands, as you mentioned, the ones that we are really seeing a lot of uptick from a conversion perspective our Quality, Clarion, Clarion Pointe, College Roadway, and Ascend. Those those brands from a conversion perspective really performed well for us. We are also seeing as I mentioned in the remarks, Country Inn & Suites by Radisson. The redesigned prototype there is driving a lot more both new construction and conversion interest for that brand as well. So those are the drivers we expect to be from a brand perspective will help us get back to that sort of positive territory we mentioned. Elizabeth Dove: Awesome. That is clear. Thanks. And then just on the RevPAR side of things, you know, in terms of what you are forecasting for domestic RevPAR outlook, you called out a couple of tailwinds or potential tailwinds from World Cup and stimulus, etcetera. I am just curious how much of that is kind of baked into what you are expecting for U.S. RevPAR growth this year or whether that is more kind of incremental upside if those come through? Patrick S. Pacious: I would say some of these, if you look at the impacts that hit us last year, they were all transitory, whether it was the government shutdown, the lapping hurricane impact we had in Q4, which is continuing here into Q1 of continued into 2025. So we have that comp the 2026. And then weaker inbound travel from international markets. When I look at the the, potential for the upside here, it is it is really some things that are a little bit harder to measure. If we look at the tax relief, the early, returns are looking great. So far, the tax refunds that U.S. citizens are getting are up 11%. And the overall tax relief that is come back so far this year on a year-over-year basis is up 18%. So we do know that the consumer has that stimulative backdrop for the first half of the year here, which we think will be a real positive for us When you look at international inbound, the dollar is the weakest it is been in four years. So, international inbound travel The U.S. is on sale from from from that perspective. And that also makes travel outside of the U.S. more expensive. So we would expect U.S. travelers to stay at home So those things are not necessarily baked in because they are a little bit harder put into our guidance. But when we look at sort of where we are in the midpoint of that range we gave, that is sort of the backdrop for how we thought about some of the demand catalysts. But as I said, you know, last year's weakness was primarily transitory. It was not structural. And we are very constructive on what we see from a RevPAR perspective in 2026. Elizabeth Dove: Got it. Thanks very much. Operator: Thank you. Your next question comes from Daniel Brian Politzer from JPMorgan. I wanted to go back Patrick S. Pacious: to the RevPAR expectations for 2026. It does sound there is some hope for stimulus in there and certainly midscale and up midscale seem to be promising. But I guess kind of as you think about the RevPAR cadence for the year, how should we think about it progressing as it relates to that guidance that you have laid out? So one thing I think to look at, and we mentioned this on the prior call when we saw it in 2025, is the fact that our occupancy index for the entire year was positive. So when we have looked at cycles in the past, the first thing to recover is occupancy then followed by rate. So from the standpoint of going into the year, that that is a really positive green shoot. The second thing, we mentioned this on the last call, and again, we saw it in Q4, is the performance of the economy segment. Is that segment improves and midscale improves and you you get sort of an upward trajectory there. Again, we saw that from a RevPAR perspective and from a RevPAR index perspective. We saw better performance in Q4 for our economy brands. And then I would just say, as you look at the first six weeks of the year here, if we look at the markets outside of the U.S., we are already seeing a 1.7% increase in RevPAR year to date. So that is without the hurricane impact in it. And then we look at what is in that 1.7, again, it is driven by a 2.3% occupancy gain. So we are seeing that strength in our hotels able to sort of fill the rooms. And that usually then leads to the impact for the ability for them to to to begin to move ADR in the right direction. I think as the year lays out, traditionally our Q2 and then our Q3, our Q3 is usually our highest demand RevPAR. And as I said in the remarks, that aligns nicely with the tax relief. It aligns it aligns nicely with the gas prices for road trippers as well. So, we would expect that RevPAR increase to sort of improve as we move into the year in addition to the lapping of the hurricane impact that we are going to see here in Q1. Scott E. Oaksmith: Dan, just to add a little bit more color. We do expect Q1 RevPAR will still be negative given those hurricane impacts that we had really is about 340 basis points to our results in in the first quarter of last year. So we will be lapping that, but we expect an inflection point in Q2 as we lap those hurricane those comps that Pat mentioned. So you will see kind of a more of a negative rep in Q1 with improving as the year goes on to reach our overall guidance. But Pat mentioned, we are very very optimistic given what we have seen on the non-hurricane states given that that is positive RevPAR for those through the first one point months of the year. Patrick S. Pacious: Got it. And then just for my follow-up, I think the footprint you have talked about in the past removing some of the lower performing properties off the platform. Maybe that were not complying with the guidelines or just underperforming in general. Have you basically cycled through that element of your of kind of culling the footprint Or is there more to go there just as we think about that pathway to achieving U.S. domestic rooms growth in 2026? Yeah. It is it is something we do naturally. So it is it is always there as as potential owners, you know, are not performing or a an asset, you know, becomes the owner wants to move that to a different to a different either go independent or or or make it a a different product altogether. So that that is a natural, but we did accelerate some of that or, I would say, you know, took some targeted ones in the fourth quarter. That was more of a onetime on really looking at where we can clean out markets where we know there is opportunity to backfill that with a higher quality, better performing hotel That impacts our average royalty rate. It impacts our guest satisfaction scores when we are able to to upgrade the portfolio. And it is something that the company has been doing for for years, but in the fourth quarter, we we we saw some real positive signs from a growth perspective on the pipeline and also on new deals. Which gave us more confidence in the ability to sort of take out some of the lower performers. So I would say it was it was more of a an outsized number in the fourth quarter. But but our normal sort of 3% to 4% churn rate is is is kind of where we would likely get back to Is there any way to just give the fourth quarter number for that? Scott E. Oaksmith: Or Patrick S. Pacious: the additional or the the overall Just just for the amount that we are kind of taking out as part of this initiative so so we can kinda better get an idea of the organic It was about 20 hotels. It is it is it is when you look at that, it is about 30 to 40 basis points of of net unit growth. Got it. Thanks so much. Operator: Yep. Thank you. Your next question comes from David Katz from Jefferies. Please go ahead. David Katz: Morning, everybody. Thanks for the question. Pat, I think you may have just touched on this a bit. But I wanted to get a sense for you know, often when there is kind of a period of removals, you know, it lasts for a period of time. How how long do you expect you know, this sort of offsetting removal process to take before we sort of settle into what Patrick S. Pacious: and presumably, David Katz: know, Nug Would Would Would Would Go Up. Right? Once That Process Is A Bit More Completed. Right? Patrick S. Pacious: Yeah. Well, That That That That is Why We Feel We are Gonna Get Back To A Positive Note This Year In The U.S. We will be we will be positive overall, but Patrick S. Pacious: in that U.S. nug number, really are looking at what is in our pipeline today The franchise agreements we sold last year, which were, as I said, in the in these primary areas where we are taking these additional exits, they are up 5%. So we have seen that, and they are in the conversion as part of the pipeline, which was up 12% in the quarter. So that gave us the opportunity to say, we know we have opportunity and interest for these markets for these brands, And so exiting these underperformers and the ability to backfill them is is the strategy. When you look at our conversion hotels, they open anywhere between three and seven months. So, again, there is a lot of that that will be sold this year. That is not yet in the pipeline that will open this year. So that that is a historical fact about the type of as I mentioned, the the speed of execution within our pipeline. So that is the that is the way we think about it, David. I would say that we what we did in in Q4 was elevated more so than what we would normally do. Scott E. Oaksmith: I think, David, think the other thing you are saying is we have been Please. We have been in a few years of of no new construction, you know, across the U.S. industry. So, you know, the the the the normal processes Pat talking about that we are always wanna make sure that we are making sure our portfolio is performing well, is a little bit more enhanced in terms of terminations just because you do not see the new construction coming in. Typically, we have about one-third of our openings are new construction. In the last couple of years, it is been more in the 15% to 20% just given the tougher U.S. development environment. So calling of our system, our exits here, sure we keep brand quality up. It is just a little bit more pronounced. But we expect our termination rate as we go forward in 2026 and 2027, to trend back to historical normals. Understood. And when we think about a much longer term you know, view, Pat, how do you see sort of the company getting Operator: you know, to a normal Scott E. Oaksmith: nug? I mean, do you know, is it reasonable to aspire Operator: you know, to where Robin Margaret Farley: you know, the the the nug levels are for some of the, you know, top industry. You know, companies are, or, you know, is something more moderate like, what you think is an appropriate sort of ongoing normalized NUB level? For choice? Patrick S. Pacious: Yeah. David, I mean, when I look at across the industry, NUB is coming from international. I mean, that is everybody's Nug. It is it is international. And and if you look at ours as well, you know, 2025 was kind of the the next phase of our growth on that on that in in effectively the rest of the world. So we are really excited about that becoming a bigger contributor mean and then I think the second piece is the return of new construction. You know, that is the that is the other, aspect of this. When I look at our business, I look at the extended stay opportunity that we have here in the U.S., I mean, that is continuing to outperform the competition. You know, we added 12% more rooms We outperformed on RevPAR. So it is really a function when I look across the industry most of the Nug is coming outside of the U.S., and that is an area that we are growing in as well. Robin Margaret Farley: Thank you very much. Thank you. Operator: Thank you. Your next question comes from Robin Margaret Farley from Unibank Switzerland. Robin Margaret Farley: Thank you. Great. I wanted to ask about your RevPAR guidance, just that the the the global is at the same rate as U.S., but you know, your international RevPAR has been growing above the U.S. rate. I think we see that broadly. So just wondering why you are not seeing something at or expecting something at a higher rate in your international markets? Robin Margaret Farley: Thanks. Patrick S. Pacious: Well, I think the the first part of it, Robin, is the the size of the international market relative to Operator: the so as we Patrick S. Pacious: we saw last year, we had very strong international RevPAR growth. But relative to the U.S., it was it was it it was offset. So that that is one factor in it. I think the second is many of the a lot of the growth we had this year are going to be ramping hotels next year. So we are factoring that into our RevPAR thinking in the 47 countries that we are in outside of the U.S. So it is a it is a bit of a a a story about it is a small contributor today, and there is obviously a lot of variability in the 47 markets that we have that we have hotels in. Scott E. Oaksmith: Yeah. And, Robert, Robin Margaret Farley: Do you think the Scott E. Oaksmith: general economic environment in the international markets is will be stronger than the U.S. Robin Margaret Farley: Great. And just as a follow-up, so thinking about your international growth. I do not think I saw that the U.S. royalty rate you mentioned in the 5% range. I do not know if you gave that specific number for for international royalty rate. I know you indicated it was up, but just wanted to get a sense of that just given how much more direct you are doing versus master franchise. It seems like that would have would have stepped up a lot. And then do not know if there is anything about key money with international growth that is that is different that you would call out than than what we are we typically see from U.S. domestic growth. Thanks. Patrick S. Pacious: I will answer the key money question Robin. So as we as we have looked at our international business, as you mentioned, it has become more a direct franchising model than than we had been in the past. And what is really exciting is the power of the brands that we have internationally means we do not have to do key money the way we do here in the U.S. from from perspective to get the the types of openings. So it is a it is a much lower amount of money that that is required to to incent new growth. And then I think, Scott, you wanted to answer that? Yeah. In terms of the royalty rate, we have Scott E. Oaksmith: contracts we have been doing, we have seen some improvement in the royalty rate Our royalty rate in our direct markets is about around 2.7% across the the international markets. When we do go to market in a MFA agreement, a master franchise agreement, obviously, are lower, royalty rates given that our partners are responsible for servicing brands in the local markets. And those rates are more around 0.5% to 1%. So we will continue to evolve our disclosures and we will moving forward, we will look to give more you know, forward-looking guidance on what that royalty rate looks like going forward. But those are, if you are looking to model some broad numbers to use. Yeah. Robin Margaret Farley: Great. Very helpful. Thank you. Patrick S. Pacious: Thank you. Operator: Your next question comes from Patrick Scholes from Turits Securities. Please go ahead. Hi. Good morning, everyone. Thank you. Patrick S. Pacious: Sorry if I missed this. Did you give a Scott E. Oaksmith: outline or a guided range for expected return of capital such as combination of share repurchases and dividends? And if not, would you Operator: be able to do so? Thank you. Patrick S. Pacious: No. No. No, Patrick. Scott E. Oaksmith: We did not give any guidance as we typically do not. You know, we we think about our capital allocation. Obviously, we have talked many times on the call, is we we first and foremost always look to invest our capital back into the business organically as we think that is the highest return to shareholders. You know, if there is meaningful and accretive M&A, we certainly look at that. And then with our excess cash flows, we do return those to our shareholders through cap dividends and share repurchases. But we typically do not provide guidance on that We will continue to evaluate, those opportunities, and as the year goes on, we will report on how we allocate that capital. But we as we typically have not, we did not give guidance. Okay. Okay. I I do think it would be helpful you know, from talking with quite a few investors about this If you did, just a suggestion. Certainly, it is well received the way Hilton and Marriott do in their earnings releases. Patrick S. Pacious: So Scott E. Oaksmith: food for thought. Thank you. Patrick S. Pacious: Thanks, Patrick. Thank you. Operator: Your next question comes from Charles Patrick Scholes from Wells Fargo. Please go ahead. Hey, guys. Just a couple of Patrick S. Pacious: more on financials questions. Working capital and other was a pretty big drag in 2025. As we look to model '26, should we Scott E. Oaksmith: expect a reversal of that $98,000,000? Or is there anything to call out specifically that Patrick S. Pacious: that is driving that? Patrick S. Pacious: Sure. And I welcome, Tran. This is your your first earnings call with us, so we are glad to Scott E. Oaksmith: have you. On the call from covering the company. Yeah. There are some some timing reversal items that are in there really around just the timing of some tax payments that we had made that will obviously be utilized in 2026. As well as the other some other working capital. So I would expect most of that to reverse going forward. In in 2020 in 2026. Great. And and then thank you guys for the the clarity on the capital outlay. Just as we look to model that, is that more an increase in the distributions and proceeds Patrick S. Pacious: coming back to you? Or is it Scott E. Oaksmith: in lockstep with that also lower contributions? A little bit of both? Or or just if you could give a little more granular detail around Patrick S. Pacious: the the multiple items that kinda feed into that? Yeah. Trey, welcome. And it is it is a little bit of both as as we we have talked about, you know, lower lower key money per unit. And then also the the tapering off of Everhome This Year And And The Completion Of Cambria last year. As we think about recycling, a lot of that is gonna be driven by market conditions around the attractiveness of the buy sell bid ask that is that is out in the market to allow us to to move some of that those owned hotels back to franchise hotels. Scott E. Oaksmith: When you look at the recycled capital, I would say the step down that I mentioned, the 70% reduction, that is primarily on outlays. So as we mentioned, we are tapering these down. So we expect recycling. This year, we did about $32,000,000 to be somewhere in that that same range, you know, with opportunities to do more of the transaction market rebounds here. But, really, the step down is really about outlays as we start tapering down those programs. Patrick S. Pacious: Perfect, guys. Thank you. Patrick S. Pacious: Thank you. Operator: Your next question comes from Meredith Prichard Jensen from HSBC. Please go ahead. Meredith Prichard Jensen: Yes. Thanks. Good morning. I was hoping you might speak a little bit more about conversions in terms of how they are breaking down from independents or other branded companies, potentially how you think about interbranded conversion. I know that is separately. And maybe a little bit of regional color there. And I I a second part of this, and I think I understand. From your comments, you may have a different take on it. I was listening to a CEO interview at ALIS, and he talked about how giving lender comfort and more conversion options that conversion levels were going to be structurally higher, that there was a change there. And I would love to get your thoughts on that. Thank you. Patrick S. Pacious: Sure. Yeah. Definitely, when you see where the marketplace has been, kind of a flattish RevPAR for the last couple of years and interest rates being high, that has driven new construction down. So it is become much more of a conversion model. That is an area that Choice Hotels has led on for years. They do pick up in times like the global financial crisis, the pandemic. And and even in the last couple of years as as new construction projects have just been harder to finance. So it is an area where of strength for us, where the conversion opportunities come from, for us, you know, I I always say when when times are a little tough for for hotel owners, independent hotels come in out of the rain. They want to come into a brand that has a, it is a proven brand, but b, it is got a loyalty program, revenue management, opportunity to lower their costs through the use of our tools and our procurement programs and the like. So those are the the types of hotels we normally see. And that is why brands like Ascend do well in times like this. Ascend had a very good year last year. Brands like Quality Inn, our economy brands, kind of picking up new units. So that is where the growth coming from into those brands, but it is primarily coming from I would say, independence, and then there are some other branded conversions. That is the usually, the second highest contributor to to our new conversion or new entrants model that are from the conversion hotels. Meredith Prichard Jensen: Great. Thanks so much. Patrick S. Pacious: You are welcome. Operator: Thank you. There are no further questions at this time. I will now turn the call over to Choice's CEO, Patrick S. Pacious, for closing remarks. Please go ahead. Patrick S. Pacious: Well, thank you, operator, and thanks, everyone, for joining us this morning. We look forward to hearing you again in to speaking with you again in May when we report our first quarter results. Have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.
Christel Bories: Good morning, everyone, and welcome to Eramet's annual results presentation. I know most of you from my past as Chair and CEO of Eramet in the last 8 years. And as you know, I have resumed the role of CEO on an interim basis at the request of the Board. It was not part of my personal plan. One year ago, I decided to not to seek a third mandate for personal reason, and I have not changed my mind. However, when the Board asked me to step in, I felt the responsibility towards the group, towards its stakeholders and above all, towards its teams. I know this company extremely well. I know its strengths, and I know what it takes to navigate a difficult cycle. And I want to see the group succeed. So, this is a temporary mission. A search for the new CEO is underway. But I will stay as long as needed to ensure continuity and stability for the group, and I will hand over once a successor will be appointed. In the meantime, I'm fully engaged and fully accountable. And as you will see today, I have a strong team with me. So, operational and financial continuity is fully ensured at Eramet. So, the agenda of today is the following. I will do an introduction. Then we will go through our 2025 financial results, and it will be presented by our acting CFO, Simon Henochsberg has been in Eramet for a few years now. He is our Head of Strategy. He is coming with a strong financial background and experience in banking. And he is today in charge of Treasury, Financing and Investor Relations. Then, we will focus on our operating and financial performance by activity and on the group performance improvement plan. And this will be presented by Charles Nouel. Charles Nouel is our COO. He has been in Eramet for 20 years. He has been in the COO position for 3 years now. And Charles is also in charge of the implementation of the ReSolution program. And then, we will move to our funding plan. And you have seen in the communique that we have announced today a comprehensive funding plan. And so, Simon will present it, and I will come back for the conclusion. So, let's start with introduction. Clearly, 2025 was a very difficult year that stretched our balance sheet. We faced strong external headwinds with cyclical lows almost across most of our commodities, combined with a weakening dollar, which is a rare and particularly adverse combination in our industry. We also encountered permit restriction in Indonesia and operational challenges in our manganese logistics in Gabon. We emerged from this period with a stretched balance sheet, and this required decisive actions that we have decided, with the full support of our Board, to restore a sustainable capital structure and provide solid foundations for the future. We will obviously come back to that in a minute in the presentation. At the same time, we have also achieved major milestones in our strategic road map. And we are particularly proud of the ramp-up of our Centenario plant in Argentina, which progressed successfully and which is really a great achievement and position us very favorably for the future. And in Grande Cote in Senegal, we are also very proud to have achieved the IRMA 50 certification. As you know, IRMA is a very demanding international standard in terms of sustainable mining. And we are one of the few mines in the world being able to achieve this level of certification. So, despite the big difficulties of the cycle, we progressed strategically on our road map, and I think it is a very important point. So, let's start now with safety. As you know, safety remains an unconditional priority at Eramet. Our incident rate stands at 0.8, which is a good standard in the world, and it is below our target of 1. As you remember, 9 years ago, when I joined the group, the safety performance was at a totally different level, and I think that the progress that we achieved over the past years is something that we can collectively be proud of. However, the situation at Weda Bay Nickel is deeply concerning. We recorded 3 fatal contractor accidents in 2025, and we had an additional one in January also with contractors. This is totally unacceptable, and corrective measures have been implemented. The contractor management has been strengthened. We have taken measures on road safety and operational controls have been reinforced. And we are also taking measure on lightning prevention and protection measures because we have had issues with lightning strikes. Safety is a fundamental priority of Eramet, and this is the first pillar of our ReSolution plan. And our target is clear. It's 0 injuries and 0 high potential incidents. So, let me now come to the broader macroeconomic environment. 2025 was marked by historically low commodity prices and unfavorable FX evolution. The macroeconomic environment and particularly the slowdown in China has weighted heavily on industrial demand. For our basket of commodities, and this is what you see on the right side, the pricing environment was comparable to 2015, which is the lowest level in the decade. And that has been compounded with a strong adverse dollar effect, which, as I said, is a particularly rare combination in the industry. So, these sharp declines had a significant negative impact on our results, which amounted to nearly EUR 300 million in 2025. These external headwinds, combined with the permit restriction in Indonesia led to a very deteriorated adjusted EBITDA, which reached EUR 372 million in 2025. It is down 54% year-over-year. You remember that we were over EUR 800 million in 2024. The intrinsic performance is also below expectation, notably in manganese logistics and because of the cost of the lithium ramp-up phase. So, you see that basically out of the -- I mean, the huge decrease of the adjusted EBITDA, 80%, roughly speaking, was coming from the external factors and 20% from disappointing operating performance within Eramet. As a result of this much lower EBITDA and tails off CapEx, notably in lithium and Gabon, the adjusted free cash flow was negative at EUR 481 million. And the net debt reached EUR 1.9 billion, and the adjusted leverage stood at 5.5x. The gearing reached 125% under the covenant definition, but we obtained a waiver for the December '25 covenant test date. So given the context, no dividend will be proposed for this year, and you will see also for next year. So, clearly, the balance sheet is stretched, but liquidity has been preserved and as we will see, remains solid at the end of December and access to financing remains secure. So, in response to this difficult situation, we have implemented a comprehensive funding and performance plan approved by the Board. It relies on 3 pillars that you can see here on the slide. The first one is, of course, the performance improvement and cash generation at the level of Eramet, driven by the ReSolution program. It covers more than 50 initiatives already underway, and Charles will detail these initiatives later on. The second pillar is a strategic asset review, exploring partial monetization options with the objectives of generating cash in 2026. The third pillar is equity strengthening, with a planned capital increase of around EUR 500 million in 2026, the [ principle ] of which has been agreed with our reference shareholders. The priority of this plan is clearly deleveraging, in order to secure a stronger and more sustainable future for the group. Simon will give you more details later on, but I think it's a very important step going forward to reinforce the balance sheet of the group. With the strengthened balance sheet, we will be in a position in the future to fully leverage the quality of our asset base. Just 2 examples here. We operate the largest and one of the highest-grade manganese ore mine in the world, as you know. The debottlenecking of the logistics and the rail infrastructure in Gabon is starting to deliver results. And so, this is positioning us very well for the future. In lithium, Centenario, as I said, is successfully ramping up. We are several years ahead of most competitors in direct lithium extraction at industrial scale. The asset is first quartile, scalable and long life in a structurally attractive industry. We think that our first quartile low-cost asset base will secure profitability and support cash generation as the commodity prices emerge from the low point of the cycle. Let me now zoom 1 minute on this first-class lithium asset. The plant, as you know, has started beginning of 2025; in fact, very end of 2024. Our plant has reached close to 75% of nameplate capacity in December last year after overcoming the problem caused by a faulty equipment, the fourth evaporator that was delivered by one of our supplier in the first half that has delayed the start of the plant for about 4 months. But the ramp-up trajectory in the second half was very good, was steep, benchmark in the industry and in line with our revised plan. Our proprietary Direct Lithium Extraction technology is now operating at industrial scale, and we have demonstrated that it's working. In 2026, as you have seen in our guidance, we target a production between 17,000 and 20,000 tonnes of lithium carbonate, reaching close to 100% capacity by year-end. And at the same time, we are focusing on cash cost optimization, particularly through improved reagent consumption and process efficiency. Longer term, the salar, as you know has a great potential of exceeding 75,000 tonnes of lithium carbonate per year with options for low capital intensity expansion short term. But we will do this expansion in a very disciplined manner and involving partnership. And just to finish this introduction, I would like to talk about CSR. As you know, I put CSR as a central pillar of our strategy 8 years ago. CSR remains central to our model and our act for positive mining road map continues to structure all our actions and we progress on it as planned. Achieving the IRMA 50 at Grande Cote in Senegal is a significant milestone. It positions us among the most advanced mining group globally in terms of responsible mining and transparency. And we continue to see top-tier recognition of our commitments from different CSR rating agencies. And we put here the example of our CDP rates on water that moved from B to A-, which is a very, very good level in our industry and the recognition of this continuous improvement journey towards excellence in CSR. So now, I will hand over to Simon for the financial results. Unknown Executive: Good morning to everyone. Thank you, Christel, for the introduction. I will start by commenting our 2025 financial results, and I will comment later on the funding plan that was announced yesterday. So, regarding our financial results. First, as Christel mentioned, we need to come back to the market situation that we experienced in 2025. Across all of our commodities, we had lower prices combined with a U.S. weakening, which is quite rare for us, which had a double impact on our financials. Regarding prices, the impact on manganese ore was minus 18% in 2025 compared to 2024. This is due to excess supply coming from South Africa, and it's also due to an Australian high-grade ore producer that came back on the market during the year. Regarding demand, steel production remains stable. On nickel, we also experienced a downgrade -- a decrease in prices by 10%. We managed to keep the prices of nickel ore stable in Indonesia, thanks to the premium we were able to get because of the permitting tension that we saw during 2025. But overall, on a global scale, we were in an oversupply situation, both on Class I and Class II nickel. In mineral sands, we've seen a structurally oversupplied situation emerging. This has been putting pressure on prices, and I will come back to that. This explains the impairment that we had to pass on our asset in Senegal. On lithium, the prices were low in 2025. We've seen the prices recover recently in the past few weeks. We had indeed a temporarily oversupplied market in '25 despite the very sustained demand that comes from both EV and ESS. But again, we are starting to see a rebalancing on that market in recent weeks. Coming to our financials. Our turnover for the year decreased to EUR 3.2 billion. So this is 7% below what we had in 2024. So this is mainly due to price impacts, and we did have some extra volumes with the start of our production of lithium in Argentina. Regarding adjusted EBITDA, as you know, we adjust our EBITDA with the share of Weda Bay Nickel. We also retreat the losses of SLN as this operation is fully funded by the French state and does not impact economically Eramet. So, on adjusted EBITDA, it decreased from EUR 814 million last year in 2024 to EUR 372 million in 2025. This is a decrease of minus 54%. This decrease in EBITDA translated into a lower net income for the year at minus EUR 370 million. This is also due to the impairment that we had to pass on our assets in Senegal, an impairment of EUR 171 million. This is the reflection of this persistent oversupply that we are seeing in this market and the downward pressure on prices. The adjusted free cash flow for the year landed at minus EUR 481 million, so lower than what we had in 2024. The impact on free cash flow is less important than what we see on EBITDA, first of all, because we were able to reduce CapEx in '25 and because we implemented a cash boost plan during the year. Due to this cash consumption, we saw our net debt increase from EUR 1.3 billion to EUR 1.9 billion. Our shareholder equity decreased as well. I'd like to mention on shareholder equity that there is the impact of the net income, but there is also the impact of the FX rate, which is very adverse as we have a lot of assets that are denominated in dollars. As a result, our credit ratios landed at 5.5% for the net leverage and gearing at 125%. As Christel mentioned, we asked for a waiver from our banks for the test date of December 2025 that was granted unanimously. Regarding the usual EBITDA bridge, I think the picture is quite clear. The external impact on our EBITDA was substantial in 2025 by minus EUR 359 million. This is 80% of the decrease in EBITDA came from external factors. In those factors, the 3 main drivers, again, are quite clear on this graph. The price impact was nearly EUR 200 million. The FX impact was nearly EUR 100 million. Taken together, you have nearly EUR 300 million that are linked to price and FX. And we had the permitting situation in Weda Bay with a new permitting constraint during the year that forced us to revise our mining plan with a higher cash cost, lower grades and a product mixed with more limonite on which we have lower margins. We also had CO2 quota sales on manganese alloys that brought EUR 46 million. And on the intrinsic, we had some positive impact on grades mainly in Senegal, and we had in 2025, the cost linked to the ramp-up of lithium. Regarding CapEx, we were able to reduce CapEx in '25 compared to '24, in line with the guidance we had provided to the market. Sustaining CapEx remained constant year-over-year. But with now the new addition of sustaining CapEx from Centenario as now we have this plant is in operation, which led to a sustaining CapEx of EUR 26 million. On non-sustaining CapEx, we kept investing in Comilog. This is to debottleneck the loading in Moanda and the ship loading at the port. We kept investing in Setrag to revamp the railway to allow for organic growth. And we kept investing in Senegal, where we are debottlenecking our plants and where we are also investing into a decarbonization project. We had some remaining greenfield CapEx linked to our plant in Argentina with the end of the construction. This amounted to EUR 96 million for the year, leading to a total CapEx of EUR 412 million. Regarding net debt, this is the result of what we described. The net debt increased from EUR 1.4 billion to EUR 2 billion. This is the result of a low EBITDA, still high CapEx as we were still investing. Taxes paid, with EUR 137 million of taxes paid, of which EUR 80 million in Gabon, which includes a settlement of a tax audit which is a one-off payment. We distributed some dividends, including EUR 56 million to minorities, which is mainly in Gabon. Regarding our liquidity position, our group financial liquidity stands at EUR 1.5 billion at year-end 2025. This includes our RCF. In January this year, this RCF was fully drawn for precautionary reasons. It provides the group with ample liquidity, especially as we have very manageable debt maturities in '26 and '28. The decision to draw this RCF in full was made by the previous management. We are currently evaluating the adequate level of cash we want to maintain going forward. Regarding our debt maturity profile, the bulk of our maturities are in '28 and '29 with the 2 bonds that are due that year. With that, we have an average maturity of our debt that stands at 2.8 years. With that, I will hand over to Charles to describe the operations. Charles Nouel: Thank you, Simon. Hello, everyone. So, 2025 operating performance and financials. In terms of operating performance, we've had mixed results. Disappointing in manganese ore. We had a low base on the -- in 2024, and we didn't manage to do more. I'll come back to that. Basically, it's around the logistics challenge being on the