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Evan Gappelberg: This is the beginning of what I believe will be a long and powerful exciting journey. And so it's way bigger than just this quarter. The global events industry is transforming. AI is the thing that's transforming it. We are at the forefront of that. It's reshaping how enterprises connect, engage and communicate. And we're really just getting started, Steve. Steve Darling: Welcome back inside our Proactive newsroom. And joining me now is Evan Gappelberg. He is the CEO of Nextech3D.AI. And Evan, good to see you again. How are you? Evan Gappelberg: Great. Great to be back, Steve. Steve Darling: Yes. So the company out with your Q3 2026 numbers and Evan, just off the top, very strong numbers. I imagine you're pretty happy with what you're seeing. Evan Gappelberg: I am. And I just want to address our shareholders because let's be honest, a lot of companies didn't make it through this last bear market cycle. We did. And not only did we survive, but we came out of it stronger, leaner and more focused and more determined than ever. While others were pulling back, we kept on building. While the market lost faith, we stayed committed to our vision. And now, Steve, with 59% revenue growth, with 95% gross margins, which is unheard of and accelerating enterprise adoption, I can feel the shift, you can feel the shift. I think our investors can feel the shift that this momentum is very real, and this is the beginning of a powerful new growth curve for Nextech. And again, as we go forward, we're looking at even better growth in the quarter ahead. This quarter, Steve, really marks a true inflection point for the company. It wasn't just a strong quarter. It was an inflection point. And it really signals, I think, to the market and especially to me that this is real and that we have emerged from this bear market over the last couple of years, leaner and stronger than ever. Steve Darling: Let's talk a little bit about those numbers. You mentioned 59% revenue growth. Talk to me a bit about where that revenue is coming from and how you look to improve on that in the coming quarters to come. Evan Gappelberg: Yes. So as you mentioned, it's not just the 59% revenue growth, that's huge. But we also showed 20% sequential growth, which means quarter-over-quarter, and record gross margins, all at the same time. That's a very, very powerful combination. And what you're seeing is the beginning of a new sustained growth curve as our unified AI Event platform gains real traction in the enterprise market. And let's just be clear, Steve, this is about enterprise, enterprise, enterprise. Enterprise deals are the big deals. These are the deals with the Googles, the Meta, the Microsofts, the BNP Paribas, which we mentioned. So this is just the beginning of a much larger acceleration. We're still in the early innings. The momentum we're seeing is just the start. So our pipeline going into the next quarter, which we're in now, we're already halfway through is larger, stronger and more enterprise-focused than at any time in our history, except maybe back in 2020 during COVID, which was like a 1 in 100-year thing. So you can't really look at that, but we expect next quarter to be even better. We expect the quarter we're in to be even better than this quarter with accelerating platform adoption and a growing number of high-value enterprise deals. So to answer your question, it's a platform strategy. The revenues coming from all of our businesses, it's working exactly as designed, Eventdex, MapD, and Krafty Labs, although Krafty Labs wasn't even in this quarter. This quarter was not including Krafty Labs. This was just Nextech with Eventdex. And even with Eventdex, it wasn't for the full quarter. So enterprise is the main event. One platform is the main event, and the best is still about to show up in the quarter that we're in and the future, Steve. Steve Darling: Yes. Just on that Krafty Labs, that was my next question was really about that and that it wasn't included in this yet. They come into the company already generating revenue. So it sounds like it's in a good position as the company moves forward. Evan Gappelberg: Absolutely. Krafty Labs is a very, very exciting acquisition for us. It's the second acquisition we've made in really just over a quarter. So as we rolled into the end of 2025, we acquired Eventdex and then January 2, we acquired Krafty Labs and Krafty Labs is gaining enterprise adoption rather quickly. We have some really big news coming on Krafty Labs in the coming weeks ahead. Krafty already has hundreds of Fortune 1000 companies, Google, Microsoft, Meta, Netflix, General Motors, BNP Paribas. These are existing customers. And so these global companies really validate the technology and help build trust around the Nextech ecosystem. And really, that's what we're building. It's -- when you get into an enterprise deal and then we expand that into our ecosystem, and we're seeing that starting to take hold where there's a much, much larger multiplatform opportunity that we're starting to just take advantage of. Steve Darling: So Evan, I guess the message you're trying to send everyone is that you're seeing momentum and you want people to understand the momentum of the company? Evan Gappelberg: Yes. I mean the message to our shareholders really is thank you for your confidence. Thank you for your support, for your long-term belief in our vision. We are entering a new phase of scalable, high-margin growth, and we're just getting started. As the CEO, but also as the largest shareholder and someone who believes deeply in what we're building together, this quarter really wasn't just another financial report, and it shouldn't be seen as that. It was a clear signal that Nextech has turned a corner, and we're stepping into a completely new phase of growth, 59% revenue growth is a huge achievement. But what matters most isn't the numbers themselves. it's really what it represents. They represent proof that our strategy is working. They represent validation from some of the biggest companies in the world. They represent momentum that is now building faster than ever before. So this is the beginning of what I believe will be a long and powerful exciting journey. And so it's way bigger than just this quarter. The global events industry is transforming. AI is the thing that's transforming it. We are at the forefront of that. It's reshaping how enterprises connect, engage and communicate. And we're really just getting started, Steve. And in the next couple of weeks, we're going to be unveiling the next-generation platform for our investors and stay tuned for that. Steve Darling: All right. We'll leave it there. Evan, thanks so much. Good to see you again. Evan Gappelberg: Thank you, Steve. Steve Darling: Evan Gappelberg, the CEO of Nextech3D.AI.
Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin shortly. Hello, everybody, and welcome to the Lemonade, Inc. Q4 2025 earnings call. My name is Elliot, and I will be coordinating your call today. If you would like to register a question during today's event, please press 1 on your telephone keypad. I would now like to hand over to the London team. Please go ahead. Good morning. Welcome to Lemonade, Inc. Fourth quarter 2025 earnings call. Executive: Joining us on our call today, we have Daniel Schreiber, CEO and Co-Founder; Shai Wininger, President and Co-Founder; and Timothy Bixby, Chief Financial Officer. A letter to shareholders covering the company's fourth quarter 2025 financial results is available on our Investor Relations website at lemonade.com/investor. I would like to remind you that management's remarks made on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent Form 10-K filed with the SEC and our more recent filings with the SEC. Any forward-looking statements made on this call represent our views only as of today. We undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, including adjusted EBITDA, adjusted free cash flow, and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key performance indicators, including number of customers, in-force premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio, CAT, trailing twelve-month loss ratio, and net loss ratio, and a definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. With that, I will turn the call over to Daniel Schreiber for some opening remarks. Daniel Schreiber: Good morning, and thank you for joining us to review Lemonade, Inc.'s results for Q4 2025. By any measure, this was our strongest quarter ever, and it capped a year of excellent financial execution and operating performance. In the fourth quarter, in-force premium grew to $1,240,000,000, up 31% year over year, and this extended our streak of accelerating growth to nine consecutive quarters. Revenue grew even faster, up 53%, reflecting both growth and improving economics across the business. Indeed, I am pleased to share that this growth translated directly into profitability metrics. Gross profit increased 73% year over year to a record $111,000,000, and if I zoom out to take in a three-year perspective, our gross profit has been compounding at an annual compounded growth rate in the triple digits. As a result, adjusted EBITDA loss narrowed to just $5,000,000 in the quarter, placing us on the brink of breakeven, and this represented a $19,000,000 improvement year over year. Indeed, we generated $37,000,000 in positive adjusted free cash flow in fourth quarter, capping a strong year of cash generation. 2025 was our second consecutive year where we saw our cash reserves swell. Somewhat unusually, insurance is a business that tends to turn cash flow positive before GAAP accounting positive. There the one almost inevitably follows the other. This then is as good a spot as any to reiterate a longstanding expectation that we will be EBITDA profitable in Q4 this year and EBITDA positive for the full year of 2027. We continue to be highly focused on growth and accelerating growth because it is a gift that keeps on giving. Faster growth drives better data and further sharpens our segmentation and pricing capabilities. This powers improving underwriting performance and rapid gross profit growth, and we can swiftly redeploy gross profit thus generated into profitable growth investments with compelling unit economics. And so the cycle continues. It is energizing to see the flywheel continue to compound even as we scale. What is particularly encouraging is that all this progress is broad based. Pet, car, and Europe are all coming into their own as powerful growth drivers, each combining hyper growth with improving underwriting performance. Our shareholder letter, we highlight critical initiatives we are investing in this year to leverage the latest AI technologies to further enhance our go-to-market operations, pricing, and cross-selling capabilities. We believe that these initiatives can drive durable competitive advantage in and unit economics that support our ability to sustain an industry-leading gross profit growth profile for years to come. One last thing, I wanted to take a moment to draw your attention to our upcoming Investor Day. This event is scheduled to take place in November in New York and online. Specifics will follow, and we certainly hope you will be able to join us for significant updates on our vision, AI capabilities, and ambitious plans. I will now turn the call over to Shai Wininger. Shai Wininger: Thanks, Daniel. Shai Wininger: Key vector for us is autonomous insurance, and specifically Lemonade autonomous car, which we announced and launched a few weeks ago starting with Tesla. As physical objects such as vehicles increasingly shift from being controlled by humans to being operated by AI, insurance needs to evolve as well. Historically, the industry has priced auto insurance using proxies—credit scores, marital status, education, and other similar features. We always believe that telematics is a much more precise tool than this blunt proxy, measuring the driving itself rather than something broadly correlated. But when a car is not driven by a human, these proxies lose touch with reality altogether. Lemonade autonomous car is priced based on three modes: when a car is parked, when it is driven by a human, and when it is driven by AI. By integrating directly with the car's onboard computer, we can tell which mode that car is in at any given moment, distinguishing between various kinds of risk and pricing each accordingly. When the car is driving itself, and doing so more safely than a human, the price reflects that. Our system accounts for the vehicle's software version, as well as for the quality and precision of the hardware—sensors and computational unit. As the car becomes better and safer with software updates or hardware upgrades, our pricing will automatically respond and continue to drop. As of this moment, autonomously driven miles using Tesla's FSD are priced at about 50% of the equivalent human-driven mile, and we expect this to get better over time. We believe this represents a fundamental shift for the industry. As autonomous driving becomes safer and more widely adopted, prices should fall transparently, dynamically. With that, I will hand it off to Timothy Bixby who will cover our financial performance and how to Tim? Thanks, Shai. Timothy Bixby: Let's start with our Q4 scorecard. In-force premium grew 31% year on year to $1,240,000,000.00, driven by customer growth of 23% and premium per customer growth of about 7%. We added about 550,000 new customers 2025, 35% more than the prior year. Prior period development, within our reported gross loss ratio of 52%, our favorable of 9% was driven entirely by non-CAT prior period development, primarily from our home and car products. Prior year development, which we report on a net basis, was $11,000,000 favorable in Q4 and about $30,000,000 favorable for the full year. Gross profit increased 73% to a $111,000,000 while adjusted gross profit increased 69% to a $112,000,000, for a gross margin of 48% and an adjusted gross margin of about 49%. These metrics use revenue as their denominator. As a reminder, adjusted gross profit as compared to gross earned premium was 39% in Q4, up 10 points from 29% in the prior year. Revenue grew 53% to $228,000,000 while our adjusted EBITDA loss improved to a loss of just $5,000,000. Notably, revenue grew more than 20 percentage points faster than IFP, a dynamic we expect to continue. Importantly, adjusted free cash flow was positive for the third consecutive quarter at $37,000,000, has been positive six of the last seven quarters, while operating cash flow was $21,000,000. We ended the quarter with roughly $1,100,000,000 in cash and investments, of which about $250,000,000 is required to be held as regulatory surplus. Annual dollar retention, or ADR, remains stable as we continued our clean-the-book efforts in our homebuzz home business at 85%, flat versus the prior quarter. Operating expenses excluding loss and loss adjustment expense increased by $30,000,000, or 24%, to a $154,000,000 in Q4 as compared to the prior year. Let's break those expense lines down a bit. Our other insurance expense grew by just $1,000,000, or 6%, in Q4 versus the prior year, as compared with 31% growth rate of our top line IFP. Total sales and marketing expense increased by $17,000,000, or 35%, due primarily to increased growth spend versus the prior year. In Q4, growth spend was $53,000,000, up 48% as compared to the prior year. Importantly, as we continue to ramp growth spend, our marketing efficiency levels remained stable and strong in the fourth quarter, with an LTV-to-CAC ratio above three times in line with prior year. We expect Q1 growth spend to be at a similar level as Q4, and expect a total growth spend of about $225,000,000 for the year. Technology development expense was up 14% year on year to $25,000,000, while G&A expense increased 29% as compared to the prior year to $43,000,000. The year-on-year increase in G&A expense of roughly $10,000,000 was made up primarily of three items: an increase in non-cash stock compensation expense of about $2,000,000, an increase in interest expense of roughly $1,000,000, and an increase in bad debt expense of approximately $5,000,000. Our headcount increased slightly by about 4% as compared to the prior year to 1,282 in Q4. Our net loss was $22,000,000 in Q4, or a loss of $0.29 per share, as compared with net loss of $30,000,000 or $0.42 per share in the prior year. Our adjusted EBITDA loss was $5,000,000 in Q4, dramatically improved versus a $24,000,000 EBITDA loss in the prior year. Our detailed guidance for Q1 and the full year of 2026 is included in our shareholder letter and represents 32% Q1 and full year top line growth year on year, roughly 60% full year revenue growth, and, of course, positive full-quarter EBITDA expected in Q4. I will now pass back to Shai Wininger to answer some questions from our retail investors. Shai Wininger: Shai? Thanks, Tim. Shai Wininger: We now turn to our shareholders' questions submitted through the SafePath. Timothy Bixby: There were a couple of questions from Paperbag about our loss ratio and recent autonomous car insurance launch. Thanks, Paperbag. As we have explained on a few occasions before, perhaps in more detail during our most recent Investor Day, we do not think of loss ratio as a standalone target, but rather as one metric or lever to optimize our quest for maximizing gross profit. Sometimes, gross profit is achieved by lowering loss ratios, sometimes by raising them. Shai Wininger: Our pricing strategy is solving for maximum gross profit in absolute dollar terms, Timothy Bixby: rather than any ratio. Turning to our total car product, with our telematics infrastructure, we are able to evaluate and price the risk associated with every driven mile accurately. In the case of Tesla FSD, the data we have shows that miles driven with it are more than 50% safer than when driven by a unit. This allows us to drop rates and become more attractive to customers versus peers, which is in turn lowering the customer acquisition cost and helps us win and retain more business. Responding to your question about our 30% growth, I would think about this autonomous car insurance launch as a first step of a much broader strategy and direction that will materialize over time. Shai Wininger: Indeed, it could take years before we see a step change in autonomous car ownership, and with that said, we believe it is critical to begin now with building the best product for that future. Timothy Bixby: With the best experience, pricing, underwriting, and coverage. In the near term, as we highlighted in our shareholders letter, our growth drivers are increasingly diverse, diversified, such as we are not reliant on any one segment or product line to drive growth above 30%. Pet and car are both seeing ISP growth in the fifties, and Europe in the triple digits, for example. In another question, we were asked how soon car will expand to remaining U.S. states. We launch new states as soon as we can from a regulatory perspective, Shai Wininger: but only after we are confident that we can competitively and profitably price risk in each state. Timothy Bixby: Our improving car results, both top and bottom line, speak for that discipline. Launching a state requires thoughtful preparation from marketing, pricing, product, tech, legal, and finance perspectives. With our local platform and the agentic automations we are constantly layering into it, we are becoming very effective in this process, collapsing stages that used to take months into days. Shai Wininger: Believe we now have the most advanced regulatory and compliance process in the market, and we are only getting started. Timothy Bixby: That said, Shai Wininger: states we have already launched Timothy Bixby: represent roughly 50% of the U.S. car insurance market, a TAM measured in many tens of billions. Shai Wininger: And car is available to about 60% of our existing customers. We have been launching multiple car states since 2025, Timothy Bixby: and expect to continue to launch new states with our autonomous car product throughout 2026. By 2027, Shai Wininger: I expect the Lemonade car product Timothy Bixby: to be available to the overwhelming majority of the U.S. population. In another question, Charwak asked, with AI simplifying the insurance industry, what will keep Lemonade, Inc. in an advantaged Shai Wininger: position over incumbents who might be willing and ready to modernize their software stack? Timothy Bixby: How does Lemonade, Inc. continue to differentiate and stay ahead? This is a question we get a lot, and I think the answer comes down to structural and cultural differences that are nearly impossible to overcome. Lemonade, Inc. was built as an AI-first organization ten years ago. Every team member was hired into that environment. People who did not thrive in a tech-first, fast-paced culture like ours moved on. Today, estimate more than 95% of our team operates with an AI-first mindset. Our product and tech organizations are the core of the company, which makes us product-led, Shai Wininger: customer-centric tech organization. In many ways, the AI explosion is the moment Lemonade, Inc. was built for. Timothy Bixby: We built the data infrastructure from day one. We collect every signal, Shai Wininger: and we have been doing so for a decade. Timothy Bixby: We have a highly rated app that customers love and actively use, Shai Wininger: which keeps them connected and allows us to continuously optimize pricing for the safest customers. Now compare that to traditional choice. Timothy Bixby: These are companies built on the foundations of people, not technology. They treat tech as a cost center, not their core. They rely on third-party vendors that are themselves built on legacy systems, which leaves insurers with hundreds of disconnected systems they need to run their business. It is very hard for an organization like that to compete with a full-stack, tech-first company like Lemonade, Inc. In fact, in the history of all tech revolutions, you can probably count on the fingers of one hand the companies that dominated Shai Wininger: prior to the tech revolution Timothy Bixby: and still were there in a dominant position when the dust settled. Shai Wininger: It would be naive to expect that incumbents will be in this place forever. Timothy Bixby: Of course, they are already talking about increasing investments in AI and sharing a case study here and there, but by the time they make meaningful progress, we believe we will always be several steps ahead. In the next question, CyberKat asked, Shai Wininger: how does Lemonade, Inc. think about AI reducing uncertainty while creating new risk categories? I have to say, CyberKat, that a shrinking TAM does not keep us up at night. Timothy Bixby: Even if AI compresses pockets of TAM, the resulting market opportunity remains essentially limitless relative to our current size. But with that said, I agree with the premise of your question. Shai Wininger: We are already seeing this in our existing suite of products, with the expansion of autonomous driving. Timothy Bixby: I think it is true that AI will continue to redefine the insurance industry with regards to the types of risks and product that are relevant over time, perhaps in ways that are not immediately obvious today. With that, I will pass it over to the moderator and we will take some questions from Operator: Thank you. If you would like to ask a question, please press 1. When prepared to ask your question, please ensure your device is unmuted locally. First question comes from Jason Helfstein with Oppenheimer. Your line is open. Please go ahead. Jason Helfstein: Hi, everybody. Thanks for taking the question. So when we look at the numbers, we can clearly see on the in marketing efficiency. You obviously talk about it. We can see it kind in a contribution margin. When I think about what that kind of implies to 2026, it would like that looks like the EBITDA guide would be particularly conservative unless you plan to make other OpEx investments or essentially kind of, like, lean into potentially pricing for growth. Operator: So Jason Helfstein: maybe talk about how you are thinking about that, i.e., reinvesting marketing efficiency into growth? Or just that it is conservative. And maybe, tie that you made three points in the earnings letter, that you plan to lean more into cross-selling Operator: and Jason Helfstein: kind of automated pricing and improved pricing accuracy. So maybe just, like, take those three comments, and I do not know if you want to link that back to, like, the first question or, you know, if it is connected. Thank you. Timothy Bixby: So I will take a a a shot at a a subset of that, Jason, then maybe my partners will jump in. Daniel has joined me here, and we have also asked Nicholas Stead, our SVP of Finance, to join us to perhaps answer a few questions. If I kind of think, you know, zoom out and think about 2026 generally from a growth perspective, you know, actually, Q4 was a pretty good proxy for how we are thinking about it. So you saw a couple things happening really coming together in Q4. Certainly, the underwriting or loss ratio side of the business came in very nicely. But from a growth perspective, which is really the core of the focus right now, which is how do we grow effectively? How do we maintain an LTV to CAC that we are comfortable with, number one, and excited about improving over time, number two, and how do we lean into that over time? And so you saw that come together nicely in Q4 where we are able to see free up a little more spending, free up a little more capital to invest because we saw nice underwriting results, and we plow that back into additional growth. So you see overperformance on the top line versus our guidance. That is because we deployed a little more growth spend than anticipated, and that is a good thing. So that is a backward-looking view. If you take a forward-looking view into 2026, we are guiding to our, you know, very strong track record of being able to maintain a solid LTV to CAC of three or better. We do see here and there in certain pockets in channels and certain products and certain geos is overperformance, and that is when we are able to lean in. So I think what you see embedded in the guidance is some of that continued goodness, but we have not changed our philosophy of taking everything good happening in the most recent period and extrapolating that forward. So I think you are right. There is probably a similar potential to overperform. We think growing a little bit faster each quarter is important, and we grow at a pace of our own choosing. Guiding to 30% plus, obviously, the market will enable us to do more. It is essentially an endless market. But I think for at this point of the year, we are six weeks in. We like what we are seeing in January and February to date, and so that guidance reflects real optimism about being able to spend more—significantly more—in 2026 and in 2025. That is a continuing trend and to potentially see that growth rate accelerate. Daniel Schreiber: Yeah. I agree with everything. Is there anything I would say, Jason, hi. Thank you for your question. There is not designed buffer or conservatism built into the number. We are guiding as best we can as we always do. Operator: We do always look for opportunities to surprise ourselves and you and everybody, but our guiding strategy is to go into pretty much what we have line of sight to. And Daniel Schreiber: what I think may be making the difference that you are kind of pointing to is captured in some of the things you referenced, which is we are investing quite a lot of R&D work this year. So we highlighted three areas of investment. There are others that we did not detail, and even those we just touched on in passing, but we are undergoing very significant investments really that compound one another. Operator: We see 2026 as a year of multiple engineering efforts Daniel Schreiber: quite aside from the fact that the ground beneath our feet is moving because the models keep getting better and better. Every day we wake up to a more powerful Operator: brain at the very core of what we are doing. But beyond that, Shai mentioned the local platform that is going to look very different by the 2026 and is at the beginning of the year. Daniel Schreiber: We spoke about our cross-selling platform, our pricing machine as we are calling it, and our revenue machine. Operator: All big initiatives that should collapse time, increase Daniel Schreiber: precision, and ultimately lower expenses. But perhaps some of the delta that you are pointing to and that you are assuming is conservative Operator: is actually going to be spent on those initiatives. Nicholas Stead: That is not in Jason. It is—hey, Jason. It is Nick. I just wanted to jump in on your question around expenses in 2026. You can think about operating expenses as being broken into two chunks. There is growth spend and then the remainder of operating expenses. Growth spend will continue to increase in 2026, as it has in 2025 and 2024. The remainder of the expense base should generally remain stable or closer to stable, growing in the single digits as compared to the top line, which is growing above 30%. Operator: We now turn to John Barnidge with Piper Sandler. Your line is open. Please go ahead. John Barnidge: Thank you very much. I appreciate the opportunity. My question is about adjusted EBITDA profitable in 2027. Timothy Bixby: How do you think about the target for premiums to surplus at that time? John Barnidge: And do you think he can operate at greater leverage given some of the operational scale he has begun to achieve? Thank you. Timothy Bixby: Yeah. So from an EBITDA—maybe two questions in there, perhaps. From an EBITDA perspective, we do expect Q4 this year, 2026, to be fully positive as well as the full year of 2027, which would be the first full year of EBITDA positivity. While we have not indicated growth rates beyond 2026, we have been in our communication that a 30% plus growth rate is our goal, and an accelerating growth rate quarter is also our goal. And so I would expect that ambition to continue into 2027 and beyond, given the immense size of the market that we are in and the markets that we can potentially be in. From a surplus leverage perspective, we noted that we have about $250,000,000 currently that is held as required for surplus. That is relatively quite capital light. You take advantage of a captive structure, and we have reinsurance in place and other structures that in combination enable us to keep that surplus satisfactory for all regulatory requirements, but also to a minimum, so that we can deploy capital in all the ways we choose to to grow the business. We expect that to continue. All of our forecast modeling tells us that we have more than ample surplus to support very ambitious growth rates even beyond our current growth rate, and with ample cushion left over. And I think you can take real confidence. Our forecasted breakeven points for EBITDA has essentially been unchanged for almost four years at this point. Operator: So Timothy Bixby: our visibility is quite good. Our leverage enables us to continue to be capital light, and we are more than sufficiently capitalized to grow at really ambitious paces. Operator: Through 2027 and beyond. Thank you. We now turn to Tommy McJoynt with KBW. Your line is open. Please go ahead. Tommy McJoynt: Hey, guys. Good morning. Thanks for taking our questions. Jason Helfstein: The first one here is, obviously, there has been a lot of headlines around some advancements in ChatGPT and sort of the integration of carriers with that distribution model. Do you guys have any plans to allow, you know, tools like ChatGPT to actually bind policies for Lemonade, Inc., or would the preferred route be to use ChatGPT as a search tool that ultimately leads to Lemonade, Inc. where they could bind the policy. Operator: I was talking on mute all this time. I am sorry. Timothy Bixby: Daniel, please continue. Yes, sir. Operator: I am so sorry. I am so sorry. Daniel Schreiber: Let me start over. Can you hear me okay now? Operator: Okay. Jason Helfstein: Yeah. Operator: Okay. I gave you a wonderful answer, but it was all lost because I was on mute. I that is right. Timothy Bixby: What I was saying was that Operator: we use AI in many, many of our marketing. At the moment, it is not on the most front-end aspect Daniel Schreiber: of our marketing, but everything other than the skin-deep kind of chat interface, which ChatGPT has integrated with some players—obviously, the skin on in—it is all AI. When it comes to that outermost layer, Operator: we generally love our own AI for that. My Daniel Schreiber: bot does and has done a great job chatting with customers, offering them an incredible experience. That is not to say that we would never use something like a ChatGPT interface, but it is not something we have launched yet, and if we decide to do that, you will be the first to know. Tommy McJoynt: Okay. Understood. And then switching gears, as you guys have rolled out this autonomous vehicle insurance product on the car side, that obviously introduces a variable level of premium that is charged to customers on either a, you know, six-month basis or a monthly basis. Is it your vision that over the long term, most car insurance will move to a variable level of pricing rather than, you know, a fixed six-month term premium? Daniel Schreiber: Yes and no. We, today, have both models. We have models where you can pay for Operator: and we have others where it is fixed and it is kind of customer's choice. We do not have all objections in all the markets right now, but is where we see this going and several states are there already. Daniel Schreiber: And this is really a Operator: choice, a style choice. You know? If you want, you can remember the early days of mobile where you could pay by minute or by Daniel Schreiber: plans and family plans and other things where you bought buckets and roll of the month and all that kind stuff. We think there are plenty of ways to do pricing around it. The big difference between what we are doing and everybody else is that we know the cost per mile. We are making predictions. Shai spoke about this in his comments earlier. Timothy Bixby: We are making predictions Operator: based on Daniel Schreiber: a plethora of data that comes to us in real time at very high granularity from really high-fidelity machinery. Allows us to know that when you are driving Operator: where you drive, how much you drive, how you drive, if it is Daniel Schreiber: you driving with a car. All of that means that we can price per mile with tremendous Operator: precision. If you then prefer to buy a bulk and have a fixed Daniel Schreiber: price, that is fine. We can use all of that information in order to price it for you as a fixed price Timothy Bixby: which will correct. Operator: Episodically, and other people prefer to pay per mile, and we offer that as well. Daniel Schreiber: Both of them are fueled by the same AI engine and dataset onto me. Operator: Thank you. As another reminder, if you would like to ask a question, please press 1 on your telephone. You now turn to Jack Matten with BMO. Your line is open. Please go ahead. Jason Helfstein: Hey. Tommy McJoynt: Good morning. Just a follow-up on the strategic initiatives in each about it in the letter, including the enhanced cross-sell platform. Just wondering if you could unpack that a little bit more. I know it references cross-sell car and home. And over the past year or so, think you have deemphasized home insurance growth a little bit. So just wondering how you view that line of business and as part of Lemonade, Inc.'s overall mix longer term? Timothy Bixby: Sure. So Shai Wininger: that was a Timothy Bixby: a good tidbit that we put in the shareholder letter to give a feel for the kinds of things that not, in a year when we are really continuing to focus on growth, on autonomous car, on really nice financial results, we are also continuing to invest in farther-reaching capabilities that we think over time will continue to not only help us maintain our advantages, whether AI-enabled or otherwise, but actually to expand those advantages versus incumbents. And those three areas we noted are really the core of what is a lot of interesting activity going on in terms of investment in future stuff. Cross-selling continues to be important. More than 5% of our customers have multiple policies at this point. That is a really important metric. Almost 20% of our in-force premium, however, is coming from customers with multiple policies. So cross-sell, our ability to cross-sell, which is a really efficient way to increase IFP and accelerate growth without quite as much of a growth spend investment, is important. And then the other two pieces—really pillars—of the are underwriting capability, which is pricing; constantly focusing on being able to de-average price and pricing, price on a car driver's behavior and not under credit score; and also to optimize how we allocate growth spend. So those are really three of the real key areas we are continuing to invest both with current resources, and actually, we will grow those resources to some extent over 2026. All of that is embedded in the guidance. All of that, we expect to deliver significant future Operator: ROI. Timothy Bixby: Yet when you peel it all apart, our overhead expense, even with those incremental investments, is growing very modestly in the low single digits. An operating expense standpoint, almost our entire growth and expense is on growth expense to acquire new customers. That is a theme you have seen now for several years running, and that will continue, we expect, well into 2026, 2027, and beyond. Jason Helfstein: Got it. Thanks. Then, I just just wanted the Tesla FSD Tommy McJoynt: initiative, and I appreciate the color you gave earlier on this. But just wondering if you could unpack the opportunity you see for Lemonade, Inc. and how much you think it could eventually contribute to the share of your business. And then just given Tesla also has its own insurance offering, can you just talk about how Lemonade, Inc.'s positioning, you know, is offering from a competitive standpoint? Timothy Bixby: We love talking about Lemonade, Inc., but we will shy away a bit from talking about Tesla and their plans and their goals. They are a terrific partner and setting a standard in so many ways, but we will let them speak for their goals and aspirations. From our view, we want to be where our customers are and where our customers are going. We have got a paper-mile product in place for years. It is not right for every customer, but it enables us to do what we are best at, which is take deep levels of granular data and use that to price a customer most effectively, and often that is to give the customer a better price. An autonomous vehicle, autonomous driving is called an electronic or without question. Shai Wininger: Pricing Timothy Bixby: the driver of the car, that is whether that driver is a human driver or an AI driver or no driver at all. The risk is still there, and we are best placed in the market to be a—I think, we think—to be a partner to Tesla, but also to be a—kind of lay the groundwork as this part of the car market evolves. We think it helps us accelerate things that change more quickly, play to our best strength, which is agility and a data-driven platform. And so we are really optimistic about it. Jason Helfstein: We do not Timothy Bixby: little premature for us to say the impact on the financial and forecast model is. And as Daniel said, when it is the right time, we will certainly do that. You will be the first to know. Operator: Thank you. Ladies and gentlemen, we have no further questions. So this concludes our Q&A and today's conference call. We would love to thank you for your participation. You may now disconnect your lines.
Operator: My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Six Flags Entertainment Corporation 2025 fourth quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question and answer session. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to the Six Flags management for opening remarks. Please go ahead. Good morning, everyone. And thank you for joining us to discuss Six Flags Entertainment Corporation's Michael Russell: 2025 fourth quarter and full year results. My name is Michael Russell. I'm Corporate Director of Investor Relations for the company. Earlier this morning, we issued our earnings release which is available on the Investor Relations section of our website. Before we begin, I'd like to remind you that today's comments include forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of those risks. Joining me today are President and Chief Executive Officer John Reilly, and Chief Financial Officer Brian Witherow. John will kick things off with his observations of the business since joining the company late last year. Brian will provide a review of our financial and operating results, then John will close things out with his outlook for the business and how we are approaching the 2026 season. We will then take your questions. With that, I would like to turn the call over to John. Thanks, Michael, and good morning, everyone. John Reilly: Thank you for joining us for our fourth quarter earnings call and my first earnings call as CEO of Six Flags Entertainment Corporation. On today's call, I will start by providing some background information on my experience in the industry, why I jumped at the opportunity to become Six Flags' next CEO, and my initial observations after spending the past two months on the ground. First, a little bit about me. I started out in the regional theme park business many years ago, selling popcorn as a teenager, before working my way up to executive positions in two of the world's largest regional amusement park companies, one based here in the U.S., and the other based in Europe. Theme parks are in my blood, and I am very proud of the work I have done at each career stop to deliver exceptional experiences for our guests, to provide a fun and dynamic work environment for our team members, and to drive higher profits for our owners. So what excited me about the opportunity to join Six Flags? First, I love this industry. The regional theme park is a resilient and growing industry, with high barriers to entry leading to limited supply, resilient performance during recessions, and consistent demand when parks are well managed. In addition, Six Flags Entertainment Corporation has a dominant position within the industry, as the largest regional theme park player in the world. Michael Russell: Second, John Reilly: Six Flags parks are located in some of the largest and fastest-growing markets in North America. There are more than 200,000,000 people living within easy driving distance to our parks, providing a huge opportunity to increase our penetration and to grow attendance over time. And finally, this company has tremendous assets and significant earnings potential. Throughout my career and, particularly as I have assumed executive-level positions over the past decade, I have often been tasked with turning around underperforming assets. I can tell you this: There is no better feeling than unleashing the potential of a talented team of people to revise strategy and to improve execution, all with the goal of delivering sustained earnings growth over time. I am not here to spend time on the past. I am here to build a disciplined operating culture that consistently delivers reliable, fun, and memorable guest experiences, as well as dependable financial outcomes, and to earn credibility with our guests and investors quarter by quarter. This role is personal for me. Growing up in the theme park industry, I know what great looks like. Over the past several weeks, I have been spending time in our parks. A lot of time. Walking the midways, meeting with park leadership teams, conducting focus groups with guests, and engaging with our frontline associates. Those visits have been invaluable, and they have reinforced my conviction about the underlying strength of our company. What I have seen reinforces two things: The underlying demand is there, and the biggest value creation opportunity is through better execution. Let me just share a few examples from my park visits, because I believe they highlight the kind of high-return work that can change consumer perception and quickly improve results. At Six Flags Magic Mountain, I visited the park's maintenance shops during my tour, and from my interactions there, it was clear the maintenance team took great pride in their efforts this past year to restore coaster trains, put them back into service, driving better ride uptime, more rides for guests, and higher guest satisfaction. With a fleet of more than 60 coaster trains, we will benefit from their hard work and our investments even more so going forward. We are already seeing positive signs of this work and investment in guest KPIs in 2025 and early in the 2026 season. We expect to see significantly increased ride uptime and throughput at Magic Mountain and at other parks. Important work like this is going on in all operating areas across our parks. On the food and beverage front, we have placed executive chefs in the park to elevate food quality and improve guest satisfaction. During my tour of Carowinds, Eraj, our executive chef there, showed me how innovations are expanding the park's menu offering this year, and he and his team explained how they are more efficiently approaching food preparation during varying demand levels, with monitored holding times to ensure guests are getting the freshest and best-quality food. The placement of chefs has been fully deployed already, and now with the right resources in place, we are positioned to reliably deliver higher quality food across our parks. Our scale provides us with a clear mandate to constantly improve efficiency. As I have traveled to parks and conducted leadership town halls, I am encouraged that our park teams are not only embracing the challenge, but taking pride in driving efficiency. They are committed to do this work the right way, always protecting the guest experience. When I visited Kings Island, our maintenance team shared their idea how we could save thousands by purchasing certain equipment we are currently renting. I can assure you this is something we are digging into further. During my stop at Canada's Wonderland, Vivendra, our workforce director, proudly explained how his efforts ensured labor is being scheduled according to forecasted demand levels, so that park labor is deployed at the right time and the right place throughout our entire enterprise. Effectiveness in this area helps reduce costs and ultimately helps drive improved guest spending. The workforce management program was deployed across the portfolio year, and now we stand to benefit from the resources and systems that are in place to drive efficiency and increase reliability in our business. Having been through this process a number of times, I can assure you this: The best ideas and highest-return innovations come from the people closest to the work. At Six Flags, that is our ride operators, our maintenance teams, food and retail leaders, call center teams, finance and accounting staff, among others. Michael Russell: Therefore, John Reilly: we have recently created a formal feedback channel for associates to submit their ideas for innovation at all our parks. So far, we have received more than 300 proposals from our parks alone, recommending projects to create efficiencies and automate workflows. These submissions are currently under evaluation, as we look to activate the ideas with the highest paybacks. We want to recognize great ideas, reward them, and scale what works across our entire park portfolio. Everyone should expect a faster operating cadence and higher accountability across the board. We are committed to the operations levers that drive our guest experience in our business: reliability, throughput, cleanliness, value, and fun events and experiences. By mastering these, we will fuel demand and increase guest spending. Moving forward, we will simplify our processes and remain highly disciplined about where we invest to ensure maximum returns. For our employees, my commitment to you is to provide clear standards, to remove obstacles to progress, and to make decisions quickly so you can do your best work. For our guests and fans, when you come to our parks, your entertainment experience each visit should meet or exceed your expectations. We want you back, so we plan to earn your trust to ensure that happens. With that, I will turn it over to Brian to walk through the quarter and full-year results in more detail. I will then share some thoughts on our initial areas of focus. Brian? Thanks, John, and good morning, everyone. I will begin with a recap of our fourth quarter and full-year results before providing an update on select balance sheet items as well as early performance indicators for the season ahead. For the fourth quarter, we are in the middle of our guidance range. Brian Witherow: Delivering adjusted EBITDA of $165,000,000 on attendance of 9,300,000 guests and revenues of $650,000,000. Two dynamics impacted the quarter. First, results for the quarter were up against a performance in October 2024, which we discussed on our last earnings call. Secondly, operating days in the winter holiday calendar mattered a lot. We operated 779 days in 2025, versus 878 days last year. As was expected and as we discussed last quarter, a significant portion of the decline in operating days reflects our decision not to operate winter holiday events at four parks, a decision that was made earlier in the year. In hindsight, that decision did not optimize profits at every park the way we needed it to. Those events can be meaningful demand drivers; removing them created a self-inflicted headwind in terms of both attendance and operating leverage. We are taking that learning directly into our planning for 2026, and we will rethink the winter holiday strategy with a tighter, returns-driven approach market by market rather than applying a broad brush. And while weather created variability in the quarter with 15 park closure days versus three last year, the more significant impact on demand was our decision to eliminate the winter holiday events, which created an attendance headwind of approximately 425,000 visits. At the same time during the quarter, spending by guests visiting our parks was strong. Per capita spending was up year over year supported by higher guest spending on admissions and on in-park products. That matters because it reinforces that when guests get through the gates, there is clear opportunity to drive revenue and profitability through better execution, including higher throughput, better staffing alignment, efficient food and beverage operations, and overall guest flow. For the full year, we produced net revenues of $3,100,000,000 and adjusted EBITDA of $792,000,000 while entertaining 47,400,000 guests and delivering per capita spending of $61.90. Similar to the quarter, the year reflects a mix of strong guest spending and execution gaps that impacted attendance and operating efficiency, particularly around the operating calendar. We are using those outcomes as inputs into a tighter operating plan for the upcoming season, with a focus on consistency and repeatability across the portfolio. As we noted on our last earnings call, this past season taught us a lot. It proved to be a tale of two cohorts. Our best-performing parks overcame their operating challenges, and in several instances, parks delivered record or near-record years. At the same time, there were other parks in our portfolio that were not as well positioned to withstand the operating challenges. The stark difference in park performance reinforces the notion that some of the profitability challenges we faced in 2025 were episodic, execution related, rather than structural or systemic in nature. This distinction matters as we strategize our path forward. Turning briefly to the balance sheet, in early January, we completed a significantly oversubscribed refinancing of our April 2027 notes at attractive rates. It is an important step in strengthening our capital structure and increasing financial flexibility as we focus on execution and performance. We have substantial covenant cushion at extended maturities and a clear deleveraging framework. Our leverage reflects 2025 depressed EBITDA, not structural over-indebtedness. Touching quickly on our longer lead indicators, at year end, deferred revenues were up approximately 1%, driven primarily by higher advanced sales of single-day tickets and increased deposits from our group business channel. More importantly, sales trends of season passes and memberships have accelerated since year end, supported by our new season pass architecture that includes guest access to multiple parks via newly designed regional pass products. While this represents a small sample size, the improved sales from the past few weeks are an indication that the strategic changes we have made are resonating with consumers. We are entering the most important part of the selling season with improving momentum, clear offerings, and a stronger platform to convert demand into park visits, a dynamic John will speak to in more detail in just a moment. Lastly, while we are not issuing formal guidance, our internal plans for the season are built around improving revenue and cash flow relative to 2025. With that, let me turn the call back to John. John Reilly: Thanks, Brian. Let me build on that with how we are approaching the business as we plan for 2026. While demand was pressured this past year, spending by guests who did visit remained solid. That and the early strong response to changes we have made to our pass programs that Brian just mentioned tells me something important: The revenue engine is intact. This is not a broken model, but one that requires sharper execution, clearer focus, and tighter alignment between commercial strategy and operations. The opportunity is to run this portfolio with greater consistency, more disciplined decision-making, and a refined playbook to convert demand into durable earnings and stronger cash generation. I am early in my tenure, and I will not pretend to have every answer. But I have spent my career in this industry, and I know what high-performing parks look like. And what I see across this portfolio are very addressable opportunities that can unlock meaningful upside under disciplined execution. Brian Witherow: First, we are evaluating how we go to market. John Reilly: We operate powerful regional brands, and we must deploy them with greater precision. Our guests are not identical market to market, and our marketing strategy should not be either. Over the past year, we saw the same promotion produce very different outcomes across regions. This is not a demand problem. It is an opportunity for us to better tailor our efforts to our local communities by applying tighter test-and-learn discipline. Marketing then becomes a demand lever, not just a traffic driver. Pricing is part of that same reset. Our architecture must be simpler, clearer, easier to communicate, across ticket types, passes, and add-ons, with fewer and stronger offers that improve conversion and yield, better alignment between promotional timing, operating calendar, and staffing levels, not simply to produce more demand, but more profitable demand. Operator: Second, John Reilly: we are driving consistency of execution and margin expansion. This business rewards operational excellence. A portfolio of our size should benefit from scale, and our guests should experience reliability everywhere—parks open on time, rides operating consistently, clean park environments, energized teams. Brian Witherow: To deliver that, John Reilly: we have tightened our operating procedures, established clear standards, defined measurable KPIs, and developed protocols for rapid follow-through. A critical lever in this effort is throughput—how efficiently we move guests through every touch point. Brian Witherow: Entry gates, parking flow, food service, John Reilly: retail counters, and ride operations. Throughput directly influences guest satisfaction, in-park spending, and improves cost efficiency. Third, we are applying disciplined ROI standards to our business Michael Russell: decisions. John Reilly: Every investment must answer a simple question: Does it enhance the guest experience in a way that drives profitable demand, reduces cost, or strengthens free cash flow? And does it do so at returns that justify the investment? That discipline applies to events, rides, and attractions at every level. Our experience with several winter holiday events this past year provided valuable lessons. We will approach seasonal programming with market-specific rigor, clear ROI thresholds, and test-and-scale methodology. It applies equally to capital investment. Safety and ride reliability are nonnegotiable. Beyond that, discretionary investments will prioritize projects that attract incremental visitors, improve throughput, enhance guest value, and generate measurable returns. And some of the highest ROI opportunities are operational improvements—reducing downtime, eliminating inefficiencies, and standardizing systems that allow our teams to perform at their best. Taken together, these actions are designed to accelerate attendance recovery, deepen guest engagement, and restore durable earnings power. Let me wrap up with these closing thoughts. Our near-term priorities are clear: Improving profitability, strengthening the balance sheet, concentrating our time and resources on the assets and initiatives that generate the highest returns. Six Flags Entertainment Corporation is a company with unique assets and significant earnings potential. Together, our teams are working to further our progress on elevating the guest experience, realizing the benefits of our incomparable scale to improve efficiency and margin, correcting missteps in marketing and operations, and continuing to create financial flexibility through deleveraging and disciplined capital allocation. We will be transparent about where we are. We will move decisively on what we can fix. And we will earn credibility and your trust the way it should be earned—through execution and results. The opportunity in front of us is meaningful, I am energized by what I have seen across the parks, I am confident in our path forward, and excited about what we can deliver together. With that, operator, please open the line for questions. Operator: We will now open for questions. Please press star followed by one on your telephone keypad. Your first question comes from the line of James Lloyd Hardiman of Citi. Your line is now open. Hey. Good morning. Thanks for taking my questions. And, John, certainly welcome aboard. John Reilly: I I James Lloyd Hardiman: in your prepared remarks, I think you said something along the lines of you are not here to spend time in the past. But I wanted to maybe take a minute and just get your thoughts on 2025 in its totality, you know, maybe do a brief postmortem here in an effort to sort of diagnose some of the problems that you are gonna be looking to solve for in 2026. And maybe specifically, if—and this is a question I get a lot, I am sure a lot of other people get this question a lot—like, how do we put the various issues into buckets? Right? Clearly, there are some cyclical pressures here. Clearly, there were some weather issues in 2025. I think you guys have spoken to maybe some unforced errors along the way. And then there is this sort of secular piece, right, that I think a lot of people struggle to identify, much less quantify. But, you know, ultimately, is there changing consumer behavior here at play? I think one of the other statements you made is that you think this is a resilient and growing industry, so maybe you do not think that there is, you know, meaningful changes there. But maybe help us put some of the issues into these categories so that we can get a better framework for the, you know, business going forward. Thanks. Operator: Yeah. Thanks for the question, James. Michael Russell: So John Reilly: when we say we are not here to dwell on the past, it does not mean we are not taking the lessons that we have learned from 2025 and correcting missteps and addressing other opportunities as we see them. So, you know, first, if you look at the consumer, we launched products in markets, as we said, that were not sufficiently localized. And in some markets that produced some abrupt changes. As we were integrating—and in those markets, the consumers were used to different messaging. In some cases, they were confused about their benefits on passes, for example. In some cases, they were paying more for a pass than they felt they had paid in the past. And so we are looking at all of those opportunities and then looking to address that misstep. So Brian mentioned on the pass program, we recently, I think two weeks ago, launched a regional pass. This is a really powerful product. And we are, you know, we are in the very early stages. Brian Witherow: But John Reilly: we see opportunity here, and we see increased cross-visitation. We see people in markets where we have membership moving to membership. So in terms of the consumer—no. We do not think this is a consumer problem. We think we can address this through improving our execution and through addressing some missteps and learning from what was done last year. And then, also, I would say in terms of performance, we have a clear mandate to do margin work. And our scale gives us that mandate. And you see in the numbers, we closed out at 27%. And we need to do better than that. And I am encouraged by what I am seeing internally that the team is embracing this challenge and doing it the right way. So we see opportunity on that front, and we are working to execute a number of initiatives there. The other thing I would say about 2025, James, is since joining the company, I have been surprised. You know, I could see the performance from the outside. But since I have joined the company, I have been surprised at the level of foundational work that was done in the integration. So in parks, bringing coaster trains up to full capacity as we had discussed. Improvements in parks, our tech stack, a lot of that work is behind us. And so as you look forward at our capital spending, it will be less in terms of IT and technology going forward. You know, we have ERP systems in place. And then the condition of the parks has been a positive indicator for me. I have been to 14 so far. So I will qualify that to say I have not been everywhere. And we have opportunities like any park chain. But it is better than I expected. So I think in terms of the consumer, we do not see any sign there is an issue with the consumer. We think we can address that through our own behavior, through our own plans. In terms of margins, we are working clearly on that. And then I think that a lot of the foundational work, especially in terms of the parks themselves, has been laid, which should help us as we go forward. James Lloyd Hardiman: That is a really good outline. And maybe to the latter point, about cost and margins, just curious to hear your philosophy as it relates to cost. Obviously, there is a fine line between sort of streamlining the cost structure and, you know, impairing the customer experience and, by extension, the demand of the business along the way. So maybe speak to how you have, you know, operationalized some of those cost savings at previous stops. And then, Brian, I think we have maybe lost a little bit of a thread in terms of the cost savings that were previously outlined. Maybe give us an update—what has been completed, how much is left for 2026, and if there is anything incremental that is been identified. Thanks. John Reilly: So I will start over, and then I will turn it over to Brian, James. In terms of the line between the guest experience and cost savings, I think the thin line you mentioned, I would say it is a red line. And that is what I have learned in doing this cost work in other chains. You have to protect the guest experience. It has to be a guardrail. Every initiative has to be weighed and measured. Brian Witherow: And you have to be willing to reverse if you do something that ends up with an unintended consequence. John Reilly: What really works here, I gave some examples on the call, but we have these 300 ideas that were under evaluation. And, you know, maybe just some specific anecdotes will give you an idea of the power of this. You know, we have a suggestion from Magic Mountain where they are renting an air compressor for $32,000 a year. It will cost us $35,000 to buy one and take that rental out of the P&L forever. At Knott's Berry Farm, it will cost them $14,000 to buy a forklift that we can capitalize. It costs us $19,000 a year to rent it. And then there are a lot of ideas like that where they are just one-offs from parks, and we can scale them across the enterprise. We have not begun to do that work yet. So storage units for events. We are in the event business in a big way. We are going to be in the event business as we go forward. But we are renting equipment that we could buy for the same price that—for the same price we could purchase it for. And then automation—parking lots, automated entry at tolls, other things—those can actually improve the guest experience while creating efficiency. There are a lot of studies that show that guests actually prefer that type of frictionless entry. So I am confident that we will do the cost work the right way. I have done this before. We will renew the initiatives because at the same time, we are working to improve the guest experience. Brian Witherow: Yeah, James. And then as it relates to your follow-up, you know, in terms of the original gross cost synergies that were part of the merger, we have effectively delivered on 100% of those by the end of 2025. But as John just outlined, you know, we are not satisfied or stopping there. We are going to continue to look for more meaningful opportunities to offset other cost pressures, other inflationary pressures that are in the business, whether that is through more efficiency initiatives, a few of which John just gave some examples to, additional and further standardization of procedures and policies. And then, you know, as you are fully aware, right, labor is our largest single cost. You know, more labor productivity improvements in the system. So not going to put a specific number on it at this point in time. A lot of work is in motion, and there is more to be done, but we are confident that we can get more efficiencies rung out of the system over the course of 2026. Great color. Thank you both, and good luck. Michael Russell: Thanks. Operator: Next question comes