railway, but also on the terminal operations. In terms of manganese alloys, we were constrained by the market, by the ability to sell our products. We have a production capacity that is a lot higher than what you see there and what we actually produced. On the positive side, 42 million at Weda Bay when we received in July the additional RKAB when we managed, in the last part of the year, to produce so much is a very positive operational performance. Again, I'll come back to that because it has some negative impacts as well. Mineral sands, it's a record production. Mineral sands used to be around 600,000 or 700,000 tonnes. We gradually increased to 800,000 and now nearly 1 million tonnes. And the lithium started with difficulties with the Forced Evaporator. But in the second part of the year, the ramp-up that we achieved going to 75% in December and it's continuing currently to increase is extremely positive and is a real success. Now, commenting the manganese performance, the main driver to explain the difference between '24 and '25 is around the price and the exchange rate. On the -- that's for the manganese ore. On manganese alloys, it's about the prices, yet we have been able to compensate that through CO2 quota sales. Regarding the free cash flow, we have, of course, the EBITDA. But on top of that, we continue to invest in Gabon on the train line, but also on the infrastructure of the mine. This is coming to an end, that part. And we paid heavy taxes, as Simon has mentioned. On the positive side, it's the free cash flow of the manganese alloys that is much higher than the previous years. And again, this business delivered some significant free cash flow. In Weda Bay, the main difference is about the grade and the quality of the material that we sold compared to the previous years. This was heavily impacted by the permitting. Permitting is about the famous RKAB permit, which is the permit to produce and to sell, but also the forestry permit. And both these permits were delivered extremely late, and we had to redo our mine plan continuously through the year. And in the end, we had a very unoptimized mining plan. This is why the grade went down because we had to sell some low-grade saprolite. We had to sell a lot of limonite as well because the second part of the RKAB that we received was exclusively limonite. And that had a very big impact on our operation and our sales. The second part also is that, when you have a suboptimal mining plan, you have increased haulage distances as well as increased strip ratio, and that impacts our productivity. Regarding mineral sands, it's a record production, as I explained, yet the prices dropped to very low levels, and that impacted our EBITDA. And on the free cash flow side, we still have CapEx, CapEx of expansion, CapEx of decarbonation. And those will finish in Q1 with start-up in early Q2 this year. So, expect some small amount of -- smaller amount of CapEx last year and finishing end of Q1, beginning of Q2. Lithium, we started. The first semester issues with the Forced Evaporator impacted our cost. Our cost of ramp-up were higher than anticipated. We also had the end of the CapEx for the construction and also some VAT losses due to foreign exchange. So, that's it for our operations. The teams have fought hard through the year to compensate all the difficulties that we had. I'm actually quite proud of the teams, especially in lithium, and I'll come back to it also on the railway. GCO in Senegal delivered excellent production. So, although it's mixed results, we are seeing some real improvements in terms of operational performance. And this will be -- is what we will build on, on the operational performance plan. We have 3 pillars. The first one was explained by Christel largely. Our goal is to get to 0 injuries and 0 high potential incidents. We are launching some coaching of our first-line managers on site. We are -- we have reviewed all our production system to embed safety deeper into the routines of our personnel. In terms of operational and commercial improvement, we are targeting EUR 130 million to EUR 170 million EBITDA. I'll come back to that. This improvement is the uplift that we must deliver within 2 years. CapEx, as Simon showed you, the amount of CapEx that we've spent in previous years, EUR 496 million in 2024, EUR 412 million in 2025. We are now going to spend between EUR 250 million and EUR 290 million. That's a very significant drop. This drop is due to some growth CapEx that are now finalized, but also a much more disciplined approach regarding sustaining CapEx. Overall, this is a 30% to 40% reduction in the amount of CapEx that we will spend. The operational improvement plan is spanning on all our businesses, manganese ore, manganese alloys, mineral sands, lithium, Weda Bay as well and also commercial. We're looking at volumes and the volume part is the majority part of this EBITDA uplift, but we're also looking at productivity and especially in mature businesses like manganese alloys as well as costs in manganese alloys and mineral sands. We're also, of course, looking at cost in lithium to reduce our specific reagent consumption. That is the #1 driver for our cash cost. Looking into more details regarding manganese ore. As I said, we've had disappointing results in 2025, not managing to produce more than the previous year. But in late 2024, we started a comprehensive plan to work on the basics, on the fundamentals in Gabon. We started early 2025 with a mindset and behavior plan on both operations in Comilog and in Setrag, and we are seeing the improvements. We are seeing, for example, a sharp drop in the number of accidents, showing more discipline, more drive of the managers. The second part that is absolutely key over there is asset management. We've had issues in all parts of our assets in terms of maintenance and reliability. We've launched programs, and we talk usually a lot about the track maintenance, the track renewal. But what we are seeing late Q3, early Q4 is an inflection in some of the leading indicators. We had less rain breaks. We had better reliability of our rolling stock. And last year, we did a record replacement of the track, 84 kilometers for sleepers, 58 kilometers for rail. So that's -- these are the leading indicators that we follow. The lagging indicators are -- have started to improve late Q4 last year and are continuing to improve. This is the kilometers, the running distance of all our trains that is slowly but surely improving. These are all the things that we're working on, the track renewal, the track maintenance, the traffic management, the rolling stock reliability, the reliability also of our terminal operations. This is what we're working on. This is why we are confident because we have this inflection on the leading indicators and this improvement of the lagging indicators, we are confident that we will deliver 6.4 million to 6.8 million tonnes this year. Regarding lithium, we've talked about it several times already. 75% is what we delivered in December. We are continuing to improve. And with this improvement, that should lead to 100% capacity, close to 100% capacity by the end of the year. We are reducing our cash cost mechanically. But on top of that, we are reducing our specific reagent consumption. And the target for our cash cost is now at 5.4 to 5.8 in 2025 terms. Remember that the 5,000 was in 2024 terms. PT Weda Bay Nickel, this is a bit of a complicated slide. Basically, the message is IWIP has 73 RKEF production lines and 12 MHP production lines. The percentage of ore that was delivered by Weda Bay Nickel mine to the IWIP Industrial Park was around 40%. With the current permit, we only have 10%. Remember that last year, we got an improvement in our RKAB, and we will request an increase as soon as possible. Longer term, our AMDAL and feasibility study is still valid. It's still at 60 million tonnes, and this is our target to deliver 60 million tonnes. And now, I will give the floor -- leave the floor back to Simon for the funding plan. Thank you very much. Unknown Executive: Thank you, Charles. I will now comment the funding plan that we have announced. So, we have built, with the support of our Board, a 3-pillar comprehensive funding plan to strengthen our balance sheet. This plan is based on 3 pillars. The first one is the performance improvement plans that Charles just described. This includes the ReSolution initiatives, and this is already underway. The second pillar is a strategic review of assets. We are targeting a sizable asset monetization in 2026, and various options are being considered. The third pillar is the equity base strengthening. The project is to launch a capital increase of around EUR 500 million in 2026. While we implement this plan, we are adapting our capital allocation policy. The priority is given to deleveraging. We are limiting investments, as you've seen on CapEx for 2026, and we are suspending dividends for the next 2 years. Regarding liquidity, while we implement our plan, we will preserve liquidity and maintain our RCF. We have obtained, in that regard, a waiver from banks in December '25. We will be seeking to obtain another waiver from banks to cover 2026 as we implement our plan. In that regard, we have had very constructive discussion with our banks in the recent weeks and are confident about this process. A bit more detail on the third pillar, the equity base strengthening. This plan was approved by the Board of Directors of Eramet yesterday. Reference shareholders have approved the principle of a capital increase of around EUR 500 million in '26. The appropriate resolutions will be proposed to the May 2026 AGM and reference shareholders are committing to voting these resolutions. Overall, with this funding plan, this will enable Eramet to normalize credit ratios, both the gearing and the net leverage and improve our financial liquidity. Regarding the implementation time line, the first pillar, the performance improvement plan is something that is already underway and is fully embedded in the budget for 2026. The second pillar, asset monetization requires some preparatory work while we evaluate all the options. The targeted execution window is to the back end of the year around Q4. Regarding capital base strengthening, the resolution will be published end of March or beginning of April for an AGM taking place in May. This will enable an execution during the second part of the year. I will now cover the outlook and guidance. In 2026, we are seeing a more favorable environment. We've seen prices increase recently. All the spot prices are much higher in January than where it were in 2025. This is already reflected in the consensus price for the year. We are seeing in manganese ore an increase in price. This is confirmed in the sales we have done in January, and this is also consistent with the low level of inventory of high-grade ore we are seeing in China today. On nickel, we have also seen an increase in prices. This is in part due to the permitting situation in Indonesia, which is creating a supply gap and putting pressure on the ore price. On lithium, the market is rebalancing, and we have continued to see extraordinary growth in both EV and ESS applications that keeps pulling demand and that contributed to an increase in prices. And the spot prices we are seeing today are above the consensus that we show here. Regarding the FX rates, we are using $1.20. This is the consensus, but this is also the rate at which we have conducted the hedging operation in January. We have decided to hedge 2/3 of our exposure on the dollar, and this was conducted end of January. Regarding our guidance for 2026. On manganese ore transported volumes, we are seeing -- expecting an uplift from 6.1 Mt last year to 6.4 Mt to 6.8 Mt. This is not translated into lower cash cost, unfortunately, because the FX rate impacts negatively the cash cost. For nickel ore, the RKAB is on 12 million tonnes, but we will request an upward revision as early as possible. Regarding mineral sands, we are expecting a stable production. This is the reflection of the increased throughput that we have with the investment that we've made, but also lower grades that are expected in 2026. For lithium, we are targeting a ramp-up to the nameplate capacity during the year. This will allow us to increase the volumes to something between 17,000 and 20,000 tonnes of lithium carbonate equivalent. For CapEx, we target a sharp decrease to between EUR 250 million to EUR 290 million. This is mostly sustaining CapEx and -- but we still have in 2026, some debottlenecking CapEx, EUR 70 million in Gabon to debottleneck the logistics and EUR 30 million in Senegal, which is the end of the investments that we have already started. Thank you. I will hand over to Christel for the conclusion. Christel Bories: Thank you, Simon. Just a quick conclusion before we move to the Q&A. Clearly, 2026 will be a pivotal year. It's all about execution. It's execution in safety, reinforcing the safety standards with a specific focus on Weda Bay; it's execution on the group operational improvement plan that Charles has presented, delivering, I mean, all the initiatives with, as you have understood, a specific focus on the full ramp-up of lithium, which will generate a lot of value and the debottlenecking of the logistic chain in Gabon; it's execution on the funding plan and especially protecting the cash flow, strengthening the balance sheet and so advancing the asset monetization in 2026 and preparing the capital increase. Above all, it's about restoring the financial flexibility of the group and rebuilding the value creation capacity for the next cycle. I'm convinced that we will be successful. We have great assets. We have a very committed team, and I can tell you that I have found back a team that is very committed to deliver for the future. And we have, as you have seen, the full support of our Board. So, I trust that altogether, we will be successful on this plan. So, thank you very much. And now we will move to the Q&A session. Christel Bories: For this Q&A session, so the team will be here to help me answering your question. So the one who have presented already, so Simon Henochsberg and Charles Nouel, but also Maria Lodkina. And Maria is the Head of the Controlling department. She is co-managing today the finance department covering controlling and accounting. Maria, if you can join and team is here for -- so Sandrine, please, on the question. Sandrine Nourry-Dabi: Okay. So, we will start with the questions from the audience, and then we will take the questions from the webcast. So, okay, first question? Christel Bories: So, I can't see you with the spot, but... Sandrine Nourry-Dabi: If you could introduce yourself as well, so [ Auguste ]? Maxime Kogge: It's Maxime Kogge from ODDO BHF. So, I have a first question on the capital increase. So, am I right to assume that the full capital increase will be at the Eramet level? Or could it also involve some disposals of minority shares in the subsidiaries? I'm thinking about lithium, for example. And related to that, if I do the math, so you have 5.5x of net leverage right now with EUR 500 million of capital increase that leads us to, on my calculation, around 2.5x net leverage by the end of next year. And we are still quite far away from the 1x net leverage long-term target. So, can you give us a sense here of when you could achieve that long-term target? Christel Bories: So, I will answer the first question and let Simon answer the second one. Just on the capital increase that we have shown in the third pillar of the funding plan is at the group level. So, the EUR 500 million is at a group level. And as we have said, there will be resolutions proposed to the general assembly and our reference shareholders have committed to vote those resolutions to be able to deliver this capital increase by the end of the year. On -- it does not mean that we could not sell a minority shareholding in our subsidiaries, and it is part exactly of what we call the asset monetization, I mean, process that we are -- we have launched, in fact, because we have already selected some -- have selected some assets, have some ideas, started some discussions so that we could be able to deliver this also in 2026. So -- but this will be in the second pillar, which is part of the -- what we call the asset monetization in 2026. Maxime Kogge: And regarding the pathway to the 1x of net leverage, that is your long-term target? Unknown Executive: On that question, so, indeed, our capital allocation policy for the coming 2 years has been adapted to -- as we face the situation, we've have a net leverage of 5.5x at the end of 2025. The way we have sized our funding plan is, first, this improvement program, which is designed to generate cash and increase the EBITDA level, which is a big component of a decrease in the net leverage. The second part, the asset monetization, which is not necessarily the biggest lever to decrease leverage and the third pillar, which is the equity increase. Coming back to 1x in 1 year is not feasible in our view, depending, again, on prices, EBITDA may increase to a level that allows to go back straight to that level. It would be interesting to -- if you remember what happened in 2015 and 2017, where Eramet leverage went up very fast. It also came back very fast in the year afterwards as prices were increasing. But in any case, to answer your question, the capital policy allocation has been adapted for the next 2 years to face this special situation and the target of 1x can only be resumed after we pass that period. Maxime Kogge: Okay. I have a second question and last one, I have to leave the floor to my colleagues. It's about lithium. So, lithium prices are currently quite high and remain to stay so for long, given the strong tailwinds. You have an operation that is running now quite smoothly. So, now it could be the perfect time to launch the Phase 2 of this project. It could have been perhaps the case already in '23, '24 when you had plans already to launch it because you would have benefited now from these very high prices. So how should we think about this expansion there? You have huge potential, but it seems that you're very much constrained. So, could the capital increase perhaps include a path to fund this project? Or is it something that will come a lot later? Christel Bories: It's a very good question. As I said in the presentation earlier, we have huge potential. And the first one is a very low capital intensity expansion of the existing plant. We have some debottlenecking potential within the existing plant, which can increase, quite significantly, the production with a relatively low CapEx intensity. So, this will be the first step before we build a second plant which is also part of the long-term growth plan for lithium in Argentina. On this first one, as I said, we will be very disciplined. And part -- it can be done with partnership, bringing a partner that could allow us, without stretching further our balance sheet and spending too much CapEx to accelerate this expansion phase, bringing a partner in this assets, in the joint venture. It's part of the things that we are considering in order to leverage the growth potential of these assets at the right time in the market. Auguste Deryckx Lienart: Auguste Deryckx, Kepler Cheuvreux. I have 2 questions. The first one is on the capital increase because reference shareholders supports this operation. Should we assume that they will participate at least to the extent of their stake in Eramet? And the second question is on divestments. Is it fair to say that the easiest asset to sell are a minority stake in the lithium mine and mineral sands? Christel Bories: Again, on the second question, I will not comment on the assets. We don't want to sell at discounted value. That's why we are considering several options that are all in line with our strategy. We don't want to sell things that would, I mean, endanger our long-term strategy in critical raw materials, and we don't want to sell at a low value. So, we are taking all this in consideration. But we think that with all these constraints, we still have options and will not comment further as you can -- and you can understand why at this stage on which asset is targeted. On your first question, I cannot comment for my shareholders. The only thing I can tell you is that both shareholders have approved the funding plan in the Board, and it was -- this funding plan was approved unanimously at the Board level that they have committed, as we said, to vote the resolution in the AGM that will allow the Board to execute this capital increase, so -- which means that they are supportive of this concept and project of capital increase. Now the modalities of the capital increase and who is participating to what will be detailed later on, and I cannot comment further at this stage. Unknown Analyst: [indiscernible] It's a pleasure to see you back, but that was not the plan. Can you comment on what happened? It was really -- it came as a surprise to us all. So that's my first question. A couple of years back, that's my second question. You mentioned that of all the things that would hamper your operations would be a naval blockade. Does the present level of geopolitical tension seems to you as moving towards this kind of risk for the group? Or do you think we're really cool for the coming, at least for 2026 as far as you can see? Christel Bories: Just so, I think we have already commented, I mean, through our communique and in the press, I mean, the reason for the dismissal of the previous CEO. It was really a question of divergence in the way decisions were made, the level of transparency, the way of working, especially with the Board. So -- but also with the teams. So, I think it's nothing to do with financial issues, nothing -- no fraud, no ethical issues. It's really the way decisions were made, lack of transparency, lack of alignment, divergence in the way of functioning. So, at this level, we need -- and it's also the culture and the values at Eramet, we need collaboration. We need consultation. We need transparency. And when those things are happening at this level, we have to make decisions. So, I'm back, as I said at the beginning, for an interim period. But in that period that will take the time it will take. I'm fully committed and accountable to lead the group. And of course, I will step down as soon as we'll have found a new CEO. The plan remains the same mid-term. On your second question, I'm not sure I got exactly what you meant, but I think that it's -- again, in terms of strategy, and maybe you can precise the question, but on strategy for Eramet, we continue to have a good momentum, and it's also part of the answer to other questions. Eramet is really a strategic company exposed to critical metals necessary to secure the Western value chain and enable the energy transition. And we think that with all what has happened in the world in the past months, we are even more critical for Europe and for the Western world in terms of producers of critical raw materials. Unknown Analyst: Well, very specifically, what happens in the Middle East with this buildup between Iran on one side, the U.S. on the other side and their respective allies, you think what everybody is saying, it's going to be okay. But if it's not okay and if these people start fighting, what happens to your relationship with China and whatever you have to deliver there? That's my point, especially from Indonesia. Christel Bories: Yes. And again, as you know, in the world of today, it's difficult, I mean, to navigate. We have to be agile. We have to be flexible. Today, that's true that we do quite a lot of our sales in China because China is a big consumer of raw materials and metals in the world. But we have developed, as a contingency, I would say, in the last months and years, we have developed ourselves elsewhere, especially we have grown a lot in India, for example. So, today, we need to be agile. We need to continue to observe what's going on in the world. But -- and that's why I said that I think we are well positioned in countries today that are remaining quite independent from those blocks. And I think that in Indonesia, that's true that what we see in Indonesia and what we see in many countries in the world today is the increase of nationalism and more and more political decisions, and we have to deal with those change in our countries. So, I cannot comment more than that today. Jean-Luc Romain: Jean-Luc Romain, CIC. I have a question regarding your RKAB, which was allowed by the Indonesian government, which is much lower than last year and probably much lower than you expected. Given the ability and what you mentioned in your press release to ask for higher RKAB, what kind of level do you think you could achieve? That's a difficult question. And -- well, should we expect a big drop in volumes this year compared to last year? Christel Bories: It's really very difficult to answer this question. Obviously, as we are -- we have been surprised by this level of cut. You may remember that part of the national -- I mean, strategy of Indonesia was to rationalize the level of allocation of RKAB in order to decrease the potential oversupply of nickel on the market and have the price increase in the coming months and years. What they have announced is that they would like to cut the RKAB overall by, let's say, 20%, they say, 20% to 30%. We have been cut by 70%. So, I'm not saying that we will come back to 20%, I don't know, but it's obvious that the level we are today is much lower than the average volume they want to decrease in terms of production. So just as -- we will resubmit, of course, request, I mean, to be in line with what we had last year, and we will see. Last year, just as a reference, we got EUR 10 million additional -- I mean, RKAB during the year. So, I don't see why we should not get at least this, this year, but we hope that it could be more. because we had RKAB of EUR 42 million last year. So, EUR 42 million, minus 20% to 30% is not EUR 12 million. Any other questions in the room? If there is no other -- there is one. Unknown Analyst: [ Bernard Vatier ] from [indiscernible]. Can I ask a follow-up question on Weda Bay. Considering current permitting you got, should we assume that you will hardly receive any dividend from Weda Bay in your free cash flow forecast for FY '26? And second question, maybe on the asset disposal plan or monetizing of assets. So, we've mentioned various optionalities. What about Weda Bay? Can you give us more color about your partnership with Tsingshan because you bought back their share in Centenario. Could you consider selling them the stake in Weda Bay or given current circumstances, it's difficult? Christel Bories: So, on the dividends, I will let Simon precise that, but we are not expecting no dividends because the consequence of having such a low RKAB, if it were staying at the same level, would be a significant increase in price. Already last year, when they started to cut the RKAB, you have seen that the premiums on nickel ore in Indonesia over the formula that is official in Indonesia have increased significantly. And at some stage, the premium were higher even than the price -- the formula price itself. So, we have a kind of -- of course, it does not offset everything, but we have kind of offsets coming from the prices. So, the impact on the cash and on the EBITDA is not as big as it could look like when you look at the absolute number. That being said, we will have a negative impact. So, on dividends, of course, it will depend on what we get at the end. And one thing that is for sure is that we don't expect to have dividends in the first half of the year. It will be more on the second half of the year once we have a better view of what will be the RKAB for the full year in Weda Bay. Simon, do you want to add something or Maria? Unknown Executive: Yes. Just a small precision on the dividend amount. We cannot give the very exact number. But in any case, we expect a significant increase versus '25. First, December was a brilliant performance of Weda Bay team, meaning that the big cash is in the second half of 2026, which will convert in dividend distribution. The amount will be, of course, dependent on the RKAB situation. But as can be seen from our financial statements, the 2025 level was very low, and it will be compensated in '26. And as Christel mentioned, the very significant part of the compensation is coming from the high premiums, and it's already clear from what we can see now in the market. Christel Bories: Just on Weda Bay, again, I will not answer directly your question. What we are seeing is that, we are reviewing different options on different assets. So, it's not the same setup and on the different assets. So, we -- I won't tell you more at this stage, but we look at different options, obviously. Are there some other questions? Nicolas Delmas: Yes, please. Nicolas Delmas, Portzamparc. Just 2 questions on my side, maybe. One, could you quickly comment on the ongoing negotiations in Gabon regarding local ore transformation? And second one, could you also give some more information regarding asset impairments in Senegal? Christel Bories: Maybe you want to comment on the second question. Asset impairment, Maria? Unknown Executive: Yes, impairment in Senegal, as Simon presented before, most of the effect is due to the depressed market and the price assumptions used in the evaluation. It has been done in accordance with the IFRS rules and purely linked to the current projections for the long-term prices. Unknown Executive: And to add a comment on the prices, we are seeing this market change structurally. There's a lot of HMC imports in China from new sources from Southern Africa notably. So, this is -- there's a lot of new supply that is coming on the market, and we see a high level of stock. This has already been reflected in the prices, which have decreased quite significantly. And we are seeing this as a structurally oversupplied market, which is the reason why we have taken this impairment. By the way, our competitors in mineral sands, Kenmare and Iluka took impairments as well this year for the same reasons. Christel Bories: Maybe one word on Gabon. As you know, on the -- I mean, the request of Gabon to transform locally the ore. It was a highly political decision. So, I mean, it's -- we respect the decision of the state. We are -- of course, we have been discussing with them since then, and we continue the discussion. We have been partners, as you know, with the state of Gabon for now more than 20 years. They are -- they have a significant share in Comilog, our subsidiary in Gabon because they have close to 30% and 29% share in Gabon. And it's a significant part today of the revenue of the states in terms of tax, dividends, et cetera. So, we are discussing on the best way, I mean, to answer this political request without, I mean, impacting the economics neither of Eramet or Gabon overall as we are altogether, I mean, really relying on the success of the present model in Gabon. So, discussion is ongoing. And of course, it will take -- still take some time, and we will keep you, obviously, informed if there is any, I mean, further decisions on this side. So, yes, Jean-Luc Romain? Jean-Luc Romain: Jean-Luc Romain, Sorry, I have another question regarding the grade of the ores you were able to sell from Weda Bay. You mentioned, Charles, that this was saprolites and other less rich ores. In your concession, do you have higher grade ores that you could sell in the future, which would improve the economics? Or should we expect, over the long term, a reduction of the grade of ores? Charles Nouel: We do have many different deposits. It's a very large concession. And of course, we have deposits that are richer than others. A good mine plan is a mine plan where you start with the higher grades. So, over the life of a deposit, you always see if it's well managed, the grade going down. Now, what happened last year was a bit of this, but also, as I explained, a suboptimal mining plan due to the permits received late. So, what we're trying to do every year is to compensate the lower grade of geological grade by a better mining plan. That's what I can say. Every year is -- you have to fight, you have to improve your productivity, you have to improve also the dilution that you have on the mine and you have to improve your product mix between the different types of material that you mine, i.e., some -- the high-grade saprolite, low-grade saprolite, limonite. The #1 effect at Weda Bay is the split between saprolite and limonite. And last year, we had 42. The extra 10 was 100% limonite. Limonite is around 1.1 in grade, where saprolite is, say, around 1.5, 1.6. This is what we have in the deposit. So, the average is 2/3, 1/3. That's what the deposit gives you. And then, you have to work on this. When the RKAB goes down, we try to reduce the amount of limonite and increase the amount of saprolite that we sell. And when it's going down as low as 12 million, we try to do 100% high-grade saprolite, yet the geology is what it is. And to get to the high-grade saprolite, sometimes you have to move some limonite and sometimes it makes sense to sell this limonite. It's an economic decision every time. It's not geology or mining. It's about optimizing with the set of geology and mining that you have, how do you maximize your revenue -- sorry, your EBITDA. Christel Bories: Other questions from the room? No. We will move to the... Unknown Executive: Yes, we'll take question from the webcast. Many have already been answered, but I will take the additional ones. Can you give us an update on the situation of your CFO? And regarding the search of a new CEO, can you give also an update as well as the progress for this search? Christel Bories: On the CEO, I mean, the -- as you know, the dismissal happened on the 1st of February. So, we are at the very beginning. So, it's -- we are starting. So, I cannot give you any specific details -- further details. We are just starting. The situation of the CFO, I think we -- it's clear. We have made a communique on that. We had an internal alert coming from several people within the organization, especially on the management of the finance department. And serious enough so that we have decided to suspend, I mean, its activities. So, for the time being, for the time for an investigation, an external investigation that will take place in the coming weeks. So, as these investigations are taking some time and it takes several weeks, we will take the time for a proper investigation and then see what really the reality is and make the appropriate decisions afterwards. Unknown Executive: Coming back to the asset monetization, do you have already identified some candidate or some possible partner? How much amount do you expect from this monetization? And do you consider only minority stake? Or could you consider selling a majority stake or even a full asset? Christel Bories: We are considering minority stakes. That being said, Weda Bay was mentioned, we are already in a minority position in Weda Bay. So, it can be a lower minority stake. So, it's -- but today, there has been no decision to exit -- to fully exit one of our key critical metals. It's a way of answering this question. Maybe on the size, Simon, you want to -- you will not give any number, as you can imagine. It's -- we said sizable, it means several hundred millions. Unknown Executive: Coming back to the capital increase, why don't you organize an extraordinary general meeting to be able to have the authorization earlier and do the operation earlier? And is it already fully underwritten? Christel Bories: I think I already answered the second question, second part of the question. On the first part, we have the Board that will vote on the resolution of the general assembly mid-March. So, it's coming very soon now. We need to work on the modalities of this capital increase. We will propose to the Board the resolution. Then the resolution will be proposed to the AGM that will take place in May. So, we thought the time it takes, I mean, to prepare also such an operation, we think that, I mean, having the resolution voted and so all the authorization ready in May is an appropriate calendar for the time being. Unknown Executive: Regarding financing, can you explain why you draw all the RCF beginning of the year? What was the rationale behind this decision? Christel Bories: Simon, do you want to answer this one? Unknown Executive: Yes. So, indeed, the RCF was fully drawn end of January. This decision was made by the previous management. We are -- as you've seen, the amount of liquidity that we had at the end of the year is EUR 1.5 billion, which gives ample room to maneuver in the coming years, especially as the debt repayments in 2026 are quite manageable. And -- but on the same time, on the free cash flow, as you've seen with our guidance and our outlook, we have a consensus price that is improving. We are guiding on an increase in volumes. We are stopping -- the investments in lithium are done now, and we have free cash flow that will be generated from that operation. So, all of that is positive for the free cash flow generation of the group. All in all, we are evaluating -- we are also in a business that is quite volatile. So we have to have enough precaution. That being said, having the entirety of the RCF drawn is not necessary in our view. We will refine the analysis in the coming weeks, and we have already engaged discussion with banks in that regard. Unknown Executive: A small final question regarding the dividend to make sure we understood correctly. When you mentioned the 2-year suspension, it's a dividend for 2025, which would have been paid in 2026 and the dividend for 2026? Christel Bories: Yes, that's the case. Unknown Executive: Okay. Thank you very much. Christel Bories: So, if there is no other question, again, thank you very much for your attention, for your attendance today. Again, it has been a challenging year, a very challenging year for Eramet. But I think we are really taking the necessary and decisive actions to bring it back to a sustainable capital structure and to be ready with solid foundations for the future. So, thank you for your support. Thanks.