from the line of Arpine Kocharyan of UBS. Your line is now open. Good morning. Thanks for taking my question. John, it is very clear you know and understand this business well. If you look at the performance for 2025, it was clear to even someone that is not an operator, right, that decremental margin and some of the underperforming parks is very large. So my question is, do you feel like you have a good handle on capturing that this year regardless of demand? In other words, a leaner organization that is more flexible to adapting to demand levels, or do you think it can take some time to get to that leaner organization? John Reilly: Yeah. What I can tell you is that the work is underway to improve the margin, to work on these initiatives that we have mentioned both in workforce deployment, in efficiency, automation, and in other efficiency initiatives that we have underway in the company. I do not have a timeline today to get to a specific target. I have, you know, I am just joining here. But as I said before, 27% gives us a mandate. And I have been quite encouraged by our team members who are embracing that and embracing doing it the right way. So we have to do it the right way. The work is underway. We believe there is considerable opportunity over time. And then the last thing, I think, that you mentioned in terms of organization, you know, getting the organization to do that is also very important. What we are doing is important, but I think the why, the how. You know, we believe strongly in pushing more decisions back, with local input, to the parks. We believe strongly in simplicity. We need more urgency in the organization. More localization. And more accountability, quite frankly. So we are working while we work on the initiatives, we are working in the spirit of more accountability, more localization, and more urgency in execution to get it done. Operator: Okay. Helpful. Thank you. Then a quick follow-up. I was curious how you think about asset optimization, and it could be early still, since you, as you said, you just got there. It is clear, you know, there are at least maybe six to eight parks generate less than 5% of EBITDA in this portfolio. At the same time, it seems to me it is not straightforward to even decide what can be pruned because there will be underperforming parks that are worth investing in to improve operations, and maybe there are assets that is not quite worthwhile to invest in. How do you think about that? Michael Russell: Yeah. We John Reilly: we approach asset evaluation through a disciplined return framework. We have rigorous work underway on that front in terms of assessing. But our highest ROI parks represent the core of the portfolio. And certainly, as you mentioned, there is a—done right, this could benefit leverage to optimize the portfolio. But really, one of the opportunities that we are looking at is the strategic focus it gives us, in order to be able to dedicate management time, expertise, know-how, capital investments, resource allocation. And I think that has, in the longer term, the potential to be the greater benefit. Thank you. Operator: Your next question comes from the line of Steven Moyer Wieczynski of Stifel. James Lloyd Hardiman: Yeah. Hey, guys. Good morning. And, John, welcome in. So I guess my first question is around guidance or lack of guidance for this year. Brian, you kind of touched on this in your prepared remarks. But maybe wondering what drove the decision not to give formal guidance. And then maybe from a high-level perspective, Brian, if you could give us some color on maybe how you think the year could play out, whether that is from an operating days perspective, whether that is from an attendance perspective, anything there would be helpful. And then, Brian, also, do you have forecast for CapEx and interest this year as well? Thanks. Operator: Hey, Steve. John Reilly: John. I will start and then turn things over to Brian on the latter part that you mentioned. Look, in terms of guidance, I just got here. You know, I have been on the ground just a little bit over two months. Now is not the time for me to come out with guidance. We are really early in the season. We have some nascent signs of growth, but it is too early to go down that road. And we want to earn your trust with execution and results over time. And, you know, just for me, two months is not enough. We are confident, however, that we have the opportunity in volume, pricing, operating costs, off the 2025 base to begin to deliver sequential improved results. I will turn it over to Brian for the second part there. Brian Witherow: Yes, Steve. In terms of operating days, as we alluded to in the prepared remarks, there is still work being done in the field as we challenge our park leadership teams to ensure that we are, you know, we are optimized on the operating day front and the operating calendar. And so there is still an opportunity to see this move. But if we look at our outlook for '26, sans the sunset park in Bowie, Maryland, I would say that the overall operating days right now are expected to be up slightly, maybe as much as 1%. That could change as we get, you know, further into the year and the opportunity to potentially add back a winter holiday event, as an example, or two. Those decisions, you know, will be made, you know, in the next several weeks. But that is the outlook on that front. In terms of CapEx, we are still expecting that our spend is going to be in the $400 to $425,000,000 range for the calendar year 2026, versus a cash spend this past year of closer to $475,000,000, and interest is expected to be in the $135,000,000 to $145,000,000 range. James Lloyd Hardiman: Okay. Gotcha. Thanks for that color. And then second question, you know, back to you, John. You mentioned in your prepared remarks you have a history of working with, you know, with so-called underperforming parks. So as you have kind of had the chance now to go through the portfolio, it sounds like you have been to, you know, about half of the portfolio at this point. What would you say as you kind of think about the underperforming parks, what are some of the top two, three, four things that, you know, you can identify and potentially make John Reilly: changes to. And I am not sure that makes sense, but hopefully it does. Yeah. I think it is a good question. So I would say that the top takeaway I have as I have toured the parks and then as we have—Brian and I and the teams in the parks and in the park support center here—is that the issues are not systemic. The issues are market by market, park by park. And, for example, you know, we have parks where price—you know, maybe price was an issue in terms of lost opportunity. We have parks where attendance was an issue. And we have parks where cost was an issue. And then we have parks that, you know, where two of those were a factor. So I think the key for us is to approach these parks issue by issue and to address it that way. And that is how—so that is how we are approaching the 2026 plans for these parks. Brian Witherow: It is not systemic. John Reilly: In some parks, we have opportunities, and, you know, for example, as I traveled to Mexico—mean, this is a great park and a great market with great weather. And so, for example, I think in Mexico is a place to lean in. We are going to add over 20 operating days in Mexico. Brian Witherow: So, you know, it really is case by case. That is a different situation than John Reilly: many other parks. So it really varies by site. Operator: Okay. John Reilly: Thanks for the color, guys. Appreciate it. Michael Russell: Thanks, Tate. Operator: If you would like to ask questions, please press star followed by one on your telephone keypad. Again, if you would like to ask a question, please press star followed by one on your telephone keypad. Your next question comes from the line of Thomas L. Yeh of Morgan Stanley. Your line is now open. Brian Witherow: I wanted to ask about the particular strength in per cap in 4Q. I know the shoulder season has some mixed factors to it, but you maybe just talk about the sustainability of that growth? And Thomas L. Yeh: Brian, I think you mentioned pass uptake improvement, recognizing it is still early in the cycle relative to last year, can you share how units and pricing are pacing on a blended basis given some of the uptake on the higher priced regional passes? Brian Witherow: Yeah. Maybe I will start with the latter, Thomas, and then John can provide some color after that. But, you know, on the season pass side, we are not going to give, you know, specific metrics at this point in large part because it is a small sample size. And I think sometimes, you know, the law of small numbers, right, some of these percentage year-over-year variances, you know, can be a little less informative than not. But we are encouraged not only by the volume and the pickup in that, but also, you know, with the reconstructed architecture of the pass, you know, as we talked about even last year, moving over to a single unified ticketing platform is going to give us more opportunity, more flexibility around things like the regional pass. We are seeing folks migrate up to more higher-priced products. I guess, I would say it that way. And, you know, that is certainly helping at certain parks in regards to that average price. Now, not all of our parks are in right now, as you know, Thomas. And so that is, you know, you have got not only a small sample size in terms of window of time, but also in terms of the parks that are in play. So, you know, there is more work to be done, but the team is very encouraged by the early signs there. In terms of per cap, again, very encouraging. Fourth quarter is not—as you get deeper into the quarter, not nearly as meaningful in terms of the number of parks in operation or the total number of days, say, third quarter—but seeing the impact of some of the late-season changes we made around promotions and pricing benefiting the admissions per cap, as well as then seeing guests continuing to spend inside the park on those in-park products like food and beverage, extra-charge attractions, to name a couple. It is very encouraging. And I think supports what John said before, which is we do not see a problem with the consumer or the health of the consumer. They are spending when they visit our parks. And, you know, our job is to just continue to find ways to improve that demand level. And I would say, this is John again. John Reilly: The, you know, as we said, the solid spending that we saw a sign that the revenue engine is intact. Along with the regional pass that we have laid out. But I would—I am taking the fourth quarter in-park per caps with a bit of caution. Because there is a lot of change in there with the reduction of the events, with the reduction of the operating days. Brian Witherow: With the change in John Reilly: both the mix of visitors by ticketing category because of the loss of the events and the mix of parks because of the loss of events. So, Michael Russell: you know, as we look at Brian Witherow: 2026, we expect growth John Reilly: in our in-park spending, but I think we are going to be careful about modeling what we saw in Q4 going forward because of the sort of noise in the quarter. Thomas L. Yeh: Okay. Understood. That is very helpful. And then one last one, just on the points about optimizing the investment structure. Wonder if you could just drill down a bit more on planned marketing spend because last year, I think you leaned into areas that did not stimulate as much demand as you desired. Just maybe any insights on unpacking the right level for that. Was it allocation issue? Or was it, you know, just kind of marketing into a weather situation that was the problem, how would you approach kind of taking that into the knee season? John Reilly: Yeah. So I would look at a couple of factors when we look at our marketing spending. I would look at, number one, the timing of the spend is something that is under evaluation. So, you know, we need to be sure that we are putting it in the right period of year that gives us the highest return on the ad spend. So that is one thing that is under review. We also have to look at the—you know, in terms of the power of the return on marketing, we have to look at the quality of creative. So the team is doing a lot of work to address some creative that they do not feel was as effective as it should have been last year. And then finally, in terms of our marketing spend, just more of the general sense, we have to look at our mix of awareness versus conversion spend. And, you know, one of the really great things about these parks is we have very high unaided awareness in our markets, but we are doing a lot of awareness marketing. And we think there is an opportunity to move more of our spend into dedicated conversion. So those are just three more general factors, if it helps, that are some of the work underway. Thomas L. Yeh: Yeah. Very helpful. Thank you. Operator: Next question comes from the line of Adam Fox of Truist Securities. Your line is now open. John Reilly: Yeah. Hey. Good morning. This is Adam on for Patrick Scholes. Just wondering if there is anything, you know, going back to the park ops optimization efforts, if there is anything you can share about Enchanted Park Holdings in particular? Thanks. Yeah, Adam. We do not have anything to share today on that front. Okay. Thank you. I will pass it along. Thank you. Operator: Thank you. Our last question for today comes from the line of Anthony Burney of Jefferies. Your line is now open. Brian Witherow: Hey, good morning. This is Anthony on for David Brian Katz. Thanks for taking our questions. The first one is, can you talk a little bit about your capital allocation priorities? How should we weigh deleveraging versus CapEx spend? John Reilly: And on CapEx, can you provide any ROIC targets that you have for that spending? This is John. I will start out. You know, first, what I would say is we have sufficient flexibility in our CapEx spend. You know, once we look at what is required for maintenance, which we would, you know, which we would always do, the remainder—you know, there is a lot of discretion in terms of attraction investments and other investments. I would say in terms of a change in focus or an accelerated change in focus would be CapEx dated to efficiency and automation that we talked about early. But we feel, you know, overall, we have a good amount of flexibility in the plan even when we address the maintenance CapEx as a given. Brian Witherow: Yeah. And I think, Anthony, just maybe adding on to that, you know, as we have been very clear, you know, in addition to, you know, continuing to reinvest in the parks and to drive growth, to mine more of those cost efficiencies, as John just mentioned. We are looking to those projects—we are going to focus those on our highest and best ROI, certainly looking to exceed our weighted average cost of capital in any of those investments. But our priority, you know, in addition to growing the business through the right level—and we think that the $400 to $425,000,000 for plan for 2026 includes a very attractive and comprehensive capital program. Beyond that, it is continuing to funnel all of our excess free cash flow back towards paying down debt until we get net leverage back inside of 4.0x on a sustained level. Okay. Very helpful. Thank you. And just a quick follow-up. D&A was a little elevated this quarter. It seems it was due to some changes in accounting. Should we expect this to be sort of the new run rate for D&A? Or is this a one-time change? Yeah. I would say you are right. I mean, it is a little bit of accounting noise, related to some purchase price adjustments on some of the legacy Six Flags parks as well as an accounting change related to the Cedar side, the legacy Cedar side of the ledger. I think, at this point in time, sans any significant change in the asset base, that is sort of the normalized run rate for Steven Moyer Wieczynski: for the go forward. John Reilly: Great. Thank you very much. Michael Russell: That concludes Operator: today's question and answer session. I will now turn the call back to Michael Russell for closing remarks. Michael Russell: Thanks again, everybody, for joining us today. Our next earnings call will be in early May when we will report our financial results for our February. Ellie, that concludes our call today. Thanks, everyone. Operator: For attending today's call. You may now disconnect. Goodbye, everyone.
John Streppa: Good afternoon, everyone, and welcome to Amplitude's Fourth Quarter and Full Year 2025 Earnings Call. I'm John Streppa, Head of Investor Relations. And joining me today are Spenser Skates, CEO and Co-Founder of Amplitude; and Andrew Casey, Chief Financial Officer. During today's call, management will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full year 2026, the expected performance of our products, our expected quarterly and long-term growth, investments and our overall future prospects. These forward-looking statements are based on current information, assumptions and expectations and are subject to risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those described in these statements. Further information on the risks that could cause actual results to differ is included in our filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and we assume no obligation to update these statements after today's call, except as required by law. Certain financial measures used on today's call are expressed on a non-GAAP basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be used in isolation from or as a substitute for financial information prepared in accordance with GAAP. Additional information regarding these non-GAAP financial measures and a reconciliation between these GAAP and non-GAAP financial measures are included in our earnings press release and the supplemental financial information, which can be found on our Investor Relations website at investors.amplitude.com. With that, I'll hand the call over to Spenser. Spenser Skates: Good afternoon, everyone, and welcome to Amplitude's Fourth Quarter and Full Year 2025 Earnings Call. Today, I'm going to cover 3 things: First, our strong Q4 results and progress in the enterprise. Second, how AI is driving demand for analytics, and our strategy to deliver. Third, a look at our new AI agents in action and a spotlight on customer stories. Q4 represents one of these strongest quarters in Amplitude history. Our fourth quarter revenue was $91.4 million, up 17% year-over-year and exceeding the high end of our revenue guidance. Our annual recurring revenue was $366 million, up 17% year-over-year and up $18 million from last quarter. This was our highest net new ARR quarter since 2021. Non-GAAP operating income was $4.2 million or 4.6% of revenue. Customers with more than $100,000 in ARR grew to 698, an increase of 18% year-over-year. Over 25 AI companies are now included in that $100,000 cohort as well. This quarter was marked by balanced execution. No single deal was over $1 million, yet we had our highest ever number of multiproduct and $100,000 ARR lands. I want to talk more about AI and our strategy. Over the past year, AI coding assistance from Anthropic, OpenAI, Cursor and others have compressed development cycles dramatically. The velocity at which companies are shipping new products has accelerated. When software is this easy to build, it creates a gap between how fast teams can ship features and how fast they can learn if they are working. This shifts the pressure to the right side of the product development loop that you see here, the use and learn side. Understanding how users behave, what works and what doesn't and what actions to take next becomes the bottleneck. The constraint is no longer knowing how to build, it is knowing what to build instead. This is the hardest problem in software today. I say that because builders and their AI assistants need a system of context that combines multiple data streams. They need structured behavioral data. They need the correct retention and funnel logic, and they need the right analytical tools exposed in a way that enables AI to reason effectively. The AI then needs to be able to iterate with that system, test hypotheses, refine queries, identify root causes and recommend actions accurately and repeatedly. This is not something that can be bidecoded over a weekend or replicated accurately with an LLM on a data warehouse. However, it is exactly what Amplitude is purpose-built to do. We have worked with thousands of companies over the past 13 years and amass the world's largest database of user behavior. Our AI can explore patterns, explain changes and guide teams on what to do next more accurately and reliably than any other system. Over the past 6 months, our Agentic analytics platform has reached a 76% success rate on complex production-grade queries, that is 7x better than a straight text-to-SQL approach. With the new agents we launched yesterday, teams can now move from insight to action in minutes, not weeks using analytics, cohorts, experiments and messaging in one continuous agenetic workflow. Through our MCP integrations with Anthropic, Figma, OpenAI, GitHub, Lovable and Slack, we are bringing behavioral intelligence to teams where they already work. Understanding user behavior now becomes as simple as asking a question in a chat window. This puts Amplitude in a unique position. The frontier labs are pushing the boundaries of AI models and they recognize the complexity of analytics experimentation and behavioral understanding, so they turn to Amplitude. As I mentioned earlier, more than 25 of the leading AI native companies, including some of the names you see here, our customers with over $100,000 in ARR with Amplitude. In addition, one of the world's largest frontier AI labs is a 7-figure customer as well. They came to us to replace a manual system built from fragmented internal tools and raw warehouse data. Using Amplitude Enterprise Analytics and Session Replay they can now understand activation, engagement, retention and monetization end to end. With Amplitude MCP, they can offer those insights directly within the AI environments, their teams already use, dramatically improving the ability for them to automate development. And it's not just AI companies, companies of all sizes need a system that gives them trusted data, insights and action to successfully deploy AI in the real world. So they turn to Amplitude as well. This momentum, combined to one of our strongest quarters across gross bookings and new ARR alongside meaningful improvement in churn. Our go-to-market motion has matured. There is a tighter focus on value-based cases in the enterprise and on expanding with multiproduct deployments. We continue to consolidate the fragmented market. Platform win rates are increasing against point solutions and our newer products are gaining traction. Guides and surveys launched less than a year ago, is our fastest-growing product to date. We are also seeing a large increase in AI native usage as agents connect directly to Amplitude. Over the past few months, the total number of queries triggered by AI agents has increased dramatically. In October last year, there were almost none, and today, it is 25%. Agents also drove the vast majority of overall incremental query growth. This tells us that customers are trusting agents with analytics work. It also indicates that our platform offers the accuracy and the context needed in production environments. Taken together, this creates a powerful tailwind for Amplitude as we continue building a durable, scalable company that can unlock the next frontier and software. Over the years, we have intentionally expanded beyond core product analytics and into adjacent workflows. We have continued that work and acquired InfiniGrow, an AI-native marketing analytics start-ups that connect spends, behavior and revenue impact. InfiniGrow brings strong AI native engineering talent to Amplitude. This strengthens our platform as a system of context and expands our ability to bring acquisition, activation and retention into one continuous feedback loop. Yesterday, we launched our global AI agents, specialized agents and MCP. This represents the start of a fundamental shift in how teams work with their analytics data. Historically, analytics has required humans to do most of the heavy lifting, writing queries, building dashboards, monitoring changes, interpreting results and then figuring out what to do next. That process does not scale in the world where teams are shipping faster and faster. AI agents change that model. Instead of asking questions one at a time, teams can now delegate work to agents that continuously analyze behavior, surface insights and guide action. Our agents understand events, funnels, cohorts, experiments, session replay and outcomes because they operate inside a context system specifically designed for them. Agents make life easier by doing the work that slows teams down today. That is very, very different from bolt-on AI tools from SaaS companies that sit outside the data and try to infer meaning after the fact. The best way to see this and understand this is to look at it in action. I want to show you a quick teaser video, and then I'm going to show you a demo of what we've released. Let's go ahead and roll the video. [Presentation] Spenser Skates: It's a great question all product builders should ask themselves now, what will you build? I want to now walk you through what we've launched in AI analytics yesterday. I'm really excited about the future, and I want to show you Global Agent. Global Agent radically changes how our customers interact with their data. Starting your day with a dashboard is dead. Take a look at this interface, no dashboard, no graphs, no charts, just a chat box and a few simple prompts if customers need help getting started. I can talk to Global Agent like I talked to a colleague. I'm going to go ahead and ask it how's our loyalty program doing? In seconds, it comes back with a summary. Notice, I didn't use any jargon about event totals or taxonomy, just a regular question. It's calling out some pretty concerning numbers. Only 5% of users who view our welcome page actually go on to join the loyalty program. That is low, so I'm going to click in and investigate more. The Global Agent has followed me to a deep dive on this chart. I can keep investigating with another simple question. Break this down by traffic source. Here's the breakdown. Facebook and Instagram are driving loyalty sign-ups at 5.6% and 5.2%, while Google and direct traffic lagged behind. The Global Agent summarizes it perfectly. Social media converts 10% to 15% better. Since social media outperforms Google, I might shift ad spend, but looking overall, all the rates are low. So before reallocating budget, I'm going to go deeper. Is this a channel problem or an audience problem? Let me ask, do new users convert differently than existing customers? Without AI, this kind of analysis takes a lot of time, segmenting users, comparing funnels, pulling insights together, the Global Agent does it in seconds. And here it is, 14% conversion for repeat purchases, 5.4% overall. That's 2.6x higher. That answers my question. It's an audience issue, not a channel issue. I should reallocate my budget towards repeat purchases. Again, simple language, fast answers, deep learning that anyone can use. Analytics is the perfect use case for agents. So I want to show you specialized agents. Our specialized agents work continuously on specific jobs that would usually take dozens, if not hundreds of hours, monitoring dashboards, analyzing session replays, processing feedback, running conversion experiments, legwork now done automatically. We're going to be eating our own dog food on this one. I already have a session replay agent set up to monitor our own session replay tool and have it set in addition to sending a slack when it has a strong finding. This specialized agent has been watching hundreds of replays and sent me some summarized findings. Users with multiple saved filters type search terms, but cannot find filters without scrolling through the full list. Power users cannot preview filter criteria before applying, forcing trial and error selection. These are all things we should improve. We could have had someone watch all those replays. We could have talked to customers from hours on end or we could have let these continue to be issues. Instead, I get these findings served to me on a daily basis with a full report and a detailed breakdown with key findings, suggestions on what to explore next and even a highlighted [ brief ] set of replays of these issues. Okay. We're going to save the best for last. Finally, I want to show you what I'm most excited about, which is Amplitude MCP. We're releasing a fast-growing library of expert level workflows that customers can trigger in AI clients like Claude with a simple slash command. I'm going to go ahead and use Amplitude and Claude by typing use slash create dashboard and create a dashboard that tracks our growth conversion performance, hit, I hit enter and it goes to work. Instead of me manually creating 15 charts, running the segmentations myself, and piecing together an explanation in a doc, this skill handles it in 1 click. With MCP apps, Claude is opening and building Amplitude charts right inside itself. It's done it. So I've now gone to the link it gave me in a perfectly built dashboard with top-level metrics, conversion funnels and segment breakdowns. Amazing. Moving on to customers. We had a great quarter for new and expansion deals with enterprise companies, including one of the largest music streaming apps, the Cheesecake Factory Asana, PGA of America, CrossFit, Stewart Title Guaranty Company, Crunch Fitness, WHOOP, Once Upon Publishing and NTT DOCOMO. I'm going to highlight 3 examples that demonstrate the power of the platform in different ways. Japanese telecom NTT DOCOMO is using Amplitude across more than 1,000 active users to drive efficiencies at scale. As an early design partner for our AI agents, their data platform team uses agents to streamline analysis across existing dashboards. In 1 project, an agent reduced campaign analysis time by over 90%. Our AI-powered session replay summaries automatically localized into Japanese help UX teams identify issues faster and improve the digital journey for millions of customers. We are now working closely with NTT DOCOMO to shape our agents road map with feedback on collaboration features and AI-powered insights. Siemens, the $70 billion global technology leader partnered with Amplitude over 3 years ago to power analytics across its website presence and broader digital ecosystem. By consolidating onto our AI analytics platform from a series of point solutions, Siemens gained a unified real-time view of user behavior. Recently, the team organizing their annual user conference use Amplitude to identify their overreliance on direct e-mail and organic channels. They experimented by reallocating spend into targeted web promos plus paid and organic social. This delivered a 90% year-over-year increase in web traffic and a projected 50% increase in registrations in attendance to their conference. Lastly, we landed one of the largest music streaming apps in the world. We are working with the teams that lead checkout optimization, upgrades, churn prevention and recovery as they seek to understand the revenue drivers for hundreds of millions of monthly active users. They will use Amplitude analytics combined with session replay to get a holistic view on these monetization drivers. These stories all point to a common theme from AI start-ups to global enterprises, customers are betting on Amplitude as the AI analytics platform that will help them thrive in this new era. Before I hand it over to Andrew, I want to be clear on how AI is shaping our opportunity. There is a common misconception in public markets that AI makes analytics either irrelevant or easy to replicate. The exact opposite is true. AI has made software easier to create, but creation is no longer the moat. The real advantage is how quickly a team can learn, iterate, improve and automate. Agentic analytics is the key. It unlocks the bottleneck on the right side of the product development loop and enables teams to learn as fast as they ship. AI is a structural tailwind for Amplitude. It is why I believe the opportunity ahead is massive and why I'm excited about what's to come. Now over to Andrew to walk you through the financials. Andrew Casey: Thank you, Spenser, and good afternoon, everyone. 2025 was a year of innovation, execution, and we delivered a solid base for our future long-term growth strategy. When we met at our Investor Day last March, we laid out a deliberate road map to capture the enterprise and accelerate multiproduct adoption, while leading the industry in innovation. Today's results demonstrate that we haven't just met those goals, we've established a new baseline for durable growth. The enterprise is now our core growth engine. ARR from our enterprise customer cohort is up 20% year-over-year, with higher retention and expansion rates than the rest of our business. This was not by accident or luck, our AI analytics platform has been designed to be enterprise-grade with trust and safety of our customers at the center. Our go-to-market team has worked for the past 3 years to orient our go-to-market motion to focus on the enterprise, increasing customer value through selling our platform and engaging in longer-term contracts. 2025 was the coalescence of this work to focus on our customers' value and creating durable base for future growth. We sustained growth of current RPO greater than 20% throughout the year. And in Q4, total RPO grew 35% year-over-year. Our average contract duration is now above 22 months. In addition to our success in the enterprise, we have also formulated our product and our go-to-market team to embrace our AI platform strategy. By combining niche point product solutions surrounding analytics into a comprehensive platform, we are able to deliver greater value than stitching together point solutions. We also believe that having a platform is essential to the harnessing capabilities of AI to reduce friction in our customers' workflows. In 2025, we did a great job expanding our multiproduct attach rate for our customers. 74% of our ARR is from customers with more than 1 product, up 15 percentage points from last year. We still have a great opportunity to expand our multiproduct customers as well. Only 51% of our ARR comes from customers with greater than 3 products. Looking at a full platform deployment of 5-plus products, that percentage is 20%, doubling year-over-year. We have a massive opportunity to expand with our customer base. We believe our market opportunity expands dramatically with the inclusion of our new AI products that promise to expand adoption and use cases. The progress in selling our platform is best exemplified through improvement of our retention and expansion motion with dollar-based net retention now above 105%, after exiting 2024 at 100%. However, our work is not done. At the beginning of this year, we introduced a new pricing and packaging strategy to our sellers. Let's start with what's not changing. We are not changing our core billing metric of events. We believe this is a great representation of the value our customers receive from our platform, and it is also an appropriate monetization strategy as we center AI engagement on our platform. What has changed is we are centralizing the monetization of our other products, such as experimentation, session replay, guides and surveys to be a percentage uplift on the core platform charge, which is events based. This reduces the friction of adoption of those products by making it easier to understand for our customers and reduces the need to estimate how many sessions or experiments they want to run in the near term. Longer term, this will also encourage greater consumption on our platform as comes no longer fear over using certain parts of the contract or underutilizing others. It's a radical simplification of our pricing that acknowledges our customers' needs for greater cost transparency and certainty on their costs as the volume of data ingested into our platform expands. It also supports our focus of integrating AI into all of our product offerings and expanding customer usage, which can be a tailwind longer term on easier lands and faster platform expansions. In summary, as we've transitioned to an AI analytics company, we have created a more durable base of our business focused on the enterprise. We've driven expansion of our platform through innovation, and we're making it easier for customers to get value quickly and encourage expansion. We've done all this while being disciplined in our spending and driving to non-GAAP profitability with record free cash flow. Looking at the rule of 40, which we measure based on free cash flow yield and ARR growth, we've now improved from a rule of 15 in 2024 to over 24% in 2025. We'll continue to focus on driving top line growth through a disciplined manner in 2026. Now turning to our fourth quarter and full year results. And as a reminder, all financial results that I will be discussing with the exception of revenue, are non-GAAP. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release and supplemental financials on the Investor Relations page of our website. Fourth quarter revenue was $91.4 million, up 17% year-over-year versus 9% in fiscal 2024. Fiscal year 2025 revenue was $343.2 million, up 15% year-over-year versus 8% in the fiscal year 2024. Total ARR increased to $366 million exiting the fourth quarter, an increase of 17% year-over-year and $18 million sequentially. Here are more details on the key elements of the quarter. We had a strong quarter for both new and expansion deals in the enterprise. Platform sales were also particularly strong. 44% of our customers now have multiple products with 74% ARR coming from that cohort. The number of customers representing $100,000 or more of ARR in Q4 grew to 698, an increase of 18% year-over-year and up 45 customers since the last quarter, representing the largest sequential increase in this cohort in company history. Additionally, the number of customers representing $1 million or more in ARR grew in Q4 to 56, up 33% year-over-year, demonstrating our ability to land significant accounts and grow them over time. In period net dollar retention progressed to 105%, and led by cross-sell expansions across our customer base. 58% of Q4 gross ARR was driven by expansions across a broad range of customers with no individual expansion exceeding $1 million. It's still driving meaningful progress in that dollar retention. We will continue to focus on driving net dollar retention higher through our platform strategy. Gross margin was 77% for the fourth quarter, flat to fourth quarter of 2024 and up 1 point since last quarter. We continue to make progress on optimizing our hosting, driving multiproduct contracts and monetizing our services engagements. We will continue to look for opportunities to incrementally improve gross margin over time. Sales and marketing expenses were 42% of revenue, a decrease of 1 point from the third quarter. We continue to focus on improving sales efficiencies, driving improvements through our changes in processes, coverage and expansion of enterprise customers. At the same time, we are investing in future growth while balancing those incremental investments with efficiency gains. In Q1 FY '26, we will have higher sales and marketing expenses as a percentage of revenue, reflecting timing of events and our annual company kickoff. R&D was 18% of revenue, flat to the fourth quarter of 2024. We expect to continue to invest in the talent and capabilities of our team to drive greater innovation in the future. G&A was 12% of revenue, down 4 points for the fourth quarter of 2024. We expect G&A to improve as a percentage of revenue over time. Total operating expenses were $66 million, 72% of revenue, down 3 points sequentially. Operating income was $4.2 million or 4.6% of revenue. Net income per share was $0.04 based on 141.5 million diluted shares compared to net income per share of $0.02 with 135.7 million diluted shares a year ago. Free cash flow in the quarter was $11.2 million or 12% of revenue compared to $1.5 million or 2% of revenue during the same period last year. In the fourth quarter, we managed our cash collections and made meaningful progress on shifting contracts with annual payments in advance. For the full year, we had a record free cash flow of nearly $24 million or free cash flow margin of 7%. We have conviction in the long-term value of our platform and have used and will use our cash to minimize the impacts of dilution. We have already purchased in the open market under our current buyback. And given the strength in our balance sheet and the underlying business, our Board has approved an additional reserve of $100 million to be used for buybacks. Our balance sheet position remains strong and allows us the opportunity to be more aggressive in our M&A strategy to accelerate our R&D road map when appropriate. Now turning to our outlook. As a reminder, the philosophy of how we set guidance is through the lens of execution. We are confident we have the right strategy and the right platform to continue to consolidate the fragmented market. We continue to improve our go-to-market motion and are accelerating our pace of innovation. We have the right monetization strategy to encourage the adoption of our AI tools, and we believe those tools will reduce the barrier to adoption of our full platform, leading to greater monetization opportunities. Our strategy remains consistent with our go-to-market is being aided by our simplification of our pricing and packaging. We will continue to focus on gaining new enterprise customers and driving cross-platform sales with our existing customer base. We also believe that with the release of our AI capabilities, our monetization of data ingested in our platform and the cross-sell opportunities of new products gives us the right strategy to align the value of our customers receive with our growth opportunities and grow our business in a profitable way. For the first quarter of 2026, we expect revenue to be between $91.7 million and $93.7 million, representing an annual growth rate of 16% at the midpoint. We expect non-GAAP operating income to be between negative $4.5 million and negative $2.5 million. And we expect non-GAAP net income per share to be between a negative $0.02 and a negative $0.01 assuming basic weighted average shares outstanding of approximately 135.1 million. For the full year of 2026, we expect full year revenue to be between $390 million and $398 million, an annual growth rate of 15% at the midpoint. We expect our full year non-GAAP operating income to be between $7 million and $13 million. We expect non-GAAP net income per share to be between $0.08 and $0.13, assuming weighted average shares outstanding of approximately 145.9 million as measured on a fully diluted basis. In closing, we are accelerating our pace of innovation, and we're growing the value that we can deliver to our customers. We have confidence in our ability to scale a durable and growing business while also bringing a Agentic analytics to the world. With that, we'll open up for Q&A. Over to you, John. John Streppa: Thank you, Andrew. [Operator Instructions] Our first question is going to come from the line of Taylor McGinnis from UBS, followed by Billy Fitzsimmons from Piper Sandler. Taylor McGinnis: Maybe just first on -- you announced a number of exciting agent offerings this week. And at the same time, you've also seen good traction with third-party agents connecting into Amplitude's platform. So -- and then Spenser, you showed a really good example of being able to extract insight using Anthropic Claude. So I guess how do you see Amplitude's agents and these third-party agents evolving? Maybe you just talk about the differentiation that you anticipate with Amplitude's agents versus what's being done with the third-party agents today. Spenser Skates: Yes. So to be clear, they both use the same underlying infrastructure. What will happen with either MCP model context protocol is a way for external products like Claude or OpenAIs, Chat GPT or Cursor to connect into Amplitude and request a set of calls. But that is the same infrastructure that both our global agents and our specialized agents use. And so the way to think about it is there's a whole set of tool calls that are available to these agents. You can say, get me a list of events, get me a retention, get me the list of tools you have like retention and funnels, get me the possible properties for this event. And what we'll do is we'll expose that to an orchestrator that we have that basically interprets a query, whether it's in the chat with Global Agent or whether it's external from MCP. And then it'll kind of pull in all the different contexts I talked about and then spit out the answers that you see. So it's the same underlying infrastructure because the nature and type of questions are the same whether you're asking it from Claude or Slack or whether you're in Amplitudes UI. Taylor McGinnis: Perfect. Awesome. And then Andrew, maybe just one follow-up for you. If we look at the 4Q numbers, it looked like the upside in the quarter was a little bit lighter than what we've seen in the past. Now ARR continued to accelerate. So was that just a function of the quarter being back-end loaded? Or anything to flag in terms of the quarter may be in any areas coming a little bit below as expected? Andrew Casey: So first, I'd say, Q4 was a great quarter for new logo ARR. We had a lot of new customers that are getting value from Amplitude and they're starting their journey with us. Those tend to be ones in which you're working throughout the quarter, and there was a large proportion of ARR that was booked later than we've seen in prior quarters. And as we mentioned before, we didn't see a lot of really big expansion during the quarter. So it was one of those areas where you're building a lot of opportunity for future growth with these new customers. And it's always one you're competing for -- when you're going into a new logo, you have to really compete and show value and sometimes those take a little longer as well. But we're really pleased with all the new customers that have become Amplitude customers, and we think that, that sets us up very well for expansions in the future. John Streppa: Our next question will come from Billy Fitzsimmons from Piper Sandler, followed by Rob Oliver from RW Baird. William Fitzsimmons: I guess maybe to start, can you help us think through the NRR improvement? And how much would you contribute or attribute, I should say, to greater upsells and cross-sells versus maybe better -- more success in kind of mitigating some of the churn in the business? Andrew Casey: Sure. So throughout the year, we've seen our customers increasingly adopting more and more of our applications in the platform. When we started off 2025, we specifically were training our sales team how to sell our platform when we're introducing new capabilities. We acquired new capabilities, and we put those into our platform as well. So predominantly throughout 2025, the improvement in net dollar retention was related to our cross-sell capabilities. And as you were alluding to, in the past, we had situations where we were overselling capacity against analytics. And even with some customers increasing data, it wasn't enough really to offset and contribute materially towards net dollar retention. Now that we're past most of those capacity-related issues that we created for ourselves. We're starting to see customers and their data ingested into our platform contribute towards net dollar retention improvements as well. And so now as we think forward, and I've said in the past that we have full intention to continue to set up our customers and expand with our customers, introducing new innovation. We think that both vectors, both data ingested into the platform, meaning upsells as well as cross-sells will contribute to further improvements. William Fitzsimmons: Makes sense. And I guess on that note, if I could sneak in one more. Can you give us a sense of how the role volume upsells will play in the FY '26 growth algorithm, especially as you start lapping some of the contract rightsizing from the first half of last year. Andrew Casey: So one of the things we talked about in the call was introducing our new pricing and packaging that is aligning not only to our enterprise motion but also towards the implementation of our new AI products. And in the past, I would say there were certain times where customers felt very leery about the amount they'd have to pay based on increasing data rates that we're ingesting in the platform, meaning that those rates were so high that they wouldn't be able to see the benefits associated with marginal incremental reductions in the cost of that data. Well, our new pricing and packaging structure rewards our customers now for adding more and more data into the platform so that they're paying marginally incrementally less. Now that doesn't mean that it's not going to contribute growth to Amplitude as our customers are getting greater value by ingesting more data in the platform. We believe it's fair for us to have some of that fair exchange of value. But if you were going to ask where we are really focused on driving NRR and where that -- the biggest benefit, it will be continued to show from those cross-sell opportunities, that expansion of our products because we want our customers to not fear adding more data. We want them to take advantage of implementing more data into our platform, and we want that to scale, especially as they look at longer-term contracts with us. Operator: Our next question will come from Rob Oliver from RW Baird followed by Clark Wright from D.A. Davidson. Robert Oliver: A follow-up there, Andrew, on the pricing and packaging question. So obviously, enterprises really like predictability. You guys have never been a seat-based model. So if you can just help us understand in the context of the new pricing model, clearly, it sounds like it's driving more engagement, a cross-sell opportunity, less of a friction experience. But how does the buyer manage that predictability? And I guess the inverse of that would be, how do you get comfortable on the cost side with AI embedded in? Andrew Casey: Yes. It's a great question. We spend a lot of time working with our sales team and our customers and showing how, one, the instrumentation with the platform can have -- give the great visibility into the data they're ingesting within it. And we work with our sellers to help them better understand as the marginal incremental data into the platform, grows, how that then translates into the cost that we're going to be charging to our customer. We're encouraging to have that conversation as part of the sales process. It's a kind of a gentler way of showing and working with the customer on how they are going to adopt Amplitude over a period of time rather than guessing what their data implementation of the platform is going to be. We're working with them very closely on it and showing how the instrumentation works. Now the piece that I think is really important, and you touched on it, but I think it's -- we did a lot of work with customers to understand whether we had the right billing metric, whether it's something that they aligned to the value proposition. And we've been testing for quite a while. In fact, nearly 20% of new ARR that we booked in the quarter was actually using our new pricing and packaging in a pilot stage. So we already know that customers like this. We already know that customers look at it as more transparent. They look at it as less friction as you were saying, we also believe it positions us very, very well given that our focus on implementing AI products into our platform is, one, it's reducing the barriers to adoption. Meaning that customers walk away thinking they're getting great value of what they've already invested in Amplitude and are less fearful knowing that they have greater cost predictability and transparency and how that usage is going to trend over a period of time. Robert Oliver: Great. Super helpful. And then Spenser, 1 quick one for you. Just on InfiniGrow, you guys were very early to the AI acquisitions among our coverage, I think been very aggressive on it. And in particular, it looks like to us like this gives you guys a further opportunity to sort of go for that consolidation play that you guys have talked about. But if you could help us maybe understand what, in particular, what area or what response to what customers need InfiniGrow is going to help address and how that might accelerate that platform opportunity. Spenser Skates: There were 2 big things that stood out to us on the InfiniGrow team. I mean, so first, we're just always looking for great talent out there. And so when the right company and the right opportunity comes along and they are aligned with our vision and excited about it, we're going to act. With InfiniGrow in particular, there were 2 big things that stood about the team. So Daniel, the CEO there as well as the rest of the group, they've been in it on AI analytics and automating workflows for the last few years and have a ton of perspective on how the future of the category is going to be shaped. And I mean we're in uncharted territory. Like we're inventing something new here, AI analytics. And so whenever you get a chance to partner with someone else who's thought about that so deeply, it's a huge deal, and we're going to -- yes, we want to figure out how we can set up a way to work with them. So that's the first one that really stood out about InfiniGrow. The other piece that stood out is they have a lot of familiarity with analysts more on the marketing side versus product management. And particularly as those personas merge over long term and more customers from legacy MarTech tools want to come off and use something bleeding edge like an Amplitude, we want to make sure that we're ready to meet them and serve all their needs and help with that transition. And again, they know a lot of those buyers better than almost any other company that we've seen in the analytics space out there. John Streppa: Our next question will come from Clark Wright from D.A. Davidson, followed by Koji Ikeda from Bank of America. Clark Wright: You noted the cross-selling opportunities continue to be an area of strength, what is the natural pathway you're seeing in terms of product adoption? And what is the role that agents are going to play going forward to help drive additional cross-selling motions? Spenser Skates: I mean it's great on both fronts. So analytics is the core. We're an analytics platform, something we've been very consistent about. You want to be able to track the core -- the base -- the foundation of the user journey. And that makes every single other part of the platform more valuable. So it makes it easier to do experiments because you can target users as well as measure those more effectively, it makes it better do session replay because you can understand, hey, for a group of users that ran into this error, let me see what they did by looking at the session replays. It makes guides and surveys better because you can target guides to specific users based on if you see them confused. So analytics is the core and all of these -- they become more valuable with analytics and vice versa. In terms of agents, I think the big opportunity there, and I just showed the session replay one is that these other products are -- while we launched AI analytics yesterday, and that was the main focus. These other products are actually capable of being leveraged by AI. So the session replay specialized agent demo that I shared earlier is a great example where you can watch 1, 2, 3, maybe 10 session replays, but watch 100. I'll take you a few hours to get through them. And so to have an agent speed up that analysis, still get all the valuable data, summarize it up and kind of put it back to you. I mean that's you're talking a 100x fold increase in productivity versus what you might other do. Experiment is the same thing. I mean one of the things that people ask us a lot is like, cool, do you have a library of best practices for what sort of web pages or what sort of interactions work and what don't? And our experiment conversion agent will actually suggest those based on best practices of what we know from all the companies that we work with. And so it makes experimentation a lot more powerful, too. So -- and then the really cool moment is when these tie together. So you can start out in analytics and say, okay, cool, give me my unhappiest users and suggest ideas for that I could do to improve them? And then it says, "Wow, okay, all of these users, they're unhappy because they ran into a page that wasn't working, and then you could have a session replay agent come in and say, okay, well, let's look at what was it on that page. It's like, oh, okay, hey, this button isn't formatted correctly and wasn't labeled and so that's probably confusing to users. And then you can -- and then go even further and say, okay, great, let's run. Can you propose a variant, an experiment variant to me that would actually fix it? And then it will propose it and propose another web page and you can run the test. And so you can not know anything about analytics, not know anything about your data taxonomy, not know anything about how to use session replay, not know anything how to do experimentation AB testing and do all the work of all of those projects -- products from the Global Agents or specialized agents interface. So I just -- it's going to be a massive unlock in terms of the usage. We're obviously most focused on analytics right now, but I'm really excited about some of the other things [ and a lot so ] it's funny. We already got some comments on Twitter that are like, hey, why does it only watch 100 sessions at a time? Why can't you watch 1,000 or 10,000 like, all right, we're working on it. We're working on it. So. Clark Wright: Appreciate that. And then, Andrew, there's a reference to increasing win rates versus point solutions. Is that an output of the go-to-market changes as well as the pricing and packaging updates? Or are there any other factors that is helping to drive improvements in that metric? Andrew Casey: I'd say the pricing and packaging is relatively new. So I wouldn't attribute that necessarily increasing win rates. I think that the biggest thing is, one, our sales team has just worked really hard at demonstrating value of our platform to our clients, and that's really resonating. And the other is you really have to credit our product team for creating just really great products that work well together. A lot of people claim they have a platform, but the reality is it's a bunch of products that's stitched together, doesn't look really well. When you have a platform, you have workflows that are instrumented well and it's easy to interact with the different modules in the product. And that's the way I would characterize our platform today. And every time that customers are adopting more than 1 product, it's because they're -- that integration, those workflows seamlessly across our platform are coming through as real value. I mean I talked to a number of customers myself with the sales team, and they always come back and say, we're just so far ahead of what everybody else is even representing an analytics platform to be. Spenser Skates: On that, like if I just go through the last 30 buyers I've talked to in the last month, all they want to do is be educated about analytics. And sorry, how AI is going to transform analytics and the whole platform. And they see it coming. They see tons of automation ahead and they're like, hey, teach me how I can be relevant. And so when we can offer that to them by, one, providing a view on how the future unfolds and then two, offering them the products, tools and services that actually enable them to be successful and relevant, they want to spend a ton of time with us. And so the competitive question especially against the smaller point solutions is kind of going away. It really is just is now the right time and can you help me get to this future fast enough and teach me. Operator: Our next question will come from the line of Koji Ikeda from Bank of America, followed by Jackson Ader from KeyBanc. George McGreehan: This is George McGreehan on for Koji. Taking a big step back, one for me on kind of the big picture. Where can we expect Agentic queries to grow to become in the mix from 25% today, maybe over the next 12 to 24 months? Spenser Skates: Yes. I mean I -- none of us have a full crystal ball, but my expectation is the vast majority are going to be done Agentically, where you're just going to have agents that run over your data all the time. They're looking at dashboards. They're looking at KPIs, they're trying to find underlying root causes of why things are changing. They're creating suggestions for your product. They're reviewing session replays. They're constantly trying out and tweaking new experiments. So I mean, yes, like I don't want to put a number out there, but I think the vast majority. I think what we're seeing generally is if you look at query growth from direct usage of the Amplitude dashboards, it's increasing in line roughly with the size of our business. If you look at Agentic query use, it's skyrocketing, as you saw on that chart in the last few months. And so the amount of leverage, I think the same thing happened to coding in the last 2 years, where if you look at it, the best software engineering teams, the majority is produced by the majority of lines of codes are produced by agents. It's mostly humans editing, interpreting them, stitching them together. And kind of giving high-level direction and that's where the best software engineers are. I think the same thing is going to happen in analytics and data analysts, where the vast majority of the data munging of the tool and figuring out what query means what thing? And how do you get to a -- how do you do a segmentation, understand the root cause, like that's all going to be automated by agents. And our goal is to be the first company to do that in a big way. John Streppa: Our next question will come from the line of Jackson Ader from KeyBanc, followed by the line from Scott Berg from Needham. Unknown Analyst: This is Nate Ross on for Jackson Ader. So implied non-GAAP operating margin for 2026 is roughly 2.5%. I guess we were wondering what specific possible sources of upside do you guys see for that number? Andrew Casey: Well, I'll tell you, first and foremost, we've been on this path where we're increasingly driving revenue growth faster than we're driving expense growth. And rooted within that is efforts on changing our go-to-market, changing our processes, modernizing our own application architectures, doing the basics of running the business in a very efficient way such that we continue to go drive growth with leverage. Those same things are not just a onetime event. You continue to focus and learn and understand how you can drive and deliver services more effectively. And so we look at the path we have in front of us with respect to our growth opportunities, what our pipelines look like, how we're managing our cost to serve with the expectation that sales and marketing will continue to improve on their efficiencies, G&A will continue to drive efficiencies as well. So it all kind of culminates in the plan that we put together for 2026. Unknown Analyst: Great. Perfect. And I guess, one more follow-up. So regarding customers' analytics budgets. Have you guys noticed any trends or changes specifically with AI affecting these budgets? Like has the current AI landscape affected customers' propensity to invest in analytics in any way? Spenser Skates: Yes. Yes. So I'd call it two things. I mean one, it becomes -- it's the bottleneck, right? So you remember that [ lumen ] I showed at the start, where it's like, okay, you're shipping all the software. Is it good? Are we even going in the right direction? So the comparative value of the analytics piece becomes a lot greater and more higher urgency. When you have like a year-long road map, it's okay if it takes a while to measure the success of it. But when your iteration cycle is measured in weeks or days like it is with the best of the best companies now, it's like, yes, you need to know if you're going in the right direction all the time. And then I think the other thing is the buyers in addition to that being the pinch point for and the big need in terms of the next big step in product development, they know -- they intuitively all know that this whole space is going to get reformulated with AI. And so they -- again, they're just desperate for education and someone to show them the way. This is not a case of like -- I think one of the differences between selling SaaS and selling AI is, in the SaaS world, it's very much like, okay, talk to your customers, get a list to prioritize features from them and build it and you go back and sell it to them. In this AI world, they don't know. Like they are like, is this model capable of this? Can it automatically look at a session replay for me? Can it analyze the root cause of a breakage in my funnel? And how -- what's the best way to make that happen? And so they're looking at us for all those questions. And this is where sharing the vision of what the future is as well as being close to the leading edge of the technology is super important. John Streppa: Our next question will come from the line of Scott Berg from Needham followed by Nick Altmann from BTIG. Ian Black: This is Ian Black on for Scott Berg. With the new pricing and packaging, are you planning on separately monetizing your AI agents? Andrew Casey: So most of our AI agents are embedded within our core platform. And so what you see there is we're getting access to customers to utilize more of the platform. That exemplifies all the power of our modules together. So there's a high propensity that customers who are utilizing our AI agents are both ingesting more data into the platform as well as expanding into other modules. Now we're also going to introduce new products with continuing -- we've done really well at innovating and some of those products will come out with more fee charges as well. So we're not worried about the ability for us to monetize our AI capabilities. We're actually very excited about the opportunities as we expand the use cases and usage of our platform. Ian Black: Congratulations on the good quarter. John Streppa: Our next question will come from the line of Nick Altmann from BTIG, followed by Elizabeth