Operator: Good day, and thank you for standing by. Welcome to the Upbound Group, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today, Steven Kost of Mountain Investor Relations. Please go ahead. Good morning, and thank you all for joining us to discuss the company's performance for the fourth quarter and full year of 2025 and our outlook for 2026. We issued our earnings release this morning before the market opened. Steven Kost: The release and all related materials, including a link to the live webcast, are available on our website at investors.upbound.com. On the call today from Upbound Group, Inc., we have Sami B. Sulaiman, our Chief Executive Officer, and Hal Khouri, our Chief Financial Officer. As a reminder, some of the statements provided on this call are forward-looking and are subject to factors that could cause actual results to differ materially and adversely from our expectations. These factors are described in our earnings release as well as in the company's Form 10-Ks and other SEC filings. Upbound Group, Inc. undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. This call will also include references to non-GAAP financial measures. Please refer to today's earnings release, which can be found on our website, for a description of the non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. Finally, Upbound Group, Inc. is not responsible for and does not edit or guarantee the accuracy of our earnings release teleconference transcripts provided by third parties. Please refer to our website for the only authorized webcast. With that, I will now turn the call over to Sami. Sami B. Sulaiman: Thank you, Steven, and good morning, everyone. Sami B. Sulaiman: I will begin with a review of key highlights from 2025, then I will hand it off to Hal for a more detailed review of our financial results and our financial outlook. Sami B. Sulaiman: After that, we will take some questions. As we reflect on the past year, it is clear that 2025 marked a period of significant progress for Upbound Group, Inc. as we execute against our strategic priorities. Since taking on the CEO role in June, following my tenure as CFO, I have been eager to build upon our recent momentum and to steer Upbound through our ongoing transformation into a leading digital and data-driven platform of financial solutions for underserved consumers. In 2025, across all of our brands, we served over 3,500,000 customers. Over the past eight months, my optimism about what is possible and the opportunity in front of us has only grown. Our team's dedication and shared vision have driven key achievements that we believe strongly position Upbound for continued success and long-term growth. During 2025, we expanded our business by adding a new segment, Bridget. Sami B. Sulaiman: A leading subscription-based financial health technology company, further diversifying our complementary offerings and strengthening our ability to serve our core customer. In addition, we welcomed two accomplished executives to our leadership team. I will start with Hal, our new CFO, who is on his first Upbound earnings Sami B. Sulaiman: call with us this morning. Hal brings extensive experience to the CFO role and is a member of our executive team, including over 30 years in consumer-based banking, financial services, leasing, retail, consulting, and government service. I will let Hal introduce himself shortly, but I will add that his insights and strategic vision Sami B. Sulaiman: have already proven valuable to our organization. Sami B. Sulaiman: We also welcomed Rebecca Wooters as our Chief Growth Officer. Sami B. Sulaiman: A newly created role for Upbound. Sami B. Sulaiman: As mentioned during our last earnings call, Rebecca's role integrates Sami B. Sulaiman: one team key strategic functions for our organization. Sami B. Sulaiman: Rebecca will lead digital transformation and initiatives Sami B. Sulaiman: and implement data-driven solutions across all three major segments of the company, promoting growth, innovation, and synergy within our omnichannel model. We have confidence in Rebecca and her team to deliver both short-term and long-term value as we continue to invest in digital products, personalized marketing, customer experience, and leveraging data as intelligence throughout our organization. Sami B. Sulaiman: Adding these experienced leaders to our already strong management Sami B. Sulaiman: team with years of operating experience inside of our brands I believe is a powerful combination that positions Upbound for long-term value creation. While these key additions help to build the foundation for growth in the years ahead, we also delivered strong operational and financial performance last year, achieving results within our expectations that we shared at the beginning of 2025. Let us dive deeper into some of the achievements across the enterprise that made 2025 successful. We are proud of the progress we have made executing on our focus areas during the year as we continue to invest in serving our customers with innovative solutions. In January 2025, we welcomed a new high growth business into our through the successful closing of the Bridget acquisition. This milestone marked the beginning of an exciting combination whose value became increasingly evident throughout the year. From our very first conversations with Bridget, we were impressed by the team's vision, culture, and technical expertise for developing relevant digital financial products that help users build a brighter financial future. Sami B. Sulaiman: A mission that closely aligns with Upbound. Sami B. Sulaiman: With a relatively small team, Bridget has already achieved remarkable growth and delivered significant value to its users. Sami B. Sulaiman: As we evaluated the acquisition, Sami B. Sulaiman: confidence grew in the potential to unlock even greater value by combining Bridget's technology and rapidly expanding user base with Upbound's scale, and similar target consumer to meet a wider range of financial needs for underserved consumers and evolve our business in a changing competitive landscape. I am pleased that in 2025, Bridget's performance validated our enthusiasm for the growth opportunities from the transaction. Sami B. Sulaiman: When introducing Bridget in 2025, we outlined three strategic priorities for the year: maintaining growth momentum, Sami B. Sulaiman: launching new products, and cross marketing collaboration with our Upbound brands that already serve millions of customers each year. Sami B. Sulaiman: Bridget demonstrated momentum throughout the year with Sami B. Sulaiman: sequential improvements in year-over-year revenue growth each quarter. Top line performance was fueled by an increase in new users, and higher average revenue per user stemming from greater expedited transfer revenue for our earned wage access product, deeper engagement with Bridget Marketplace offers, Sami B. Sulaiman: and continued upsell from Bridget's Plus membership to its premium tier membership, Sami B. Sulaiman: demonstrating the value provided to customers by Bridget's range of products and price points. Bridget also made strides in developing new products, notably piloting a line of credit offering in late 2025. This product leverages Bridget's powerful cash flow underwriting capabilities to provide qualified consumers with up to $500 of liquidity for recent or upcoming purchases, bridging the gap between smaller ticket BNPL offerings and larger ticket lease-to-own solutions. The pilot has yielded promising preliminary results and we are planning a broader rollout in 2026. Finally, Bridget launched a number of cross selling initiatives, marketing its product to Acima and Rent-A-Center customers. These efforts included targeted email campaigns and in-store promotional material at Rent-A-Center and Acima staffed locations. Expanded throughout the year and have shown promising early results. Now let us turn to Acima. Our strategic priorities for 2025 included driving repeat business through an even greater focus on the customer and leveraging digital advancements to grow merchant relationships. In 2025, the team successfully delivered on these priorities, which resulted in revenue and adjusted EBITDA growing low double digits, and adjusted EBITDA margins improving 10 basis points year over year Sami B. Sulaiman: despite Sami B. Sulaiman: a tougher macro environment that saw demand pressure and elevated losses in the half of the year. Acima demonstrated the power of its customer focus through the expansion of its direct-to-consumer marketplace, marketplace. Sami B. Sulaiman: Over the years, Acima has built connections with millions of Sami B. Sulaiman: by facilitating transactions at more than 35,000 merchants locations nationwide. Increasingly, and especially over the past year, Acima's innovative team is leveraging these relationships and data to empower its customers with additional choice and flexibility. Through its direct-to-consumer channels, Acima enables customers to start new leasing experiences with top national retailers, but or at virtually any durable goods retailer across the country using the Acima virtual lease card. At the beginning of 2025, Acima's direct-to-consumer market small but promising addition to Acima's established channels. By the end of 2025, the marketplace had experienced substantial growth with GMV growing more than 100% year over year in 2025. Sami B. Sulaiman: The marketplace now accounts for nearly 10% of Acima's GMV Sami B. Sulaiman: and continues to be a strategic focus as we enter 2026. Its ability to strengthen relationships with existing customers and to provide the ability to shop at a broader range of top retailers including those without integrated lease-to-own solutions, Sami B. Sulaiman: makes the marketplace a valuable asset for driving repeat business, increasing the lifetime value of Acima customers, and Sami B. Sulaiman: driving incremental revenue opportunities for our retailers. Moving on to Rent-A-Center. Throughout 2025, the segment concentrated on digital evolution and disciplined underwriting. Sami B. Sulaiman: The segment made significant progress in elevating the customer Sami B. Sulaiman: experience and strengthening its digital presence. Sami B. Sulaiman: Including upgrading the infrastructure of the rentacenter.com website Sami B. Sulaiman: to improve its scalability and reliability as the segment continues focus on growing its e-commerce channel. In addition, the Rent-A-Center team developed new tools to improve the approval process Sami B. Sulaiman: for certain applicants who might not meet our more stringent online underwriting criteria. The website now invites these select online applicants Sami B. Sulaiman: who may previously have been declined to visit their nearest store to complete the process in person. This approach exemplifies Rent-A-Center's ability to harness both the Sami B. Sulaiman: expanding digital channels and its robust retail footprint Sami B. Sulaiman: to drive customer acquisition. By balancing digital innovation with the strength of its physical locations, Rent-A-Center is well positioned to identify and capitalize on further synergies between channels, which will be critical to the segment's growth moving forward. Enhancements to Rent-A-Center's refer-a-friend campaign, the revitalization of its loyalty reward program, and successful marketing efforts that drove strong customer demand in the second half of the year all provided additional support to top line performance. Sami B. Sulaiman: Reinforcing Rent-A-Center's commitment to new customer acquisition, customer engagement, and retention. As a result of these efforts, Rent-A-Center's Sami B. Sulaiman: trends improved through the second half of the year and the segment finished 2025 with year-over-year same-store sales growth in the fourth quarter of 80 basis points, improving 40 basis points sequentially, paving the way for a sustainable path as we enter the new year. Sami B. Sulaiman: Now let us go to slides five and six and recap how these achievements across our enterprise drove strong consolidated financial results. Sami B. Sulaiman: I am pleased to share that our full-year financial results exceeded the midpoint for Sami B. Sulaiman: each of the figures we provided on our third quarter call. Our revenue grew 8.7% to approximately $4.7 billion, representing the highest full-year revenue on record for Upbound. Surpassing the previous record in fiscal year 2021 which, of course, benefited from stimulus and the pandemic-related pull forward in the furniture sector. Adjusted EBITDA for the year was nearly $510 million, which was up 7.5% from the prior year. Sami B. Sulaiman: Our non-GAAP diluted EPS was $4.13 compared to $3.83 in 2024. Sami B. Sulaiman: A 7.8% improvement and near the high end of our guidance last quarter. Sami B. Sulaiman: Finally, our cash flow generation was particularly strong in 2025 with free cash flow of $180 million, increasing over $130 million year over year, and net cash provided by operating activities increasing over $200 million to approximately $306 million, the highest full-year figure since 2022. Sami B. Sulaiman: Year-over-year improvement was due in part to the benefits associated with tax legislation allowing for accelerated recognition of tax depreciation. Turning to the fourth quarter on slide seven. Consolidated revenue was $1.2 billion, a 10.9% increase from a year-ago period, Sami B. Sulaiman: driven primarily by the addition of the Bridget segment Sami B. Sulaiman: in addition to 8.6% year-over-year revenue growth at Acima. Upbound delivered $126 million of adjusted EBITDA, which was a lift of 2.6% year over year and adjusted EBITDA margins of 10.5%, down 90 basis points from last year. Sami B. Sulaiman: Non-GAAP diluted EPS was $1.01, down 4% from the year-ago quarter. Sami B. Sulaiman: Overall, I am pleased with the financial and operational performance that our team delivered in 2025. Sami B. Sulaiman: Throughout the year, in addition to completing a transformational acquisition, Sami B. Sulaiman: the company executed on key priorities while also proactively implementing targeted risk management adjustments for the increasing pressures that our consumers face. Our core consumer continues to navigate a challenging environment, including the cumulative effects of inflation and elevated prices for essentials like groceries, rent, and utilities, which weigh on their purchasing power, and wages that have not kept up pace with their cost of living. Both of our lease-to-own segments took actions to reflect the evolving macroeconomic landscape, Sami B. Sulaiman: and we are pleased with the outcome of these efforts and the health of our portfolio entering 2026. Sami B. Sulaiman: At Bridget, as I mentioned, the segment's growth in 2025 has further demonstrated the growth potential we anticipated when we acquired the business a little over a year ago. And its opportunities for additional expansion make us excited for the future. On that note, as we look ahead to 2026, our priorities remain focused on positioning Upbound for sustainable, profitable growth as we continue to execute our strategic transformation. We will continue investing in our people, Sami B. Sulaiman: data, and technology, including advanced analytics and AI capabilities, to better serve our customers and merchants while strengthening our competitive advantages. By leveraging our proprietary data more effectively, Sami B. Sulaiman: we aim to deepen customer personalization, improve satisfaction and retention, drive repeat business, and realize the full benefits of our scale while pursuing increased cross-sell opportunities across our platform of brands. These efforts will also support continued enhancements to underwriting allowing us to optimize risk-adjusted returns against our targets. Sami B. Sulaiman: We also remain focused on operational excellence by leveraging Sami B. Sulaiman: technology in the core competencies of each of our brands, taking proven best practices and scaling them across the organization. In parallel, we are driving targeted efficiency and cost initiatives including enhancing coworker efficiency across store operations and customer service while simplifying processes to favorably impact the overall cost of doing business. We believe these efforts will improve execution, scalability, and discipline across the enterprise while supporting margin and long-term value creation. Sami B. Sulaiman: Over the last few months, as I have transitioned into my new role, Sami B. Sulaiman: I have had the opportunity to assess our business across various key aspects focused on serving our customers, growth opportunities, risk management, and synergies between the brands. While our overall strategic vision and focus areas will remain fairly consistent, we are in the early stages of our transformation and must continue to evolve to the ever-changing business environment. I am excited about the opportunities in front of us, and together with our new and existing leaders, I am even more confident in our ability to execute on our strategic goals. Sami B. Sulaiman: Our goals for the long term are clear: deliver responsible and profitable growth, Sami B. Sulaiman: through disciplined risk management while pursuing operational excellence through data and technology and effectively manage capital to ensure appropriate Sami B. Sulaiman: returns. Sami B. Sulaiman: With that, I will hand it over to Hal to cover the financials in more detail. Thank you, and good morning, everyone. Before reviewing segment results, I would like to start by expressing how excited I am to be joining the Upbound organization as the company's CFO and the opportunity to be part of its future success. I joined Upbound in November drawn by the company's durable foundation and scale, paired with its compelling growth profile. I am confident that together we are poised for exceptional times ahead. Let us now turn to a review of the segment results and then discuss our outlook for FY 2026, after which we will take questions. Starting on slide nine, Acima recorded another quarter of GMV growth in the fourth quarter, an increase of approximately 40 basis points year over year. At nearly $550 million, fourth quarter GMV was the highest it has been since we added Acima five years ago. Acima's continued growth is due to a few factors, including the performance of its marketplace, as Sami mentioned earlier, in addition to its exceptional sales force continuously onboarding new retailers and servicing existing retailers. Furthermore, we continue to diversify our product lineup with furniture, our largest product category, representing approximately 40% of rental revenue in the fourth quarter, compared to 43% in the prior-year period. Acima revenue grew 8.6% year over year, which was its ninth consecutive quarter of revenue growth, and adjusted EBITDA of $87 million was up 7.3% from a year ago. EBITDA margins were down 10 basis points from 2024, however, they were up 180 basis points compared to the prior quarter. Acima's loss rate of 10.1% for the fourth quarter was up 110 basis points year over year and up 40 basis points sequentially. While Acima's losses finished the year elevated relative to recent levels, in our targeted longer-term range, our fourth quarter loss rate was consistent with the guidance we had shared during our third quarter call. We discussed how certain challenging vintages underwritten earlier in 2025 would temporarily impact Acima losses as they flowed through the portfolio. Key performance indicators, including early payment and delinquency trends, give us confidence that the adjustments we have made will drive loss-rate improvements from here. I will cover expectations for 2026 in more detail shortly. Let us move to slide 10 and review Bridget's results for the fourth quarter. Bridget finished the quarter with approximately 1,600,000 paid subscribers, which was a nearly 30% increase from the year-ago period and a 7.4% increase sequentially. Hal Khouri: ARPU, or average revenue per user, was $14.15 on a monthly basis, Hal Khouri: a nearly 10% increase from the fourth quarter in 2024 and a 3% lift sequentially. Bridget originated approximately $45 million in cash advances in the fourth quarter. That is up 19% year over year and nearly 4% sequentially, reflecting the value that consumers are discovering with not only the product offerings, but also the transparent subscription-based pricing model. For the fourth quarter, Bridget's instant cash loss rate was 3.5%, which was up 70 basis points from the year-ago period, primarily due to expansion into new profitable user segments and the impact of a consumer that remains under pressure. Bridget recorded $64.6 million of revenue for the fourth quarter, which represents an increase of 41.5% from the year-ago quarter. Subscriptions were 68% of Bridget's fourth quarter revenue, with expedited transfer fees and marketplace income representing the balance. Bridget adjusted EBITDA was $11.1 million for the fourth quarter, representing an adjusted EBITDA margin of 17.2%, an increase of 110 basis points sequentially. Let us move to the Rent-A-Center results starting on page 11. As you will recall, in late 2024, Rent-A-Center tightened underwriting standards while strategically limiting certain product categories that typically experience higher risk metrics in challenging environments. While these changes weighed on top-line performance in 2025, especially in the first half of the year, the segment proved its resiliency and the success of these adjustments in the second half of the year. In the third quarter, we guided that same-store sales would return to flat to positive in the fourth quarter, and we are pleased that the team achieved this goal. Same-store sales increased 80 basis points in the fourth quarter, which was the first positive quarter of same-store sales since 2024. Rent-A-Center recorded nearly $480 million of revenue in the fourth quarter, which was flat compared to the year-ago quarter, an improvement from a 4.7% year-over-year decrease in the third quarter. Ultimately, those adjustments from late 2024 helped manage Rent-A-Center's loss rate, which improved year over year in both the third and the fourth quarters as the portfolio flowed through. The loss rate for the fourth quarter finished at 4.9%, down 10 basis points from the year-ago period, in line with the guidance given on our prior call. Rent-A-Center's adjusted EBITDA was $69.2 million, down approximately 13% from 2024, while Rent-A-Center's adjusted EBITDA margin was 14.4%, down 230 basis points year over year, due primarily to the impact of certain expense benefits that positively impacted operating expenses in the prior-year period. For Rent-A-Center, 2025 represented a year of stabilization that sets the segment on a promising path moving forward. Next, let us cover our liquidity and capital allocation priorities on slide 12. Our business has a proven and long track record Hal Khouri: Our cash flow generation trended closer to historic, finishing the year with approximately $180 million of free cash, Hal Khouri: above the midpoint of our guidance. This represents an increase of $132 million year over year and exceeds even 2023 levels by over $30 million. Net cash provided by operating activities was approximately $306 million, an increase of over $200 million year over year and due in part to benefits associated with the bonus depreciation provision tax legislation last year. I will say more about our expectations for 2026 in a moment. But we anticipate cash flow to continue to improve in the year ahead. Regarding liquidity, as you will recall, the company leveraged its balance sheet to address the upfront cash portion of the consideration for the Bridget acquisition in January 2025. This decreased the company's ABL availability and resulted in approximately $312 million of liquidity at the end of the first quarter. We are pleased that liquidity improved by year end, reflecting in part the company's refinancing of its Term Loan B in the third quarter. As of December 31, between our cash on hand and revolver availability, liquidity was $358 million. Next, let us take a moment to reiterate our capital allocation priorities, which include reinvesting in the business and funding organic growth, delevering debt on the balance sheet, and supporting our shareholder dividend distributions. The company will also consider executing opportunistic share buybacks based on market conditions and funding constraints. And while we continue to remain open to strategic corporate development opportunities as they arise, our current expectation is to focus on organic growth in the near term through our expanded portfolio of products and services across the enterprise. These remain our main priorities entering the new year, and I will now expand on our approach to each. First, in 2025, we made investments that bolster our ability to serve our millions of customers efficiently at an increasing scale, representing a meaningful growth engine for our business. This included approximately $67 million of CapEx, reflecting investment in our technological infrastructure, data modernization initiatives, and improvements to our omnichannel customer experience. As we look ahead towards 2026, we expect to continue deploying capital towards investments in our enterprise technology and digital capabilities across segments. Additionally, Upbound's robust free cash flow allows us to sustain a strong dividend alongside other business priorities. Our dividend remains integral to our strategy for returning capital to shareholders. Turning to leverage, at year end, our net leverage ratio was approximately 2.9 times, above our leverage ratio of 2.7 times at the end of the prior year due to the acquisition of Bridget in January 2025, but slightly below our recent peak of 3 times at the end of the second quarter. With higher free cash flow and adjusted EBITDA growth expected in 2026, as well as consistent focus on deleveraging, we are targeting a leverage ratio in the 2 times range over the long term, with additional progress expected throughout 2026. We are also frequently asked about share repurchases, especially given our strong cash position, free cash flow generation, and recent trading levels. Our team has evaluated share repurchases over the past few months and while compelling, we have to date opted to prioritize our commitment to leverage reduction. That said, we will continue to evaluate opportunistic share repurchases in the year ahead. And it is worth noting that our expectations for leverage ratio improvement over the coming quarters should enhance the company's ability to return additional capital to shareholders depending on other opportunities to deploy that capital. And finally, following the Bridget acquisition and our focus on integration, we do not currently have any near-term plans for M&A. Our capital structure is flexible and we will be ready if the right combination of value and strategic fit arises. Before turning to 2026 guidance, I would like to provide an update on the progress we have made regarding a number of our legal and regulatory matters. At year end 2025, our estimated legal accrual on the balance sheet was $72 million. This accrual is primarily tied to previously disclosed matters we are now expecting a near-term resolution and reflects what we believe are the ultimate cash amounts that we expect to pay as part of the settlement of those matters. The McBurney class action is awaiting a final court approval on the settlement. And for the multistate attorneys general matter that has been ongoing since 2021, we believe we are nearing a nonbinding agreement in principle with the Executive Committee regarding the primary monetary and injunctive terms of potential settlement. We are actively engaged in discussions with the objective of finalizing the multistate settlement agreement in the near term, although any final binding settlement cannot be assured. Our 10-Ks filing will provide more details on both matters. Let us shift to our financial outlook. In this external operating environment, we expect the near- to mid-term horizon will continue to be challenging and characterized by continued evolving domestic economic and monetary policies. Uneven macro factors that pressure our core consumer discretionary income and demand levels, but also tend to make our range of flexible financial solutions even more relevant to these consumers. This outlook also assumes a normalized tax season and maintaining our conservative underwriting posture throughout the year. At Acima, we expect continued growth and opportunity. Our team is committed to profitably expanding GMV through several avenues, including by acquiring new retail accounts through a robust business development pipeline, as well as enhancing productivity amongst our existing merchant base. Acima will also focus on leveraging its customer relationships and data to deepen connections while boosting engagement and lifetime value. We will do this by expanding our direct-to-consumer marketplace and our virtual lease card as Sami described earlier. Finally, Acima's loss rate is expected to benefit from continued disciplined and targeted underwriting and the flow-through of those challenging 2025 customer vintages I mentioned earlier. Taken together, we expect 2026 GMV and revenue to increase mid-single digits year over year, while adjusted EBITDA margins should remain in line with 2025 and losses stabilizing in the 9.5% area for the year. Turning to Bridget, we expect the segment to maintain a strong growth trajectory in the new year. Bridget's value proposition is especially relevant in today's economy, with more consumers appreciating the flexibility and value of Bridget's instant cash products and its other financial wellness tools. That is why the segment remains focused on refining its marketing efforts and rolling out new products and features that further meet the evolving needs of its users. Through continued innovation in financial health and liquidity tools, Bridget aims to serve its customers more frequently and with even more relevance, strengthening the business' long-term competitive positioning while reinforcing the segment's role as a high-growth engine in Upbound's portfolio. As a result of these efforts, we expect Bridget to deliver annualized revenue growth of over 30% in the $265 million to $285 million range and an adjusted EBITDA in the $50 million to $60 million range. Although the figures are trailing our initial estimates from the 2024 acquisition, this variance is impacted by the extended timeline required for launching new products and obtaining necessary underwriting and product insights for iteration and improving in a challenging macroeconomic environment. Despite these factors, we remain optimistic about Bridget's future financial performance. We continue to support product design, marketing, and infrastructure development to drive growth. Bridget is committed to ongoing product innovation and to prudently manage the scale and timing of new rollouts to navigate the current economic uncertainties, while testing additional marketing initiatives to showcase the anticipated levels of economic performance of the portfolio. At Rent-A-Center, 2026 priorities will include a focus on customer-driven growth, as well as improvements that modernize and unify the digital customer experience. The business will leverage the force of its expanded digital presence and its national store footprint to focus on driving productivity, all while continuing to focus on capital efficiency and disciplined cost management. As a result of the Rent-A-Center team's efforts over the past year, we believe that trends have stabilized and the business is poised for modest top-line growth in the coming year, with full-year 2026 revenue expected to be flat to positive relative to 2025 and with adjusted EBITDA margins in line with 2025. At the Upbound level, our corporate costs are expected to be roughly flat to 2025 as a percentage of revenue, at approximately 4%. We expect the tax rate to be slightly higher than 2025, in the 26% range, with an average diluted share count for the year of approximately 59,400,000 shares. Taken together, our consolidated outlook for 2026 includes a revenue range of $4.7 billion to $4.95 billion, an adjusted EBITDA range of $500 million to $535 million, and fully diluted non-GAAP earnings per share of $4.10 to $4.35. The company expects to increase free cash flow to approximately $200 million in 2026. This growth is expected to be primarily driven by enhanced profitability and the accelerated tax depreciation benefits from the One Big Beautiful Bill Act, projected to augment the company's cash flow by around $100 million. This guidance is inclusive of a payment outflow of $72 million in non-ordinary course legal and regulatory settlements as previously discussed, including the largest portion of that amount for the multistate matter. And it assumes relatively flat CapEx spend to support business growth initiatives. These factors position Upbound favorably to advance its capital allocation priorities as we focus on delivering compelling and sustainable returns for shareholders. In regards to the first quarter, each of our segments will navigate seasonal and macro factors including the start of a tax season. Based on what we have seen to this point, we expect consolidated revenue to be $1.16 billion to $1.26 billion and adjusted EBITDA to be $120 million to $130 million. We expect non-GAAP EPS to range from $1.05 to $1.15 compared to $1.00 a year ago. With respect to loss rates, we expect Rent-A-Center's lease charge-off rate to remain flat to slightly higher sequentially. Acima's lease charge-offs should improve sequentially, finishing the first quarter in the mid-9% area and remaining in that range over the course of the year, while first quarter GMV should be relatively flat to the prior year, reflecting the tightening we have undertaken to keep lease charge-offs in our target range. Bridget's net advance loss ratio remained in the 3% to 3.5% range in the first quarter. Now as we wrap up, I would like to emphasize a couple of points that Sami mentioned earlier. In 2025, we made substantial progress on our key strategic priorities. For over five decades, we have provided accessible and flexible lease-to-own solutions to millions of underserved consumers. In 2021, we added further scale by significantly expanding into higher growth digital, technology-driven lease-to-own channels through our Acima acquisition. Now with Bridget, we have added in-demand scalable digital financial health and liquidity tools that expand our growth opportunities even further, and our ability to support our core customer when and where they need us most. These expanding complementary products and capabilities make our platform even more relevant. Especially in today's economy, when consumers are looking for innovative solutions that improve their financial lives. Our consumers' needs and expectations are always evolving, and in 2025, we enhanced our ability to meet those needs today and in the future. In 2026, we will continue to prudently introduce relevant solutions with scalable growth opportunities, both online through expanded digital capabilities and in store at our over 2,200 retail locations across the United States and Mexico. For our stakeholders, we remain committed to creating long-term sustainable value by building off of our strong financial foundation, allocating capital thoughtfully, and responsibly growing our business through our platform of connected financial products and services. We look forward to delivering on our goals again in 2026 and continuing the momentum we have built across our brands. Thank you for your time this morning. Operator, you may now open the line for questions. Thank you. If your question has been answered, and you wish Operator: to remove yourself from the queue, please press *11 again. Our first question comes from Robert Kenneth Griffin with Raymond James. Your line is open. Robert Kenneth Griffin: Good morning, guys. Thank you for taking my question. I guess, first, part of the question is just trying to unpack maybe the guidance a little differently or look at it Robert Kenneth Griffin: a little differently and understand it. If you take the 1Q guidance midpoint, you are up in, you know, call it 10% EPS, but then the year is only up 1% at the midpoint. So what is happening from, like, the seasonality of the year or something that is driving that? There are some cost pressures developing, or I am just trying to figure out kind of how the year is playing out. Does that make sense? Sami B. Sulaiman: Good morning, Bobby. Yes. Thanks for the question. It makes sense. First thing I would say is you have a full benefit of a full quarter of Bridget being in the numbers. So that is last year in 2025. Recall, we closed the acquisition at the end of January, and so you only had two-thirds of the quarter with Bridget on our books. So that is first and foremost. And then, yes, the benefit of coming into the year with a stronger portfolio, both on the Rent-A-Center side and still growing on the Acima side, should flow into our EBITDA numbers for the first quarter. So nothing that I really want to point to in second, third, fourth quarter that we would say is surprising from a or unusual, I guess, for the rest of the year. But the big thing is for the first quarter, I think, is the Bridget acquisition being for the full three months. So that would— Hal Khouri: Yes. No worries. It is Hal here. Just to also tack on there a little bit as well. So, you know, we have got some seasonality happening through the course of the full year. So, you know, Q1 is typically a bit stronger, and then Q2, Q3, you know, we have got some seasonality that brings that down a little bit. So just a little bit of movement there at play. Robert Kenneth Griffin: Okay. And then, and then, Sami, to dive into the second part, you know, it is a good callout on the one month to Bridget, but, like, the strong portfolio momentum coming into the year, I mean, do you see anything today from the customer base or something that would, you know, imply that that would not continue to build? Or you would not continue to be successful? And I understand the idea of keeping some conservatism baked in the guide, and I truly appreciate that. But just, you know, I am trying to gauge between the strong momentum entering the year and then something slowed. It does not seem like something has slowed for that part of the equation to actually not be as powerful in the remaining nine months. Hal Khouri: Yes. Hey, hey, Bobby. Maybe I will play in to Sami here. So, you know, we did, as you might recall, tighten up credit prudently towards the back half of the year. You know, one, just kind of given experience that we were undertaking there. Prominently in our Acima business, I would say, as well as what we are seeing in terms of broader macroeconomic environment. So that credit tightening likely will manifest itself through the first quarter or two of this year. And then, you know, subject to, you know, environmental conditions at that time, you know, loosening up the portfolio towards the back end of the year as some of that credit tightening would have allowed itself to kind of flow through the business in the earlier part of the year. Notwithstanding the jump-off point that you are referencing? Robert Kenneth Griffin: Okay. Makes sense. I appreciate it. Sorry to be so granular, but it was just the shape was giving me some questions. I guess, secondly for me, it is