Porter from Morgan Stanley. John Gomez: This is John Gomez on for Nick Altmann. With the shift to Agentic democratizing the end user and product analytics, can you just talk about whether you're seeing new users or new lines of business leverage Amplitude and how that's shifting to go to market. So just any commentary on new end users and how that's impacting how you think about the go-to-market strategy would be helpful. Spenser Skates: It's not really new end users. I mean it's the same. You're talking about product teams. You're talking about marketing teams, engineering and data teams. And so it's the same people trying to leverage the data. What they're really -- again, what they're really desperate for is education. And so when we can show them Global Agent, specialized agents, MCP, AI feedback, AI visibility, what we're doing with our next products and Assistant and LLM analytics, there's always a whole bunch they want to grab on to and say, okay, great, teach me, how to use this, make it successful, everything else. So that's the biggest difference. It's one where our go-to-market is -- it's about training, getting them to be able to educate, to be able to share the vision, to be able to demo these products and make customers successful. John Streppa: Our next question will come from the line of Elizabeth Porter from Morgan Stanley, followed by YC Wong at Citi. Lucas Cerisola: I'm Lucas Cerisola here for Elizabeth Porter tonight. So with the uptick in new app development that we've seen over the past few months, could you walk through your expectations for balancing this potential new demand from smaller customers with your move-up market as you evolve your go-to-market strategy? Spenser Skates: Yes, we're doing both. I think one of the things we see on the start-ups and newer customers is they're very bleeding edge, and so they're trying to push the capabilities of us. And so we've always had a motion where we've taken innovation that we've done with them and bring it to the enterprise in a deliberate way. So we're going to continue to do that. I think there's actually massive opportunities, particularly with the rise of Vibe Coded apps. There's going to be Vibe-Coded analytics, too, that needs to go along with all those applications. So it's early, but there's a big opportunity for us there, too. Again, the core thing you want in terms of understanding your customers and knowing if you're going in the right direction and building the product is the same, whether you're -- the newest start-up that was just founded yesterday or your 100 year-old long-lasting business. And so for us, it's like we're here to serve all of them. And again, they're very keen on learning the bleeding edge of what's happening in AI analytics. And so if you're able to teach them that, then it doesn't matter your size. Lucas Cerisola: Got it. That's super helpful. And then could you speak to the 7-figure deal pipeline in 2026? And then are there any specific verticals in which you see outsized growth already? Spenser Skates: I mean we're seeing -- like as I said on the call, we're seeing a lot of AI companies use us. We have 25 over $100,000. And then we have a 7-figure contract with one of the largest foundational model labs out there, who's been a customer starting last year. And so that's very, very exciting because they obviously know what's going on when it comes to what's possible, and they see a future world where we're a really big part in that. John Streppa: Our next question will come from YC Wong from Citi, followed by our last question from Arjun Bhatia at William Blair. Yitchuin Wong: Congratulations on a pretty strong close to the year here. I guess maybe I just want to touch on, Spenser, you talked about Amplitude being one of the largest database of user behavior. Just given the rapid progress of agentic capability across our data platform players called Snowflake and Databricks, where we are seeing also customer consolidation towards maybe bigger data platform players. Curious if you're seeing any -- I think customer blur of like your analytics use cases from Snowflake and Databricks versus Amplitude? Spenser Skates: I want to make sure, YC, I want to make sure I understand what you're saying, you're saying do we see competition from Snowflake and Databricks because they have a lot of data too? Yitchuin Wong: Well, it's not just data. They are thinking about doing the application side as well. I mean if you think about Vibe Coding and then you think of application building, you can make it easier to build. I'm just curious if you see anything blurring between customer talking about just use cases between a customer you can use a data platform like Snowflake to build it, they have Cortex versus what you will see with Amplitude? Spenser Skates: So one of the big things that we see is that customers always want the most advanced and bleeding edge capabilities. Like I heard this great analogy the other day where software is very much like sushi. So it's fine that the gas station at 7-Eleven offers it, but Jiro in Japan is not -- probably not going out of business. In fact, it's going to create more demand for him. And so from our standpoint, what we think about is how can we offer the most advanced and robust system for analytics. So if you look at the benchmark that we -- with hundreds of evals that we released, where we got a 76% accuracy rate, if you look at the Cortex or you look at DataBricks Genie, I mean they're going to be in the 10% or sub that. We're working on releasing full metrics on that. And that's because the text-to-SQL is only really one part of it. The other -- there's 2 other big parts. The first is the context layer. So what data sources are you bringing together in the right way, analytics data, session replay data, data from interactions and guides and survey data from other sources and interpreting those in the right way and then giving an LLM agent, the right set of tool calls so that they can iteratively query, okay, hey, what's my onboarding funnel? Where is the biggest drop on it? Why is the biggest drop on it? What's the biggest difference between users who went to the next step versus the previous step, right? So that's like just in that example, that's 4 queries that you're going to have to do in a row all correctly. And to do that, you need to prop the LLM in a very particular way. You need to give the right tool calls, you need to give it the right context. And so we have thought really deeply about because we have the largest repository of user behavioral data in the world, we have thought very deeply. We have seen what millions of analytics queries, what good looks like for millions of analytics queries and translated that into an agent that does the same. And so because, again, you're going to need to give it all that context and then be able to iteratively query a data system, the differences in accuracy are really, really stark if you were just to roll your own or use a Genie or Cortex versus using an Amplitude. And when you're an analyst, that difference between 76% and 10% is a massive difference in terms of your ability to leverage agentic analytics. Yitchuin Wong: No, that's helpful color. Maybe one for Andrew. The profitability definitely came in well ahead of expectations here. Maybe you guys are leveraging some agents internally that helps to drive better sales efficiency. But curious to see going into next year, like what can we expect, especially on the free cash flow that outperformed probably saw an expansion by 4 points. Like curious to see what your expectation into next year? And any other moving parts that we should be aware of or headwind from to be mindful from the strong performance this year? Andrew Casey: I think what you're seeing is that the efforts we've been doing on sales and marketing, on our cost to serve and our G&A and operating more effectively as a company, is not just a one effort, one activity. There's multiple. And certainly, we're introducing agentic capabilities into our own workflows within the company, and that's certainly contributing to it. But there's so many things structurally we've done to the business to create greater durability that that's ending in greater abilities for us to drive efficiencies. I'll give you one example. We've talked a lot about our ability to go drive increasing contract duration to our customers and that our RPO has been growing rapidly. Well, if you don't have to renew your installed base every year or that installed base percentage goes down because you're executing more and more longer-term duration contracts with your customers, then the sales team has more time to dedicate towards selling new and expansion deals rather than working on renewals. And so it's just a great example of a strategy we put in place that's going to accrue benefits for a longer period of time. John Streppa: And our last question is going to come from Arjun Bhatia, William Blair. Willow Miller: I'm Willow on for Arjun Bhatia. Andrew, in terms of guidance, the full year revenue range seems a bit wider than normal at $8 million. Can you help us understand the reason for this? And what scenarios are contemplated at the low and high ends of the range? Andrew Casey: I think when we approach we approach our guidance, we approach it with what we think we can go execute in the period. And I wouldn't read too much into that other than we have a breadth of different opportunities that we're going after both with our product set, with improvements in our targeting enterprise customers. So I wouldn't read too much into it. John Streppa: And that will conclude our fourth quarter earnings call. Thank you for your time and interest, and we look forward to seeing you on the road this quarter as we attend conferences hosted by Baird, Citizens, KeyBanc, Morgan Stanley and others. Take care.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Group 2026 Half Year Results Briefing. [Operator Instructions] Please note that this conference is being recorded today, Thursday, the 19th February 2026. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group Chief Executive Officer. Thank you. Sir, please go ahead. David Harrison: Good morning, and welcome to Charter Hall Group's First Half FY '26 Results. Joining me today are Sean McMahon, our Chief Investment Officer; and Anastasia Clarke, our Chief Financial Officer. Today, I will provide an overview of the highlights of a very active last 6 months and then cover the usual funds under management, equity flows, valuations, operating environment and finish with our property investment balance sheet portfolio. Sean then will take you through development activity and our sustainability initiatives, followed by Anastasia with the financial highlights. We'll conclude with our outlook and Q&A. Turning to the group's highlights. Operating earnings for the half were $239 million or $0.505 per security, reflecting continued momentum across every segment of the business. This strong performance underpins today's upgrade to FY '26 guidance to $1.00 per security, representing 23% growth over FY '25. Return on contributed equity continues our multiyear trend of generating above 20% returns, which has increased to 23.1% post-tax and over 28% pretax. FY '26 also marks the 15th anniversary of consistent dividend growth. Over that period, dividends have grown at 7.8% CAGR, well ahead of historic inflation in the REIT peer group. Group FUM increased from $84.3 billion to $92.2 billion on a pro forma basis, which includes additional FUM created post 31 December, while property FUM rose from $66.8 billion to $73.6 billion. During the first half, we had a very active total transaction volume of $9.8 billion. Acquisitions and development activity more than offset divestments, supported by positive net valuations, largely driven by rental growth as economic growth and increased tenant demand met with a severely reduced supply across all of the markets we operate in. Our balance sheet remains exceptionally strong with balance sheet gearing of just 7.7% and $1 billion of dry powder providing for accretive acquisition capacity, which contributes to the more than $7.8 billion of total platform deployment capacity. Importantly, we also recorded the strongest level of gross equity flows in our funds management business in our 3.5 decade history. On Slide 5, the Investment Management business secured $4.8 billion of gross equity inflows during the half. Inflows over the past 6 months have accelerated materially exceeding the prior full 12-month period. We also are pleased to report average annual inflows over both the last 5- and 10-year period at close to $4 billion annually, highlighting our consistent capacity to attract inflows through cycles. Total transactions were $9.8 billion, comprising $6.6 billion of acquisitions and $3.2 billion of divestments. Acquisitions, development completions and valuation growth, as I said earlier, comfortably outweighed divestments. Turning to Slide 6 and our strong earnings growth history. Operating EPS has tripled over the past decade, delivering a 12.6% CAGR while distributions have grown at over 10% per annum. Around half of our post-tax earnings are reinvested back into the business, funding growth in property and development investments. This enables us to invest alongside capital partners, expand our funds management earnings and generate strong return for security holders without the need to issue new public market equity to grow. This is a key competitive advantage we retain, and we will continue to organically grow the business through the retention of earnings via our payout ratio policy. Given our capital-light business model, this is a powerful and sustainable driver of organic earnings growth. Slide 7 highlights the long-term strength of our distribution profile. Over the past 16 years, Charter Hall has delivered consistent dividend growth higher than the growth rate of U.S. REITs currently included in the U.S. S&P 500 Dividend Aristocrats Index. Slide 9 provides a deeper look at our property funds management platform. Institutional investors contribute over 76% of total platform equity, while more than 82% of our property funds under management is across the unlisted wholesale and direct channels. Investor demand for unlisted property remains strong, reflecting the safe haven characteristics of Australian real estate and the diversification benefits unlisted assets provide amid a heightened listed/liquid asset class market volatility. Turning to Slide 10. Property FUM increased from $66.8 billion to $73.6 billion on a post balance date acquisition-adjusted basis, driven by acquisitions, development completions, positive valuation movements and of course, our previously announced Challenger mandate, which was secured during the half. Growth was led by the wholesale unlisted platform. This reflects early signs of valuation recovery and the benefits of disciplined portfolio curation across all 3 of our listed REITs, which has helped deliver meaningful earnings and NTA value growth for those REITs. Property FUM has now surpassed the peak achieved in June '23 before the devaluation cycle the market experienced. With $7.8 billion of available investment capacity, we expect further growth through acquisitions, valuations and ongoing develop-to-hold strategies over the remainder of FY '26. Our property platform, as highlighted on Slide 11, comprises over 1,600 assets, spanning 11.5 million square meters of lettable area with 97% occupancy and a market-leading 7.5-year WALE, or weighted average lease expiry. Our integrated property management team secured more than $3.6 billion in net rent each year, a critical metric as rental income underpins everything we do. I&L or industrial and logistics is our largest sector exposure at 37% of the platform, whilst convenience retail continues to grow and now represents over 20% of the platform. Our office platform at over $26 billion is the largest in the country. We are seeing encouraging early signs of recovery and are actively planning increased development and deployment in high-quality CBD asset locations, whilst we're also repositioning opportunities such as the recent acquisition of 1 O'Connell Street and the adjoining assets in the core of Sydney CBD, which on a combined site area basis of approximately 6,800 square meters is one of the largest site consolidations in Sydney CBD alongside our 7,500-meter Chifley site. which, as you're all aware, we're well progressed on developing a second Chifley Tower, which on a combined basis will generate over 110,000 square meters of lettable space in 2 adjoining premium-grade towers. Turning to equity flows. During the half, Funds Management secured $4.8 billion of equity inflows, a record for a 6-month period across the history of the group. Inflows were broad-based, spanning all 3 wholesale pooled funds, CPOF, our office fund, CP Industrial Fund and of course, our recently launched CCRF or convenience retail fund. Partnerships have also been a strong contributor, including the Challenger mandate I mentioned, and we have seen a notable uplift in fund or equity flows for Charter Hall Direct, which in 6 months has exceeded all the flows generated in the whole of FY '25. Slide 13 summarizes our industrial platform. We manage over 7.2 million square meters of lettable area, representing $27 billion of funds under management and importantly, close to a 20 million square meter land bank across that portfolio, making this the largest third-party industrial platform in Australia. The portfolio is modern, most of which has been developed by Charter Hall, attracting a high occupancy and is underpinned by Long WALE, strong leasing renewals during -- achieved during the half. And importantly, we still believe the portfolio has got a 17% discount to market rents, providing positive rental reversions over the course of coming years. Our development pipeline sits at $6.5 billion in industrial. This is underpinned by a significant land bank of over 223 hectares. And I also note our recent media announcement on a new 20-year lease on a 100,000 square meter facility to ALDI at one of our largest states in Melbourne as an example of the ongoing pre-committed development activity we are completing within the industrial platform. Slide 14 outlines our office platform. Clearly, Australia's largest at $26 billion with 2.1 million square meters of lettable area. Leasing momentum was strong with 124,000 square meters leased across 134 transactions during the half. Net effective rents outpaced face rent growth and 93% of tenants were retained in their existing or expanded footprints. Occupancy remains high at 95% relative to peers and clearly relative to the market, well ahead of our broader aspirations for occupancy. And I also note that in a strongly improving net effective rental market, it's also helpful to have a bit of vacancy so you can capture those positive market rental growth reversions. I anticipate that you'll be hearing a lot more from us on various office activity as we move forward. We are positive on the outlook for our assets and also deployment as this market is clearly at least for quality CBD holdings in the early phase of what could turn out to be a sustained and attractive recovery for office landlords. Our convenience retail platform on Slide 15 manages around $15 billion of assets or over $17 billion, including our Long WALE Bunnings assets. The sector represents a significant long-term opportunity given limited institutional ownership and the increasing difficulty of replicating well-located assets in inner and middle ring metropolitan markets. Last year's successful take private of HPI was just another example of us expanding our Long WALE convenience retail platform, and recent acquisitions of Bunnings portfolios such as the $290 million sale leaseback acquisition we closed with Bunnings in the last half is further evidence of our conviction to grow into the convenience net lease retail sector with the market-leading tenants in each of those sectors. When we think about barriers to entry in this submarket, including land availability, zoning, scale and capital, we do believe that Charter Hall has a durable competitive advantage in securing further growth for our investors. More importantly, it's also providing another string to our bow when we talk to our tenant customers around curating their existing lease portfolios, but also being able to fund sale and leaseback transactions if that suits these major retail customers. Slide 16 and social infrastructure remains a core strategic focus. These assets provide essential services, exhibit low correlation to economic cycles and are among the lowest risk property sectors. With Australia's growing population, demand for these services will only increase, and Charter Hall is well positioned to play a leading role across all aspects of social infrastructure from government leased essential service assets through to childcare. The portfolio is 100% occupied, supported by Long WALE and predominantly triple and double net leases. Now just looking at our tenant relationships on Slide 17. Our top 20 tenants contribute 53% of platform income. We manage over 5,300 leases, collecting more than $3.6 billion in net annual rent. Over 69% of tenants hold multiple leases, enabling deep long-term relationships across assets, locations, states and sectors. During the half, we were highly active with renewals, expansions and sale and leaseback transactions virtually across every one of the sectors that we operate in. Long-term tenant partnerships remain a cornerstone of our broader strategy. Slide 18 and our transactions. As mentioned earlier, we completed close to $10 billion during the half with net activity up strongly. Office and convenience retail were the largest contributors to acquisition growth during that 6-month period, whilst we continue to actively curate our industrial portfolio. Slide 20 provides an overview of our property investment portfolio, which those of you who are not familiar with the terminology represents the Charter Hall on-balance sheet investment portfolio. The $2.8 billion portfolio spans over 1,500 properties, 97% occupancy and an 8.2 year WALE and a 3.3% weighted average rent review. That is reflective of our co-investments predominantly in all of the funds and partnerships we manage. In addition to that, we also have curated property investments on balance sheet generally for warehousing to provide assets that will attract further external capital. Cap rates compressed by 10 basis points over the half with the weighted average discount rate now at 7%. Geographically, New South Wales or Sydney represents close to 40% of our exposure. Brisbane, predominantly Brisbane or Southeast Queensland and Victoria, each around 20%. Our balance sheet exposure to office is deliberate. We believe these assets offer most attractive prospective IRRs, will attract external capital and provide income uplift potential across the platform over the next 3 to 5 years. With that, I'll now hand over to Sean to cover development activity and sustainability. Sean McMahon: Thanks, David, and good morning to everyone on the call. Our development pipeline now totals $17.9 billion. Our development capability and track record has been a significant key strength of the group for over 30 years. Developed to own next-generational assets are highly accretive to long-term returns for our investor customers. Development activity continues to drive modern asset creation, providing property solutions for our tenant customers and enhancing returns whilst attracting new capital to our funds and partnerships to deliver on strategic objectives. Development completions totaled $1.3 billion in the last 12 months. Notwithstanding completions, the pipeline continues to be restocked and is currently $17.9 billion. There are currently $4.8 billion in committed developments with 74% of committed office developments pre-leased and 94% of committed industrial and logistics developments pre-leased, providing derisked adjusted accretive returns for our funds. We have generated a $5.5 billion pipeline with living and mixed-use projects that have now obtained strategic planning approvals, optimizing existing holdings and providing optionality to grow in the living sector. The successful said planning approval of Gordon Shopping Center that potentially delivers a mixed-use multistage project of $1.6 billion in value was the material addition to the pipeline in the first half. Noting David's previous comments on Australia's strong forecast population growth, we expect that the creation of new developed investment stock and opportunities for investment management platform will continue to feature prominently. Now turning to Slide 24. Over the first half, our industrial platform completed $515 million of developments for the WALE of 10 years. We currently have $2.3 billion in industrial development projects committed and underway. Our total pipeline of future industrial investment-grade stock now sits at a material $6.5 billion. There are 3 major projects driving the pipeline growth pre-committed by Australia's major supermarket retailers, Coles, Woolworths and ALDI that have a combined completion value of $1.5 billion. That will deliver state-of-the-art automated facilities to service their respective networks. There is also good momentum at our Western Sydney Airport joint venture site where there are multiple major pre-commitments secured or at advanced stages. Charter Hall has one of the largest industrial footprints in the nation, comprising over 20 million square meters of land, and we are focusing our efforts to maximize for our investor customers from the land we own. Given the scale and diversity of our land holdings, there are multiple key data center sites existing in with this industrial land bank. There are a number of data center sites in focus in our land banks that are located within availability zones, and we're in the process of unlocking significant power supply and associated planning approvals over the next few years. Importantly, we retain optionality to sell this powered land at a material premium to industrial land values or negotiate long-term ground leases with hyperscalers as we have done before. Now turning to Slide 25. The Chifley precinct, which includes the existing North Tower and the South Tower where construction is progressing well, will eventually have a precinct value of approximately $4 billion. The project is Sydney's premier office address and will be Charter Hall Group's largest asset with a combined net lettable area of 110,000 square meters. The project is scheduled to complete in mid-'27 and is owned by various Charter Hall managed wholesale investment vehicles. Our wholesale clients are participating in the investment with the objective of long-term retention of this iconic asset. As you can see, the group has been very busy delivering new high-quality office developments across Australia, anchored by government and Tier 1 tenant covenants. Now turning to Slide 26. We continue to drive our industry leadership across all facets of ESG, demonstrated by recent GRESB global and regional awards with 18 of the group's funds in the top quartile and notably, 5 CHC funds were ranked in the top 10 global funds. Our listed entities achieved an A ranking under the GRESB public disclosure rating and the AA MSCI rating. Pleasingly, we have now installed 89.7 megawatts of solar power across our platform, and this equates to sufficient power for approximately 20,000 homes. And our green loans now exceed $8 billion. From July '25, our whole platform operates as net zero through existing on-site solar and renewable electricity contracts. I'll now hand over to Anastasia to discuss the financial result in more detail. Anastasia Clarke: Thank you, Sean, and good morning to everyone on the call. The first half of FY '26 delivered strong operating earnings after tax of $238.8 million, representing an increase of 21.6% on the comparable prior period. Top line revenue growth was driven across all 3 segments, comprising property investment income, development investment income and funds management revenue. Growth in property investment income was underpinned by like-for-like funds income growth of 4% on our co-investments, together with a material contribution from the incremental deployment of $290 million net equity investment over the past 18 months. This results in a full period contribution of the FY '25 investments and partial period contribution from the year-to-date investments to PI EBITDA, all on significantly higher equity PI yields. Development investment EBITDA has increased to $38.1 million, representing approximately 10% of the group's EBITDA, achieved through the successful completion of developments primarily sold down to funds. Funds Management EBITDA remains in line, which follows the usual historic pattern of strong equity inflows in the half, translating to fully annualized funds management fees in the following financial year post a period of deployment. Underlying FUM growth through valuations and net acquisitions and progressive funding of the $4.8 billion platform committed development pipeline is supporting growth in base fee revenue and transaction fees, offset by higher operating costs. Pleasingly, the group is reporting a healthy statutory profit after tax for the first half of $272.8 million, reflecting the combination of operating earnings and positive property revaluations. OEPS increased 21.6% to $0.505 per security, whilst DPS continues to grow consistently at 6%. This results in approximately half of the group's earnings being retained for reinvestment, primarily into higher-yielding property investments. As noted earlier, this reinvestment is meaningful in scale, underpins growth in property investment EBITDA and provides a pipeline of assets to create new funds. Slide 29 provides further details on funds management earnings. Funds management base fees increased by 5.3% in the first half, driven by higher FUM arising from valuation uplifts and net acquisitions. Transaction fees are materially higher at $32 million, reflecting large transaction volumes with net acquisitions supported by high equity inflows across the platform, most notably within CCRF. Property services revenue was lower in the first half due to elevated leasing fees in the prior period. Notwithstanding this, the group expects a sizable positive skew across all property services revenue in the second half of FY '26. Variable operating costs has increased in first half '26 to $73.5 million, reflecting employee and payroll tax accruals. Overall, this resulted in FM EBITDA of $142.3 million for the first half. Importantly, elevated net equity inflows lead to future deployment resulting in full contribution to funds management fee revenue in the following financial year. Turning to the balance sheet and total returns on Slide 30. The group's balance sheet investment in the property investment and development investment portfolio has increased to over $2.8 billion. And pro forma adjusted for post balance date deployment, including investments such as the O'Connell precinct in Sydney, exceeds $3 billion. Positive revaluations and retained earnings during the half has driven an increase in NTA to $5.54. Gearing remains low at 7.7%. And subsequent to balance date, the group has added $400 million of new undrawn debt lines, together with existing cash providing investment capacity of $1 billion, positioning the group well to pursue investment growth opportunities. Further refinancing across existing bank debt lines to extend tenor, combined with new bank lines results in a lower margin and line fee of 22 basis points in the second half. Total returns continue to grow with the group delivering an after-tax annualized return on contributed equity of 23%. Maintaining strong return metrics is fundamental to ensuring optimal deployment of both the group's capital and that of our partners. This continued focus on total return outcomes ultimately generates long-term earnings growth and sustainable value creation for our investors. On Slide 31, similar to the group's balance sheet, we had a highly productive half year, which continues, raising $10 billion year-to-date of new debt and refinancing existing debt across our funds management platform, supported by favorable credit market conditions. We expect the pace of refinancing to further accelerate in the second half through to 30 June 2026. Credit appetite from our lending partners, including both domestic and international banks remains very strong. This is evidenced not only by the significant new and extended loan volumes completed year-to-date, but also in wider covenant headroom and lower credit margins, averaging savings of 27 basis points. This debt financing activity has increased investment capacity to $7.8 billion, providing additional flexibility to deploy capital across a range of various real estate strategies and opportunities. Whilst the RBA cash rate and market floating rates remain higher than previously expected, we have progressively implemented hedging throughout the first half across funds, providing protection against earnings volatility in both FY '26 and FY '27. Overall, the group has achieved a 10 basis points lower WACD across the funds management platform as at 31 December compared to 30 June 2025. Before handing back to David, in summary, the first half of FY '26 represents a strong earnings result. The combination of elevated equity inflows and balance sheet capacity positions the group well to deliver ongoing FUM growth and sustainable future earnings growth. David Harrison: Thank you, Anastasia. Turning now to Slide 33 and our earnings guidance. I'm pleased to advise that due to strong performance within our investment and property services business, today, we are providing a further upgrade to earnings guidance for FY '26. Based on no material adverse change in current market conditions, FY '26 earnings guidance is for post-tax operating earnings per security of approximately $1.00 per security, which represents 23% growth over FY '25 earnings and an additional $0.05 above the AGM upgraded guidance provided of $0.95. This earnings guidance excludes any expectation for performance fees. FY '26 distribution per security guidance is for 6% growth over FY '25, continuing a 15-year history of annualized DPS growth. That now ends the prepared remarks, and I now invite your questions. Operator: [Operator Instructions] Our first question comes from the line of Suraj Nebhani with Citi. Suraj Nebhani: Great results, guys. A couple of quick questions from me. Firstly, on the CCRF fund, you called out $2.4 billion of gross equity. Can I just confirm how much of that -- how much of that has been filled in terms of transacted upon? And what capacity does that give you in the second half, please? David Harrison: Thanks, Suraj. The -- well, the answer is that there's another $1 billion of acquisition capacity over and above what we announced or issued in the media today with another $360 million portfolio acquisition. The other part of that capacity is we're continuing to raise equity in CCRF. So I think that dry powder will accelerate over the next few months with further inflows. And what typically happens with these open-ended funds is that particularly with the scale and diversity of the LPs that have supported that fund, I think we're going to see an acceleration in both domestic and offshore wholesale investor inflows into that fund. So whilst it might be $1 billion of dry powder now, I'm sort of expecting that to continue to grow even as we deploy further. So I don't sort of really give guidance on how much I expect to acquire further in the second half, but it's fair to say with today's announcement of $360 million and various other acquisitions, I expect it will be a pretty strong contributor to further FUM growth in the second half. Suraj Nebhani: And maybe just one question for you around your -- you obviously called out a very favorable backdrop and record inflows, yet we have seen 10-year rates move up pretty strongly and even the longer-term rates in the U.S. are up pretty strongly in the last, let's say, few months. Is that having any impact on the discussions you're having with capital partners with respect to property investments? David Harrison: Well, I think it'd be naive to say that movement in bond yields doesn't have an impact. The only thing I'd say is before we even went into this almost historical view on multiple interest rate rises, there was already a pretty strong gap between bond yields and unlevered IRRs and levered IRRs that we can deliver to our capital, both in core value-add and opportunistic. So I think the demand still exists. I've said it before, even though there's been some corrections in stock markets around the world, the reality is that most of the capital we talk to are underweight, their strategic allocation to property. A lot of our capital have experimented in various forms of alternatives, some of which have blown up completely, some of which have been highly disappointing in terms of the return you should be getting when you're going into sort of new sectors. So I think there's both absolute underweight pension capital. And I think we're also going to see further reallocation away from some of what I call the alternative experimental investments we've seen in the last few years back to really good quality core, particularly when in all core sectors, office, retail, industrial, you're buying existing buildings way below replacement cost. And I'll call out things like office where we went through a period of quite elevated rising incentives and incentives are coming down. And so effective rental growth is outpacing face rental growth. So it will become a strong deliverer of good total returns. And as I've said before, because cap rates in office are virtually 150 bps above where they were pre-pandemic, whereas other sectors have more or less got cap rates back to pre-pandemic cap rates. The total return proposition for prime office is pretty strong. So I think we'll continue to get good demand in convenience retail, logistics. And I think, as I've said on a couple of occasions, I think office might surprise everyone over the next 2 or 3 years. So overall, yes, I don't really see the latest sort of gyration in long-end bonds sort of material having an impact for all the reasons I just outlined. Suraj Nebhani: And if I can just ask one last question from Anastasia, please. Around the costs in the funds management division, the $73 million, that seemed reasonably high compared to first half last year. Is there a skew Anastasia there to the first half this year or maybe expectations for the full year, please? Anastasia Clarke: Thank you, Suraj. Not a particular notable skew to call out. I did say that it's variable costs, employee costs and payroll tax, and it's really associated with the outperformance we've achieved in the business. You've seen 2 earnings upgrades and associated with that outperformance, obviously subject to Board discretion, but there's an accrual there for further short-term incentive and the payroll tax that goes with that. Operator: Our next question comes from the line of Solomon Zhang with UBS. Solomon Zhang: First question was just, I guess, in relation to the volatility in global capital markets that you referred to in your opening remarks and the result announcement. You've mentioned that, that's increased the institutional demand for Australian property. Just wondering if you've got any data points around this. Are you seeing an uptick in year-to-date inbound inquiry and appetite to deploy on the platform? David Harrison: Look, as a broad statement and every pension fund or super fund is different. But what we're seeing is a reduction in allocations to international listed equities. The -- I'm not sure I'm necessarily seeing an absolute reduction in allocations to domestic equities. If you sort of think about the private markets and most pension funds have people running listed equities, fixed income and private markets. And within private markets, you've got property, infrastructure and private equity. We are seeing globally a lower new investment into private equity because it's well understood that private equity has materially increased their investment holding periods, and therefore, the cash coming back to investors out of realizations from private equity has severely been reduced. So we think we will be a beneficiary of incremental dollars not going into PE and sort of coming into property. Infra has obviously sort of performed pretty well, but it's often very lumpy, the new deployment opportunities that exist. So all of that sort of puts it into, I think -- property into a basket that will have demand. And then when you split the world into regions, I'm not sure we're seeing a lot of narrative around incremental CapEx going or investment into U.S. property from global investors who need to make a choice where they want to invest. We're certainly seeing a good acceleration in demand out of European pension funds wanting to sort of invest in Asia Pac. And the backup in bond yields in Japan is actually helpful because most Asia Pac core capital really doesn't see core markets outside of Japan and Australia. Most of the other options are sort of seen as a little more volatile and higher risk. And with the backup in bond yields in Japan, there's some question marks around whether or not the 30-year yield spread play where there's not a lot of capital growth and/or potential negative capital growth. Now a lot of people are starting to wonder whether there is going to be negative capital growth with the backup in Japanese bonds. So all of that sort of means we're getting accelerated demand for investment in Australia. And as the biggest player in the country across all the sectors, we're a natural port of call for this capital. And we just don't wait for them to walk into 1 Martin Place. I've got a team traveling the world regularly talking to capital. So I sort of feel that we're in a good position. Australia is generally in a good position. And I think we're going to see, as I said earlier, both core value-add and opportunistic risk capital wanting to get deployed in Australia. Solomon Zhang: That's good color. And as a follow-up to that, would you have an estimate of where property allocations might sit versus their strategic asset allocation targets? I know we have good visibility into the Australian super fund data, but less into offshore. David Harrison: I mean I think even the Australian super fund data is very different, whether it's a defined benefit fund and accumulation fund. But it's a broad cross-section, and this is all available on APRA. I'd say domestic super allocations to property could range anywhere between 6% and 13%. We've found global capital typically would have a higher allocation at the bottom end. And in some cases, I've seen allocations up to 17%, 18%. But if you want it at a rough rule of thumb, I'd say 9% in domestic and 10% or 11% to 12% for international capital. And then depending on the particular partner, whether European -- whether it's a pension fund or a sovereign wealth fund, some of them are very opaque in their weighting. So it's difficult. But all I care about is do people have incremental appetite and everyone I talk to has got incremental appetite. So that hopefully gives you the color. Solomon Zhang: Maybe just a final question for Sean. Just on the $5.5 billion living and mixed-use pipeline. Can you just give us some math sort of how you've built up to that amount, i.e., maybe just how many lots rough area of value per square meter? And can you just confirm whether this is assuming -- you assume you hold 100% of the project equity at the end? Or do you assume that you bring in a capital partner for part of that stake? Sean McMahon: Yes. Thank you. Look, that's the pipeline completion value on the assumption that we build out the strategic planning approvals we've delivered over the last year or so. So in terms of optimizing our existing assets, which is the real strategy, that's a big accomplishment, which leads to $5.5 billion. And that's more recently, a material addition was Gordon Shopping Center, where we just got a set amendment for a potential $1.6 billion mixed-use project. So we now have the optionality to bring in new partners to strategically develop these assets out or we can optimize the existing assets as they are and trade them for a premium. I think the main thing is we have optionality now to grow in these sectors, which is a new thematic, if you like, in the living space. But I might add that over the last 5 or 6 years since we've owned Folkestone, we've built out about 6 in global residential subdivisions, which has been very successful. So it's not a brand-new sector for us, but we're just optimizing the existing assets that gives us optionality to deliver future earnings in different spaces in the future. Do you want to add to that, David? David Harrison: Yes, I'd just add, over 95% of the gross completion value is build to sell. So one of the reasons why pension capital likes build-to-sell is over the course of a sort of 3- or 4-year project, they know they're going to get their money out plus their profit because that's the nature of build-to-sell and there is absolutely no way we're funding any projects without majority external capital. So I think that answers your question. I think the other thing I'd say is that we're probably -- when you think about this pipeline, we've added value to assets that we already own in the platform. We're not going out there buying overpriced Sydney land, which has been the case for a lot of people trying to do residential. We're actually cultivating and adding value to our existing owned assets or managed assets. So it's quite a different model. But depending on market cycles and obviously, us attracting external capital when we're ready to go, that's how these things will get developed out. Operator: Our next question comes from the line of Simon Chan with Morgan Stanley. Simon Chan: David, you talked about pretty successful fundraising campaigns over the last 6 months. Just wondering if you think office market now has stabilized to a point where flow of equity could come rushing back into CPOF, because from memory, you're going to kick off a capital raise there, right? Have you got any insights for us? David Harrison: Yes. No, we already recently raised $0.25 billion in CPOF. I think as I said before, Simon, when I look at like-for-like cap rates for prime office versus the other sectors, they've got the most cap rate compression just to mean revert back to pre-pandemic levels. I think all the hysteria around work from home is dissipating quickly. You only have to look at the occupancies, the vibrancy in both Sydney and Brisbane. Obviously, Melbourne is going to have a slower recovery, but it also has got very little new supply, and we're starting to see double-digit, unbelievably double-digit net effective rental growth coming through in the Paris end of Melbourne, albeit off high incentive levels. But -- so yes, I think I've been saying for 12 months, I think you might find over a 5-year period, offices are sleeper in terms of inflows. Do I think that's going to be the next 6 months, 12 months, 18 months? I don't know. I can say we're having a lot of constructive discussion with investors and the smart ones who realize you want to get in early in a recovery cycle, not at the later end of it to maximize your IRRs, having a really good look at jumping in now. If you look at our acquisition of 1 O'Connell Street, that's a pretty big statement about where we think really strong potential growth is going to come in the prime core of Sydney. And all I can say is that we're looking to play that office recovery across core value-add and opportunistic. And I think there's a bit like I was saying about build to sell on our existing assets, it's pretty hard to go out there and buy a block of land and make things work. So quite often, as we've done with Chifley, we'll cultivate what we've already got. In Melbourne, about 8 years ago, we built another 26,000 meters on an existing 30,000-meter building, effectively didn't know me anything on the land, and I created 2,500 meter floor plates on the bottom 10 levels. And so I think there's different ways that you can play that market. But yes, I think office will provide sort of outsized go-forward equity IRRs compared to other sectors. And there'll be some that are sort of smart enough to get in early, and then there will be others that wait for a couple of years of solid NTA growth before they sort of jump back in. So that's the sort of landscape we're looking at. Simon Chan: Fair enough. If I think about your guidance, originally, you were guiding to $0.90 for the year and now you're guiding to $1. Essentially, over the course of the last 6 months, David, you found an extra $50 million somewhere, right? That's not -- that's a sizable number. Like what has driven -- I know in your prepared remarks, you kept saying our business is better, but $50 million is a big number. Like did you just completely misread the market back in August? Or like where is the bulk of the $50 million coming from? David Harrison: Well, first of all, if you think about $4.8 billion of inflows in 6 months, which is probably higher than any full year inflow we've ever had, even with my optimistic outlook, I didn't think we'd sort of raise that amount of capital. And obviously, there's some wins in there that we wouldn't have necessarily anticipated at the start, like the Challenger mandate. There's a few other things that are happening in the second half that we'll eventually announce. We've also done, I think, a good job in further recycling equity we had, selling it down to capital partners and then redeploying into new investments that has helped drive the PI line. So look, I've said it before, Charter Hall has historically been able to deliver very, very strong and consistent multiyear earnings growth after a correction cycle. If -- you're an analyst, you have a look at the history of Charter Hall's earnings. So we're in a positive momentum situation, but the last thing I'm never going to do is over guide based on, I might raise $4.8 billion of equity in 6 months. I'd prefer to guide where we have visibility. And if we can deliver upside through further deployment, particularly further equity flows, that's the way we've run the business for 21 years since it was listed. The other thing I'd say is, and I've called this out before, there's a bow wave or delayed impact on revenue and hence, earnings from strong inflows. If we have $4.8 billion in the first half, you won't see an annualized impact on that until FY '27. So if we can have another strong inflow year in the second half, so we've got an even bigger record of inflows in FY '26. The bow wave effect means you're not going to see a full year annualized revenue and EBIT impact from that until '27. So this is why we're pretty constructive about the future. And obviously, myself and the rest of the 600 team are out there raising more equity, continuing to do active leasing and grow the business. So hopefully, that gives you the answer that you wanted. Like if you're asking me why I didn't know we'd be at $1 when we guided $0.90, well, that's the answer. Operator: Our next question comes from the line of James Druce with CLSA. James Druce: I just wanted to clarify something on [indiscernible] I mean you've done 11.5% return over 10 years. Since inception, it's probably better than that. Is that in performance fee territory for '27? David Harrison: Mate, I don't give you 1-year forward guidance, let alone 2-year forward guidance on anything. So all I'd say is you'll recall, we generated performance fees out of Charter in FY '19 and FY '20. As you point out, there's another measurement period in '27, what I would say to you is we're going to need a decent level of cap rate compression to get that back to the high watermark because your IRR calculation on all performance fees always goes back to time 0 and has regard for previously paid performance fees. But -- so I wouldn't say it's out of the question, but I certainly wouldn't say it's in the money at the moment. James Druce: Okay. All right. And then just second question just on the $5.5 billion mixed-use opportunity. How do we think about the timing of getting further go to market for that? I mean it sounds like you've got all the pieces of the puzzle together, the strong demand in that sector. David Harrison: You're talking about residential? James Druce: Yes. David Harrison: It's all about market cycles. So some of those have got Stage 2 planning approval like 201 Elizabeth Street and would be ready to go. Similarly, at Westmead, Gordon needs to go through another stage before it's fully ready to go. They're all income-producing brownfields opportunities. So we're in no hurry. So what I call the planets aligning is, a, having vacant possession and planning approval; b, having external capital partners to fund it with us maybe doing a bit of a co-investment and more importantly, our team having conviction that's the right time to go. Now if you think about build-to-sell, you're not going to start construction on any build-to-sell without a significant level of presales. So if I sort of think about all of that, you need the planets to align, including presales, so you can get nonrecourse project finance to -- like anything, you've got to match the equity funding with the debt funding and presales for you to start construction. So that's how we're going to prosecute those development opportunities. Whilst residential, particularly luxury REITs such as 201 Elizabeth Street is strong. We think there will be very, very strong demand for something like Gordon. The reality is you've got to make all the planets aligned, including getting fixed price, construction contracts that makes sense. Fortunately, we're starting to see some deflation in construction pricing in industrial, where we've let a lot of building contracts well below what it would have been a year ago. But it's still -- it's not easy, as you probably heard from some of the on-balance sheet resi developers. It's not easy to sort of lock down decent pricing on construction. So they're all work in progress. And as I said, for the time being, we're getting good passing yields on those assets in the various funds and partnerships that own them. Operator: Our next question comes from the line of Adam Calvetti with Bank of America. Adam Calvetti: Just trying to reconcile, I mean, first half, you've done $6.6 billion in acquisitions, transaction revenues, $32 million. I mean last financial year, you did about half the transactions and the same transaction revenue. So I mean, is there some unrealized acquisition fees there? Are they going to fall into the second half? I mean, have you had to give away just the structuring of the different funds, some are having acquisition fees? What's really going on there? David Harrison: Well, first of all, when CQR put its seed assets into the core retail fund and swapped part of them as an equity investment in that fund, we were not charging CQR divestment fee. So it's a good question. But what I'd guide is that not all of the transactions are generating fees if there's that sort of related party transaction. The other thing is that there is a bit of a deferment on transaction revenue if something wasn't completely unconditional at 31 December, it will become a second half transaction fee. And of course, as you'd expect, it's hard to charge a client like Challenger gives you a mandate an acquisition fee when they already own the assets. So that's the reason why when you look at those transaction fee revenue numbers versus the volume, it looks a bit different than prior years. Adam Calvetti: Okay. That's pretty clear. I mean on the $1.9 billion of post [indiscernible] acquisitions, will those be generating any fees? David Harrison: Yes. Anastasia Clarke: In second half. David Harrison: In the second half, yes. Adam Calvetti: Yes, correct. Okay. And then I mean, just thinking -- if you just double first half, you're probably going to see some growth in PI and FM. We're above 100. So what's going to be dragging it down? David Harrison: This is my 21st year doing this, and you guys always do the same thing. You just double all the first half metrics to get to a full year number. It's not that simple. And there will be various items. But like it's hardly a first half, second half skew at 50.5 versus 49.5. So I wouldn't get too excited about why aren't you doubling everything to get to a higher number. Adam Calvetti: Okay. That's somewhat clear. David Harrison: It's about as clear as I'm going to be. But look, what I would say, and I said it earlier, we have an expectation for the second half, which has sort of guided our recommendation to the Board who signed off on the guidance. If like the answer I gave to Chan earlier, if we pull off some miraculously great deals or inflows that drive our revenue and EBIT above our expectations, then we might beat that guidance. But at this stage, we're pretty comfortable with that guidance. And as I said earlier, I think you guys should be thinking about the bow wave effect and what this sort of equity flow and FUM growth is going to do on an annualized basis into '27 and beyond. Operator: Our next question comes from the line of Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: David, I just have a question on the operating expenses. Historically, there has been a skew to the second half. How are you and the team seeing the composition for this financial year? David Harrison: Anastasia? Anastasia Clarke: Yes. As I said earlier, we're not seeing a very significant skew. You should see it as fairly in line in terms of the expenses we've reported in the first half is indicative of second half. Operator: Our next question comes from the line of Tom Bodor with Jarden. Tom Bodor: I just was interested in your acquisition of 1 O'Connell post balance date. I noticed that's not in the development pipeline for office. I'd just be interested in your thoughts around that project, the potential to maybe take onboard the other 50% over time and what scheme you think makes sense for the site? David Harrison: When you buy a site consolidation, that's cost a vendor a lot of money, and we're buying it well below what they accumulated for, I wouldn't necessarily think the highest and best use is bowling over 5 buildings and creating a 100,000 meter tower. So we like that because we effectively think that we've got optionality. The sum of the parts and the realizable value on each of those buildings once Charter Hall adds its active asset management, it may well be a much better outcome than doing a major development, whether it's a 100,000 meter single tower or 250,000 meter towers. So we and our partners are just looking at that with lots of optionality. Clearly, we have a preemptive right over the other 50% when and if that fund decides to sell. Given what's happening with that series of funds, I'd be surprised if we -- they don't go down a path of looking to sell it. And if they do, well, we've got a preemptive right to look at it at sensible pricing. So because of all of that and because it's a Stage 1 DA, not a Stage 2 planning approval, I wouldn't see any potential development scheme, as I said, whether it's 1 tower or 2 towers sort of coming into our uncommitted development pipeline until we went down that path, if, in fact, we even go down that path. So I think that's the best way to answer it. But there's no doubt we have a Stage 1 planning approval for 100,000 meter tower that virtually has to be worth $40,000 to $50,000 a meter. By the time it's built, it's $4 billion or $5 billion of built form. So that is the way I sort of look at it. But by the same token, if -- unless it beats an alternative strategy, which is our base case, we won't be doing 100,000 meters of development on that site. Tom Bodor: Yes. That's very clear. And then maybe just a follow-on question just around the valuation cycle is clearly troughed, all the REITs have seen positive revals. But if you look in the sort of smaller and mid end of the sector, there's still some pretty significant discounts to NTA. Do you see that -- how do you see that evolving? And what opportunities do you see in the listed sector over the next few years? David Harrison: Well, as you know, we've been running prop securities money for a long time, ebbs and flows. But if you're sort of roughly -- say we've got roughly $1 billion in our various prop securities funds invested in the REIT sector. I think there's some dogs out there, and I think there's some really cheap buying. So as an investor in REITs on behalf of the balance sheet and our capital partners, I think there are some good buying. Just if you look at my 3 REITs, just because the market trades them at a discount to NTA, it doesn't mean that me or the rest of the direct buyers in the world don't think that NTA is real. You only have to look at how much money we've raised in our retail fund at NTA to show what the wholesale world thinks. So we're just going through a normal listed cycle where the listed markets are punitive on good quality portfolios for macro reasons. It doesn't mean I think the listed pricing knows what it's doing. And if you look at the history of this group, when the listed market is not pricing things correctly, we've taken opportunities to take REITs private. So I don't see that being any different over the next 10 years, for the last 15 years. So -- but we're not going to jump into something we don't like. And as I said before, the sort of planets have to align for that to work. But if listed markets keep mispricing things, well, yes, I think there's -- whether it's us or others, you're going to see a continuation of REIT take private. You've already got NSR on the block. We did HPI last year, a bit like virtually half of the listed infrastructure sector, it's all gone off the boil is because the wholesale capital is prepared to price the assets different to the listed market. So yes, I don't see it being much different, to be honest. Operator: Our next question comes from the line of David Pobucky with Macquarie Group. David Pobucky: Just the first question on Chifley South, if I could, 60% committed. Just curious to know how you're thinking about the pace of the lease-up and any anecdotes on current interest levels that you can provide, please? David Harrison: I'm in no hurry. All of our internal forecasts suggest to me we're going to be getting well into double-digit net effective rental growth in the core of Sydney CBD, and we're really the only new top of the hill premium quality tower. There is one other, which I call down in Tank Stream is nowhere near the sort of level of what Chifley South is. And to be honest, the achieved face and net effective rents sort of prove that. So yes, we'll be patient about how we do deals in the rest of the tower. I think we'll probably get -- of the 20,000 still to lease, we'll probably get 10,000 done with sort of multi-floor tenants and the rest of it will be whole floor tenants who literally will have no other choice to go into a whole floor premium grade tower at the top of the hill. So I think we're going to get a very good result on both the rents and the end value of that new tower. So yes, I'm very relaxed about being where we are with 60%, but it's fair to say I think it will be higher than that in June and then higher again in December. And I'm not too much in a hurry given the strong growth in rents. David Pobucky: Just a couple of quick ones for Anastasia. Just firstly, around tax expense. I think the rate was around 18% versus 23% in the PCP, just the driver of that and how you think about the tax rate going forward? Anastasia Clarke: Yes. We've done some cross-staple capital reallocation, $400 million in the year prior and $200 million recently. And that certainly has particularly the prior one had a result in lowering our effective tax rate on CHL side of the staple by about 5 percentage points is our estimation for FY '26. David Pobucky: And just a second one around where your weighted average debt margin currently sits and how much that's come down by versus last year, please? Anastasia Clarke: For the head stock main balance sheet, it's come down from 1.65 by 22 basis points. I don't necessarily think it will land there. We've got some further plans around refinancing, which actually translates right across the platform. We talked -- we -- the result today was $10 billion of refinancing, and we're accelerating that pace all throughout the second half. And so across the platform, we reduced margins by 27 basis points, and we expect that to build as a number as we get through that refinancing program just because credit markets are very, very strong. And we're also wanting to lock in the higher covenant headroom that we're achieving across the platform. Operator: [Operator Instructions] Our next question comes from the line of Richard Jones with JPMorgan. Richard Jones: Just interested in your high-level views. So obviously there were market discussion about AI and the potential impacts for office. So just interested in your views and the associated views of capital as to whether that may delay potential office investment. David Harrison: Look, there's a lot of theories out there. And I think there's an unnecessary focus on white collar employment versus all sectors of the economy. We're seeing a massive acceleration in automation going into warehousing. So whether you want to call it technology or AI driven, like the reality is we're seeing an acceleration of what I've seen for 20 years in terms of blue-collar workers being in warehousing, being replaced with automation. In terms of the office markets, our view is that if sort of processing type roles are going to be most at risk from AI, we think that's going to have an outsized impact on suburban office markets as opposed to sort of core CBD, which is virtually where most of our assets are. And look, right now, we're continuing to do lots of leasing with both whole floor and multi-floor tenants. And I'm not seeing any planned reduction in floor space when people are signing up on 10-year leases. So I think that just reflects that the whole corporate world is not quite sure whether headcount is going to be materially impacted or whether there's going to be a reallocation of roles and/or whether AI is simply going to augment productivity rather than replace human labor. So that's sort of how we're playing it and have a very strong view that the very best modern office buildings in the best core markets will prosper. Right now, who would have thought the net effective rental growth in Brisbane is higher than the Sydney CBD. But that's what's happening. It's tightening up very quickly up there. We're fortunately sort of be in high conviction on Brisbane in core CBD for a long time. So I don't have the answers. I don't think anyone's got the answers. But I think if you're going to shape your portfolio towards the very best locations and keep them as modern and as relevant as possible, you'll do better than a lot of other buildings. Our team have constantly reminded me that virtually 90% of all vacancy in most markets, but particularly in Sydney, sits in about a dozen buildings. And will be no surprise. Most of them are sort of older buildings that haven't had capital invested in them and aren't necessarily in the sort of absolute core locations. So I think each market will be very bifurcated by the quality of the building and its location, and we'll continue to see sort of, if you like, centralization. That's why I've never like North Sydney, we're seeing a centralization of relocation, tenants relocating into the city because the new metro basically has taken away the time advantage that used to exist for people to locate in North Sydney. We're also seeing a flight to modern quality. We've secured ING Bank to move from a pretty old boiler in 60 Margaret into a modern 1 Shelley Street building. So I think these are the sort of bifurcation trends we're seeing. And that's why you'll see us continue to have modern buildings in good locations that are going to attract the tenants. So -- and if anyone else can give you a better answer on the future impact of AI, please let me know. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to David for closing remarks. David Harrison: Okay. Thanks once again for your time. And I'm sure we'll be meeting various people at investor meetings following the results. Thank you.