just on Bridget. You know, you kind of trimmed a little bit of the outlook Robert Kenneth Griffin: from original expectations, talked about the delay in new products. Can you maybe just expand on that? And kind of what is driving that? Has stuff changed regulatory wise? Is it just, you know, just something that maybe we did not quite fully understand or get fully taken into account originally? And then the second part of it on Bridget is just the deposit side has been kind of the underwriting and how that is different from your core business. And I have asked this before, but just curious on, you know, that integration and where that can go and, you know, when you can start seeing that kind of benefits across the enterprise more? Sami B. Sulaiman: Yes. Bobby, this is Sami. I will touch on Bridget generally and try to touch on both of your questions. First and foremost, obviously, pleased with the performance throughout the year. As we have highlighted really every quarter this year and including in the fourth quarter, we expanded revenue by 41% year over year, subscriber growth of 29%, and then ARPU up almost 10% in the quarter. And for the year, coming in above our expectations really from an EBITDA contribution standpoint. So really strong performance. And as I said in our prepared remarks, we are still very excited about the future with Bridget. As far as the guide for 2026, revenue of $265 to $285, there are a couple things that are driving that. First, I would highlight just lower year-end subscribers kind of coming into the year, you know, as we saw that little softness in the fourth quarter, so we kind of bled that through the forecast. We talked about a little bit of a delay in some of our new products that we rolled out, started late 2025. We were hoping to get that out sooner in the year and by now have that kind of fully launched into 2026. So we are a little bit delayed on the new product front, as well as our marketing dollars did not stretch as far as we had hoped to stretch in the fourth quarter. And then as we also said, the macro uncertainty—let me touch on the macro piece of it—that uncertain market landscape or the macro landscape did give us some pause and does give us some pause to really aggressively roll out some of these new products or our existing products to new audiences. We want to be very cautious just like we are in Rent-A-Center and Acima around our loss profile and kind of judging where the consumer is. And so really focused around being very disciplined and profitable in our growth objectives for 2026 across the board. We would love to maximize EBITDA dollars. We are focused on maximizing EBITDA dollars on all of our segments. But at the same time, we are really focused around, you know, profitable and responsible growth. So, you know, on the new product side, as I have mentioned, line of credit, we were hoping to have it rolled out a little bit faster. You know, we had some back and forth around getting our bank partner to approve the product. I think, you know, it has been well documented last year around some of the very public bankruptcy around bank partners, and, you know, our bank partner, even though that was not who we were dealing with, it is not our bank partner, but there was a domino effect across the industry and really around fintechs generally around slowdown of new products rollouts, just given some of that uncertainty with the bank partners. So the good news is we rolled it out. We have been able to put in some new features in December and in January, and now that product line of credit product, you know, because it is a little bit longer tenured product than our instant cash product, six to nine months, now it is a matter of just seeing how performance comes in, tweaking it, and then making sure that we are ready for the rollout. So a combination of things that has caused us to slow down, but it is a shift, I would say, from 2026 to 2027. The opportunity is still very much in front of us. We still see a lot of opportunity with the cash flow underwriting, and maybe that is a good segue into your other question around where we are from integration standpoint. I would point you back to, you know, at the beginning of when we announced the acquisition, we said that we were going to have a pretty light touch around integration, and that has been the case. We bought Bridget for their innovation, for their product roadmap, and their pipeline of new product rollouts. And the last thing we wanted to do was slow them down through the acquisition. And so that is still the case. We have done some things around, you know, cross selling around some of the marketing and some of the email campaigns and some of the text campaigns, but I would say it has been fairly light touch. We have not done any of the data integrations that we plan to do. We have not really done any system integrations outside of some accounting things. And so all that is on the come. None of that is in our forecast for 2026. We will start making real plans for that by the end of the year to hopefully kind of build that foundation for growth in 2027. So I would say very early stages, but an intentional integration plan. Robert Kenneth Griffin: Thank you. Robert Kenneth Griffin: Appreciate it. Best of luck here on 2026. Sami B. Sulaiman: Thanks, Bobby. Thanks, One moment for our next question. Our next question comes from Vincent Albert Caintic with BTIG. Your line is open. Vincent Albert Caintic: Hey, good morning. Thank you for taking my questions. A lot of great detail already. First, I wanted to focus on Acima. So appreciate the guidance for, I think, full-year GMV, mid-single year-over-year growth. And I think the first quarter is flat— Vincent Albert Caintic: I am sort of wondering if you could maybe help us with the cadence of growth. It sounds like maybe the second half of the year, we should be expecting that you can— Vincent Albert Caintic: greater acceleration. And then if you can talk about if I remember correctly, it was a particular cohort of GMV that you had to tighten up on. Is there any sense that you could give us if you were to exclude that cohort where you Vincent Albert Caintic: where underlying GMV has been growing so far? Thank you. Sami B. Sulaiman: Vincent, thanks for the questions. I will start and Hal is welcome to chime in. As far as the GMV trends, let me answer your question directly, then I want to take a step back and highlight a couple of things that we saw really throughout the year and then in the quarter. But I think as far as the cadence goes for GMV, I think the first half of the year will be relatively flat, consistent with what we guided for the first quarter. And then we kind of get back to Acima's norm as we lap some of the changes that we made in the second half of the year, and that kind of evens out into the mid-single digits for the year. So from a cadence standpoint, I think we will lap the changes we made sometime in the third quarter and then obviously in the fourth quarter. So you will see an uptick and hopefully return back to the low double-digit growth in the second half of the year, but that is how you get to kind of the mid-single digits for the year. As far as just maybe some highlights go for Acima, I want to point out two things around GMV that were really fantastic developments. One, we talked about, which was direct-to-consumer channel for us. When we talked about some of the strategic objectives coming into 2025, we talked about shifting and adding focus into the customer, not just merchants are always going to be part of our bread and butter strategy with Acima, but we also wanted to take a look at the consumer and make sure that we viewed it kind of from both lenses. And growing the direct-to-consumer channel by 100% this year, fantastic, leveraging our AI leasability engine, and getting it to be 10% of our GMV in the fourth quarter. With still plenty of room for upside there. We are just now getting started with our virtual lease card program. We are in pilot phases there, and that should continue to benefit us going forward. And then returning customers, you know, as we talked about focusing on the customer and the direct-to-consumer channel is a returning-customer channel for us. Our returning customers are up to 45% of GMV in the fourth quarter, which is up from kind of the mid-thirties last year. So we are able to generate more GMV from customers that we know well. GMV per customer in the calendar year 2025 was up 5.5%. And the number of transactions that our returning customers interacted with us was up 15%. So the direct-to-consumer channel really gives us a lot of LTV, a lifetime value for our consumers, and should really help us continue to grow as we add more and more merchants to the lineup. As far as normalizing for underwriting changes, that is a tough one to answer, Vincent. We are constantly making changes to underwriting day in, day out. Obviously, what we did through the second, third quarter last year was a little bit more broad based than what we typically would do. But it is hard to quantify how much of the guide is because of the changes that we made just given mix shifts, consumer mix shifts, and uncertainty in the market. But as you can tell, I mean, we have been on a really good run with Acima growing GMV. And being growing in the fourth quarter, but at a different clip, is a big function of the underwriting changes as well as just consumer deterioration and continued consumer stress. So hard to really normalize for the changes that we made. Hal Khouri: And maybe I will just bolt on here, Vincent. So we continue to invest overall in the business. But, you know, as it relates to Acima in particular, as Sami had referenced, continue to put dollars into digital technology and transformation and enhancing that customer and merchant experience. So, certainly, those are going to be key initiatives for us in 2026 as well. Vincent Albert Caintic: Okay. That is very helpful detail. Thank you. Switching to Bridget. So you are at your one-year anniversary of acquisition. You talked about product rollout and so forth, what you are expecting in 2026. I am sort of wondering, you know, from that initial 2025 when you put the deck out on your expectations, kind of where are we in terms of the roadmap of what you are expecting from Bridget? How much more can you do? You say you have a light touch in terms of the integration. Perhaps, you know, where could you see that over time? Maybe not putting it necessarily just on 2026, but your kind of the evolution of your views for the long term. Thank you. Sami B. Sulaiman: Sure, Vincent. Yes. Look, as I said, everything that we talked about when we made the acquisition in December 2024 and everything that we highlighted since then is still very much part of the plan. And us integrating their data insights, their technology, even just their process—you know, some of the things that we are doing now with our growth organization really mimics a lot of the Bridget model and how we go around thinking about innovation. But the cash flow underwriting attributes that they generate and they look at are going to be game changing for Rent-A-Center and Acima at the appropriate time. You know, we are doing things to—again, light touch—but we are doing things to try to learn as best we can on how do we approve more customers, how do we market to our customers more effectively, given some of the insights that we have, and we think about what we are trying to do really across all of our segments around personalization. I mean, that is going to be the future for us is to really be smart around personalizing our offers, personalizing our inventory purchases on RAC, and putting those promos in front of the right customers at the right time. And I think a lot of the data insights that we get from the Bridget model are going to allow us to do that. So, you know, even though the product rollout and the pipeline is a little bit delayed given the things that I mentioned earlier, they are still on the come. You know, the line of credit product, as we said, is in pilot phase. There is a lot of demand for that product. We just want to make sure that we do not overextend on losses, and we understand kind of the performance of that product before we really launch it. So a little bit delayed, but still very much excited about the opportunity. If you think about the midpoint of the revenue guidance that we just gave, you are up 25% on a full-year basis, up 30% from a contribution standpoint. So—and generating, you know, high teens to low 20% EBITDA margin. So the business is definitely performing. Some of the higher growth items are shifted between 2026 and 2027, but we are building a foundation for long-term growth and we are still very excited about the acquisition. Vincent Albert Caintic: Perfect. Very helpful. Thank you. Operator: One moment for our next question. Operator: Our next question comes from Kyle Joseph with Stephens. Your line is open. Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. Kyle Joseph: Just want to Kyle Joseph: kind of walk through tax refund expectations. I know it is Kyle Joseph: early in the season. We have seen a lot of headlines about refunds being elevated this year, but kind of walk us through the assumptions you have for first quarter, really on the Acima and Bridget side of things. Obviously, we know well how that, how tax refunds and potentially an outsized refund season impact RAC and Acima, but kind of walk us through your assumptions on Bridget for the first quarter in particular. Sami B. Sulaiman: Sure. Happy to, Kyle. Thanks for the question. So as you said, still very early on tax season. They are a little bit delayed, I would say, from typical years. But they are right around the corner. So the guide assumes more of a normalized tax season. As you referenced, the range of people have said that they are going to be up 10% to, I have seen, 30% range. And I think if they are in the lower end of that, 5%, 10% increase, it will have some impact but not a lot. But if it is, you know, up 30% or so, then I do think it will have a meaningful impact to us and really across the board between all three segments. Generally speaking, when you put more cash in our consumers' pockets, it is going to be a good thing for all of us. But in the short term, what I would say is if we do see that big tax refund, you will see higher revenue in the first quarter for both Rent-A-Center and Acima. But it will come at a lower gross profit margin. So even though you definitely will clean up credit and will be positive, you will have to replenish that, and so it puts a little bit more pressure on us to make sure that we convert some of those payouts into new leases. But generally speaking, you will see higher revenue and lower gross profit impact. And with Bridget, you know, typically in the first quarter, just seasonally speaking, you will have lower subscriber growth given people are with cash. You will see higher profitability levels in the first quarter and lower losses. So very similar from that standpoint. And then kind of post tax season, you will start seeing a ramp-up both in subscriber growth as well as our marketing spend to kind of match the seasonality there. So early on, but look. If it ends up being a lot higher than what we guided to, then that is great for our consumers, and we will be ready to market to them on getting their second, third, and fourth leases. Kyle Joseph: Great. Really helpful. And then just the follow-up for me in terms of the outlook for RAC, we understand that the second half benefited, obviously, lapped some underwriting changes. And it sounds like, you know, some successful marketing efforts. You know, but talk about some of the macro puts and takes on the RAC business and how that is influencing your outlook into 2026 and beyond? Thanks. Sami B. Sulaiman: Thanks, Kyle. Yes. Look, Rent-A-Center has had a really strong end to the year from a pretty volatile first half of the year. If you think about the sequence in same-store sales being down 4% in the second quarter, down 3.6% in the third quarter, and then really challenging the team to make it flat, and they end up growing the portfolio and grew the same-store sales by 80 basis points. So quite a turnaround from the first half of the year, and we feel like, you know, on a same-store sales basis, we are poised to be flat to slightly positive in 2026. And we were able to do that with losses coming in slightly better year over year, down 10 basis points. Delinquencies are stable under 3.5%. EBITDA margins normalized in the fourth quarter this year compared to where they were last year, but still hit our 15%, our mid-teens number for the year, and we expect that to continue into 2026. So very pleased with the team's execution in a very difficult environment. We talked about, you know, the consumer and kind of where that is. But we feel really, really good about where we are from an inventory standpoint, from a supply chain standpoint, from an e-commerce standpoint. We have got a lot of things in the works with the growth organization around being smarter about how we interact with our customers. They are all in the future. We feel really good about that segment. It really turned the business around throughout 2025. And if you look at the portfolio value ending the year, it was up almost 11% year over year. So again, a really strong fourth quarter, really strong execution on the Rent-A-Center side. Kyle Joseph: Great. Thanks for taking my questions. Operator: Thanks, Operator: One moment for our next question. Our next question comes from Bradley Bingham Thomas with KeyBanc Capital Markets. Bradley Bingham Thomas: Good morning. Thanks for taking my question. I wanted to follow up on the Acima parts of the business and the GMV outlook. And, Sami, just wondering if you could talk a little bit more about Bradley Bingham Thomas: category performance, how much that has played a role. And how do you think about the opportunity ahead to continue to add new merchants going forward? Bradley Bingham Thomas: Thanks. Sami B. Sulaiman: Morning, Brad. Thanks for the question. So, yes, I kind of take a step back and look at, you know, Acima's performance. You know, I think it is important to kind of maybe look back to 2024. You know, we grew that business percent that year. And on top of that, now we are growing at low double digits this year. So really strong performance across the board over the last two years. And in 2025, you know, applications were up 9%. Our approval rate was down 120 basis points. Average ticket was relatively flat. Our customers were up, as I mentioned before. We interacted with 1.3 million customers throughout the year. So very, very pleased in a pretty challenging environment with Acima's performance as well. As far as the categories go, I would say furniture, which is still our largest category, is still very much under pressure. Looking at it, really, all year has been flat to slightly down year over year. And so offsetting that, we have done a really great job of diversifying where the GMV comes from. We talked a little bit earlier around the direct-to-consumer channel, but as I look at just the broader categories, you know, jewelry was up over 20%. The auto business in wheel and tire was up mid-single digits. Now jewelry, we talked about last quarter around some of these cohorts that were underperforming. Fourth quarter was actually flat in jewelry, but still a strong year in 2025 that positions us for growth next year. And as far as the pipeline goes, look, very bullish around our ability to continuously add merchants and locations into our network. We have done really, really well in the small- and medium-sized businesses throughout the year. We do have some RFPs in the works that we hope that we win our fair share as we always do on the regional side throughout the year. So yes, very confident in our sales team's and our business development team's execution around continuously adding to our network and continuously diversifying where the GMV comes from. Bradley Bingham Thomas: That is really helpful. And if I could just squeeze in a follow-up regarding AI, you did touch on it in your prepared remarks, and I know there are going to be a number of opportunities. Bradley Bingham Thomas: But at this stage, if you tried to maybe rank where you think it can first be Bradley Bingham Thomas: you know, most impactful for you, is it what you are seeing on the revenue or new customer side of things, or the efficiency side, or the underwriting discipline? Where do you see the biggest bright spots for the impact of AI for you all? Sami B. Sulaiman: Brad, so it is all of the above. I think you touched on it almost in the right order, I think. We are—the biggest thing that I can point to is the leasability engine at Acima. I mean, we talked about the direct-to-consumer channel. What unlocked that GMV for us would be being able to basically in real time determine if the product that is in the cart is lease eligible or not. And AI is the feature to do that. So very much integrated in our innovation strategy. The core of our innovation strategy, we are trying to do it around the consumer, and we are already doing that both through the Rent-A-Center business and the Acima business, and Bridget for that matter, just through, you know, generative and the GenAI. We are, you know, establishing different tests and pilots and use cases around how do we interact with customers, how do we understand where the customers are shopping and what they are interested in? And so as we think about kind of rank ordering where it is, it is around growth, revenue growth and customer interactions. Then, you know, underwriting. I think we are already doing a lot in the machine learning space and talked a little bit about integrating what Bridget is doing into our other business. So that will also be, you know, driven by AI functionality and automation. And then probably last in that order is probably around efficiency. We are rolling that out to all of our coworkers and dabbling with that, but it probably starts with revenue growth and then ends with the efficiency piece. Bradley Bingham Thomas: Very helpful. Thanks so much. Operator: One moment for our next question. Next question comes from Hoang Manh Nguyen with TD Cowen. Your line is open. Hoang Manh Nguyen: Thanks, guys. I just have a question on Hoang Manh Nguyen: Bridget. So I think at the beginning, when you guys announced the deal, Hoang Manh Nguyen: you guys were calling for an acceleration in revenue growth this year versus 2025. Given some of the delays that you mentioned as well as, I guess, maybe subscribers coming in a little bit below what you had previously expected. Can we sort of expect Bridget to accelerate this year, and if so, what would be the cadence throughout the year as you guys continue with your cross-sell efforts? And then one of your competitors also recently launched a, I guess, cash advance feature as well. It seems a success. But how do we think about the competitive landscape for Bridget's offering at this moment? Thank you. Sami B. Sulaiman: Hoang, you broke up a little bit. Who did you say launched a product? Hoang Manh Nguyen: Oh, one of your competitors. I read yesterday. New cash app. So— Sami B. Sulaiman: Yes. I will just touch a little bit around just the competitive landscape, I guess, first, and then I will move over to the revenue and subscriber growth for 2026. Yes. Look. I think there are people who are announcing different versions of EWA products and instant cash- Sami B. Sulaiman: like Sami B. Sulaiman: products. And honestly, I am not surprised by that. There is a lot of demand for the product. People are seeing the same thing that we are seeing, that consumers, especially in this environment, need liquidity solutions. And it is not surprising that others are jumping along developing or acquiring similar products like Bridget, like we saw, you know, all the same rationale and merits that we saw. Others are seeing the same thing. So what we need to do is make sure that we continue to differentiate our products and to add value to our bundle to make sure that we retain the customers that we get from Bridget. And I think we have done that. And we will continue to do that with the product roadmap and the line of credit and the other things that we have talked about, really giving consumers more choice around the different pricing and different tiers that we have. That is the way that we will be able to differentiate Bridget and hopefully maintain the growth that we expect. As far as the cadence goes for 2026, as I mentioned, still very healthy top-line growth year over year. We are delayed on some of the new products. And again, being very cautious from a, you know, new audience and new product rollout given the uncertainty in the market. I think the acceleration seasonally is generally subscriber growth is going to be back-end loaded. I think the faster we are able to roll out the new line of credit will also have big impact on subscriber growth, and all those things are kind of pointed to the second half of the year as we get performance data around that product. Hoang Manh Nguyen: Got it. Thank you. Operator: One moment for our next question. Our next question comes from Eunice Sun with Jefferies. Your line is open. Eunice Sun: Hello. Thank you for taking my question. And congratulations, Hal, on joining the team. Eunice Sun: My question was around the margin across the segment. You mentioned there was some comp effect in the fourth quarter 2024. Eunice Sun: But looking at the gross margin per segment, it is Eunice Sun: still trending downward compared to past quarters and fourth quarter 2024 in RAC segment. And could you give a little color around if that is driven by any changes in product mix shift, consumer behavior, or is it more so on the inventory side? Any color will be great. Thank you. Hal Khouri: Yes. Sure. It is Hal here. Maybe I can touch on that. You know, in terms of the first piece of that, we did actually in Q4 of last year experience some in-period benefits on the labor cost lines associated with our worker compensation numbers. So that was an in-period benefit last year. And as we look at the comp year over year, obviously, this year, we would not have realized some of those in-period benefits. In terms of the margins overall, certainly, the competitive landscape, I think, is putting pressure across the board on margins on the top-line perspective. But also, if you think about our gross profit margins, certainly the cost of goods as well. You know, we are experiencing some cost shifts there, you know, with tariffs certainly playing into the equation as well. Our furniture category has been impacted by that as well. And so, you know, those in concert—you know, selectively top-line pressure competitively, us trying to garner additional volume, and being competitive with our pricing—tightening up on the credit side as well, I would say. So on the margin, you know, perhaps reducing some of the customer that would have been a bit higher in terms of the overall margin contribution as well on a top-line perspective. That and the overall cost of goods actually increasing period over period. So, you know, all of that being said, as we think about the outlook going into 2026, as Sami had mentioned, generally positive outlook in that respect, being more efficient, I would say, in terms of how we operate, looking at areas as some of those historical vintages flow through. We would expect, you know, some improvement through the back end of the year and expansion in overall margin and contribution there as well. Eunice Sun: Great. Eunice Sun: Really helpful. And in regards to some of the tightening actions throughout 2025, how should we think about the cadence of that unfolding in terms of credit or growth throughout 2026? Thank you. Sami B. Sulaiman: So, yes, I think we answered some of this as far as the cadence goes from a GMV standpoint. But look, on the underwriting side, losses—and Hal touched on it a little bit earlier—you know, delinquencies on both Rent-A-Center and Acima are in line with years past and at a very acceptable level. The changes that we made at Acima seem to be working as intended. The early performance indicators of the more recent vintages are much more in line with historical years. And so that is why we felt confident in guiding the first quarter and really the year for Acima to be in that 9.5% range. And so we feel good about peaking like we said we would in the fourth quarter at 10% and coming back into a more normalized range really throughout the year. Now it does come at a cost of GMV growth, and that will be impacting GMV for the first half of the year, then hopefully we rebound into more normalized levels in the second half of the year. And with Rent-A-Center, I think the same thing, pretty stable environment from our consumer standpoint. You know, no major changes that we see on the horizon from an underwriting standpoint other than our normal, you know, push-pull on some of the levers that we would do, and it has been stable. We are very comfortable operating in that 4.5% to 5% ZIP code from a loss perspective and generating mid-teens margin on that business. And with Acima, kind of the low- to mid-teens EBITDA margin. So losses seem to be stable, obviously, a very uncertain macro that we are dealing with here. But for now, we feel really good about our portfolio and the health of the portfolio coming into the year. Operator: One moment for our next question. Our next question comes from Anthony Chinonye Chukumba with Loop Capital Markets. Your line is open. Anthony Chinonye Chukumba: Good morning. I will keep this short, so you guys Anthony Chinonye Chukumba: get back to actually managing your business. Anthony Chinonye Chukumba: You have touched on this a few times, but I just wanted to clarify. The slowdown in Acima GMV, was that solely due to the credit tightening, or was there, you know, were there any other factors, like, any kind of slowdown in underlying demand for Anthony Chinonye Chukumba: furniture and appliances? Thank you. Sami B. Sulaiman: Morning, Anthony. Thanks for the question. Yes, I would say the majority of it was probably just intentional from our underwriting standards. There was some softness in demand going into the year—or sorry, into the fourth quarter, I should say—in the holiday season. So there is a part of it that is the macro. There is no doubt that furniture continues to be under pressure. I do not think that is unique to us at all, either Rent-A-Center or Acima. And I think that did, you know, have some headwinds in the fourth quarter. But as I said, we are very optimistic about our ability to continue to add merchants and add locations on the Acima side. And when furniture does come back, you know, we will still have all of those furniture retailers on our network. We will have all the diversification that we talked about, and we can then, you know, use that to feed the marketplace and direct-to-consumer channels. So, you know, right now we are managing losses the best we can, managing the underwriting in a pretty difficult environment, also through demand pressures, especially in our largest category. But once all that kind of clears, we will be in a really good position to have a lot of tailwinds, especially when you think about our ability to generate repeat business on the Acima side that I went through earlier on the call. That gives us a lot of confidence to continue to grow GMV. Anthony Chinonye Chukumba: Got it. Thanks so much. Operator: And I am not showing any further questions. I would like to turn the call back over to Sami for any further remarks. Sami B. Sulaiman: Thanks, Kevin. Thank you, everyone, who joined us today for an update on our Q4 performance and our outlook for 2026. I am thankful for the collective efforts of our exceptionally talented and dedicated coworkers and our merchants who helped us deliver 2025 strong results while setting us up for another transformational year ahead. We are grateful for your interest and support. We look forward to updating you all again next quarter on our continued progress. Have a great day, everyone. Operator: Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Good day, everyone. My name is Kehaylani, and I will be your conference operator today. At this time, I would like to welcome you to the EPAM Systems, Inc. fourth quarter and full year 2025 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, and if you have joined via the webinar, please use the raise hand icon now, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Mike Rowshandel, Head of Investor Relations. Good morning, everyone. Mike Rowshandel: And thank you for joining us today on our fourth quarter and full year 2025 earnings call. As the operator just mentioned, I am Mike Rowshandel, Head of Investor Relations. We hope you have had an opportunity to review our earnings release we issued earlier today. If you have not, copies are available on epam.com in the Investors section. With me on today’s call are Balazs Fejes, CEO and President, and Jason Peterson, Chief Financial Officer. I would like to remind those listening that some of the comments made on today’s call may contain forward-looking statements. These statements are subject to risks and uncertainties as described in the company’s earnings release and SEC filings. Additionally, all references to reported results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are available in our quarterly earnings materials located in the Investors section of our website. With that said, I will now turn the call over to Balazs Fejes. Thank you, Mike, and good morning, everyone. Balazs Fejes: It is a pleasure to be here with you all, and I look forward to seeing many of you again in just a few weeks at our Investor Day in Boston. Today, we are pleased to share another quarter of strong results as we close out a very successful 2025 and continue to execute our long-term growth strategy, further positioning ourselves to win in the AI-native era. We are confident of our unique differentiation and look forward to building on the momentum we created throughout 2025. At the start of last year, we noted that for us, it was going to be a year of transition. In fact, today marks my second earnings call and my very first year-end report, underscoring the fast pace at which we continue to operate and adapt to conditions both externally and operationally here at EPAM Systems, Inc. As we look ahead to 2026, we see a year of AI momentum marked by our clients’ ongoing shift in spending towards AI investments and strategic deployments. Importantly, we are expect to build on our growing momentum in AI-native services supported by our AI foundational services that enable clients to scale AI across their enterprises. These offerings are becoming a more substantial piece of our total services mix, illustrating our ability to capture higher volume and more strategic opportunities as AI investments accelerate across the market. Let me share why we believe EPAM Systems, Inc. is positioned to win this new AI-native services category. While we are seeing measurable productivity gains at scale, we are also seeing complexity dramatically increase at faster pace than we have seen in prior cycles. Clients are facing growing pressure to continue to invest in AI, and that means platform modernization, data, and cloud foundations, security, and critical AI-native upskilling. As a result, AI presents a favorable opportunity for EPAM Systems, Inc. within the build versus buy volume proposition. EPAM Systems, Inc. continues to be positioned in this sweet spot as we believe we are entering an age of building. With our internal AI-native engineering transformation nearly complete, we are now shifting to develop more verticalized AI-native business offerings and consultancies. This positions us to deliver AI strategy and execution to clients simultaneously, helping them build their own AI-native businesses and platforms. Before getting into details, I would like to quickly reflect on a few themes from the past year, which highlight our differentiated position and underpin our confidence as we continue to grow our revenue and improve our bottom line trajectory over the long term. First, we believe we have clearly demonstrated, and we are continuing to that we position to win in the AI-native engineering category. Our advantage comes from our highly differentiated engineering and AI-native talent, along with the tooling and workflows that enable us to deliver production-grade AI at scale. Notably, in Q4, we generated more than $105,000,000 in pure AI-native revenues, where we continue to see solid momentum and strong sequential growth. As a reminder, our AI-native revenues are defined across two groupings: number one, AI-native IP products, platforms, and solutions where AI was the core of the solution versus simple work accelerated by the use of AI tools; and number two, AI-led transformation initiative across the entire enterprise. Importantly, our definition excludes all the AI foundational services along with any AI-assisted work performed by EPAM Systems, Inc. employees within the software delivery life cycle. Looking ahead, we continue to see robust demand for our AI-native services and expect to scale these revenues in excess of $600,000,000 in 2026. Second, our developers and builders’ DNA, forged by over thirty years of experience in software product and platform engineering, prepare us incredibly well for this new super cycle. To stay ahead of the curve, we expanded our three-year AI readiness mandate to keep pace with advancing technology, new agentic delivery and new commercial models that help us meet our clients where they are, to enable their unique AI journeys. Even under extreme geopolitical and macroeconomic adversary have persisted or business model and brand of very high quality and execution and today give us a leading edge on AI strategy and delivery. Mike Rowshandel: At scale. Balazs Fejes: Third, we are supercharging our client-zero mentality by extending AI capabilities across our entire business. We have been pioneers, builders, and change agents in transforming the software delivery life cycle and advancing the AI maturity model with talent, IP, and the ways of working. Now we are adopting our go-to-market approach for a more AI-centric environment, focusing on industry and verticalized expertise and innovating engagement and commercial models to adopt new and emerging trends. We are transforming the way we engage with existing and new buyers, expanding our market growth opportunities across all regions and buyers’ personas. Our most recent announcement of Empathy Lab expansions demonstrate this AI-native momentum with our proven AI-native agency now expanding to help CMOs across North America become the growth architects for their businesses. We are bringing AI-powered creative