Operator: Good day, and thank you for standing by. Welcome to Aegon's Second Half 2025 Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Yves Cormier, Head of Investor Relations. Please go ahead. Yves Cormier: Thank you, operator, and good morning, everyone. I would like to welcome you to this conference call on Aegon's second half year 2025 results. My name is Yves Cormier, Head of Investor Relations. Joining me today to take you through our progress are Aegon's CEO, Lard Friese; and CFO, Duncan Russell. Before we start, I would like to ask you to review our disclaimer on forward-looking statements, which you can find at the end of the presentation. And with that, I would like to give the floor to Lard. E. Friese: Thank you, Yves. Good morning, everyone. I will start today's presentation by running you through our strategic developments and commercial performance in 2025 before Duncan will go through the results in more detail. So let me start with Slide #2 with the key messages for the year. Our results over 2025 demonstrate the strength of our strategy and our ability to consistently deliver upon our ambitions. We have either met or outperformed all our financial targets for 2025. Operating capital generation before holding and funding expenses increased year-over-year to EUR 1.3 billion ahead of target. Our operating results increased by 15% compared with 2024 to EUR 1.7 billion. This increase reflected business growth across all units, stable market impacts, and improved experience variances in the Americas and international businesses. Free cash flow for the full year 2025 was at EUR 829 million, consistent with our target. On the back of our strong capital position and financial performance, we proposed a final dividend of EUR 0.21 per common share, resulting in a full year 2025 dividend of EUR 0.40 per share, in line with our target and up 14% from EUR 0.35 per share over 2024. Furthermore, we executed EUR 400 million of share buybacks in the second half of 2025. And we are currently executing the first half of our new EUR 400 million buyback program for 2026, as announced at our Capital Markets Day in 2025. Commercial momentum remains strong in 2025. In our U.S. strategic assets, we continue to grow WFG as well as our new life sales and our retirement plan assets. At the same time, we continue to reduce our exposure to financial assets. The capital employed in this segment was $2.7 billion at year-end, ahead of our target. We also reported solid results in our other business units in 2025. Our asset manager delivered net third-party inflows. Our U.K. workplace platform generated healthy net inflows. And our international business continued to perform well. Finally, we are making progress with the preparations for our proposed relocation to the U.S. as announced at the Capital Markets Day. U.S. GAAP implementation is still at an early stage, but is progressing as planned. I'm now turning to Slide 3 to run through the commercial performance of the Americas in more detail. As we discussed at our 2025 Capital Markets Day, progress in the Americas remains strong. Starting with World Financial Group, we remain on track to grow the number of licensed agents to around 110,000 in 2027. As of year-end 2025, the number of licensed agents amounted to nearly 96,000, an 11% increase on the previous year. Initiatives to improve agent productivity have led to a higher number of producing agents. In addition, producing agents also sold a higher average number of policies at a higher average premium per policy sold. As a result, new life sales increased by 10% compared with 2024, while sales of annuities increased by 6%. The productivity gains in WFG were one of the key drivers of the 30% increase in new life sales in our Individual Life business. We also recorded strong new life sales of the final expense product that we offer in the instant decision market through a fully digital underwriting platform. Furthermore, we continue to successfully grow our RILA sales. We achieved a 45% increase in indexed annuity net deposits in 2025, thanks to higher gross deposits from further improvements in wholesale distribution productivity. In the Savings & Investments segment, the midsized retirement plans business reported net inflows in 2025 on the back of our strong positioning in the pool plan space and supported by a large takeover deposit earlier in the year. The level of written sales remains solid, which should support gross deposits going forward. We also generated further growth in both general accounts stable value and individual retirement accounts as we work to increase profitability and diversify revenue streams of the retirement plans business. I'm now moving to Slide 4 for an update on our other businesses. At Aegon U.K., we continue to be well positioned in the Workplace Platform business. Net deposits during 2025 were driven by both the onboarding of new schemes and members and regular contributions from existing schemes. For the Adviser Platform business, net outflows in 2025 reflected ongoing consolidation and vertical integration in nontarget adviser segments. As announced at our 2025 Capital Markets Day, the strategic review of the Aegon U.K. is ongoing. In our International segment, new sales continued to contribute to the growth of the book in 2025. Our joint venture in Brazil reported higher new life sales, particularly in credit life products as did our activities in Spain and Portugal. In China, new life sales were negatively impacted by changes to product pricing to reflect the new pricing regulations and the current economic environment. Aegon Asset Management generated positive third-party net deposits during the year in both global platforms and strategic partnership businesses, although at a lower level than last year. In global platforms, net deposits were mostly driven by fixed income products and more than offset outflows from the SGUL reinsurance transaction that we did last year. In strategic partnerships, net deposits were driven by our Chinese joint venture, AIFMC. We are implementing the plan for asset management as presented at the 2025 Capital Markets Day. For instance, we recently expanded our CLO warehouse capacity in the U.S. and Europe in line with our ambition to grow our higher revenue margin third-party business. Before handing over to Duncan, I would like to take a step back and reflect on the outcome of the plan we presented at the 2023 Capital Markets Day using Slide #5. First, as I mentioned, we either met or exceeded our financial targets in terms of operating capital generation, free cash flow, dividend and leverage. Second, at the same time, we have significantly transformed our business. We finished the year ahead of our target in terms of capital employed for the financial assets at $2.7 billion, and our U.S. strategic assets now significantly outweigh our U.S. financial assets, both in terms of CSM and capital employed. This is quite a remarkable shift. These are not only great achievements, but they also lay strong foundations for the next steps of our journey as we relocate to the United States while continuing to increase the profitability of the group and return capital to stockholders. I am very proud of all our colleagues across our businesses for contributing to our success. Well done, everyone. I will now hand over to Duncan to discuss our financial performance in more detail. Duncan, over to you. Duncan Russell: Thank you, Lard. I will zoom in on our second half 2025 results, starting on Slide 7. The operating results increased by 11% year-on-year to EUR 858 million, with all of our businesses delivering higher figures. Operating capital generation increased by 8% with strong figures from Transamerica. Free cash flow in the second half of 2025 amounted to EUR 388 million, and we received remittances from all units. Cash capital at holding decreased to EUR 1.3 billion at the end of 2025, mostly because of capital distributions to shareholders in the form of dividend payments and share buybacks. Valuation equity per share increased by EUR 0.60 with a positive contribution from both shareholders' equity and the CSM balance after tax. Gross financial leverage was stable at EUR 4.9 billion. Finally, the group solvency ratio remains robust at 184%. As announced in May last year, the eligibility of the perpetual cumulative subordinated bonds in our capital stack ended as of January 1, 2026. These bonds contributed 7 percentage points to the group solvency ratio as of December 31, 2025. Now using Slide 8, I will address the development of our operating results in the second half of 2025. Starting with the U.S., the operating result increased by 5% in euros or 14% in U.S. dollars, thanks to a combination of growth and more favorable variances. The operating results of strategic assets increased by 10% in local currency and benefited from business growth, notably in the individual life and retirement plan businesses, partially offset by a lower operating margin in the Distribution segment. In financial assets, the operating result increased because of more favorable experience variances compared to the second half of 2024. On the other units, the operating results of the U.K. increased, benefiting from business growth in favorable markets, which led to both a higher CSM release and increasing noninsurance revenues in the second half. In the International segment, the increase of the operating result was also driven by business growth and a onetime item in China. Furthermore, the results from China benefited from a true-up related to the local implementation of IFRS 17, which is booked in the second half. Aegon Asset Management's operating results improved in the global platforms business mostly from the impact of favorable markets on revenues and from an improved operating margin. Looking forward, as mentioned at our recent Capital Markets Day, over the 2026 to '27 period, we aim to grow the operating result of the group by around 5% per year from the EUR 1.5 billion to EUR 1.7 billion in run rate in 2025, taking into account an assumed euro-dollar exchange rate of $1.20. I now turn to Slide 9. Here you see our IFRS net results for the second half of 2025. Nonoperating items were unfavorable in the period and were largely driven by realized losses on assets transferred in the context of the SGUL reinsurance transaction. These realized losses were taken in the P&L, were fully offset in other comprehensive income and therefore, had no impact on the development of shareholders' equity. Net impairments reflect an ECL reserve increase from new investment purchases as well as a small number of downgrades and defaults of bond investments. Fair value items were negative mostly from revaluations of solvency hedges in the U.K. and other charges were mostly driven by various items in the U.S. and U.K. and partially offset by the positive result from the stake in ASR. I am now on Slide 10. In the second half of the year, our shareholders' equity grew by 2%, and our CSM balance increased by 4% over the same period. The increase in the CSM was largely from business growth in the U.S. strategic assets. We saw a 24% increase in CSM in the second half, thanks to profitable new business, favorable assumption changes and experience variances. The CSM of our financial assets decreased due to the runoff of the book as well as the impact of the SGUL reinsurance transaction. These developments mean that the CSM balance of our strategic assets now accounts for 57% of total Americas CSM. Outside the U.S., the changes to the total CSM balance were limited. Overall, valuation equity per share, which represents shareholders' equity plus net of tax CSM increased by 7 percentage points over the second half of 2025 to EUR 9.06 per share. Moving now to Slide 11. OCG before holding, funding and operating expenses increased by 8% compared with the second half of 2024. OCG from the U.S. increased by 19% or 27% in U.S. dollars over the same period with a higher contribution from both the strategic and financial assets. Mortality and morbidity claims experience was favorable in the second half of 2025, while it was unfavorable in the prior year period. OCG benefited also from a favorable release of required capital from the investment portfolio actions and a reduction in short-term financing. This was partly offset by a higher new business strain from growing our strategic assets. Adjusting for favorable items, the U.S. OCG in the second half of 2025 fell within the guidance of $200 million to $240 million per quarter. In the U.K., OCG decreased mostly because the second half of 2024 includes some favorable items, while the International segment reported lower OCG. At Aegon Asset Management, OCG increased due to favorable markets and an improved operating margin compared to the prior year period. Holding, funding and operating expenses were largely unchanged year-over-year at EUR 142 million, bringing the total for full year 2025 to EUR 295 million. As a result, OCG after holding, funding and operating expenses for the full year 2025 amounted to EUR 992 million. I'm now turning to Slide 12. The capital positions of our business units remain strong and well above their respective operating levels. The U.S. RBC ratio increased by 4 percentage points compared to June 2025 to 424%. The increase was driven by OCG from the operating entities applying the RBC framework. This is partly offset by remittances to the holding. Onetime items and management actions negatively impacted the RBC ratio by 3 percentage points during the period. The negative impact on the RBC ratio of the SGUL reinsurance transaction was offset by capital investment into Transamerica from the group. Market movements had a limited impact. In the U.K., the solvency ratio of Scottish Equitable decreased by 2 percentage points to 183%. Operating capital generation in the period was offset by remittances to the holding and investments in the business. Market movements here also had a limited impact. On Slide 13, you see that cash capital at holding has come down in the second half of 2025 to EUR 1.3 billion. This development is consistent with our aim to reach the midpoint of the operating range for cash capital at holding around EUR 1.0 billion by the end of 2026. Free cash flow amounted to EUR 388 million in the period and included remittances from all our units as well as dividends received from our stake in ASR. For full year 2025, free cash flow amounted to EUR 829 million, consistent with our target of around EUR 800 million for the year. We returned nearly EUR 1 billion of capital to our shareholders through dividends and share buybacks in this period. Consequently, our share count ended 2025, 5% lower than at the start of the year. Capital injections into the businesses amounted to EUR 751 million and mostly related to the investment in Transamerica to offset the impact of the SGUL reinsurance transaction. This is funded by the disposal of part of our ASR stake, 12.5 million shares, as indicated at our Capital Markets Day. The remainder mostly related to investments in our international investment management businesses and in Aegon Asset Management. We have already launched a share buyback for the first half of 2026, totaling EUR 227 million and expect this to be completed on or before June 30, barring unforeseen circumstances. This share buyback covers both the first half of EUR 400 million program for 2026 announced at the Capital Markets Day and EUR 27 million related to share-based compensation plans. After completing this first part, we expect to launch the second half of the EUR 400 million program. I am now moving to my final slide, #14. To conclude, the results over the second half of 2025 were strong, and we are confident we are well positioned to meet our growth ambitions for 2026 and 2027. As discussed at our 2025 Capital Markets Day, the next time we present our results will be in August with the first half figures. We will also move the timing of our results conference call to 2:00 p.m. Central European Time to accommodate U.S.-based investors. With that, I would now like to open the call for questions. Please limit yourself to 2 questions per person. Operator, please open the Q&A session. Operator: [Operator Instructions] And our first question today comes from the line of Farooq Hanif From JPMorgan. Farooq Hanif: My first question is on the operating profit in the second half of the year, which was kind of at the upper end of your guidance range. Having looked at the detail and discussed with the IR team, it feels like it's a reasonably clean number. But obviously, it's towards the upper end. So I'm just wondering about the sustainability of that, given the growth in CSM, the strategic assets that you talked about. So if you could comment on that, that would be helpful. And my second question is on, I mean, the ASR stake. I know you've been reluctant to really give much update on it in the past. But I was just wondering, sort of philosophically, is this something that you would want to or could or would be happy to own once redomiciled in the U.S.? And to what extent do the proposed tax legislation in the Netherlands impact your decision around that? E. Friese: Thanks, Farooq. Duncan, can you take both? Duncan Russell: Sure. Farooq, you're right, the second half operating result was, once you adjust for favorable or unfavorable items, I think, is a reasonable representation of the underlying figure. It benefited obviously from strong markets, which we saw in the second half of the year. But it leaves us in a good place with our ambition to hit the targets we outlined at the Capital Markets Day in December. On ASR, no change there. So that's a shareholding which we're happy with. We've given guidance in the past that there are 2 reasons we would sell that. One is that we feel that it hits intrinsic value and/or we have an alternative use of the capital. Our redomiciliation to the U.S. has no impact on our ownership there. Farooq Hanif: What about the tax, is that something you've considered? Duncan Russell: Again, I think, at the Capital Markets Day, I said that I didn't see tax having an influence on our ownership position with ASR. Operator: Your next question comes from the line of David Barma from Bank of America. David Barma: Firstly, on OCG, which is tracking towards the bottom end of your quarterly run rate in Q4. What conditions do you need to see for you to be closer to the top besides currency movements? And in particular, on the new business strain, which was particularly strong or high in Q4, what kind of strain are you expecting for the coming years? And then secondly, on WFG, results came down in 2025. I'm looking at the first profits here. And if I look at agent productivity or cost income, they both seem to have deteriorated in the period. So are you able to give some color, please, on the trends there? And maybe if you can quantify the investment program that I think is going on at WFG in '25? Duncan Russell: On the first question, on OCG, you know, we had a very strong quarter in OCG. Our reported OCG was actually very healthy. We highlighted three things in there, which supported it in the fourth quarter. The first was, we had positive mortality and morbidity variances. As you know, that's going to move around quarter-on-quarter, but this quarter, it was pretty favorable. Secondly, we had high new business strain versus the guidance we gave during 2025, and that reflects that we had a very strong commercial performance on the life insurance side. And then thirdly, we had a high release of required capital, which was high versus prior quarters. Although if you look at our history there over the last 2 years, you do see that can move around quite a bit, and does tend to spike in the second quarter and the fourth quarter as that's the quarter we paid dividends out of Transamerica. So net-net, it was a strong quarter. Once you adjust for all of these favorable items and also take into account FX, we think we were at the bottom end of the kind of underlying run rate. And if you go back to our Capital Markets guidance, which we gave in December, we feel in a good place with achieving that for 2026 and 2027. E. Friese: So on WFG, we have a lower margin on the back of very strong sales growth and also productivity growth. So there's more producing agents producing also higher premium per policy sales. But the reason why the operating result is lower than last year is that we're investing in the business in a number of areas. It's in leadership and governance of the company as a whole because the company is growing quite a lot, don't forget that, from 56,000 agents a number of years ago to 96,000 now. Also, technology initiatives to strengthen the sales process, a lot of training that we did to improve productivity and making more agents that are licensed producing quicker and compliance and field support for the growing number of agents. So that's the reason -- that's the investments that we are having in the business. Duncan? Duncan Russell: And maybe just to add on that. So if you go back to the Capital Markets Day, we flagged that we saw our strategic assets in the U.S. growing by around 10% per annum over the coming years. For Distribution segment, we flagged also that we expected the operating margin to remain at the lower end and the growth in the profits to be mostly driven by revenue growth. Operator: Your next question today comes from the line of Farquhar Murray from Autonomous. Farquhar Murray: Just 2 questions, if I may. Firstly, on the legal settlement. So I suspect in terms of magnitude, the most we're going to get is that it's part of the $230 million of charges in the U.S., which I can understand. But maybe you could give us some color on those cases where this settlement takes us in terms of the uncertainties around that and maybe what's the process for finalizing this? And then secondly, on the U.K. strategic review, if this ultimately does come to a sale towards the summer, could I ask how you will approach any decision between cash and equity within the offers made around it? And is there any preference or what are the criteria and considerations from your side? E. Friese: Farquhar, this is Lard, I'll do both. So let's start with the legal settlements. They are pertaining to 2 cases, which we settled. The detail of that, it's quite technical. So I will refer to a page, which is Page #269, 2-6-9, of the annual report. It's the first 2 paragraphs under the section proceedings in which Aegon is involved. And if you read those 2 sections, you will find those are the 2 cases that we're talking about here. They are indeed included in the other charges of USD 230 million, as you pointed out yourself. So they're including that alongside other items in that bucket. As pertaining to the process, we settled those cases, they now need to be approved by the courts, and that's a process that will take a bit longer. Then when it comes to the U.K. review, we have launched it, as you know, at the Capital Markets Day on the 10th of December. It's early days, so we will not give any comments on this until such time as we have an update for you. We expect that update to happen somewhere before the summer, let's say. That's what we aim to do. Operator: [Operator Instructions] And our next question today comes from the line of Michael Huttner from Berenberg. Michael Huttner: I had 2 questions. One, in the past, Duncan, you've given us the kind of waterfall to the underlying OCG. I just wondered if you could do that, for my benefit, I imagine my competitors are much more clued up than I am, but that would be really, really helpful for the year. And then the second question, which kind of relates to it, but maybe a bit differently. I'm always obsessed by mortality, and there's that lovely Munich Re update, I think, this week on GLP-1s and stuff. Can you talk a little bit about the improvement in mortality you've seen? So year-on-year, the variance is better, but is there any trends here we should be thinking about? Duncan Russell: Michael, thank you. So we think that the clean 4Q OCG was around EUR 294 million for the group compared to the reported OCG of EUR 372 million. And if I break the movement from one to other down, we had a positive impact of around EUR 47 million in the U.S. from favorable items. And within that, there was EUR 36 million attributable to favorable claims experience. The majority of that was mortality, EUR 29 million was mortality, EUR 7 million was morbidity. So that's good. Against that, we had new business strain, which was EUR 34 million higher than the guidance we gave at the start of 2025, and that's reflecting strong sales. And then against that, we had relatively elevated release of required capital against the guidance we gave at the start of 2025 of around EUR 45 million, and that's reflecting normal ALM activity. And as I noted, we do tend to see that spike a bit in 2Q and 4Q as Transamerica pays dividends. Then in the other units, we had overall positive favorable items of around EUR 31 million, of which about EUR 20 million was in international, split equally between China and Spain. And then around EUR 7 million in the U.K. and EUR 4 million in Aegon Asset Management. On mortality, we saw this quarter favorable severity. We saw that particularly in younger ages and very old ages. You know that number can move around in any single quarter, given the size of our book. But if I take a step back and look at our mortality experience since we made the updates, about 1.5 years ago now, we're happy with how it's performing versus our best estimate. Operator: Our next question today comes from the line of Nasib Ahmed from UBS. Nasib Ahmed: First one on financial assets. At the CMD, you did the universal life deal. And it seems like you've got the SPV set up. So are you going to chip further away at the $2.7 billion this year? Do you have anything in the pipeline in terms of reinsurance transactions or anything else? Any more color on that, Duncan, would be appreciated. And then secondly, I noticed you're focusing a little bit more on IFRS in the presentation slide. You removed the bridge of the OCG where you show the expected in-force and the release of capital. Just wondering why the change? Is it because U.S. GAAP is closer to IFRS? How should we think about U.S. GAAP, is it more closer to OCG or IFRS? E. Friese: Duncan, 2 questions for our CFO. Duncan Russell: So on the reinsurance deal, you're right. In December, we announced at the Capital Markets Day, I think a very innovative transaction on our part, whereby we reinsured a significant part of our secondary guarantee universal life exposure in the U.S., and that brought our required capital down to $2.7 billion. Actually, if you take a step back and look over the last 4 years, I would argue that we've done a huge amount of management actions across all of our books. And we're actually positioned as one of the more innovative parties in the market with the recent transaction, I think, giving us even more optionality because we've established this reinsurer. We continue to look for ways to bring down the $2.7 billion to our targets in 2027. That will be done through a range of actions, management actions we can take ourselves, actions which we engage with policyholders on and then also potentially third-party actions. I think the main message I'll give you is that we're confident we can hit our targets. And we've demonstrated, I think, that we are at the forefront of innovation in dealing with these legacy blocks. On the shift from -- on the emphasis on IFRS, I think we've always placed a great deal of emphasis on IFRS. We've historically run 2 frameworks, OCG and our accounting framework, which is IFRS 17. We are trying to simplify our communication. We took a step of that with the Capital Markets Day, where we have given targets, which I think are simple to understand and simple to track. And so that's how we're going to manage the next 2 years. You know that we're in the early phases of implementing U.S. GAAP. I'm not going to comment on that on how that's going or what the expected outcome of that is. But over the coming years, we will update the market when we have U.S. GAAP figures and eventually transition our disclosures to that of a normal U.S. company. Operator: [Operator Instructions] And our next question today comes from the line of Farooq Hanif from JPMorgan. Farooq Hanif: So just following on from Nasib's questions. You mentioned at the CMD that the reserving on a stack basis, you're happy with across most of your books, but LTC is the one that stands out. Is your position still that it's hard to find market deals that economically make sense to you right now? Is that still your position and that you can deal with it kind of internally through your internal management actions on pricing? And secondly, this is a slightly kind of open-ended question, I guess, but just, I mean, you consistently have lots of positive and negative experience variances on an IFRS basis, for example. And I see quite a lot of assumption changes again in CSM. I'm just kind of wondering to the best of your knowledge, do you feel like you're getting closer to dealing with these variances going forward? Or are there any items we should watch out for going forward in earnings that could still remain volatile under IFRS? E. Friese: Both questions for you, Duncan? Duncan Russell: Okay. On the financial assets, so what we tried to give at the Capital Markets Day was, firstly, a framework whereby we said that we look at third-party transactions on an economic basis, and we referenced our valuation equity and also free cash flow per share, so both cash and economics. So that's the framework when we assess transactions. Second thing we gave was, we stated that our statutory reserving in aggregate for the financial assets was now comparable to on an IFRS basis. But within that, there are obviously blocks which are stronger and blocks which are lower. And we did indeed say that long-term care was lower. If we look at third-party transactions, actually, I think the binding is more the economic price. And if you look at long-term care, the reality there is that there are a lot of -- it's a relatively more sensitive block because it's long duration. The peak reserves are not until sometime in 2030. And that makes it a bit more sensitive to various policyholder and behavior assumptions. And therefore, we've so far taken a view that we are the appropriate owner of that block and our approach to managing that liability is through rate increases and other options we give to the policyholder to manage exposure. And I think that's probably the base case for the coming period. On variances, well, we gave a range of around EUR 100 million within our operating profit, which I think should be enough to cover positive and negative variances in a half year period, both from experience variances and onerous contracts. There will always be variances. This half year, we had positive mortality. We had some negative on premium persistency and expense on onerous contracts. So there will always be a number, and that simply reflects the leverage of the balance sheet to the P&L. But I believe that the operating range we give, which is EUR 100 million range, so plus or minus EUR 50 million should be enough to cover those variances on a go-forward basis. Operator: Your next question today comes from the line of Iain Pearce from BNP Paribas. Iain Pearce: Just one. In the presentation, you flagged some impacts from downgrades and defaults. I was just wondering if you could give us any more details on what this relates to, if there's sort of concerns about further downgrades in the investment portfolio? If