talent, accelerators, and innovation frameworks to the business of marketing. We will be sharing much more on this at our upcoming Investor Day in March. Finally, our strategy is being validated by the market and our partners in significant way that underscores our unique AI-native capabilities. With Microsoft, we are thrilled to be named the 2025 Microsoft Innovate with Azure AI Platform Partner of the Year. With AWS, we were recognized as 2025 AWS Global Innovation Partner of the Year. With Google Cloud, we launched several advanced AI agents on Google Cloud Marketplace. Most recently, we announced a strategic partnership with Coursera to build and scale AI-native teams global enterprises. Beyond partnerships, our technical acumen is recognized by independent benchmarks. EPAM Systems, Inc.’s AIRON developer agent was recently ranked in the top five on SW Bench verified leaderboard, an industry-leading benchmark designed to evaluate large language models and AI agents on real-world software engineering tasks. Furthermore, Gartner has positioned us as a Leader in the Emerging Market Quadrant for Generative AI Consulting and Implementation Services, further solidifying our standing as a trusted guide in this complex landscape. Now let us turn to some Q4 highlights. Our fourth quarter results came in better than expected, marking another quarter of outperformance. In Q4, we delivered double-digit revenue growth including solid year-over-year organic revenue growth of 5.6%. Our underlying growth momentum remains broadly intact, with five of the six verticals growing year over year and four out of the six verticals growing organically. Notable standouts included financial services, emerging verticals, and software and high-tech. Across geographies, EMEA delivered strong year-over-year growth followed by the Americas and APAC. We continue to add talent across all key geographies. Now turning to the demand environment. Overall, the client sentiment remains intact with no material change over the past ninety days. AI continues to trigger both incremental and sustained demand and is driving positives in our pipeline. Based on our current visibility, we expect client budgets to remain relatively intact in 2026, compared to 2025, with a continued shift in spending towards scaled AI deployment. Even with the progression of AI towards larger programs, there is a growing emphasis on ROI and the need for scalable enterprise-grade solutions. While these larger programs naturally introduce a more mature procurement process, including RFPs, and the modest extension of sales cycle, it also represents a large opportunity for EPAM Systems, Inc. to deliver even greater value through bigger and more strategic, higher-impact initiatives—something we are observing in our sales pipeline today. Now turning to our AI progress. EPAM Systems, Inc. is uniquely positioned to guide clients through the market towards AI-native transformation. We continue to invest in people, accelerators, and advanced tooling to capitalize on our expanding growth opportunities. As a part of evolution to a pure play AI-native company, last quarter, we launched our AI Run Transform Playbook and frameworks, along with our AI-native business transformation offering. Together, AIRun for SDLCs and AIRun Transform are the building blocks for our IP-enabled go-to-market strategy, and I am pleased to say both are picking up early adoption in 2026. These frameworks and tools support the hundreds of AI-native projects we had active in Q4. In line with last quarter, between 60% to 70% have expanded from initial proof of concept into larger programs, a clear indicator of our ability to revenue. scale AI-native solution into production and convert early wins into more meaningful incremental. And highly connected to our AI-native services is our AI foundational services, which encompasses the critical AI readiness and preparation work where our clients are undertaking. Demand for these services remain quite strong and the size of this portfolio is already significantly larger than our pure AI-native revenue base. Once again, in Q4, we saw outsized growth in both our data and cloud practices compared to the rest of the business. Now turning to some client examples to illustrate the impact we are making. EPAM Systems, Inc. partnered with EBSCO Information Services to enhance software development processes using the AIRun Transform framework. EPAM Systems, Inc. played a critical role by providing AI guidance, helping to establish governance framework, and building an AI adoption dashboard to measure real-time performance metrics. Through each phase of the rollout, EPAM Systems, Inc. and EBSCO maintained a strong emphasis on measurable outcomes—code review lead time—using the dashboard to track metrics such as velocity, cycle time, AI impact, and productivity gains. In addition to measurable productivity gains, EBSCO also established a robust foundation for future continuous improvement in the use of AI development tooling. Bayer partnered with EPAM Systems, Inc. to develop an AI-powered pricing tool that optimized pricing strategies across 35 countries. Leveraging machine learning, the tool delivered €20,000,000 to €30,000,000 in incremental yearly profit, reduced analytics time by 10x, and provided advanced scenario planning capabilities. This collaboration transformed Bayer’s pricing processes, enabling smarter, data-driven decisions. We are also seeing compounding value of our long-term trusted partnerships with our clients like Zalando, where we are driving impact across data, analytics, AI, and cloud transformation. Our collaboration has yielded three significant outcomes. First, we have developed the pilot for a Gen AI powered stylist solution giving mobile users an interactive, highly personalized shopping experience. Second, leveraging our proprietary MigWiser tool, we rapidly migrated their mass data warehouse platform, which fuels their business intelligence, to Amazon Redshift. Finally, we built a sophisticated machine learning solution that combines automated tagging with intelligent oversight to solve the complex challenge of managing extended producer responsibility compliance. Lastly, we are also incredibly proud to announce a new multiyear partnership with National Geographic Society where EPAM Systems, Inc. has been designated as NatGeo’s preferred digital transformation partner. This collaboration is about far more than modernization. It is about utilizing innovative technologies to inspire the next generation of explorers and solution seekers. By leveraging our engineering DNA to modernize their nonprofit infrastructure, we are also helping NatGeo to engage global audiences through distinctive experiences that bridge the physical and digital worlds. Our efforts to lead in the age of AI and digital transformation are also being consistently recognized by the industry’s top analyst firms, validating our strategy and quality of our execution. Throughout 2025, we have been honored to receive several key leadership distinctions. For example, EPAM Systems, Inc. has been named the top IT vendor in Europe for application services and general satisfaction by Whitelane Research, for the third consecutive year, which included expanded coverage across categories, ranking first across multiple categories including application services general satisfaction, innovation, and service delivery quality. The report highlights EPAM Systems, Inc.’s commitment to delivering high-quality services and innovative solutions. This milestone reflects the trust and partnership of our clients and the dedication of our teams. Gartner recognized EPAM Systems, Inc. as a Leader in the Magic Quadrant custom software engineering, a testament to our deep-rooted engineering DNA. Furthermore, Gartner also named us a Leader in the Emerging Market Quadrant for Generative AI Consulting and Implementation Services, highlighting our early and impactful entry into this transformative space. Forrester positioned EPAM Systems, Inc. as a Leader in the Forrester Wave for modern application development services, reinforcing our strength in helping clients to modernize and innovate across their technology stacks. IDC MarketScape acknowledged our end-to-end capabilities by naming us a Leader in two critical areas: our third year in a row of recognition, CX Design Services and CX Build Services. This underscores our unique ability to not only envision, but also deliver world-class customer experiences. These recognitions spanning engineering, generative AI, customer experience, and application development affirm our position as a trusted partner for enterprises navigating complex transformations. They reflect the hard work and dedication of our global teams and unwavering commitment to delivering tangible, high-value outcomes for our clients. We see this as a strong validation that our integrated approach—from strategy and design to engineering and AI-native delivery—is what the market needs today. To close, our operating momentum exiting 2025 is strong as AI continues to be the net growth driver for our business. We are encouraged by our progress transforming our company, our go-to-market capabilities, and our offerings. The EPAM Systems, Inc. foundation we have built over the past several years—diversifying our global delivery model, enabling our entire organization with AI, and bringing meaningful solutions to market with our AIRun playbooks and underlining IP—position us to continue delivering sustainable revenue growth while also expanding profitability. Jason, over to you. Jason Peterson: Thank you, Balazs, and good morning, everyone. In the fourth quarter, EPAM Systems, Inc. generated over $1,400,000,000 in revenues, a year-over-year increase of 12.8% on a reported basis, exceeding the high end of our Q4 revenue outlook. On an organic constant currency basis, revenue grew 5.6% compared to 2024. We delivered another quarter of very solid year-over-year organic constant currency growth, reflecting our steady and focused execution throughout 2025. As Balazs mentioned, we continue to benefit from the momentum we have created across our AI-native and AI foundational services. One thing is clear. Clients need help in their AI transformation journeys, and our advanced engineering capabilities, AI assets, and strong delivery execution are helping clients address their most complex business challenges. Our growth this quarter was well balanced, reflecting our relevance and agility across our major geographic regions. Moving to our Q4 vertical performance, five of our six industry verticals posted year-over-year growth. As highlighted last quarter, Neoris and First Derivative revenues moved from inorganic to organic in November and December 2025, respectively. Financial services once again delivered very strong growth, up 19.8% year over year on a reported basis with 5% organic growth in constant currency. Growth was mostly driven by ongoing strength in insurance, banking, and asset management. Software and high-tech grew 18.1% year over year, driven by strong execution and broad improvement across large clients. Consumer goods, retail, and travel delivered 10.9% year-over-year growth, notably driven by retail and consumer goods. Life sciences and healthcare increased 2% on a year-over-year basis. Revenue growth in the vertical continues to be driven primarily by clients in life sciences and med tech. Business information and media delivered flat year-over-year revenue performance. Our emerging verticals delivered another quarter of strong year-over-year growth of 0.1%. On an organic constant currency basis, growth was 9.7%, primarily driven by ongoing strength in energy and telecommunications. From a geographic perspective, the Americas, our largest region representing 58% of our Q4 revenues, grew 7.6% year over year on a reported basis and 2.2% in organic constant currency. EMEA, comprising 40% of our Q4 revenues, grew 21.8% year over year and 11.7% in organic constant currency. And finally, APAC, making up 2% of our revenues, grew 0.6% year over year, and declined 4.3% in organic constant currency. Lastly, in Q4, revenues from our top 20 clients grew 7.3% year over year, while revenues from clients outside our top 20 increased 15.5%. Moving down the income statement, our GAAP gross margin for the quarter was 30.1%, compared to 30.4% in Q4 of last year. Non-GAAP gross margin for the quarter was 31.7%, compared to 32.2% for the same quarter last year. Relative to Q4 2024, gross margin in Q4 2025 was negatively impacted by higher variable compensation expense driven by our stronger second half performance. GAAP SG&A was 17.3% of revenue, compared to 17.4% in Q4 of last year. Non-GAAP SG&A came in at 14.5% of revenue, compared to 14.4% in the same period last year. GAAP income from operations was $149,000,000, or 10.6% of revenue in the quarter, compared to $137,000,000, or 10.9% of revenues in Q4 of last year. Non-GAAP income from operations was $230,000,000, or 16.3% of revenue in the quarter, compared to $208,000,000, or 16.7% of revenue in Q4 of last year. Our GAAP effective tax rate for the quarter came in at 24%, and our non-GAAP effective tax rate was 22.9%. Diluted earnings per share on a GAAP basis was $1.98. Our non-GAAP diluted EPS was $3.26, reflecting an increase of $0.42, or 14.8%, compared to the same quarter in 2024. In Q4, there were approximately 55,300,000 diluted shares outstanding. Turning to our cash flow and balance sheet. Cash flow from operations for Q4 was $283,000,000, compared to $130,000,000 in the same quarter of 2024. Free cash flow was $268,000,000, compared to free cash flow of $115,000,000 in the same quarter last year. We ended the quarter with approximately $1,300,000,000 in cash and cash equivalents. At the end of Q4, DSO was 72 days, compared to 75 days in Q3 2025 and 70 days in the same quarter last year. Share repurchases in the fourth quarter were approximately 1,200,000 shares, or $224,000,000, at an average price of $192.33 per share. Moving on to a few operational metrics from the quarter. We ended Q4 with more than 56,600 consultants, designers, engineers, trainers, and architects, reflecting total growth of 2.7% and organic growth of 2.2% compared to Q4 2024. In the quarter, we added approximately 500 delivery professionals. Our total headcount at quarter end was more than 62,850 employees. Utilization was 75.4%, compared to 76.2% in Q4 of last year and 76.5% in Q3 2025. Q4 2025 utilization was impacted by higher levels of vacation driven by the shift in delivery locations, as well as the introduction of juniors, who initially operate at lower levels of utilization. The addition of juniors is intended to improve our seniority index in 2026. Turning to our 2025 full year results, revenues for the year were $5,460,000,000, up 15.4% on a reported basis year over year. On an organic constant currency basis, revenues were up 4.9% year over year. GAAP income from operations was $520,000,000, a decrease of 4.5% year over year, and represented 9.5% of revenue. Our non-GAAP income from operations was $831,000,000, a growth of 6.7% compared to the prior year, and represented 15.2% of revenue. Our GAAP effective tax rate for the year was 25.3%. Our non-GAAP effective tax rate was 23.5%. Diluted earnings per share on a GAAP basis was $6.72. Non-GAAP EPS was $11.50, reflecting a 5.9% increase over 2024. In 2025, there were approximately 56,000,000 weighted average diluted shares outstanding. Cash flow from operations was $655,000,000, compared to $559,000,000 for 2024. And free cash flow was $613,000,000, reflecting a 94.7% adjusted net income conversion. And finally, share repurchases in 2025 were approximately 3,500,000 shares for $661,000,000 at an average price of $186.67 per share. Let us turn to guidance. Before moving to the specifics of our 2026 and Q1 outlook, I would like to provide some thoughts to help frame our guidance. We are encouraged by the underlying momentum of our business and the steady outperformance delivered throughout 2025. We step into 2026 with higher confidence in our long-term strategy and growth trajectory, supported by healthy client sentiment, a solid pipeline, and strong momentum in AI-native and AI foundational services. We see relative stability in overall client budgets, with a continued shift in spending towards build and strategic AI programs. Similar to last year, we are seeing some slowness in decision-making at the start of 2026, as clients finalize budgets and establish priorities for the year. Our organic constant currency revenues now include Neoris and First Derivative. As we noted throughout 2025, Neoris’ largest client headquartered in Mexico has been significantly impacted by a challenging economic environment, including the impact of U.S. tariffs. Revenues from this client will decline sequentially from Q4 2025 to Q1 2026, and then are expected to stabilize throughout the remainder of the year. The full year 2026 revenues from this client will decrease relative to 2025, and this decrease is expected to have a negative 1% impact on EPAM Systems, Inc.’s 2026 organic constant currency growth rate. In 2026, we remain committed to improving overall profitability, and specifically gross margin. Our guidance assumes that we will be able to continue to deliver from our Ukraine delivery centers at productivity levels similar to those achieved in 2025. Now starting with a full year outlook. Revenue growth will be in the range of 4.5% to 7.5%. Foreign exchange is expected to have a positive impact of 1.5%. Therefore, the organic constant currency growth rate is expected to be in the range of 3% to 6%. We expect GAAP income from operations to be in the range of 10% to 11%, and non-GAAP income from operations to be in the range of 15% to 16%. We expect our GAAP effective tax rate to be approximately 26%. Our non-GAAP effective tax rate will be approximately 24%. For earnings per share, we expect that GAAP diluted EPS will be in the range of $7.95 to $8.25 for the full year, and non-GAAP diluted EPS will be in the range of $12.60 to $12.90 for the full year. We expect weighted average share count of 54,400,000 diluted shares outstanding. For Q1 2026, we expect revenue to be in the range of $1,385,000,000 to $1,400,000,000, producing year-over-year growth of 7% at the midpoint of the range. Our guidance reflects a negligible inorganic contribution and estimated 4% positive FX impact during the quarter, producing an approximately 3% organic constant currency growth rate at the midpoint of the range. For the first quarter, we expect GAAP income from operations to be in the range of 7% to 8%, and non-GAAP income from operations to be in the range of 13.5% to 14.5%. Our Q1 income from operations guide reflects the impact of resetting Social Security caps, slightly softer revenues in the month of January as clients in certain verticals finalized budgets, as well as the negative foreign exchange impact. We expect our GAAP effective tax rate to be approximately 30%, and our non-GAAP effective tax rate, which excludes tax shortfall related to the stock-based compensation, to be approximately 24%. For earnings per share, we expect GAAP diluted EPS to be in the range of $1.32 to $1.40 for the quarter, and non-GAAP diluted EPS to be in the range of $2.70 to $2.78 for the quarter. We expect a weighted average share count of 54,700,000 diluted shares outstanding. Finally, a few key assumptions that support our GAAP to non-GAAP measurements for 2026. Stock-based compensation expense is expected to be approximately $202,000,000, with $53,000,000 in Q1, $53,000,000 in Q2, $48,000,000 in Q3, and $47,000,000 in Q4. Amortization of intangibles is expected to be approximately $69,000,000 for the year, with approximately $18,000,000 in Q1 and $17,000,000 in each remaining quarter. The impact of foreign exchange is expected to be an approximate $3,000,000 loss each quarter. Tax-effective non-GAAP adjustments are expected to be approximately $70,000,000 for the year, with $19,000,000 in Q1, $19,000,000 in Q2, $16,000,000 in Q3, and $15,000,000 in Q4. We expect tax shortfall upon vesting or exercise of stock awards to be around $4,000,000 for the full year, with an approximate $4,000,000 shortfall in Q1 and minimal excess tax benefits or shortfalls in the remaining quarters. Expenses associated with the 2025 cost optimization program are expected to be $14,000,000 in Q1 and $11,000,000 in Q2. And one more assumption outside of our GAAP to non-GAAP items. We expect interest and other income to be $12,000,000 for the 2026 full year, with $3,000,000 in Q1, $2,000,000 in Q2, $3,000,000 in Q3, and $4,000,000 in Q4. My thanks to all the EPAMers who made 2025 a successful year and will help us drive growth throughout 2026. Operator, let us open the call up for questions. Operator: We will now move to our question and answer session. As a reminder, if you have joined via the webinar, please use the raise hand icon which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Please limit your inquiry to one question and one related follow-up. Your first question comes from the line of Margaret Nolan with William Blair. Please unmute and ask your question. Hi. Can you hear me okay? Jason Peterson: We can, Maggie. Operator: Great. Thank you. I wanted to ask about the first quarter guidance Margaret Nolan: at the midpoint. It is a little bit lower than the full year organic revenue and margin guidance. So do you expect the year to build? And how is the visibility when we think about the larger deals ramping, bookings, pipeline, those types of factors? Jason Peterson: Okay. Let me talk a little bit about Q1, and then I will hand it to Balazs to talk about the remainder of the year. So I think probably the incremental piece of information that we received between our last earnings call and the one, obviously, we are doing today is that the Neoris’ largest customer was going to ramp down business between Q4 and Q1. Now we have met with them in their headquarters in Mexico, and we do think it stabilizes from this point forward. But we have kind of a mid-single-digit decline in their business between Q4 and Q1, and that probably is the biggest kind of incremental factor. Even with that, if we can run closer to the high end of the range, we are talking about a 3% or maybe somewhat better organic currency growth rate in the quarter. Balazs Fejes: Margaret, hi. This is Balazs. For the remaining quarters, I mean, I think we already have a very nicely built pipeline. And as we are seeing the opportunities arriving, we are actually seeing how that would be converting from it. We see very good traction in the European and the Middle East markets, which we feel that is going to be allow us to deliver on the year. Margaret Nolan: Okay. Great. Thank you. And then, Balazs, you had made a comment on wanting to bolster the vertical industry expertise. Are there investments that you need to make in sales or delivery in order to achieve this? And are those going to be material to the P&L? Maybe a few comments on how that will impact your competitive positioning as well. Balazs Fejes: So I think our current P&L reflects, or the guidance reflects, the investments which we are planning to make in 2026. Yes. We are prioritizing investment into business development and prioritizing developing, besides just AI, which is our biggest investment area, building out our industry capabilities and vertical accelerators and expertise themselves. Jason Peterson: Thank you. Operator: Your next question comes from Jonathan Lee with Guggenheim Partners. Please unmute and ask your question. Jonathan Lee: Great. Thanks for taking my questions. You know, last quarter, you called out an expectation of 2026 organic growth being faster than that of 2025. With that in mind, can you help us reconcile that commentary to the 2026 outlook that, at the midpoint on organic constant currency basis, is slower than what you delivered in 2025? Is that due to Neoris’ largest client? Are there any other factors there? Jason Peterson: Yeah. Jonathan, thanks for the question, and it is certainly a good one. And so you are right. I think we had 4.9% organic constant currency growth in 2025. The midpoint of the range would produce 4.5%. Since the last time we talked, as I told Maggie, we did get incremental information on the Neoris largest client. As I called out in my fixed remarks, we expect the decline on a year-over-year basis will have a negative 100 basis point impact on growth. So you have got the 4.5% at the midpoint of our range. Obviously, it would be 100 basis points higher on the rest of the business. I think the other thing that we are trying to do from a guidance standpoint is to make certain that we guide to what we can see today. We are not assuming improvement in environment. Clearly, we have got some opportunities that we talked about throughout the remainder of the year. And so we are clearly going to work to drive towards better, and we will update you on our progress throughout the year. Jonathan Lee: Understood. With that in mind, across the low end and the high end, can you help us walk through what is contemplated? How much go-get is still needed? And are there any verticals that you would expect to accelerate versus decelerate in the near to medium term? Balazs Fejes: Let me start with the verticals. We continue seeing very strong demand in financial services and energy. We also forecast, or expect, our life science and healthcare to gain momentum later part of the year, which is typically very much calendar dependent. So that is very, and clearly, high-tech and software and high-tech continues to be a growth area for us. In terms of between the low end and the high end, I think we are not contemplating anything like changing macro environment in order to achieve the high end of the range. Just like this year, we are expecting that we are going to winning the deals and some of the clients start accelerating expenditure in later quarters. Mike Rowshandel: Appreciate that color. Operator: Your next question comes from James Schneider with Wells Fargo. Please unmute and ask your question. Jason Peterson: Hi, guys. Thank you. So I wanted to come back to James Schneider: some of the commentary around the elongated sales cycles and then I think, Jason, you mentioned some client indecision at the outset of the year. So are those dynamics impacting the full year guide or just the shape of the year, i.e., the Q1 outlook? So putting Neoris’ largest client on the side, I just wanted to understand those broader dynamics that you both alluded to in prepared remarks. Jason Peterson: Thanks. Balazs Fejes: So I think as the year started, it is starting similarly to last year. We actually do have better visibility in 2026 than what we had in 2025. But it is starting in the same way in terms of shape of the revenue decision-making process. At the same time, as clients are now really decided to actually embark on large AI transformation programs, that naturally drives them towards a more stringent, let us call it slower, process, which involves procurement, which is naturally going to slow down the decision-making process itself. But I think this just makes things bigger. And it is actually because the programs are bigger now and more substantial, this just makes a little bit of a delay. And that is going to be realized on those project starts will become in the later part of the year. But I think it is more natural to the shift what we are experiencing. James Schneider: Okay. Okay. So it sounds like those dynamics did not really impact how you guided the full year. It is just more about the shape of the year. Is that right? Yes. Balazs Fejes: That is correct. Okay. James Schneider: Okay. And then, Jason, just real quick, anything you can give us on gross margin and free cash flow expectations for this year? Thanks, guys. Jason Peterson: Yeah. So that is great. So we had, obviously, really strong free cash flow in 2025. The only thing I would say is as we look ahead towards 2026, we did come out of 2025 above our traditional 80% to 90% conversion guide, and to think that we will continue to do that, I think that we should operate within the 80% to 90% range. And then from a gross margin standpoint, and this also would answer one of Maggie’s questions, is we do intend to continue to make investments in business development and partnership programs to drive top-line revenue growth. With that said, I do not expect as much benefit from productivity and efficiency in SG&A, again because we are going to recycle some of those benefits into investments in business development. So most of the improvement will come from gross margin. What we are seeing is better execution in some of our expanding geographies, like Western and Central Europe and India, as we have talked about, and the profitability in each of those geographies continues to improve on a year-over-year basis. Plus, we are getting a little bit of price as we enter the year. And so all those things give us confidence that we can improve our gross margin between 2025 and 2026. James Schneider: Thanks. Operator: Your next question comes from the line of Bryan C. Bergin with TD Cowen. Please unmute and ask your question. Jason Peterson: Hi, guys. Good morning. Thank you. First on the growth guidance, Bryan C. Bergin: Jason, on the large client, I think I heard you said you expect that to be down, I think, sequentially mid single digits. What does that translate to as a headwind to year-over-year growth for the first quarter? Also, for the first quarter growth guide, are there any bill day dynamics to consider? Jason Peterson: Yeah. So it is a 100 basis points approximately for the full year, and it is also about a 100 basis points impact on the Q1 number. And so, again, you could do the same thing. You could add 100 basis points to our guide for organic constant currency, and that would be our book of business excluding that one large customer. The bill day impact: you have fewer bill days, so that clearly has some impact on both profitability and on revenues as you go from Q4 to Q1. You probably will have lower vacation, though. So maybe there is a kind of a net-net on that when I think about the revenue from Q4 to Q1. Bryan C. Bergin: Okay. And then as it relates to the workforce, can you give us an update on pyramid and global delivery optimization, kind of the effort and progress there? And your expectations around billable engineering resource additions for 2026? Jason Peterson: Yeah. The interesting thing is in Q4, we actually did see better utilization Q3 to Q4 if you adjust for vacation. As I hinted in my prepared remarks, we finally have gotten to that shift where we do have more people taking their year-end holiday around December 25 rather than January 7. And so what we did see is lower bench. We continue to focus on that through our cost optimization program. We are getting, I would say, better cost outcomes and great execution in Western and Central Europe, Eastern Europe, and India. And at the same time, we are moving to make certain that we are cost efficient in those geographies. So we are seeing improving profitability in each of those more rapidly growing geographies, and we continue to work on utilization improvements throughout the year. Balazs Fejes: In addition to that, throughout 2026, we will continue working and optimizing our pyramid. And that is why we started to onboard the juniors already in Q4 in 2025. So that is very much going to play out throughout the year, and we will continue working on it as we talked about it in previous quarters, on optimizing our delivery organization or delivery pyramid itself to actually go back to shape which is more healthy and more sustainable on a going-forward basis. Bryan C. Bergin: Understood. Thank you. Operator: Your next question comes from David Michael Grossman with Stifel. Please unmute and ask your question. Jason Peterson: Thank you. Good morning. Jonathan Lee: So, Jason, you did a good job of explaining the impact of the acquisitions on growth in 2026. I am just curious, maybe you could do the same and help characterize what impact pricing is having, either positive or negative year over year in 2026, and also whether there is any kind of mix shift dynamics that may still be impacting revenue growth. And I am speaking specifically of mix shift to India. Jason Peterson: Yeah. That is fair. Thank you. So we did get a little bit of price improvement in 2025. And what we are seeing as we enter 2026 is a quite significant number of clients in both Europe and North America are giving us at least low single-digit rate increases. And so it is not the way it would have been, let us say, four or five years ago. But it is definitely a somewhat improving pricing environment relative to the last couple years. I think, to your point with India, we continue to execute successfully across the broad range of geographies. India is growing faster than the other geographies. We are still priced at a premium there, and the profitability in India continues to expand beyond our average. So last year, I said, India is operating at profitability higher than EPAM Systems, Inc. average. This year, we expect it will operate at an even higher level of profitability, getting closer to our most mature geographies. But India still obviously prices at a somewhat lower rate on a dollars-per-hour basis. So there is probably some impact there, but, again, we continue to feel that it is actually positive or margin accretive—any expansion that we see in that geography. David Michael Grossman: Great. Thanks for that. And then I think there was some commentary in the prepared remarks about, and I think Balazs said this again in the Q&A, about decision-making slowing. However, the deals are getting larger. I think the industry has been talking about this for the past twelve to eighteen months. When does that dam have to break? At some point, when does the spending have to accelerate despite uncertainty? Balazs Fejes: I wish I would have a crystal ball for that, but I think we are seeing more and more larger programs, which makes me optimistic that we are getting close to that point. So I think right now there are clearly, in certain industries—financial services, for example, in Europe—people are no longer able to hold back transformation and the nondiscretionary CapEx expenditure. Plus, in certain other industries, we are already seeing people are no longer able to delay their decision-making around AI investments, and that is triggering larger programs. But as larger programs are being requested or being executed, clearly, governance around the selection process, the procurement, actually becomes a little bit more bureaucratic, and when all the enterprises that are making larger decisions, the selection process naturally slows down. David Michael Grossman: Yeah. Are there any data points you can share that would kind of help us understand the momentum that may be building or accelerating in terms of conversion? Balazs Fejes: I think in AI, Dave, we are definitely going to start sharing one. But I think the data point which also was part of my opening remarks is that the scale of the AI-native revenues we expect to reach $600,000,000 in 2026 for EPAM Systems, Inc. So it is actually scaling up, growing really rapidly. But it is still a smaller part of our business. Jason Peterson: Great. David Michael Grossman: Alright. Thank you. Jason Peterson: Hey. Thank you. Operator: Your next question comes from Jamie Friedman with Susquehanna. Please unmute and ask your question. David Michael Grossman: Hi. Good morning. Thanks for the opportunity. I had a couple of Jamie Friedman: more quantitative questions. By my math, the revenue per utilized head year over year grew about 10, almost 11%. And because pricing conversations can be quite subjective, that we think of as price. So I am just wondering if you would react to that. Is that revenue per utilized head reflecting better pricing environment? And then I have one quick Jason Peterson: Yeah. I think as we have talked about over the years, the revenue per head calculation is not one that we usually do internally because there is just an awful lot of noise. But I know it is something that people do externally. Just to remind people of the noise, foreign exchange can have an impact. Obviously, price can have an impact. Utilization can have an impact. And then there are different kind of revenue recognition elements that can also have an impact where you might have done work earlier in the year and then recognize revenue later in the year. So all those things can kind of impact that number. The other thing that I do want to remind people of is that we are reporting numbers that are employees only. We do have some contractors. If the contractors grow, they obviously would generate revenue, but it would not necessarily be in the denominator in that head count figure. So with all those things said, Jamie, I would do the same math that you would do, and I would see that the revenue has improved. I would say some of that is foreign exchange based. Some of that is price. And then we did have a specific one or two revenue recognition items where the work was done earlier that was recognized in Q4. So all those things contributed somewhat to that beat. And at the same time, even if I adjusted out any of those benefits, we still had a Jamie Friedman: the Jason Peterson: beat relative to our original guidance for Q4. Jamie Friedman: Okay. And then just to follow-up with that, Jason, the other thing that makes the math, that limits the math, is the shift to fixed price. And you had a 150 basis point increase in fixed price as a percentage of total revenue to 20.2%, and I would imagine that since it is not time and materials, it is not gated by headcount. But at the same time, your free cash flow is really good and your DSO was good. So, anyway, in terms of the journey to fixed price, which you have been talking about for a while and it clearly evolved last year quite a bit, how should we be thinking about that as the impact on, say, free cash flow, because we do not see unbilled revenue, and it is hard for us to get other details. So any comment about how the fixed price transaction impacts free cash flow? And I am sorry. Someone asked me to ask you about the implications of that for repurchase would be helpful. Free cash flow, repurchase. Thank you. Jason Peterson: Excellent. Excellent. There are a lot of questions in that. So let me just unpack that. Yep. Jamie Friedman: Thank you. That is fine. Jason Peterson: Okay. So you are correct that we are seeing an evolution towards more fixed fee. Yes. I think I have said in my prepared remarks that I do think that there, at least in the past, it does give us an opportunity to improve pricing as we introduce, let us say, somewhat different commercial models in response to the changing mix of AI-native and AI foundational revenues. And so I think you will continue to see an increasing mix of fixed fee. Again, we do not think it goes from 20% to 50% in 2026, but I would suspect it will continue to increase throughout the year. From a cash flow standpoint, I think it is hard for me to say exactly how the fixed fee impacts that because there are different types of fixed fee. So some do have a monthly fixed kind of element associated with them, and that would have a very similar feel to T&M in terms of how we get paid. There might be some opportunities to have milestone payments that maybe occur before revenue recognition, which would give you an increase in deferred revenue, and at the same time, allow you to collect cash in advance of revenue recognition. But I think I would take us back to what I said earlier, which is I would really think, as we look ahead, that we will operate in the 80s, not in the 90s the way we did in 2025, from a free cash flow conversion. And then just quickly to fork in that share repurchase: clearly with the share price where it is today, you will continue to see us reasonably active in terms of share repurchases, particularly in 2026. James Schneider: Thank you. Operator: Your next question comes from the line of Bryan Keane with Citi. Please unmute and ask your question. Jason Peterson: Hi, guys. Bryan Keane: Good morning. I wanted to ask just on the big debate going on with AI eating software and potential implications for the IT services market. Obviously, software stocks have sold off and as a result, we have seen the IT services stocks also under pressure. So how do you think about, Balazs, especially the AI pressure potentially from Anthropic and OpenAI as some of their modules get pushed out. David Michael Grossman: So I Balazs Fejes: Bryan, thank you very much for the question. I think we are actually very, very bullish and optimistic. This is going to open up a tremendous opportunity for EPAM Systems, Inc. It is going to flip the buy versus build question. And EPAM Systems, Inc. is a builder. We are going to build much, much more software. There is no limit how much software people would like to build. Yes, the coding part of the activity will be automated. But this opens up the potential for all the high-end work what EPAM Systems, Inc. is famous and known for. It is going to make us stand out because we can use these tools. We can bring our engineering capabilities to it, and we can deliver the solutions our clients are looking for. So actually, I am much more on the side of AI will enable building more software, more capability. We are a builder. We are not maintaining software. We are not running business processes. We are not input—what people call it—we are not input limited. We are what we want to build. There is a tremendous appetite out there, and if you listen carefully to the comments from Anthropic, comments from OpenAI and a couple of podcasters, they all talk about how much more software people want to build. And right now, because building software becomes easier per unit, people are going to build more. That is what I think about. And that is how I see the situation. I think the market is a little bit confused. It is very hard to decipher all the signals. But in the long run, we are optimistic and actually very, very bullish about what this is going to mean for us. Bryan Keane: Got it. Got it. And we see the pure AI revenues growing significantly Surinder Singh Thind: Yes. Bryan Keane: for you guys now. I guess the flip side of that, is there any AI pressure as a result of some of the productivity and pricing that gets passed on to the consumer? Do you see some pressure also in addition to the pure actual revenue growth that you see from the AI revenue? Jason Peterson: Yeah. I think the one thing I would say is, just to echo Balazs, we do not have BPO. We do not have application maintenance that probably is more likely, or really large testing practices that might be more impacted. The other thing I just need to make certain that it is communicated is we are not seeing a pressure on our pricing due to AI. Again, most of the pricing that we have is time and materials. As I talked about earlier with some of the earlier questions, we did see rate improvement in 2025 and are seeing rate improvement again here in 2026. So I certainly understand that if you have got a large book of multiyear fixed fee business, that might be subject to pressure in certain types of revenue streams. But with the build work that we have historically done and this more advanced AI work, we are not seeing bill rate compression associated with that. Bryan Keane: Okay. Thanks so much. Operator: Your last question comes from Jim Schneider with Goldman Sachs. Please unmute and ask your question. Bryan C. Bergin: Good morning. Thanks for taking my question. Jim Schneider: Relative to what was just referenced in terms of the pressure on the software stocks and the services stocks, maybe share with us your thoughts on capital allocation. What are you thinking? What is the board thinking in terms of the desire to potentially do more inorganic actions versus potentially be significantly more aggressive with the buyback? Balazs Fejes: Jim, thanks for the question. I think we continue to focus on the share buybacks, which as Jason also already communicated, we announced the share buyback plan earlier, the previous quarter. And in the next couple of quarters, at least definitely in the first half year, we are going to continue to make acquisitions as appropriate and repurchase shares. And especially, what we really want to execute is small tokens. But that is our plans at this point of time. And once we stabilized our previous acquisition, that is when we look for other opportunities. Jason Peterson: Yeah. So, Jim, in the near term, you probably still have a focus on share repurchase, and then over time, I think we would be more open to kind of scaled M&A activity. Jim Schneider: Fair enough. And then just one question on the AI-native revenue that you called out in the quarter. By my math, it kind of gets you to, for the full year, sort of an 80% increase in the run rate of AI-native revenues as we exit Q4. Can you maybe comment on whether that is directionally correct? And then, more importantly, can you talk about how you believe that maybe your AI-native revenue is different from some of the AI revenue or bookings numbers being reported by your peers? Thank you. Jason Peterson: Yeah. So I would say kind of directionally correct. So very high rates of growth on a year-over-year basis. And we talked about the fact that we were seeing strong sequential growth throughout the year and expect to continue to see solid sequential growth in the quarters going forward. I think our definition is very tight. I think Balazs did pick that up during his prepared remarks. If you want to provide some more color, Balazs? Balazs Fejes: So I think it is very important that our definition of AI-native revenue is super tight, which means that we are not including a lot of things which probably some of our competitors do include. So just a reminder, we basically include type one, which is new types of solution where the center of it is AI itself, and the AI model is making it possible. We are not including anything in this which is AI-assisted, i.e., you are delivering with AI. The solutions, what you need to be—we got which we are delivering—has to be built on top of AI. Number two is when somebody embarks on an end-to-end or enterprise transformation, which we call AI 360, that is what we include in the second type. We are not including in the second number any kind of work which is what we call a data or AI foundational element. Actually, those revenues are much, much larger for us than our AI-native revenues in that Surinder Singh Thind: Thank you. Operator: This concludes the time allotted for Q&A. I would now like to turn the call over to Balazs Fejes for closing remarks. Surinder Singh Thind: Thank you so much. Balazs Fejes: I would like to thank all EPAMers who made 2025 a successful year and who will make us deliver throughout 2026. And thank you all for attending the call. I am looking forward to seeing many of you on our March Investor Analyst Day in Boston. Thank you very much.
Operator: Welcome to the 2025 full year results. [Operator Instructions] Now I will hand the conference over to the speakers, Julien Hueber, CEO; and Vincent Piquet, CFO. Please go ahead. Julien Hueber: Thank you. So good morning, everyone, and thank you for joining us today for Nexans' Full Year 2025 Results Call. This is Julien speaking. So let's start, as usual, in Slide 2, a short disclaimer noting that this presentation contains forward-looking statements subject to the usual risks and uncertainties. Moving to Slide 3. So before diving into the presentation, I would like to officially welcome and introduce Vincent Piquet, who, as you know, recently joined Nexans, our CFO. Nexans (sic) [ Vincent ] brings a wealth of experience from the automotive and industrial sectors and was previously CFO of Ampere at Renault Group. So I am very pleased and we are all very pleased to have him on board. He's fully already engaged with the teams and deeply involved in the preparation of its results and our outlook. You will, of course, have a chance to hear from him in a moment. So before we move into the results, just a brief technical clarification. So in compliance with IFRS 5, the Industry & Solutions businesses are now classified as discontinued operation in the 2025 consolidated financial statements. This is reflected both in 2025 and in the comparative 2024 figures. Let me now walk you through the key highlights of our 2025 performance. Let's move to the results slides. Yes. So 2025 was a pivotal year for Nexans marked with an excellent financial performance. We have reached a major step in our portfolio rotation, fully refocusing the group on electrification, and we delivered a strong set of results across all key metrics. The group standard sales, if I start by this, reached EUR 6.1 billion with an organic growth of plus 8.3% year-on-year, well above our midterm guidelines and demonstrating strong momentum across all our electrification businesses. The adjusted EBITDA amounted to EUR 728 million, representing an adjusted EBITDA margin of 11.9% of standard sales. Excluding other activities, which mainly consist of metallurgy, our electrification organic growth and EBITDA margin were even stronger with 11.6% organic growth and a 13.3% adjusted EBITDA margin. The cash generation was also very solid in 2025 with a cash conversion ratio of 47%, underlying the quality of earnings and strong cash discipline across the board. From a capital efficiency standpoint, ROCE reached 21.3%, confirming value creation power of our business model. And finally, we ended the year with a sound balance sheet with a leverage ratio of 0.36x. Vincent will come back on that later on. And at the same time, we continue our M&A activities with 2 major acquisitions, the one in Canada, Electro Cables, that we concluded in December last year and the one in Spain, that we also -- RCT, that we also concluded in June midyear 2025. Moving to Page 7. So this slide illustrates the consistency of Nexans' performance over time. The adjusted EBITDA has increased steadily, reaching EUR 728 million in '25, with a margin of 11%, as I just explained, compared to 10.3% in 2024. This result illustrates the group's strategic focus on operational excellence, selectivity and value growth driver. The free cash flow reached EUR 344 million, with a cash conversion ratio of 47%, up significantly compared to previous years and higher compared to our midterm guidelines. A strong performance that illustrates the cash generative nature of Nexans' business model as well as the strong cash discipline across all business units and the working capital favorable evolution. The ROCE also continued to improve, reaching 21.3% in 2025, compared to an 18% in '24 and reflecting disciplined capital allocation and a strong operational execution. In a consistent manner over the years, Nexans' transformation is delivering sustainable growth, improving profitability and strong cash generation year after year. Now moving to Page 8. So as a reminder, during our Capital Market Day in November 2024, we clearly stated our ambitions to become a global electrification pure player, fully focused on our 3 core businesses: Transmission, Grid and Connect. In '25, this year, marked the final step of our portfolio rotation. And as announced, we have entered into exclusive negotiation for the disposal of the last part of non-electrification, which is Autoelectric, our automotive wire harnesses activity. This transaction is expected to close midyear 2026. With this transaction, Nexans complete its strategic refocus and now is fully dedicated to electrification with a simpler, more focused and more resilient business profile. Moving to Page 9. So alongside with the divestment we just explained and you've seen in 2025, we continue to pursue targeted acquisition to strengthen our electrification footprint. In 2025, we completed 2 acquisitions, representing around EUR 260 million of cumulative full year sales. The first acquisition, Electro Cables in Canada, reinforced our positioning in low-voltage cable and high added solution. It brings attractive growth, a robust profitability profile and supported by a strong industrial footprint in Canada. This acquisition fits very well with our Connect strategy and offer clear opportunities to deploy our operational discipline. The second acquisition, RCT in Spain in Saragossa area, strengthens our expertise in flexible fire safety solutions, especially in data center and critical buildings, 2 fast-growing and high value-added segments that we are targeting. The newly industrial capacity that was announced at the time of the acquisition is now up and running and delivering profitable growth. And we are very proud and satisfied with the new team that have effectively put in place this new machine and capacity increase. What is critical in both cases, is not only the asset acquired, but how value is created after closing. In line with our approach, synergies are being deployed through the rollout of our proprietary SHIFT program, ensuring smooth integration, execution discipline and value creation. Taken together, this acquisition illustrates how Nexans used M&A to reinforce its electrification pure player positioning, expand selectivity in key geographies and replicate its value creation model in a disciplined and repeatable way. Now moving to Slide 10 regarding the sustainability. So let me focus on sustainability, which is fully embedded in Nexans' operating model and group strategy. In 2025, and especially on our decarbonization trajectory, Nexans pursued the same trend and exceeded its midterm target for Scope 1 and 2 with minus 49% of CO2 emissions, mainly driven by energy efficiency solutions implemented on site and significant level of renewable energy usage. In the meantime, the current performance on Scope 3 was reached following low carbon product innovations and circular material integration for our initiative like CableLoop that was launched in France and Spain with our platinum customers, enable us to reach 880 tonnes of cable collection during the year. We will explain in the deep dive session how we will expand these solutions. Through these initiatives, combined with the metallurgy project in Lens that will be commissioned in 2027 or another example on the partnership with RTE, the French TSO, where we have launched the first European closed-loop recycling system for aluminum, we are not only reducing our environmental footprint, but we are also reinforcing supply security and reinforcing a structural competitive advantage on the energy sector. Let's move to Slide 12 and go now deeper in the business overview regarding the year 2025 performance. So first, let me first focus on the fourth quarter, which was particularly strong. In Q4 2025, the group delivered an organic growth of 11.8% or even 18% excluding other activities, reflecting an exceptional high level of activity, notably in Transmission and in Power Connect. This Q4 performance was well above our normalized run rate, supported by a combination of strong demand, high project execution intensity and a favorable phasing effect. Of course, we anticipate a normalization of the first quarter 2026, reflecting a more balanced phasing of projects. Beyond Q4 dynamics, the strong finish of the year further supports the structural improvement of profitability with the group adjusted EBITDA margin reaching 11.9% and 13.3% excluding other activities, which was mostly driven by Power Transmission and Power Grid and supported by our selective approach on quality of execution. Overall, 2025 clearly demonstrates Nexans' ability to translate long-term electrification trends into profitable growth. Now let's now move business by business, and I will start by Power Transmission, which delivered an exceptional level of organic growth in 2025. Indeed, organic growth reached plus 29.8%, so almost 30% for the full year, accelerating at the 40% rate in the fourth quarter of 2025, reflecting a very high level of activity and a strong execution. Bear in mind that the last 2 years, we have registered an unusual high level of organic growth, thanks to capacity increase, and we should go now back to a normalized level in 2026. The standard sales of Transmission amounted to EUR 1.6 billion compared to EUR 1.2 billion in 2024. The adjusted EBITDA reached EUR 203 million, EUR 203 million with an adjusted EBITDA margin of 12.3%, up from 11% compared to the year before. This margin improvement was mainly driven by quality execution on projects and increased efficiency following the full year operations at the expanded plant in Halden in Norway. Finally, the adjusted backlog stood at EUR 7.7 billion at year-end and including EUR 1.2 billion of the GSI project still in phase of rescheduling with our customers. This adjusted backlog provides us a good visibility until 2028. Now moving to the Power Grid part. Our Grid business delivered a growth of 5.5% in 2025, in line with our midterm guidelines and confirming a favorable momentum. In the fourth quarter, organic growth was plus 3.5%, reflecting seasonal softness, particularly in winter sensitive activities and project phasing. Standard sales amounted to EUR 1.3 billion compared to the EUR 1.2 billion in 2024. The adjusted EBITDA increased to EUR 217 million, which is up by 19% year-on-year with an adjusted EBITDA margin of plus -- sorry, of an EBITDA margin of 16.4%, which is an improvement of 226 bps points. This strong performance reflects our focus on operational excellence with the continued strength of our accessories activities, increased selectivity in high demand environment as well as some one-off effect linked to some European renewable projects that we had in the last part of the year -- this strong performance reflects our focus on operational excellence, the continued strength of our accessories activity and increased selectivity in a high-demand inventory as well as some one-off effect linked to some European. Importantly, the business benefits with strong visibility supported by multiple long-term frame agreement wins with recent contracts such as Enedis, providing increased visibility going forward. And if you remember, we have communicated the wins in the contract of Enedis for coming 7 years. Now let's move to Slide 15. Finally, the Power Connect business, which grew organically by 3.6% year-on-year in line with our midterm guidelines. In the fourth quarter, organic growth accelerated by a plus 10.9% driven by delivery of large infrastructure and data center-related projects. Standard sales reached EUR 2.3 billion, which compared to EUR 2 billion in 2024. The adjusted EBITDA amounted to EUR 289 million compared to EUR 271 million in '24, and it stood at 12.3% compared to 13.1% last year. Margin performance reflects strong profitability in advanced offer on platinum customers, while the more conventional part of the business remained under pressure, particularly in Asia Pacific and in Oceania. Finally, the integration of La Triveneta Cavi in Italy and the rollout of the SHIFT program continue as planned, with a strong focus on operational and industrial excellence. Again, let me remind you that Power Connect is a contrasted segment where we have some very strong performer, both in top line and margin, and our objective is to make all business units catch up with the best-in-class. We will now move to the key financials, and Vincent, welcome on board, and over to you now for the financial part. Vincent Piquet: Thank you, Julien, and good morning, everyone. Before going into the details, let me take just a brief moment to say that I'm honored to be here today. I want to thank Julien and the Board for their trust. I've now been working closely with the teams for a few weeks, and I'm very excited about the fundamentals of the business and the road ahead. With that, let's start with the 2025 revenue bridge. As you can see, group standard sales increased by 10.1% year-on-year, reaching nearly EUR 6.1 billion. Growth was primarily organic with a strong 8.3% increase, reflecting a solid underlying momentum across the group. Scope effects contributed a further 5.1%, illustrating the growing contribution from our recent acquisitions over the year, mainly RCT and LTC full year contribution. These positive drivers were partly offset by an unfavorable foreign exchange impact of 3.3%, mainly related to the Turkish lira and the Canadian dollar. On the profitability side, adjusted EBITDA increased by 27.3% year-on-year, reaching EUR 728 million in 2025, with the margin improving from 10.3% to 11.9% of standard sales. This evolution reflects the contribution of our electrification businesses supported by growth and margin improvement. First, Transmission delivered both growth and higher profitability, making it a strong contributor to the group's EBITDA improvement last year. Grid also recorded a positive year with strong improvement in profitability year-on-year. And in Connect, performance was more contrasted across regions and business units as described by Julien. Asia Pacific and the Nordics were slower, and the process of improving LTC's performance is ongoing, and we also have the impact of the full year versus a few months in 2024. That said, we are confident in our ability to bring LTC up to Nexans' standards. Overall, within Connect, our structural drivers performed well, while we remain focused on enhancing the profitability of the rest of the portfolio. The Connect segment includes EUR 26 million of scope effect in the full year of LTC and only 7 months -- sorry, the full year of LTC versus only 7 months in 2024 and RCT with a 7-month contribution. In other activities, the variance is mostly driven by negative one-offs recorded in 2024. As expected, metallurgy was impacted by the U.S. tariffs effect in H2 after a strong H1 and accounts for a negative EUR 6 million of impact on a full year basis. Overall, this bridge illustrates strong operational leverage in 2025 with EBITDA growth clearly outpacing sales growth and translating into a meaningful margin expansion. Moving on to net income. As we've just seen, the starting point of the net income progression in 2025 is a very strong increase in adjusted EBITDA from EUR 571 million in 2024 to EUR 728 million in 2025, an increase of 27.3%, well above the 10.1% of growth of our top line and demonstrating our strong operational leverage. This EBITDA progression is also the main driver of the increase in net income from continuing operations, which reached EUR 219 million, up 31.1% compared to last year. Beyond EBITDA, a few additional elements are worth highlighting. First, financial expenses decreased significantly, mainly linked to hedging effects, in particular, the evolution of the forward spread on the Norwegian kroner. At the same time, depreciation and amortization increased to EUR 253 million in 2025 compared to EUR 175 million in 2024, mainly reflecting investments in our Norway transmission plant in Halden. Net income from discontinued operations increased to EUR 138 million, reflecting gains on disposals linked to AmerCable and Lynxeo as well as the operations -- operating performance of Industry & Solutions, partially offset by an impairment on Autoelectric as we moved it to discontinued operations. Overall, group net income reached EUR 358 million in 2025, up 26.6% year-on-year, illustrating the strong earnings conversion of the group's operational performance. Moving now to cash flow and net debt. 2025 was another year of solid free cash flow generation, which reached EUR 344 million compared to a restated amount of EUR 177 million in 2024, translating into a 47% cash conversion rate above our midterm guidelines. This level reflects, first, the strong performance of adjusted EBITDA, but also a strict cash discipline as shown by our working capital evolution and also helped by above-average down payments in Power Transmission. CapEx amounted to EUR 383 million, mainly driven by Power Transmission as we continue to execute on the capacity expansions decided in prior years in both Norway and Charleroi in Belgium. Dividend and others includes the cash impact of our employee share buyback program on top of the dividend payment. And the M&A column mainly reflects the contribution from the closed acquisitions of Electro Cables and RCT. It does not include the impact of Autoelectric as the closing of this transaction is expected mid-2026. Change in discontinued activities relates to the divestments of Lynxeo and AmerCable as well as the reclassification of our automotive activity under discontinued operations in compliance with IFRS 5 standards. As a result of these transactions, combined with strong cash generation, net debt decreased significantly from EUR 681 million at the end of 2024 to EUR 266 million at the end of 2025. As you can see, overall, the company is in great financial shape. Let me now spend a moment on our financial structure. At the end of 2025, Nexans benefits from a very solid liquidity position. We have significant cash on hand, complemented by committed and largely undrawn credit facilities. This gives the group ample headroom to operate comfortably. Our debt structure is well diversified and fully fixed rate, which protects us from interest rate volatility and provides good visibility on financing costs. And importantly, we have no material debt maturity before 2027. From a leverage perspective, Nexans remains very conservatively positioned with a low financial leverage ratio of 0.36x. This strength is also reflected in our credit profile with an S&P BB+ rating with stable outlook. It confirms that the group has the financial firepower to pursue targeted M&A, growth CapEx and continue to deliver shareholder returns. In fact, shareholder return is a core component of our value creation model. Over the past 3 years, Nexans has delivered a total shareholder return of 59% and 215% over the past 6 years. This performance reflects the consistency of our execution over time. As shown here, the dividend per share has increased steadily over the past years, reaching a proposed EUR 2.9 per share for 2025, an increase of 11.5% compared to 2024 and another historical record. This dividend growth is anchored in the group's improved profitability, strong cash generation and disciplined capital allocation. Our approach remains very clear. We aim to reward shareholders while preserving flexibility to invest in our growth and maintain a sound balance sheet. Looking ahead, this discipline remains a key area of focus. Our dividend policy is fully aligned with our financial trajectory with a target payout ratio of at least 30% by 2028, while remaining consistent with our leverage and investment priorities. And with that, I now hand over back to Julien. Julien Hueber: Thank you, Vincent. So let me now turn to outlook for 2026. So we expect the -- for 2026, the adjusted EBITDA for the full year to be between EUR 730 million to EUR 810 million and for our free cash flow to range between EUR 210 million and EUR 310 million. We expect the first half of 2026 to be softer than the second half, mainly due to project phasing across different segments. This guidance excludes the contribution of a non-complete acquisition and does not assume the execution of a GSI project in 2026. Overall and in conclusion, I think that you can see that from the combination of our '26 guidance and the dynamic nature of divisional overview that we are excited for the future. We have successfully transformed into a high-return business with a robust balance sheet focused on electrification as a global pure player. Nexans will continue to operate with a disciplined financial framework for the benefit of its shareholders, employees and the broader economy. So before moving to the Q&A, I would like also to remind you that we will host our business deep dive sessions today shortly after this session at 10:30 Paris time. We will go deeper into our value creation model, market and strategic priorities. We will provide you an additional insight into how we are executing on roadmap. So with that, thank you all for your attention. And with Vincent, we'll now be happy to take your questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I was hoping to ask 2 related things. But the first one, just can you clarify in the guidance on EBITDA between the bottom and the top end, you're very clear that you've taken off GSI from it. But do you have any contract mitigating the under-capacity that you would potentially have from not executing that? How much is included in the bottom end and in the top end of guidance? I'll start there, and then I'll ask the follow-up. Julien Hueber: Daniela, thank you for your question. So clearly, yes, GSI is not included into our guidance, even though we are -- as we have communicated early January that because this project is rescheduled, that we are at the same time launching specific actions, both industrially speaking, but as well commercially in order to offset partly the GSI element. So we are actually quoting different projects on MI on a part of it. Of course, I cannot display precisely because we are still quoting and we don't know precisely when it will start, but a part of it is inside the guidance. Daniela Costa: So just to be very clear, on the EUR 730 million at the bottom end of guidance, that includes part mitigation on things that are not yet in the backlog but in tendering? Julien Hueber: Exactly right. We are still quoting on some MI projects on those. We have considered that some of them, we have a good chance to succeed. But the timing element is not yet clear. So we will -- we have included some of it but not fully. Daniela Costa: And the top end of the guidance is the full compensation of GSI or not -- also not fully? Julien Hueber: So the guidance is not only about Transmission. It's also about different elements. Typically, the restart of the European business that you know has been relatively soft in 2025. We consider some elements of the restart of the activity, specifically in H2, softer in H1, stronger in H2 for the restart of the business, and that's mostly impacting the Connect business. Daniela Costa: Okay. Got it. And then just a follow-up also in Transmission. You mentioned that you will have, I guess, 2 other things, normalized level. Just wanted to clarify what should we interpret it as normalized? Do you think transmission business top line-wise can be up or given taking off GSI? And also, can you clarify your comment on the first half versus second half EBITDA? Do you -- how should we think about the first half margin for Transmission given that's potentially the mitigations, I would imagine if you're still tendering, fall more into the second half, what type of profitability should we think about for the -- between the 2 halves? Julien Hueber: Okay. So overall, we foresee an improvement of our EBITDA during the year 2026 in Transmission with indeed a stronger increase in second half due to the reason we just explained about, still quoting for the MI part. That's basically why we see a softer in H1, stronger in H2. That's basically -- and maybe Vincent, I don't know if you want to add anything? Vincent Piquet: No, I agree that the timing of the quoting makes it a bit second half loaded. And beyond transmission, also the other businesses, we feel very good about Grid and Connect is, as Julien mentioned, a bit dependent on the improvements of the European market, and we're being cautious in terms of what will happen in the second half. And then finally, I'll mention in terms of explaining the range of the guidance, there's a metallurgy, which is quite impacted potentially by tariffs volatility in the U.S. And so we're trying to take that into account in the range we're proposing today. Daniela Costa: Okay. And you can't comment on Transmission first half versus the second half of '25, for example, just to help us understand how much is underutilization in the first half could mean? Vincent Piquet: In '26, you mean? The underutilization of the MI line will be manageable in H1 as we're basically working to do some cost actions. And then in the second half, we are planning on winning a number of short orders and new orders that will fill the line. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I have a few as well. The first one is on your cash flow bridge. So when I look at your full year cash flow bridge, you have minus EUR 371 million for M&A and disposals. And if I compare it with H1, you had EUR 613 million in inflows from divestments. So I wanted to ask this EUR 370 million -- EUR 371 million is only what you paid for 2 deals and not the disposals? So now the disposals have accounted separately? So that's the first one to ask what that EUR 371 million in the cash flow bridge is? Vincent Piquet: You got it right. We've separated the disposals from the acquisitions, and the way you explain it is the correct way. Akash Gupta: And then my second one is on M&A. Clearly, you have been quite vocal about your M&A ambition in the press release, but I wanted to ask what are the area of focus? Maybe you can talk about the regions and business areas. And can you also talk about the hurdle because some of the growth business could be quite expensive compared to where you trade. So do you have any hurdle rate that you would like to highlight on which acquisition you want to go ahead and which you will not? Julien Hueber: So we will deep dive a lot on the M&A on the second part in the deep dive session just after. But basically, our strategy remains very aligned to what we said end of last year. So there is -- it's based on 3 elements. One part -- pillar of the M&A strategy is linked to midsized companies -- small to midsized company in country where we already here to create industrial synergies in some markets we are already present. Second pillar of the strategy is based on slightly bigger size of M&As in new geographies. And the third one is based on, let's say, adjacent to cable, so basically could be anything like accessories. So that's our strategy, and we are fully in line with. This doesn't change. It's the same strategy. Having said that today, we are looking specifically some geographies like the North America, the example of Electro we did in December, is a good example. But we are looking for other type of target in North America as well as other part of the world, could be Middle East or the other parts. Akash Gupta: And lastly, a housekeeping question. Depreciation and amortization last year was EUR 253 million, and I believe it might be including some one-off there. It was EUR 175 million in 2024. Can you tell us what shall we expect in 2026 for D&A? Vincent Piquet: Yes, it will stay in line. We're continuing to see the impact of the investment we've made in Norway, especially, and that's hitting our P&L. And from a cash standpoint, the major outlays on par -- in line roughly with what we've had in 2025, are driven by the third vessel as well as the investments in Charleroi in Belgium, the land cable plant. Akash Gupta: So roughly EUR 250 million D&A in 2026? Vincent Piquet: Roughly. Operator: The next question comes from Lucas Ferhani from Jefferies. Lucas Ferhani: The first one will be on the free cash flow. Just can you give us an idea of what do you expect the conversion could get to? You're still investing quite a bit in '26, '27, and it's running at 30% plus at the moment. But what could you get to the EBITDA conversion of free cash flow in the next few years as the CapEx kind of comes down a little bit? And the second question was just on the grid margin. Obviously, it's very, very strong in the second half. Can you give us an idea of maybe what's the normalized level? You do talk about some kind of pull-forward of activity or some one-off effects in there. Kind of how should we think about that margin going forward? Is 17% something you can do again in H2 next year or maybe that should normalize a bit? Vincent Piquet: So thank you, Lucas, for your question. I'll take the first one on free cash flow conversion. So free cash flow conversion in general is improving on the flow businesses, but the Transmission business, as you can see, is obviously big and lumpy, and it depends a lot on down payments. So we had a bit of a strong year in 2025. We will continue to improve progressively as we grow all of our businesses, but it's a bit dependent on the down payments we'll get from the different deals in the Transmission business. And so we're committed to our 2028 guidance on the cash conversion, and we'll continue to drive that in '26 and '27 as well. And Julien? Julien Hueber: Regarding your second question, yes, indeed, you have seen the jump in the margin for Grid moving 2 points up 14% to 16% EBITDA margin. We are very pleased with this business. The demand is very strong. We expect to -- let's say, at the first stage to maintain this level of margin. And it's driven by innovation, driven by accessories that is still growing and at a higher margin even. So in order to continue to push, we need to continue to develop specific verticals. And I will explain at the deep dive just after the importance of data center, that are a big driver of margin increase for the Grid parts. But I would say, let's say, in the coming months, we should be at, let's say, similar level of margin before we acquire new capacity, and we are working on it currently in order to continue to grow and develop this business. But it's a very solid, resilient business and a big part of the result of Nexans. Operator: The next question comes from Sean McLoughlin from HSBC. Sean McLoughlin: Firstly, Vincent, taking maybe a fresh look at the margin progression in Transmission, how confident are you on the journey to high teens margins by 2027, 2028? And what in your view are the key steps to reaching that level? That's the first question. Vincent Piquet: Yes. Thank you, Sean. It's a very important question. It's something we spend a lot of time on with the team. We see significant improvement. You saw it between '24 and '25, and we're still committed to the direction we've given historically of continuous improvement. It's driven by a few things. First, much better quality of execution. We've invested a lot in the team to drive that quality of execution and not have bad surprises during the execution phase of the project. And we are seeing that investment pay off in 2025. The margin improvement is driven by this better quality of execution. Second thing, the selectivity we've applied to the deals that we've taken into the backlog is paying off as well. We're continuing to execute on historical bad cholesterol, if I can say, deals that are hurting our profitability. The new deals we see ahead of us, the ones we're starting to execute on now, are much better in terms of margin accretion, and that gives us very much strong confidence in our ability to get to the high teens in terms of profitability for the Transmission business. Sean McLoughlin: If I could touch also on Connect. You've talked about need for recovery in Europe. You've also talked down Asia Pac in Q4. Again, can you maybe just walk us through what are the main components of improvement in profitability in Connect in '26? Julien Hueber: Connect? Then I will take this question. So Connect, indeed, you've seen a lower margin in second half. It's -- I mean, we understand very clearly, and we are working on it precisely, it's coming from a few elements. First one is indeed pressure on price in Oceania, specifically in Australia, second half of the year. That has impacted us negatively, and we are currently changing things to come back to a normalized level of profitability in this part of the world. Second is that one of the high contributor of margin in Connect is the Nordics in the Northern Europe. I mentioned that in Q3, but it remains in Q3, the same, that the market there has been softer. So we have had less volume, not -- we didn't lose any market share. In fact, we even win market share, but the overall market has been very soft in this part of the world. And we expect to see hopefully an improvement, let's say, midyear second -- Q2 or midyear 2026. And the third element is, you know that our strategy, what we did in the M&A, is clearly to buy, make some acquisitions at a low multiple. And therefore, the margin level of the company that we bought are lower than our average. They are not yet at the maturity in terms of innovations, technology, verticalization. And when you -- on all our job is to transform them into a much higher level of profitability. In the case of 2025, specifically second half, we had a full year effect of LTC, which is not yet at the level we expect from them. They are working very hard. We're very satisfied what we do, but the size of this LTC business has an impact on the overall margin of Connect. Having said that, all the other -- and you know that we are clustering our businesses, different cluster, innovation drivers, profit drivers. This business, the top-end of our business, which is a large part of our Connect business, is doing very well, both in margin level, both in growth. Operator: The next question comes from Scott Humphreys from Berenberg. Scott Humphreys: I have 2 actually. I'll ask them one at a time. The first one on the high-voltage demand through the next decade. How have recent U.K. offshore wind auction results and some stronger pledges from the North Sea companies around offshore wind influence your view of supply and demand in high voltage into the next decade? That would be the first question. Julien Hueber: Okay. So I will start. So I guess you have seen in Hamburg a month ago, a big meeting with the politics, energy ministers from 7 countries, highlighting the need and the importance to deploy offshore wind businesses in -- from -- basically from 2030 to 2040, with an increase of capacity of offshore wind of 15 gigawatts per year for the coming 10 years. So the demand is there, and it's supported by the, let's say, different states in North of Europe. So we see that this business will continue to grow. So 15 giga per year, it's huge, because you need to keep in mind that currently in -- we have 34 gigawatts already installed. So the ramp-up of this business will be extremely important. Second, interconnections. Here again, there has been a very supportive, European Commission, to accelerate the interconnection links between countries, funded by the European Commissions, and they have committed if you -- I don't know if you have seen this but in December. So basically, both businesses, of our submarine, both wind offshore and interconnections are basically positive in the outlook in the next 10 years. Scott Humphreys: Great. And moving over to the metallurgy business in other activities. How is the continued rise in metal prices influence your view on kind of the pros and cons of vertical integration in bulk production? And maybe as a follow-up to that, why don't you think peers -- or why do you think peers might not be following your footsteps in this regard? Vincent Piquet: Yes. Thanks, Scott, for the question. The metallurgy business is strategic to us. We see a lot of advantages of this integration. It's security of supply, which is key. It's recyclability. We control prices much more. We have long-term agreements with mining firms that gives us a lot of stability in our supply. So we clearly think that strategically, it's really important for us to keep this metallurgy business, and we're driving it. And it's obviously quite impacted short term by the movements in the tariffs. It's adapted well. As I mentioned, after a very strong H1, it had a tough H2. But net-net, overall, it's been quite neutral. And so we're managing it strongly and investing in that business. We think it's very important for us. The rise in the copper price is obviously having an impact. We're quite protected. It actually -- we transmit that increase in price to our customers. We're protecting ourselves and protecting the financials very strictly. And we see maybe a long-term impact in terms of copper demand and evolution. But in total, for us, in the midterm and short term, it's really, really strategic, and having that integrated business actually gives us more levers to react and to adapt to the current volatility in the price and the tariffs. Julien Hueber: And I will add one point. If you remember that 4 years ago, Nexans has clearly mentioned that by '26, '27, there will be some kind of scarcity of copper supply. And now you start to see the impact on the basically tons of copper reaching $13,000 a ton. So we anticipate that a few years ago. That's why we have massively invested in our metallurgy and Rod Breakdown in Lens because it gives us a capability to recycle scrap of copper. This project is well ongoing. It should be in operation by 2027. And we will have access to the ability of scrap copper -- scrap cables already on site in Europe. So it will also give us an additional security of supply. Operator: The next question comes from Chris Leonard from UBS. Christopher Leonard: Could I maybe go with 2 questions to start with? And the first is digging in again on the Connect business. And maybe it would be helpful if you could give us, as you have previously, what the divisional margin might have been for 2025, if you were to exclude LTC. I believe you commented on that in first half results. And equally, could you also help us dig into how big the Asia exposure is or Oceania, which you commented on being weak? When we're trying to judge how the margin in the second half of the year, was 11%, so the weakest since 2021. Just trying to get a read if this is an aberration in the short term. And then the second question, actually, I'll wait for the second question. Julien Hueber: Okay. So for sure, if you exclude the M&A on LTC -- but, yes, it is the same, by the way, because it's just taking -- we are taking over this business. If you exclude the newly acquired businesses, which are ongoing in the transformation, the average of EBITDA would be much above, and we will not see any decrease of the percentage of EBITDA. So that's why we are putting a lot of effort and focus in order to, I'd say, the transformation of this business. We have launched in Q3 and Q4 some innovations for the Italian market with a brand Klaro and so on. So we are on the way to transform the business. But clearly, it has an impact on the overall businesses. On your second question regarding the businesses in Oceania, it's an important business for us, but it's not -- let's say, it's less than 10% of our overall activities in Connect. Vincent Piquet: And maybe I would say, Chris, also, if you take the -- a bit of a step back, we've taken the profitability of that business from mid-single-digit levels to strongly above in the double digits. And there are some ups and downs. We're integrating, as Julien mentioned, businesses that were improving as we're bringing them up to the Nexans level. So if you take a step back and look at the trend over time, clearly, it's very positive, and we know how to do this. We've done it in the past, and we'll continue to do it. Julien Hueber: And we will present to you just to this next session, an example of Reka, which basically we acquired 2.5 years ago, which is very -- exactly at the level we expect, above the average of Nexans in terms of profitability. Christopher Leonard: That's helpful. And the second question, Julien, is maybe related as well. But just looking at the 2028 EBITDA guidance range, that's remained unchanged. And I know that you guys are focusing industrially here and maybe there could be some further synergies that come through. And I just wonder, on your look at the portfolio, if there's been any view as to where you think the possibilities are on the industrial angle for you guys looking into 2028? And then as a follow-up, could you also comment as to how much of the GSI contract is currently factored into that 2028 EBITDA guidance for the group? Julien Hueber: Okay. So yes, you are a little bit on the industrial part. Already at the second session that I will describe just after. But basically, you're right. It's important for us. Our DNA, we are industrial people. Our DNA is industries. We will -- and we have launched already several actions on the industrial excellence and the operational excellence that will provide us some competitiveness in order to help our business to grow and to continue to grow our EBITDA margin. And that's -- Connect is clearly one element in this. Regarding the guidance for 2028, indeed, we maintain the same guidance of EBITDA, no change in this. We are clear that we will achieve these targets. We have in this guidance 2028, some utilization of the MI line, of course. So either it will be GSI if this project resume and we have good hope that it will come back or we will use unless other ongoing large projects to come in MI, as I think we have explained also recently, that could also replace. But we have the possibility to do either GSI or another one, but it's included in our numbers for 2028. Christopher Leonard: And just to clarify on that in terms of other projects you're looking at, should we view this as a sort of previously discussed plan B for GSI? Or should we view this more as like sort of the Malta-Sicily contract that you signed last year as a small extension and a book to ship within a year or within 12 months? How should we kind of look at these projects you're looking to sign currently for the Transmission business? Julien Hueber: So regarding MI specifically, it's nothing to do on the plan B, is in all, let's say, deepwater project requires MI technology. There are some project queuing today that we will be able to quote. Now that we have announced, and this is why basically I have taken a decision to make this communication early January, was to officialize the fact that we have an MI line available, and that triggered some opportunity and discussion with some customers that know that we have now this line available for some time. And therefore, we are now discussing with them to basically quote and win this project of MI. So MI will be loaded by 2028. I don't see any problem on that. Operator: The next question comes from Nabil Najeeb from Deutsche Bank. Nabil Najeeb: Just staying with GSI for a little bit. First off, and sorry if I didn't catch this, but what is the current status of GSI exactly? Is the rescheduling now done? And if so, what's the ultimate time line that you have settled on? And is the cable that has already been manufactured going to be stored until the customer then decides to restart work? And is there any compensation that Nexans gets for the idle capacity in such cases? Julien Hueber: Okay. So the situation -- again GSI is the same as what we have communicated early January, meaning that there's a rescheduling ongoing with customers. So we have some very close discussion with customers about a different date to restart the project. So this is what we call rescheduling. So there's not a date specific because there are things ongoing. And I'm sure you understand this discussion are more at a political level that I will not describe. What is for sure is that all the cable that we have produced on store today belongs to the customers. So Nexans has no financial impact on this matter. So today, we are talking with customers, [ the site meeting ]. So this is basically it. But there's been no specific news since the communication we did early January. Vincent Piquet: Yes. Just to be -- all the cable produced has been paid for. So financially, we're completely covered. It's being stored. The customer is obviously working through its own processes and decisions, and we're working with them and to see when it can be installed. But financially for us, it's fully neutral now. Nabil Najeeb: Got it. And my second question is on the mitigation measures. I wonder if you could give us a bit more color on the various mitigation measures that you're considering? Specifically, which, if any, projects are you hoping to bring forward from the backlog? And I realize you have started some discussions on new projects, but are there any specific new projects that you are looking to win? And finally, how would the margin profiles for repair work differ from those 4 large interconnected projects? Julien Hueber: So I would say the mitigation measure, they have 3 type of categories. The first one are purely industrial. So we are relocating the workforce. We are reducing some expenses. We are doing what needs to be done in the plant when you have a line which is basically not running. So that's done. That's ongoing and we are -- the reactivity of our teams in Norway has been at a great level. Second is that we have already win some small orders for repairs because the line is available. It's an important business of doing the repair. And what matters when you do repair is the speed. So you need first to have a cable available to do reparation as well as the vessel available. So we are setting in place an organization to be able to both produce, and we are producing some cable for repairs with our customers, basically, they own the cable. So this is ongoing. And we are, let's say, setting an organization in order to be extremely reactive in case a cut of cable appears under the sea. And third is the commercial activities. So we are -- I'm not going to give you a name of a project because I guess some of my competitors could hear what I'm saying. But indeed, we are currently quoting for some projects on MI, and we expect to have some answers during ahead of Q2 or during Q2 in order to see and hopefully win some of these projects. Nabil Najeeb: Understood. If I could squeeze in a short one. Just on the MI workshop that you have in Futtsu in Japan, what's the plan for that? Julien Hueber: We have communicated, if you remember, I think it was September, October, the fact that we have basically sold this workshop to a company. We can use it, but it does not cost anything. So when it's idle, when the loads are not -- when the machines are not loaded, it doesn't cost anything to us. It's -- we sold the land, the building on the machine, but we are -- it's available to us as soon as we have some load to do. So no cost for us in Futtsu. Operator: The next question comes from Eric Lemarie from CIC CIB. Eric Lemarié: I've got 2 small questions. Precision first, you mentioned -- when you talk about backlog, you mentioned an adjusted backlog in your press release. And I was wondering what kind of adjustment are you talking about here? And when I look to the backlog, should I consider that the projects within the backlog are 100% secured? Is there anything specific to know here? And the second question about the project you mentioned, you mentioned you are quoting on some new projects to mitigate GSI. Are you talking about similar -- are you talking about wind offshore or interconnection project or similar project in terms of profitability or the larger project you are currently quoting? Just to have an idea of the profitability difference between this potential new project and GSI profitability? Vincent Piquet: Thank you, Eric. I'll take the first one. So the adjusted backlog is basically due to the nature of the type of contracts we enter into the Transmission business. Everything that's in the backlog is executable. So it will convert into cash. That's why we put it into the backlog. But the time line and the exact call-offs by the customers in terms of when it happens have different levels of certainty. And so there are things that are extremely firm and certain. There are things where the time line can move a bit more, which is why we use this notion of adjusted backlog. But overall, what we report as adjusted backlog is, unless there's a major cancellation and change in contract, obviously, but it's convertible into cash in the future to drive our cash and profitability. Julien Hueber: And by the way, it's the same definition of the backlog like we always did, so there will be no change on that. I will take the second question regarding the, let's say, other MI projects. So to answer your question, it is interconnection type of projects. So specific to MI technology, so meaning deepwater type of projects. And in terms of profit, of course, we are quoting, so difficult for me to tell you a number, but we are in the similar type of profitability as GSI, yes, same technology, same type of margin. Eric Lemarié: Very clear. And regarding the backlog, how much is -- could be considered as extremely firm project within the backlog? Vincent Piquet: We don't really communicate on that. We just communicate on adjusted backlog. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Julien Hueber: Okay. So thank you all for your questions and for the discussion we had together. So we now look forward to continue this conversation with you in just a few minutes during our business deep dive, where together with Vincent Piquet and Vincent Dessale, we will go deeper into our value creation model, our markets and how we are intensifying execution across the group. Thank you again, and hope to see you very shortly. Vincent Piquet: Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to Tronox Holdings plc Q4 2025 Earnings Call. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please thank you, and welcome to our fourth quarter and full year 2025 conference call and webcast. Jennifer Guenther: Turning to Slide 2. On our call today are John D. Romano, Chief Executive Officer, and D. John Srivisal, Senior Vice President and Chief Financial Officer. We will be using slides as we move through today's call. You can access the presentation on our website at investors.tronox.com. Moving to Slide 3. A friendly reminder that comments made on this call and the information provided in our presentation and on our website include certain statements that are forward-looking and subject to various risks and uncertainties, including but not limited to the specific factors summarized in our SEC filings. This information represents our best judgment based on what we know today; however, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business and believe are useful to investors in evaluating the company's performance. Reconciliations to their nearest U.S. GAAP terms are provided in our earnings release and in the appendix of the accompanying presentation. Additionally, please note that all financial comparisons made during the call are on a year-over-year basis unless otherwise noted. It is now my pleasure to turn the call over to John D. Romano. John? John D. Romano: Thanks, Jennifer, and good morning, everyone. We will begin this morning on Slide 4 with some key messages from the quarter and the full year. Tronox Holdings plc delivered a stronger finish to 2025 than anticipated by remaining focused on the things we can control and influence. Safety continues to be one of our core values and remains our number one priority across the company. In a year marked by challenges, volatility, and inevitable distractions, maintaining that focus has never been more important. Despite that environment, I am pleased to report that in 2025 we delivered our best safety performance in more than a decade, achieving our lowest overall injury rate for the period. This is a reflection of our team's discipline, diligence, and unwavering commitment to keeping one another safe. From a financial perspective, we concluded the year with stronger volumes than anticipated and executed on actions to drive cash flow and improve our long-term cost position. TiO2 volumes in the fourth quarter reached their highest point of the year, a pattern that was previously only observed during the COVID period in 2020. This notable trend underscores how antidumping duties have positively influenced the relative market. Our gains in India and other protected regions show increased market share and suggest a structural change in the global TiO2 trade flows. As anticipated, TiO2 prices were lower in the quarter; mix was an incremental headwind due to higher sales in Asia. However, we are now implementing price increases that are beginning to show results in the first quarter. Early indications show positive momentum, and with a shift toward higher-price regions, market dynamics are gradually moving in a favorable direction. Zircon volumes concluded the year positively, supported by customers restocking and resuming normal buying patterns. Zircon pricing was a headwind in the quarter, compounded by unfavorable mix. That being said, we have announced price increases and are optimistic that they will be implemented in the second quarter. From an operational standpoint, we maintained a disciplined approach to cash preservation and inventory management. While certain measures impacted EBITDA for the quarter, they reinforced working capital discipline, resulting in $53 million of free cash flow, a notable achievement given the challenging environment. We also executed on an opportunistic $400 million senior secured note offering in September, proactively increasing liquidity. In addition, we took the necessary actions on our footprint to position the business for the long term, including announcing the closures of two of our pigment plants. The decision to close the Fuzhou plant in China, as announced last month, was driven by prolonged market downturn, weak domestic demand, overcapacity, and unsustainable pricing levels in China. Combined with the Botlek closure, which we announced in March, these actions streamline our footprint and improve our cost structure over the long term, while ensuring we can continue to reliably serve customers through a more efficient global network. We thank our Botlek and Fuzhou teams for their unwavering commitment to safety and their contributions to Tronox Holdings plc over the years. Transitioning to our sustainable cost improvement program, we continue to make significant progress. We exited 2025 with more than $90 million of run-rate savings, three times our original target, and we remain on pace for the high end of our $125 million to $175 million run-rate target at the exit of 2026. We are now tracking more than 2,000 initiatives; more than 500 of them are already delivering savings, and another 250 are moving to the planning and execution stage. The largest benefits came from fixed cost reductions, including the work we have actioned across labor, contractors, and outside services, along with SG&A reductions that came in ahead of plan. These savings are helping us offset a number of headwinds this year and continue to structurally lower our costs for the long term. We also raised key milestones on our mining projects in South Africa last year. We commenced mining at Fairbreeze and began the commissioning of East OFS. We also advanced our rare earth strategy with the announcement in December of the conditional nonbinding financing with EFA and Ex-Im Bank for the building out of a cracking and leaching facility in Australia. We are progressing our work on a definitive feasibility study and continue to evaluate adding refining capacity to the value chain. As we look ahead, we are cautiously optimistic, and that optimism is grounded in facts and execution. Market dynamics are starting to change. TiO2 prices are improving as a result of price increase announcements that are starting to take effect in the first quarter, and we expect favorable mix benefit from selling more into higher-price regions. At the same time, our actions on inventory, cost, and portfolio rationalization are designed to counterbalance near-term headwinds and support cash generation. As pricing and costs improve from actions already underway, I expect free cash flow to be positive in 2026. Taken together, these developments position us for a step change in earnings power as the market fundamentals continue to improve. I will speak to 2026 in more detail later in the call, but for now, I will turn the call over to John for a review of our financials from 2025 in more detail. John? Operator: Thank you, John. John D. Romano: Turning to Slide 5. For the full year 2025, we generated revenue of $2.9 billion. The year-over-year decline was driven by unfavorable pricing and mix, D. John Srivisal: and lower volumes in both TiO2 and zircon. Loss from operations was $253 million, and net loss attributable to Tronox Holdings plc was $470 million. These results include $233 million of restructuring and other charges, net of taxes, primarily related to the closures of Botlek and Fuzhou. While our loss before tax was $458 million, our tax expense was $15 million, primarily driven by not recognizing tax benefits in jurisdictions with losses. Adjusted diluted earnings per share was a loss of $1.50. Adjusted EBITDA was $336 million, and our adjusted EBITDA margin was 11.6%. Free cash flow for the year was a use of $281 million, including $341 million of capital expenditures. Since we covered our key fourth quarter figures in the January 26 pre-release, I will not spend time on the financial overview, but will instead move to the next slide to review the highlights on our commercial performance. As John mentioned, volumes were stronger than anticipated across both TiO2 and zircon, partially offset by continued pricing and mix headwinds. Sequentially, TiO2 revenues increased 5%, driven by a 9% increase in volumes partially offset by a 4% decline in price including mix. Volumes exceeded our guidance of up 3% to 5%, reflecting continued market share gains in India, Latin America, and the Middle East supported by antidumping measures. North America and Europe were lower, consistent with normal fourth quarter demand patterns. Pricing was in line with expectations, down 2%, and mix accounted for an additional 2% headwind, primarily due to stronger growth in regions with lower margins and seasonally lower demand in our higher-margin markets. Zircon revenues increased 32% sequentially, driven by a 42% increase in volumes. This exceeded our guidance of 15% to 20%. Zircon price was down 7% quarter to quarter, or 10% total including mix. Revenue from other products increased 10% compared to the prior year, mainly driven by higher pig iron volumes. Sequentially, revenue from other products decreased 17% due to higher sales of heavy mineral concentrate tailings in the third quarter. Turning to the next slide, I will now review our operating performance for the quarter. Our adjusted EBITDA of $57 million represented a 56% decline year on year as a result of unfavorable pricing including mix, higher production costs, and higher freight costs, partially offset by the increase in sales volumes, exchange rate tailwinds, and SG&A savings. Year on year, production costs were higher by $39 million as a result of actions taken to improve cash generation. These actions were deliberate and temporary. Bringing forward maintenance, lower pigment and mining operating rates, idling assets, and additional downtime at Stallingborough and Bonneville drove unfavorable fixed cost absorption and higher idle and LCM charges. These were partially offset by savings from our cost improvement program as John outlined earlier. Sequentially, adjusted EBITDA declined 23%. Unfavorable pricing including mix was partially offset by improved production costs, favorable sales volumes, and lower freight costs. Turning to the next slide. We ended the year with total debt of $3.2 billion and net debt of $3.0 billion. Our weighted average interest rate in Q4 was approximately 6%, and we maintain swaps such that approximately 77% of our interest rates are fixed through 2028. Importantly, our next significant debt maturity is not until 2029. We do not have any financial covenants on our term loans or bonds. We have one springing financial covenant on our U.S. revolver that we do not expect to trigger. Liquidity as of December 31 increased to $674 million, including $199 million in cash and cash equivalents that are well distributed across the globe that we are able to move around with little to no frictional cost. Working capital was a use of approximately $26 million for the year excluding $76 million of restructuring payments related to the closure of our Botlek site. Fourth quarter working capital was a source of $133 million excluding $19 million of restructuring payments, exceeding our expectations. This was driven by targeted working capital initiatives including reducing inventory levels. This discipline around working capital will continue into 2026. Our capital expenditures totaled $341 million for the year, approximately 60% allocated to maintenance and safety and 40% almost exclusively dedicated to the mining extensions in South Africa to sustain our integrated cost advantage. We returned $48 million to shareholders in the form of dividends paid in 2025. And as a reminder, Q1 is typically a seasonal use of cash due to timing of payments and the seasonal build of working capital. However, I remain confident in our ability to generate positive free cash flow for the full year 2026. Jennifer Guenther: With that, D. John Srivisal: I will hand it back to John to review our capital allocation priorities. John? John D. Romano: Thanks, John. Turning to Slide 9. Our capital allocation priorities remain unchanged and focused on cash generation. We continue investing to maintain our assets, our vertical integration, and projects critical to furthering our strategy, including rare earths. With Fairbreeze and East OFS mining spend largely behind us, we are able to reduce our capital expenditures further in 2026. While we have some catch-up capital from delayed projects in 2025, we expect CapEx to be approximately $260 million in the year. We continue to focus on preserving liquidity, and we have plenty of liquidity to manage the business and endure market fluctuations. As the market recovers, we will resume debt paydown targeting long-term net leverage of less than 3x. We will do that the same way we navigated this downturn: by staying focused on what we can control and influence, reinforcing the business through cost reduction and cash improvement actions. While prioritizing cash has been a near-term trade-off to EBITDA, these actions strengthen the foundation of the company. With that, I would like to turn to our 2026 guidance and walk through the cash assumptions that will drive performance this year. Turning to Slide 10. For 2026, we expect TiO2 volumes to be relatively flat sequentially on the back of a very strong fourth quarter. We are experiencing growth in all regions with the exception of Asia, predominantly influenced by India, our second-largest market. This is due to customers shifting a portion of their volumes back to China following the temporary halt of the collection of duties in late December following a court ruling. We expect this to be a short-term event as we believe there will be favorable resolution on duties in the coming weeks, which would shift volumes back to local and Western suppliers, including Tronox Holdings plc. We also expect TiO2 pricing to be up approximately 2% to 4% sequentially, reflecting the price increases that went into effect at the beginning of the year and the continued shift in mix towards higher-value regions. We expect zircon volumes to mirror the solid performance we had in the fourth quarter. Zircon pricing has stabilized in Q1 and we are optimistic that the price increases we have announced for Q2 will be implemented. As we stated earlier, we are focused on generating cash while balancing the impact to EBITDA. We made decisions to keep the West mine down and one of our furnaces down longer than originally planned, and we also dialed back some production in Australia on the mining side of our business. These decisions reduced near-term EBITDA, but they are focused on our goal of improving working capital and generating positive free cash flow. We are also managing FX volatility on the Australian dollar and South African rand. At the current rates, this translates to a $10 million headwind in Q1 versus Q4 average rates, which has been factored into our guide. As we have done in the past, we are actively evaluating opportunities to utilize financial hedges to manage that volatility. Partially offsetting these pressures are the savings from our sustainable cost improvement plan, which continues to gain traction and will build through the year. Taking all this into consideration, we expect Q1 2026 EBITDA to be in the range of $55 million to $65 million. Incorporated in our positive free cash flow guide for the year are the following assumptions on cash: net cash interest of approximately $185 million, net cash taxes of less than $10 million, capital expenditures of approximately $260 million, and we expect working capital to be a source of cash in excess of $100 million. Turning to Slide 11. From a broader perspective, our first quarter guidance does not fully reflect the underlying earnings potential of our business. In recent quarters, we have implemented several initiatives to enhance our cost structure, streamline operations, optimize mix, and enable improved pricing. As these measures are realized in our P&L, we will generate significant benefits and establish a solid foundation for earnings growth as the recovery progresses. We believe we are at an inflection point for both TiO2 and zircon price. Additionally, we have outlined a number of actions we have taken over the last year to prioritize cash generation that are temporarily reducing EBITDA. One notable example is how reduced asset utilization affects absorption. As these headwinds subside and as the market continues to recover, we will realize an improvement in our cost structure. As the most geographically diverse TiO2 producer, Tronox Holdings plc is well positioned to capitalize on the opportunity created by the rebalancing of the market evidenced by the effective antidumping duties and supply rationalizations in the industry. These factors establish the foundation for a meaningful step change in earnings potential. Turning to the next slide, I will provide a brief update on our Rare Earths initiative. We continued to advance our rare earth strategy during the quarter, reflecting our objective to move further downstream into separated rare earth oxides over time, while maintaining capital discipline. We made meaningful progress toward a definitive feasibility study and are evaluating development pathways to prioritize returns and limit incremental leverage on our balance sheet. Concurrently, we are engaging widely with stakeholders, including potential customers, partners, and funding sources to identify the most viable and responsible path forward. Our approach remains dedicated to generating long-term shareholder value and balancing strategic opportunities with prudent financial management. We believe that our rare earths present a promising growth platform for Tronox Holdings plc, leveraging our existing mining footprint and expertise in hydrometallurgical and chemical operations. That will conclude the prepared remarks. I will now move to the Q&A portion of the call, so I hand the call back over to the operator to facilitate. Operator? Operator: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by 1 on your touch-tone phone. You will then hear a prompt that your hand has been raised. To remove yourself from the question queue, please press star followed by 2. And if you speak at phone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you have any questions. Thank you. First question will be from Joshua David Spector at UBS. Please go ahead. D. John Srivisal: I wanted to ask if I go through your free cash flow guidance Joshua Spector: I guess to get to breakeven, you probably need about $350 million in EBITDA roughly. I guess one D. John Srivisal: is that Joshua Spector: how you are thinking about it? And two, just given where you are starting in Q1, and some of the timing lags that it takes on some of the mining costs to flow through with the lower utilizations, how do you see yourself getting to that level from here? John D. Romano: Yes. So maybe, Josh, thanks for the question. I will start, and I will let John add some color. So again, we provided a guide for the year. We have not provided guidance for the full year. You can get to that math. So we are not providing a guide because there are still lots of variables with regards to how we are running the business. Our costs are going to be largely dependent upon how long we keep the assets down. On the last call, I made reference that we were going to keep our assets down and focus on cash until we got a couple of good quarters under our belt, and we felt confident that the recovery was underway. And we got another quarter, so we are still progressing in that direction. But we have made some decisions to pull back on one of our furnaces a little bit longer. We have made some other decisions on mining. But, again, we are targeting a $100 million free working capital improvement. And, John, you can add some more color on it. Yes. No. I think, you know, obviously, we D. John Srivisal: from looking at where we guided Q1 to the rest of the year, we do see, I am sorry, EBITDA expanding to get to that positive free cash flow, if not more significant than that. Some of it will be driven by earnings. As John mentioned, we do see the sustainable cost improvement program which we have only seen, you know, about $10 million or so in 2025 hitting, but that was a run rate at the end of the year of $90 million. So we would expect to see that benefit flow throughout the year. Additionally, as you know, we did shut down Botlek and Fuzhou. And as we see our sites, with volumes even being flat, we will see that cost come through from a fixed cost leverage improvement throughout the year. And, you know, obviously, our focus on controlling our costs throughout the year as well. So we do see a path to higher earnings in the second half of the year. Obviously, a big driver of that is price. As John mentioned, we are seeing an inflection point in both TiO2 and zircon Q1 to Q2. So that will help us as we move across the year. John D. Romano: And Josh, we referenced that, I think even on the last call, on the zircon side of the business. We had a lot of customers that were starting to get back to normal buying patterns, and we saw that actually reflected in our sales in the fourth quarter. We are seeing that in the first quarter of this year. We talked about a price increase that we have some confidence in. But both on zircon and on TiO2, to get a price increase in the first quarter is, I would say, not normal. So we are cautiously optimistic that the momentum we are seeing on price is going to continue to translate into additional momentum next year. The price increases on TiO2, we have announced everywhere. So globally, there have been announcements made. And, again, the implementation on those increases will be different in every region, but we feel pretty confident right now, with cautious optimism, that we are starting to see that recovery that we talked about last quarter. Joshua Spector: Great. And if I could just follow up quickly on the cost side. So sequentially in fourth quarter, your production costs were actually a slight positive. I think in your answer then, you talked about taking down some additional furnaces. I guess if we look at your production cost bridge into first quarter, is that a positive because of some of the cost actions? Or is that a negative because of some of the mining actions? What should we expect there? John D. Romano: Let me make one quick comment, and then I will let John answer that. So we did not take down an additional furnace. We have made a decision to keep one of the furnaces down longer than what we had originally planned. So now we are planning to keep that furnace down until midyear. And, again, we have taken some other actions on the mining side of the business. We pulled back on our mining production in Australia. The West mine in South Africa is now down. So I just want to be clear. It is more mining, not necessarily on the smelting side. John? D. John Srivisal: Yes. No. But we do expect improvement in our operations from Q4 to Q1, a pretty significant improvement. As we mentioned, Stallingborough was down in Q4. It is up and running pretty well in Q1, so we will see some benefit. And just overall, see more efficiencies and improvements throughout our portfolio. I think the one thing if you are looking at the Q4 to Q1 bridge item, we have, and we direct you to currency. So if you look at the average rates that were in Q4 versus Q1, as we mentioned, looking at spot rates, that is about a $10 million hurt for us Q4 to Q1. Joshua Spector: Okay. Got it. Thank you both. John D. Romano: Thank you. Operator: Next question is from David L. Begleiter at Deutsche Bank. Thank you. Good morning. John D. Romano: John, just to go back to the prior question. Looking at the two of the key bridge elements for this year, sustainable cost improvement and the mining costs. What are the tailwinds, the actual tailwinds you are expecting now in 2026 versus 2025 for those two bridge items for this year? John D. Romano: Yes. So I will start on the continuous cost improvement program. Again, John kind of gave some indication on how much of that continuous cost improvement actually resulted in EBITDA. D. John Srivisal: Again, John D. Romano: we have got very good visibility into the projects that we are working on to continue that work. A lot of it has been fixed cost, but there is a lot of work going on across the entire company, and we feel confident that this $125 million to $175 million target will be at the high end of that range. There are things that are continuing, FX issues. Right? So we will be looking at hedging. But right now, that is a headwind in the first quarter. There is also, again, the cost associated with running the assets at lower rates that is a headwind. John, you want to add to that? D. John Srivisal: Yes. No. I think if, David, if you recall, we did shut down Botlek in the first part of the year, first quarter, as well as Fuzhou, which we have announced early this year. But, you know, by bringing down those plants, obviously, you know our chain is pretty leverageable and integrated, and so we were able to ramp up our other facilities, and so that is providing a good cost improvement year over year from that fixed cost leverage. John D. Romano: And I would say we made this comment last time, I think, on the call: when we start thinking about when does the industry typically start to get pricing leverage, those two plants that are down, we have actually kept a lot of the customers from where we were selling them. So, you know, we are north of 85% capacity utilization now. And normally, when the industry gets there—I cannot speak to the industry, I can speak to where we are—you start to get leverage on price. So running our pigment business at lower rates has—we have talked about what that impact is on EBITDA. It is not as significant on the mining side. And the pigment business is running at much higher rates. Understood. And just on rare earth, I know there have been some meetings over the last few weeks establishing maybe a framework for some pricing support in the U.S. for these minerals, which would be what you need to move forward with refinery. What has happened from your perspective, and what is potential for this pricing support going forward? Thank you. John D. Romano: Yes. Look, that was, I think, a very positive result. Right? It is not only the pricing support, but it is the vault that was announced. So the strategic stockpiling. There is still some work to be done on getting finalized on what that actually will look like, and that will come with time. But we are also—I think to be clear—we are working in multiple jurisdictions on our rare earth opportunity. We have got assets in Australia and the U.S. So we are working across a lot of jurisdictions to try to come up with what is the best opportunity for Tronox Holdings plc. We are engaging with partners. We have talked about Ex-Im and EFA around the potential financing network we could have to fund the acid leaching cracking facility in Australia, but we are making very good progress. I am not at liberty to talk about who those partners are at this particular stage because we have got nondisclosure agreements. We are making good progress. We are staffing up that group. And we do feel that this is an opportunity that we are going to turn into another, I would say, pillar of our strategy in the long term. Thank you. Operator: Next question will be from Duffy Fischer at Goldman Sachs. John D. Romano: Yes. Good morning. You mentioned that at the pigment level your D. John Srivisal: operating rates are north of 85%. What is the plan on the mining operations this year? What operating rate do you think you will run at there? John D. Romano: And then relative to the benefit D. John Srivisal: that you get from purchasing, you have always kind of talked about a couple hundred dollars there. How much lower will that be this year because of that lower operating rate in mining? John D. Romano: Sure. So I will start that one, Duffy. We have typically said $200 to $400 a ton advantage of vertical integration on feedstock, and I would say we are on the lower end of that range right now. We have four furnaces in South Africa. We are running three. The SR kiln that we have in Australia, we are continuing to run that at capacity. We pulled back on our mining operations. Again, we do not need as much ilmenite to feed four furnaces when we are only running three. So we will make the decision to start the West mine back up, increase our capacity in Australia again when we feel confident that the positive momentum that we are seeing now turns into more of a solid recovery. And I would say that from the standpoint of where we are as far as vertical integration, I think the power of the vertical integration is still something that we believe in. But our objective this year is to generate free cash flow. And all the actions that we are taking right now are to bring our working capital down. The closer we get to capacity on the TiO2 side, we are going to need some of that feedstock. But right now, what we are doing with the slag that we are producing is drawing down the inventory. We are drawing down the ilmenite. We are drawing down zircon inventory. Quite frankly, on the zircon side of the equation, our inventory is getting to the point where it is tight. So, as we start to think about how we are allocating volumes and we talk a little bit about price increase opportunities in zircon, a lot of that is being driven by the market, from our perspective, starting to tighten up. That is going to give us an opportunity to have more confidence in those price increases in Q2. Duffy Fischer: Great. Thanks. And then maybe just two quick ones on cash flow. If you get to your positive free cash flow this year, how would that look first half versus second half? I am assuming you will eat working capital in the first half and be free cash flow negative and then release it in the second half. But roughly how big a delta will that be Q1 to Q2? And then what is the run-rate spend on the rare earths project currently? D. John Srivisal: Yes. So if you look at our working capital and free cash flow progression across the quarters, we expect this year Q1 to be roughly the size and scope of, you know, what we would have done in the past several years. So a pretty significant use of it. And then we do claw back, you know, going across the year. And so, you know, significant use—most of the use, if not all of the use—in Q1, and then free cash flow positive for the rest of the year. John D. Romano: And then on the rare earths, I mean, again, you look at our capital projection for this year, $260 million, which is significantly lower than it was last year. There is not a lot of CapEx at this particular stage that is in that forecast. So, again, we are looking at a variety of funding sources for that. Working on the definitive feasibility study. We have added some people into that group to continue to progress that work forward. But as of right now, there is not a significant amount of capital on that rare earths piece yet. Duffy Fischer: Great. Thank you, guys. Operator: Thank you. Next question is from Jeff Zekauskas at JPMorgan. Please go ahead. Joshua Spector: Thanks very much. Can you remind us what the volume change was D. John Srivisal: in TiO2 for the year for Tronox Holdings plc? Were you down about a couple of percent? Joshua Spector: And in that context, did the global TiO2 industry D. John Srivisal: contract a little bit in 2025, and if it did, by how much, in your opinion? John D. Romano: Yes. Thanks, Jeff. Your estimates on volumes Operator: Q3 2024 to 2025 are pretty close. John D. Romano: And I would say probably the market was somewhat similar to that. Again, it was, I would say, maybe a little bit more of a tale of what happened in the first and second quarter versus what happened in the third and fourth quarter. And, again, the fourth quarter, we saw a significant increase. I think we were targeting a 3% to 5% increase in volumes. We were up 9%. A significant amount of that was actually coming from volumes that came in Asia, predominantly in India. And a lot of that came from a shift in market share as a result of the antidumping duties. So we picked up volume in the Middle East, specifically in Saudi Arabia. We picked up volume in Brazil. And we picked up volume in India. And I made reference on the call about the shift in the first quarter. So in the fourth quarter, the duties were stayed, but they were still being collected. In December, a court ruling came which eliminated the requirement for those duties to be collected. So now you have got a shift of customers in India that are starting to buy more from China. We are still selling in India, but the volume between Q4 and Q1 is down. But we would expect that the antidumping duties are going to be reinstated, Duffy Fischer: and John D. Romano: once that happens, we will see that shift back to, you know, local producers, Western producers, including Tronox Holdings plc. Duffy Fischer: Okay. Joshua Spector: You have spoken of TiO2 prices as being at an inflection point. And D. John Srivisal: when you look at the global coatings industry in Europe, China, and the United States, Joshua Spector: it does not seem as though there is D. John Srivisal: much volume growth. You know, maybe it is up a tiny bit or down a tiny bit or flat. Operator: So what is it that makes Joshua Spector: us at an inflection point in TiO2 Justin Timothy Pellegrino: given a soft demand background. John D. Romano: Well, I think one thing you have got to reference is that since 2023, you have had 1.1 million tons of capacity go away. So any movement towards a regular buying pattern, where people were driving down inventories, created a significant shift. And then you have got the antidumping duties, which are also helping that. So I would not disagree with you that there has not been a move in demand. A lot of this has been structural shifts based on a lot of the proactive work that we have been doing as an industry to try to get the business in a profitable Duffy Fischer: place. John D. Romano: That being said, when we look into the first quarter, we are seeing volume growth in every region except Duffy Fischer: Asia—specifically India, as I just mentioned. And we are starting to see, you know, coating season, John D. Romano: which is normalized. Again, I made this point on the last call. If you think about the duty-affected areas at the peak of export from China into those areas—so Europe, Brazil, India, and Saudi Arabia—that is about 800,000 tons of exports from China. And, again, I made this comment last time. Use the U.S. as a proxy when the Trump 301 tariffs went into place back in 2018. In a 900,000-ton-per-year market where only 20,000 tons of TiO2 is being exported from China. So I am not assuming it is going to go to that. But if you think about—let us just say that there is half of that volume, half of that 800,000 tons gets distributed to other suppliers. Reasonable to assume that we would get at least 25% of that? That is 100,000 tons. And at that rate, we are sold out. We are selling more than we are making with our new footprint. And we have redistributed our products so that we can continue to service the customers that came out of Botlek, probably not so much in China, because we exited that market because it just was not profitable. Duffy Fischer: Okay. Great. D. John Srivisal: Thank you very much. John D. Romano: Thank you. Next question will be from John McNulty at BMO Capital Markets. Operator: This is Caleb Bonnellien on for John. So I have a couple of quick follow-ups. So to, I think it was Josh's question earlier on the production cost quarter over quarter. Joshua Spector: Do you expect that benefit to grow sequentially throughout the year, D. John Srivisal: or did I kind of, like, misconstrue what you were saying earlier? D. John Srivisal: Yes. I think it is—so some of it related to, you know, some improvements in our operating sites, which were challenged in Q4, as we have mentioned, from a Stallingborough perspective. So we do see our sites operating at a decent clip in Q1. So you should not see a huge increase from operating well or at higher rates. We are ramping up some plants a bit more, so you will see some of that. But a big driver is the sustainable cost improvement program that we will see get larger throughout the year. John D. Romano: Yes. So from Q4 to Q1, it had a lot to do with the higher costs rolling into, you know, our balance sheet from the outages that we had. But when you think about, on the TiO2 basis—I will not share a budget with you—but our costs were relatively flat throughout the year. With the forecast that we currently have, with running our mining operation at lower rates in the first half of the year than we are in the second half of the year, if we start to ramp up in the second half of the year, costs will go down on the mining side of the business. D. John Srivisal: Gotcha. Okay. That is helpful. And then what exactly are you thinking for, like, the base case for U.S. and China and the Chinese housing markets for this year that is embedded in kind of your free cash flow guide for the year? John D. Romano: Yes. Look. It is a great question. And I know a lot of the customers that we sell to are companies that you follow. I think a lot of it in the U.S. is going to depend on interest rates. So what I can say is that our volumes that we are forecasting right now for the year do not assume a significant swing up on the construction side of the business. Volumes are being driven a lot by the activities that were put in place for the shift on antidumping. There is some growth. We are seeing, you know, a seasonal improvement in Europe and in North America this year, similar to what we saw last year in the first quarter. And last year in the first quarter, we had a pretty good bump up on our sales. The reason it is not bumping up this quarter is because we are coming off of a very strong fourth quarter. So, you know, there has been a lot of investment in Germany. Germany is spending a lot of time trying to figure out how they can reengage that economy. So we are hopeful that the economy is going to pick up, we will see a swing in the construction market. But we are not planning on that being a crutch to lean on all year long. D. John Srivisal: Okay. That is helpful. Thank you. I will turn it over. Joshua Spector: Thank you. Operator: Next question will be for Peter Osterland at Truist Securities. Please go ahead. John D. Romano: Hey. Good morning. Thanks for taking the questions. D. John Srivisal: For TiO2, what are the dynamics around mix that you are expecting in the first quarter? On a year-over-year basis, is mix expected to be a headwind? And what are the major drivers there? John D. Romano: Well, Q4 to Q1, mix will be a tailwind on price. So as I mentioned, Asia—we sold a lot more in Asia, and there are some lower-margin sales in Asia in the fourth quarter. India sales in the first quarter are down for reasons that I explained. And we are seeing a seasonal build in Europe and in the U.S., which typically yields higher margins. So when I referenced first quarter, we are implementing price increases. We estimate those price increases to be 2% to 4%. That is a mix between actual price increases and the positive mix that we are getting from selling into higher-priced markets. Peter Osterland: Very helpful. Thank you. And then just as a follow-up, on the potential for higher zircon pricing beginning in the second quarter, could you just size approximately the price increase that you are targeting? And are you seeing market dynamics that are favorable enough to potentially support continued price recovery beyond the second quarter? John D. Romano: So we are negotiating with a lot of different customers. I cannot provide you with specifics on price, but I can say that I have got a high level of confidence based on what we are seeing right now that the increases that we are working on for Q2 will start to be implemented. And if the market continues Duffy Fischer: to John D. Romano: be tight—and, again, I made reference that our inventory is getting lower. We had a strong fourth quarter. Again, first quarter is going to be a mirror image of that. So I would expect that the industry is going to continue to get tight. We are also starting to see buying patterns from customers where they had destocked; they are restocking, getting back to normal buying patterns. We have seen—I think on the last call, I said we have started to see some positives on the zircon side of the business everywhere except China. Now we are starting to see some positive moves on the Chinese consumption. So it is a bit early for me to give you an annual guide, but I have confidence that, for lots of reasons, price momentum will continue beyond Q2. But it is still a bit early to call that definitively. D. John Srivisal: Great. Thanks a lot. John D. Romano: Thank you. Operator: Next question will be from Frank Mitsch at Fermium Research. Please go ahead. John D. Romano: Hey. Good morning, John. Listen. I mean, when I see something Duffy Fischer: like 13% volume growth at the same time that price is down 8%, John D. Romano: macro 101 suggests that there is a price war breaking out, and people are using price to grab volumes. You know, you have been outlining why that is not the case, but what are you seeing on behalf of the industry as a whole? You are announcing price increases. It takes two to tango. Is there some resolve in the industry, you believe, and some price discipline, given that we are at pretty low John D. Romano: profitability levels? Any color there would be very helpful. John D. Romano: Yes. It is a great question, Frank. Thanks. Again, I cannot speak to everybody. What I can tell you is what I hear in the industry, and that is everybody is announcing price increases. So we are not on an island. And, again, for us to be getting traction on prices, others need to be pushing. China has made some announcements. The question is, will they implement those price increases? There are other things that are going on as well. I mean, we talk a lot about antidumping. I mean, there is some activity going on to try to increase those duties in Europe. But the reality is profitability in the industry—you look at Duffy Fischer: Yeah. John D. Romano: fourth quarter EBITDA announcements by the publicly traded companies—there was not a lot of EBITDA there. And I do not—I cannot presuppose what is going to happen when other announcements happen, but I think the industry needs to get back to a profitable place. So part of it has to do with profitability, but at the end of the day, there has to be—to your point, it does take two to tango, and you cannot be on an island. I do believe that the industry is moving towards price increases. I cannot speak to exactly what that will look like, but I do think that, based on what we are hearing, we are not the only one announcing increases. D. John Srivisal: And I would say, you know, one contributing factor with our Chinese competitors is sulfur prices have gone up significantly. If you take a look at where they were since mid-2025, they are up 70%. So they are facing a big headwind on raw material costs. John D. Romano: Yes. I think that is a good point because it is not just Chinese. It is anybody that makes TiO2 on the sulfate base. So it is all the European sulfate producers. And John made that point: it is up 70% since July. Since 2025, it is up 160%. And that is not sustainable. It has a lot to do with the Ukraine-Russia war, but there are lots of reasons why prices need to move. But the point you made is the most valid one, Frank, and that is it all depends on how the competition works, and I cannot speak exactly to that other than we are not the only one announcing increases. Frank Mitsch: That is very helpful color. Frank Mitsch: And I appreciate the breakouts on Slide 6 and 7 in terms of what drove sales and what drove EBITDA. What jumped out at me was volumes sequentially increasing $56 million on the top line but $2 million on the bottom line sequentially. I was wondering if you could speak to the incremental margins on volume growth and what your expectations are there? John D. Romano: Great question. And, again, a lot of that has to do with a lot of the sales that we had, or a lot of sales growth we had in the fourth quarter. I would say the variance between the 3% to 5% guide that we had and the 9% that we actually achieved had a lot to do with where we sold it, and a lot of that in Asia. The significant portion of it was in India. Again, we are still competing with the Chinese over there. So it had a lot to do with where we are selling. So when we think about the volume shifting in the first quarter, it is shifting away from those markets. And that is why part of our margin improvement in the first quarter is being driven by mix. And that is regional mix, in addition to price increases. Frank Mitsch: Terrific. Thanks so much. John D. Romano: Thank you, Frank. Operator: Next question will be from Vincent Andrews at Morgan Stanley. Please go ahead. Frank Mitsch: Good morning. This is Justin Pellegrino on for Vincent. Justin Pellegrino: Was just hoping you could describe the next process and kind of the antidumping duty story here. What is the approach to take share from other Western suppliers for share that had originally been ceded to the Chinese? And then are there any other markets that you are watching for potential antidumping duty measures in the future? Thank you. John D. Romano: Yes. I will start with the last question, and I would say anywhere where there is TiO2 production, there is probably work underway to look at antidumping. I cannot go into any specifics, D. John Srivisal: but Duffy Fischer: you know, John D. Romano: this is a shifting tide. And as I have mentioned before, in Asia, China has largely saturated that market. But there are other areas where TiO2 is produced, and, you know, there is work underway in every one of those regions on antidumping. Could you restate your first part of the question again so I make sure I answered it? Justin Timothy Pellegrino: The next step? Absolutely. I was just kind of curious, you know, as we have Justin Pellegrino: seen these antidumping duties put in place, now that they are largely in place, what is the approach to take share from other Western suppliers—was originally share that was ceded to the Chinese? Is it largely a price dynamic? Or are there other competitive actions that you can take to gain share? John D. Romano: From other Western suppliers, I would say the majority of what we are doing with antidumping is actually taking share from China. So, again, when we think about our marketing plan, there are areas that are strategic for us, and we will continue to grow in those markets. But antidumping is largely going to be a structural shift where we are taking share that we basically lost to China as they were dumping. Not to say that we do not compete with all the other Western suppliers—we do—but antidumping is not really driving an opportunity for us to go out and do anything other than recapture share that the Chinese actually had taken based off of very low dumping prices. Justin Timothy Pellegrino: OK. Thank you. Operator: Next question will be from Roger Neil Spitz at Bank of America. Please go ahead. John D. Romano: Hi. Thank you very much, and good morning. Operator: And maybe you said it and I missed it, but if you exclude John D. Romano: for TiO2 price for Q4 on a year-over-year basis, or sequential basis, if you exclude the regional mix, which was an adverse mix, what was Operator: what was TiO2 pricing? Was it Joshua Spector: was it essentially flat, John D. Romano: was down 2%. And that was what we forecasted. Operator: OK. And Joshua Spector: the Stallingborough downtime, did you provide an EBITDA impact in Q4 from that? John D. Romano: About $11 million. Roger Neil Spitz: Got it. And lastly for me, have you or can you say what is the total fixed cost savings of having shed Botlek and Fuzhou on an annual basis? D. John Srivisal: So, you know, as we have—from a Botlek perspective—we have mentioned that longer term, the fixed cost leverage would be about $30 million of savings. And then Fuzhou would be about a $15 million savings. John D. Romano: And just to be clear, maybe on that Stallingborough comment, that outage is behind us. Roger Neil Spitz: Yes. Got it. Thank you very much for your time. John D. Romano: Thank you. Operator: Next question will be from John Roberts at Mizuho. Please go ahead. Please go ahead, Mr. Roberts. John D. Romano: Sorry. I was on mute. Should we think about normal, seasonal, sequential volumes after the March quarter? It has obviously been pretty volatile and unusual seasonality in the last couple of quarters. But is that, in your mind, kind of when we normalize again? John D. Romano: Yes. I would say even in the first quarter when we think about seasonal volumes—I made a reference that if you look at Europe and North America, the Q4 to Q1 growth is pretty similar to what we saw last year, and that was an uptick. And we are forecasting normal seasonal growth. To the extent we see more of a pickup in demand, and it is not just a structural shift, then you could get a bit of a higher bump on that. But I think a lot of that is going to depend on the housing market and what happens with interest rates. But short answer is yes. We would see more of a normal shift in seasonal demand. And could you share any updated thoughts on the proposed China acquisition of the idled U.K. TiO2 plant? John D. Romano: I can tell you that there is a lot of work going on there. There was an article that came out earlier this week. CMA is obviously investigating that. I think on the last call, we said that it is not a slam dunk. That is still a work in progress. And I cannot give you clear visibility on what is going to happen there, but there is a lot of, I would say, activity going on around that acquisition, and there has been no decision on how that is going to be concluded yet. Thank you. Operator: Next question comes from Aaron Rosenthal at JPMorgan Chase. Please go ahead. John D. Romano: Hey. Good morning. Thanks for the call. D. John Srivisal: Is your definition of cash flow that is being referenced both on the call and in the slides defined as cash from ops plus CapEx? Or is there an adjusted cash flow definition that we Justin Pellegrino: should think about? D. John Srivisal: And on that same front, what are your expected cash restructuring charges this year? D. John Srivisal: Yes. No, that is correct. It is free cash flow after—basically before the dividend and other debt movements. Then from a restructuring charge perspective, the vast majority of the restructuring charges were hit in 2025. So we do see a significant reduction—just about $6 million left there. And then China, we expect about $15 million or so restructuring charges related to that. So overall, a $50 million improvement on a cash basis year over year. Okay. Great. John D. Romano: Then just looking at liquidity and thinking about the cash flow bridge. So Q1 cash burn, I think, Q2 maybe flattish, and then an implied second-half cash generation. Roger Neil Spitz: But as you think about D. John Srivisal: effective liquidity, you know, pro forma at either 3/31 or into the second quarter, it seems like it is going to be very light and with very little margin of error. Are you entertaining any additional sources of liquidity in the near term? Equity is up a lot. Secured bonds are par. The market loves chems. It seems like right now it would be a very opportunistic time. D. John Srivisal: Yes. So we ended the year with $674 million of liquidity. So we believe that is a strong and sufficient amount of liquidity to manage through any cycle. We have said in the past that, you know, we can operate as low as $200 million or so of liquidity. We like to go into Q1 with over $300 million as that is the biggest use for us. So we are more than double the position of even being comfortable at a reasonable range. And so we are just focused on running the business, managing, you know, pulling levers that we can. But, you know, as we expect to generate a significant amount of free cash flow in the rest of the year after Q1, we think we are in a solid position. Justin Pellegrino: Great. And if I could just sneak maybe one more in. I think D. John Srivisal: beyond the primary cash flow revolver, there is a handful of other smaller facilities. I think there is one that was up for renewal. I think it was maybe $50 million or $60 million in 2026. Is the expectation that you are going to renew and extend that? D. John Srivisal: Yes. We normally get those renewed every year. We have a couple facilities in the U.K. and Saudi that we get renewed. Justin Pellegrino: Great. Thank you. Operator: Next question will be from Hassan Ahmed at Alembic Global. Please go ahead. Hassan Ahmed: Morning, John. John, obviously, a lot of comments made about volume growth Justin Timothy Pellegrino: in 2026 year on year. And then obviously, expecting a positive titanium dioxide sort of pricing inflection. So just wanted to sort of bring all of those factors together and seek some clarification. Look, I mean, my understanding is, and correct me if I am wrong, that you guys obviously had a very strong Q4 volume-wise. Right? So even if the market does not, demand-wise, grow that much this year, just, you know, for Tronox Holdings plc in particular, the sort of market share gains from antidumping and the like should put you in a very decent position to show meaningful volume growth year on year. So first part of that question is, is that fair to assume? And then, you know, obviously, restocking and maybe growth in the market would just be gravy from a volume perspective. And then, you know, alongside that, on the pricing side of things, it just seems that towards the end of last year, pricing got a bit sloppy. You know, you had a bankruptcy out in England. You know, there was this chatter about, you know, inventory being sold at below market pricing and the like. So a combination of maybe Roger Neil Spitz: the absence of that Hassan Ahmed: and a lot of folks not making EBITDA, you know, is that really what is driving your confidence in terms of getting pricing in Q1 and beyond? John D. Romano: Thanks, Hassan. I think I will start with your first part of your question, and you are exactly right. We are not forecasting a tremendous amount of demand growth. It has a lot to do with the restructuring of the business. And again, I made that reference if, you know, we only get— Duffy Fischer: if China keeps half the exports that they were exporting at the peak, John D. Romano: and we get 25% of that 400,000, 100,000 tons for us, and, you know, very quickly, we are sold out. To the extent market demand improves, then that is going to be additional volume for us. So we are not banking on a significant recovery. Although, as I mentioned last quarter, the market will recover. I cannot specify exactly, but we are starting to see seasonal trends that would lend themselves towards supporting that. So agree with everything you said from a demand perspective. On the pricing side of the equation, I would agree with you as well. You know, there were a lot of reasons why pricing should not have gone down in this fourth quarter. It did. We are starting to not only announce increases, we are implementing them in the first quarter. And, you know, kind of going back off the question Frank had earlier, you cannot do that if you are on an island. I tell you that, you know, if we are the only one raising pricing and Duffy Fischer: there is a John D. Romano: supply-demand that is out of balance, then it is hard to do that. So I would agree with that. And, again, you start to think about the recovery. The recovery is going to be an inflection that will be a bit different because there is a lot of Western supply that is just not there anymore because it is permanently closed. Every single Western supplier has closed plants. We have closed two. One supplier does not even exist anymore. And it was not like, you know, they were not a good supplier. So I would agree with everything that you said. And if the market picks up, and interest rates start to move and housing moves in the right direction, that will only be a catalyst for higher pricing. Hassan Ahmed: Very helpful. And as a follow-up, obviously, everything pointing towards 2026 certainly being a better year than 2025. And, you know, hopefully, you know, things cycling up thereafter. I mean, you know, with that said, where do we stand in terms of rationalization? I know you talked about it in prior calls, even on this call—that 1.1 million ton figure of capacity shutdown since 2023. Are you—I mean, with this sort of improving backdrop—what are your thoughts about further rationalizations? Particularly as they pertain to China? I keep sort of thinking through, you know, at least 20 facilities in China being less than 50,000 tons. So how does the whole sort of anti-involution thing play in? And does further rationalization happen if indeed the environment is getting a bit better? John D. Romano: Yes. It is another good question. The closure of our Fuzhou plant was not an easy decision, and it was not as if it was low on the profitability wheel in China. We do not get subsidized. But, you know, it is a great question. I would have thought capacity would have closed already. And to the extent these antidumping initiatives continue to expand as we believe they will outside the regions they are already implemented in, you are going to have to see some kind of rationalization. And, again, is it going to be in China? Will it be outside of China? I think there could be a mixture of both. I cannot tell you how long sulfur prices are going to be up. But that is a significant headwind in the industry right now. Prices up in twelve months almost 160%. That is not sustainable. It takes about 1.3 tons of sulfur to make a ton of pigment. So you do the math. It is a lot of money. So I would expect if the market continues to recover quickly, maybe you will not see as much. If it takes a bit longer to recover, you might see more rationalization. And China is still kind of an unknown. I would have expected more capacity to come out already. Hassan Ahmed: Very helpful, John. Thank you so much. John D. Romano: Thank you. Operator: Ladies and gentlemen, this concludes the question-and-answer portion as well as our conference call for today.