it has anything to do with any of your private credit holdings as well? And I assume these are U.S. related as well. Just any details on what's driving that because it's not something we've really had flagged before. Duncan Russell: I can take that. That's a good question. So as you know, under IFRS, we have the ECL. And if you look in our statistical supplement on Page 15 you'll see the movement in the ECL and there you'll see transfer between stages, which we saw some movement from stage 1 to stage 2 and some movement from stage 2 to stage 3, relatively small. I would say, still fairly benign. And that was across a range of bond holdings we have, ABS holdings we have, et cetera, but still pretty benign, to be honest with you, not a meaningful number yet, but it is something we track. On our asset portfolio, in general, it's performing very well, and you can see that in the movement in the ECL. Operator: And your next question comes from the line of Jason Kalamboussis from ING. Jason Kalamboussis: Two quick follow-up questions. The one is in the U.S., plus 14% on local currency is above your -- which you're indicating as guidance. Do you think that this was supported mostly by the stronger markets we saw in the second half? Or do you find that there is a good momentum that could be carried in 2026? And also incidentally, I mean, if you could comment on the fourth quarter, how was it compared to the previous 3 quarters in the U.S. in local currencies? And the second thing is just for my understanding on the U.K. sale process, I understand that you are not going to comment on it, but I was looking just to understand how it works. So you are looking at bids for the whole of the U.K. But within it, do you also take or do interested parties show an interest for part of it and give a price or they have to actually look at it as one piece. And if you want afterwards to sell it in two different pieces, for example, because you're not happy with the price you get for the whole piece, then they have to resubmit, and you start discussions on that kind of second process. Essentially, is it a 2-stage process? Or is the second one folded partly in the first one. So I would be just interested if you could share any thoughts on it. E. Friese: Jason, this is Lard. I will do the U.K. piece and then I'll hand over to Duncan for your first question. On the U.K., as I mentioned, the strategic review that we launched pertains to the insurance business and pertains to the platform business. It does not pertain to the asset management office that we have and business that we have in the U.K. So that's something I want to make sure it's clear for everybody. Secondly, it's in the early stages, and we aim to give an update when appropriate, and we hope to do that before the summer of this year. Duncan Russell: On the operating profit in the second half, what tends to drive -- or what drove a lot of that growth, Jason, was the variances. So in the second half of 2025 for the U.S. on a U.S. dollar basis, we had a positive experience variance on claims of $129 million linked to mortality and morbidity comment earlier, whereas last year in the second half, that was only $33 million. So there's a big swing from variances, which are always going to occur, but hopefully should be captured in our range. If we look forward, the guidance we gave at the Capital Markets Day was that we would expect the operating result run rate to grow around 5%, driven by around 10% growth in strategic assets and shrinking profits and financial assets. As you know, the strategic assets profits are driven mostly by CSM progress and then our noninsurance profits. You see that our CSM is progressing really nicely. So our CSM on Protection Solutions ended the year at $4.3 billion and at half year it was $3.6 billion. So good progress there, which I think is supportive of the growth ambitions on the insurance side. And I just flagged earlier that on distribution, we expect a continued lower margin but good revenue growth. So that should support the overall roughly 10% growth in strategic assets. Against that, the financial assets will continue to run down. You note there that the CSM ended the year at $3.2 billion, began the year at $3.8 billion. So as that runs down, there'll be a lower release from CSM and hence shrinking operating profit over time. And the dynamic of those two things should get you the roughly 5% growth in operating profit. Operator: And the next question comes from the line of Michael Huttner from Berenberg. Michael Huttner: It was on the net inflows rather than -- so what I noted from speaking to your excellent IR, but I wanted to have some comments on how you see it developing. In the second half, net outflows in retirement plans in the U.S. was $0.6 billion. I think that's the retirement of baby boomers. I just wondered what the outlook is there? And then in the U.K., we had EUR 273 million net inflows in H2, which is well below what we had in H1, I think EUR 1.9 billion or something. So I just wondered how you see the run rate here. Then finally, on asset management, EUR 1.3 billion net outflows, I think, again, second half. And I just wondered how you see that developing? E. Friese: These are different business lines. I will go one by one. First of all, our plan assets in the U.S. have gone up by 13% year-on-year. And the net outflows you're reporting, so the business itself is in very good shape. And especially when you look at the written sales, the new plans, the pool plans that we're getting, actually, the retirement business is doing very well. The outflows are indeed something that is in line with what the market sees overall in the U.S., which is baby boomers taken there, taking some of the money out. But also given where the stock markets are, people taking a little bit of money out. And that's what you're seeing there. Nothing else driving it. If you look at the U.K., the outflows we're seeing there is stemming from the same trend that we've been seeing for a longer time, which is a combination of a couple of things. And in the second half, there was one additional thing that I want to mention as well. So first of all, we target, as you know, a target segment of 500 advisers. Beyond that, in the nontarget segment, there's quite a lot of vertical consolidation and that drives where people are buying platforms and as a result, move assets away from it. So we've seen that for quite a number of quarters, and that has not changed. What we also saw in the second half of the year, there was quite some jitters in the U.K. on the budget. It's now settled because the budget is clear. But before that, there were concerns and as a result, clients took some money out because there were rumors that the tax-free pickup of pension money would not be possible anymore. And as a result, that led to a little bit of that. We have good progress actually on the technology improvements that we're making with target advisers providing positive feedback on that. But unfortunately, the commercial result of that is not yet visible. If you look at the AUM flows, so first of all, third-party flows were up. So they were worse than last than 2024. '24 was a record year, by the way, for that. But they were much lower than 2024, but they were positive. So we have positive flows driven -- so both on global platforms, which is our own platform as the strategic partnerships. And in terms of the outflows, we saw 2 main things happening; one client in the U.S. redeemed from our U.S. high-yield fund; and then we had the ASR, so they had some allocation changes in their general account. And as you know, we have a partnership with them on that. We noticed that in our asset management results. That is what we've been seeing. However, bottom line is, the retirement business in the U.S. is doing very well as is demonstrated by the set of numbers here. And the U.K., the workplace business is also in a very good place. It may not have been as high as the previous year because that was like a record year. This one is the second best year that we had, so it's still in a very good place. And on the adviser platform, I gave my views. And on AUM in total -- sorry, on asset management in total, we had positive flows, as I mentioned earlier. I also want to point to the margin improvement that we saw, by the way, in the asset manager, it nearly doubled this year to 17%. Operator: And the next question comes from the line of Nasib Ahmed from UBS. Nasib Ahmed: Just one question. Lard, you mentioned the legal proceedings on Page 269. I had a look, and there's a paragraph, the third paragraph, which has been there for a while around distribution. Just wanted to understand what that's related to? Is that WFG related? Or is it something else? E. Friese: Well, the two that I was referring to are the cases that -- so one has to do with an old block of business and bonuses that were paid on that on universal life policies. Again, it's more eloquently described in the first paragraph of that section in Page 269. And the second one had to do with the topic of the MDR, so the monthly reduction rates that were increased. And also that is described more wholesome in Page #269. Those two cases have been settled. That's good news. And now we await the confirmation. Now, then what you're referring to, the third paragraph, they're not WFG related. So the first two cases -- so the cases I mentioned that we settled are not WFG-related. Nasib Ahmed: Sorry, I was asking about the third paragraph where it says, there's some legal action going on around agents that might be considered independent contractors as opposed to employees. So I was asking about that one, whether that's WFG related? E. Friese: We'll follow up with you on that. But I think you're referring to a case that we mentioned half a year ago, already in our half year disclosure. We'll follow up. IR will give you a ring. Operator: And the next question is a follow-up from Michael Huttner from Berenberg. Michael Huttner: Sorry about that. On the number of advisers at WFG, the total number is up, which is wonderful. The dual or the multiticket number is up, but it's kind of much slower growth. Can you talk a little bit about that? I think it was a question a couple of years ago, and I think the implication was that it didn't worry you too much, but it's the multiticket is obviously the higher value part, I don't know. Any comment would be helpful. E. Friese: You may recall in many of the discussions last year that we wanted to improve productivity, right? And I've mentioned in a number of earnings calls that we were running programs to indeed improve that productivity. Now what has happened is that through our training and through our field support, we have been able to make more agents because the agency sales force has grown quite a bit. So the agents that become fully licensed agents, then also need to learn and to get productive and to become sellers. And that's what you're actually seeing in the numbers. We were able to improve the number of producing agents. Then the second thing that happened is they also sold insurance policies with a higher premium amount. And that also drives the metric of productivity up. That's all good news. So the agency network become stronger, has become bigger, has become more productive and that bodes well for the future, and we will continue to strengthen the network. I mentioned that we are doing investments supporting the field force training, all these good things to ensure that, that massive sales force that we have, which is the second largest in the U.S., and that goes to the underserved mainstream American family class and help them with our protection and retirement plans, et cetera. So yes, it's a good progress that we're making there. Operator: Thank you. We have no further questions. I would like to hand the call back over to Yves Cormier for closing remarks. Yves Cormier: Thank you, operator. This concludes today's Q&A session. If you have any remaining questions, please get in touch with us at the Investor Relations team. On behalf of Lard and Duncan, I would like to thank you for your attention. Thanks again, and have a good day. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Magnus Grenfeldt: Good morning, and welcome to Oslo and Hotel Continental, a fairly calm Oslo, clearly affected by winter break and the fact that Norwegians ski this week. Welcome to you in the room who are not skiing and also welcome to all of you online. We are here to present Q4 of 2025, Smartoptics and also, of course, full year 2025. We will start as we always do and talk a little bit about the highlights of the quarter. Like last quarter, I will let the numbers speak a little bit for themselves. Stefan will come back and talk in great detail about everything that you see on the left of this slide. I will just conclude that it's a fantastic quarter and a fantastic year for Smartoptics. It's an all-time high revenue quarter. We're seeing demand stable to accelerating, I would say, accelerating towards the second half of the quarter and continuing. We're seeing increased traction with our large accounts, independent of customer type, network operators, neo-scalers, cloud providers and so on and so forth. We have an absolutely fantastic market in the U.S. And interestingly enough, we have a Europe that looks very promising and looks very interesting for the coming years, and I will come back and explain that. Last but not least, from a product standpoint, we're growing in all our product areas, and I'm very happy to report that it's a record quarter with super good growth in our business area, optical devices, which is a business area where we changed the leadership, where we started to invest about a year ago. And we're seeing like Smartoptics in the past, where we spend our money, where we invest, we also get growth and good business. So it is working. We are continuing to invest in the company. I said in Q3 that not investing in at this point with this great market ahead of us would be foolish, and I will just reiterate that. We are going to continue to invest. And the question right now is what do we mean by disciplined investments? Well, we do mean that we're going to invest or rather grow our OpEx slower than we grow our revenue. And we are going to grow with profit. But the most relevant question now is, is this a good time to hit the accelerator to capture the market opportunity that's coming from AI-driven capacity extensions over probably the coming decade. And we will, of course, work hard on that over this year, but it's no doubt investments are continuing. Q4, yet another quarter where we are proving that we are the challenger of challengers in our market space with one exception in the numbers that has been reported so far to the industry analysts with one exception, which is purely related to hyperscale build-out, we are growing far faster than anyone else. So we are the challenger of challengers. I want to talk a little bit about what's happening in the market and explain a little bit where we are doing well. And of course, it's nearly impossible not to talk about AI at this moment. And I'm going to do that from a standpoint of our 3 customer segments: Enterprises, Network Operators and Cloud AI, what we also sometimes call ICP, Internet Content Providers. So what is happening in the market? And the reason why I want to talk about it from all these 3 standpoints is that all of them are equally relevant from the standpoint of AI. What's happening in the world is that data centers are being built at a pace that we have never seen before. When you're building data centers, you need one thing more than anything else, and that's cheap electricity or low-cost power. That's available in certain spaces and places on the planet. And if you find it, you will build a data center and you will load that data center up with GPU technology, et cetera. The other thing you need secondarily is to cool that equipment and you need access to water. Having network connectivity to these places because obviously, if you build a data center, much like cloud in the past, you need to connect these data centers to the Internet, to the pairing points and to other places in the network. That's easier to solve. You just buy bandwidth, build networks and the problem is solved. And that is what our customers are doing. So these data centers, they can appear in many different locations. We've heard about building in cooler geographies to achieve natural cooling. I recently attended a big conference where a lot of data center companies were present. What else are they talking about? Well, they are talking about building data centers nearly everywhere. So submerged data centers under the sea. We're talking about data centers on decommissioned oil rigs because you have access to wind power and you have space and you have water. We're talking about -- I was in Tokyo last week in Japan, they are building dedicated platforms in the Tokyo Bay where they will place data centers. And really, any idea is as good as the other ones. So that's clearly one element. Our customers are building new data centers. They need to connect these with multiple terabits. The biggest projects that we have been looking at is day 1 requirements of hundreds of terabits connecting that to the Internet. That's one application clearly. Who are doing that? Well, it's affecting -- so we are selling equipment and networks to the people who are -- who own the GPU clusters, so the neo-scalers and similar. We're selling equipment and networks and services and software to people who own the data center, who in turn rent out capacity to the people who own the GPUs, et cetera. And of course, we're selling an awful lot of networks and services and software to the CSPs, the operators of the world who are providing bandwidth to the people who own the GPU factories, et cetera. So it scales across the whole thing. The last one that I want to talk about enterprise there is the fact what I believe and what many in the market believe is that the whole idea of outsourcing your inference to the cloud, if you're a large enterprise, is great at the moment. But the belief is that more and more enterprises will start building their own GPU-based AI clusters for their demands, so their inferencing demands. One good example of that is Smartoptics. Of course, we're an early adopter. Of course, we need to have control over our models. We have already invested in pretty advanced AI servers where we are running our models, where we're expecting our customers to use our softwares and to run our cloud-based services in the future. That will accelerate. So it's going to be across all customer segments. I only talked about connecting the AI data centers to the network now, so kind of North-South traffic for those of you who are more knowledgeable about that terminology. The other thing with AI is, of course, the West East traffic. So the scale up, the scale out, the scale across, which is really connecting data centers in the region to optimize where you run your workloads, et cetera. We are doing that too. And that's a market that I believe is going to continue to grow as these data centers continue to grow. So it's a fantastic opportunity out there, and it's spanning across all our customer segments and really nearly all of the applications that we are involved in delivering. I want to take you through some of the numbers, where the numbers are coming from in the quarter, and I will start with a slide that we have used one time per year, namely in Q4 every year. We look at the invoiced customers in the year, and we draw some conclusions. The conclusions are very similar to every other year in the Smartoptics history. It is accelerated, yes. But we can see that a certain amount of our business this year, about 15% of our business is coming from brand-new customers. We can also see that we have a super good retention of customers. More than 50% of the revenue in 2025 is coming from customers that we had in 2020. We can see that our partner network is expanding. We have more partners who are using our equipment in their bigger solutions to their customers. And overall, we are seeing just an expanding customer base, which is very good for 2026, 2027, 2028 and onwards. When we look at these customer segments that I talked about, Enterprise, CSP and ICP or Data Center, Cloud and AI, we can see that 2 of them are growing much faster than the third, namely Enterprise. There is also a geographical aspect to this that I will talk about in the next slide because a lot of the business that we have done in Europe is enterprise related. And those of you who have been following us know that several years ago, we started to talk about traction with larger operators in the U.S. market. So U.S. is a couple of years ahead of Europe there. I will come back to that. But the largest growth we find in our CSP segment. And these are -- there's a lot of customers. It's effectively Tier 2 and Tier 3 operators across the world with some dominance in the U.S. We have now several new customers in the year and several existing customers who are continuing to roll out technology. And I talked about availability of power, where do you build data centers and where do you need capacity? Well, in the U.S., one place where you have low-cost electricity is Texas. So it's not a coincidence that our biggest customer in 2025 is a U.S. regional operator with focus on the Texas market. We're also seeing tremendous growth in the green segment, the ICPs. That's where we put in everything that has to do with cloud. So that's where you find the neo-scalers, that's where you find the cloud operators. That's where you find the content, the gaming, the Internet exchanges and all of that. And of course, Enterprise growing a little bit slower. This is heavily dominated by our classical enterprise business, so storage area networks, disaster recovery networks, data center to data center communication basically for security purposes. I'm expecting Enterprise to pick up as AI inferencing is affecting that market more and more in the future. Looking at our channels, we can see a very healthy growth with our indirect business. The fact that our direct business is growing faster than indirect is, I would say, nearly 100% related to the red on the left, namely the CSP. When the CSP market is growing faster, a lot of CSPs prefer to have a direct relationship with us and hence, our direct business is growing. I'm very happy with this split. We have super good partnerships out there, super good channel really across the world. It's several hundred people who have contracts with us and can use our technology in their solutions. So a very solid base of indirect partners. Now we're coming to the geography. And of course, Americas, super impressive. So thank you very much for my team in America, which has grown. By the way, we're investing more in America on the back of this success. So fantastic. EMEA, as I said, the way I look at Europe is that Europe is where Americas was 2 years ago. We are now working. We have closed contracts with larger network operators in Europe. We have delivered networks to larger operators in Europe, and we're sitting on a pipeline and list of opportunities that is highly developed of at least 10 operators in Europe, very, very similar to what I talked about in Americas 2 years ago. So of course, we're seeing signs of this. The fact that quarter-over-quarter, Europe has developed in a fantastic way since midpoint of the year. Q4 is a very good quarter for Europe. I'm expecting Europe to pick up and be -- it's a very promising market for us over the near term. Asia, it is a little bit more project-driven. So we can see that when the large projects happen the quarters grow when the large projects don't happen. And with large projects, I'm talking about 300,000, 400,000, 500,000 projects that we do out there. And apparently, Q4 was not one of those quarters. Am I worried about Asia? No, quite the opposite. I think we have great opportunities in the markets that we are addressing. So Australia, New Zealand, Japan, Southeast Asia and so on. And we have recently invested a little bit more into Asia and Africa, I should say. I mean, it's relatively small investments compared to Americas as a -- for instance, but we are investing and the opportunity is there. I just came back Tuesday morning from Japan, where we have opportunities with Japanese customers. We're continuing our IOWN efforts, and we're continuing the proof of concept with NTT DOCOMO business for the IOWN architecture. We are having good dialogues with a bunch of Japanese companies now, but it will take time, rest assured. Products. So about a year ago, we did a leadership change or rather put in a new leader for business area Optical Devices. We started to renovate and improve the back end of that business. And we can see that, that has clearly paid off. We are in a much better shape to deliver fast and quality to our customers. We are continuing that investment. So right now, we're building a brand-new manufacturing facility for business area Optical Devices in our brand-new facility in Kista, Stockholm, that's being built for us as we speak. So focus there, automation, robotization of that business. It is high-volume business. It's several hundred thousand devices that we're shipping every year. So we will invest in that going forward. That's also going to result in a restructuring cost in the first half of the year of about $500,000, but it's all done in -- to capture future growth and capture the momentum that we have. The most important business area still Solutions, Software and Services growing in a very nice way. So all good. I would like to hand over to Stefan to take you through some of the financials. Stefan Karlsson: Thank you, Magnus, and good morning, all of you. We have a -- we had a strong quarter. We had the revenue increased 37.7% to USD 23.2 million compared to USD 16.9 million last year, and that was mainly driven by high sales in Americas of USD 13.9 million compared to USD 6.9 million. The gross margin in Q4 was down to 46.1% compared to 49.0% last year and was impacted by inventory reserves, write-offs and other inventory-related one-off items. The underlying margins, however, are very consistent and strong quarter-over-quarter throughout the year. The full year margin that I think we should focus on was stable at 47.8% for 2025 compared to 48.1% last year, and that serves as a better guide for going forward as an indicator for the margin development. Looking on EBITDA, it was good on USD 3.6 million compared to USD 2.4 million last year and an increase of USD 1.2 million. And that split is USD 2.4 million is related to the revenue increase and minus USD 1.4 million is related to increase in employee benefit expenses that has increased to USD 5.7 million over USD 4.3 million last year. And that's driven by the organizational growth of 7% from 131 to 140 full-time equivalents, and that's including new hires in sales in the U.S. We have FX impact that worked against us with 8 percentage points. We have inflation and increased variable compensation due to the positive development in sales. Other operating expenses is rather flat year-over-year and quarter-over-quarter. EBITDA margin increased to 15.3% compared to 14.4% last year. Cash flow from operations was super good this quarter was at USD 6.8 million compared to USD 0.2 million last year and mainly driven by the good underlying business and some reductions in inventory. The equity ratio was 54% as a result from a growing balance sheet. We have non-current assets of USD 9.1 million compared to USD 7.1 million last year. Current assets is USD 39.7 million compared to USD 33.9 million, and it's mainly inventory and trade receivables. Cash is up compared to last quarter, up to USD 7.3 million, but down a little bit from last year that was USD 8.0 million. We have available credit facilities of NOK 75 million, USD 7.4 million equivalent. We have a high focus on cash and mainly inventory forecast process that has been improved, and we are doing continued management on trade receivables. Non-current liabilities is only USD 0.3 million compared to USD 0.8 million last year. Current liabilities amounts to USD 12.8 million compared to USD 10.7 million last year and it's mainly trade payables and tax liabilities and personnel-related expenses. Deferred revenue up to USD 12.8 million compared to USD 9 million last year. And the increase is related to stable higher revenues from business area software and services and growing revenues. The working capital amounts to USD 14.5 million compared to USD 14.9 million last year and down from USD 18.4 million last quarter, and that's mainly driven by inventory reductions and increased deferred revenues. The inventory is now on USD 18.7 million compared to USD 12.6 million last year, but a little bit drop from last quarter when it was USD 20 million flat. And the increase from last year is mainly driven by that we now have longer lead times and the components we have now are more expensive. And the higher inventory level that we set, we talked about that last quarter that is essential to secure the future growth in sales. But the improved forecasting process that we have done during the quarter have reduced inventory slightly. But despite the high level, there is a low risk sitting in inventory. Trade receivables decreased to USD 18.7 million compared to USD 19.9 million last year, down from USD 19.0 million last quarter. We have good collections in Q4 and this quarter, the sales was more evenly distributed over the month compared to the average quarter where we actually have a bump in the last month of the quarter. And we don't see any risk in trade receivables at all. Trade payables increased to USD 5.6 million compared to USD 5 million. And net other short-term liabilities amounts to USD 17.2 million compared to USD 12.5 million last year, and the increase is mainly driven by increase in deferred revenue. And then we also have a little bit of tax liabilities of USD 1.7 million, a slightly bump up from last year when we had USD 1.1 million. Thank you, and back to you, Magnus. Magnus Grenfeldt: Thank you very much. Like last year, the Board intends to propose a dividend of NOK 0.6 per share. So no change there. This is, of course, pending AGM approval later in the year. I want to talk a little bit about how we're viewing our future right now. This is more or less the same slide that we've been using now since we introduced our new long-term ambitions. One major difference today compared to 6 months ago is that we need to focus on our core markets. We need to focus on our business because we're doing great. There is no doubt about that. So continued focus on our 2 big home markets and of course, the initiatives that we have running. So you notice that when we talk about new growth drivers, we have now removed M&A from the chart. And the reason why we've done that is we want to convey that we are not actively working with that question at all at the moment. Maybe we will later in the year, we shall see and maybe opportunities will arise that we choose to pursue and go after. But at the moment, the focus is on what we're doing. And of course, adding new growth drivers, committing to major accounts, yes, we are doing it. You can see it in our product development. We're developing much more advanced products for release later this year and next year. We are developing the company in all aspects, anything from compliance to procedures and how we conduct our business. We are going into the new geographies to a very large extent, following our customers also, don't forget that. It is not going into South America with a completely brand-new -- brand-new play, it is the same. The hyperscalers are building data centers in Mexico, too, meaning our network operator customers needs to connect those data centers. So the business model is the same. So it's all very controlled in a sense. And we are investing more in our software automation and AI tools. This is both external, meaning softwares that we will sell to our customers, both as part of the SoSmart network orchestration platform and as [indiscernible] software packages that will help them automate their processes. It's all about going after the OpEx of our customers and help them to improve that. And also our internal tools. AI is now something that scales across our whole company. All functions are building a pipeline and a road map for our internal tools development team. And I have really good hopes that, that's going to dramatically improve the way we conduct our business in 2026. Remember that we are a company that can do this. In order to do this, you need software skills, you need to have an understanding of how you develop these architectures because the architecture is the important thing here rather than the actual coding and we're in a very, very good position to do that. Looking forward, a great market out there. We maintain our ambition to grow our market share by 2 to 3x in the relevant markets that we have been talking about, and we're continuing to believe and to target the 13% to 16% EBITDA range -- sorry, EBIT range that we have been discussing before. Now the question is, of course, how big is this market and how fast is it growing? And we will have to come back with that. We have, through 2025, talked about 5% to 6% growth in the market up until 2030. We know that the industry analysts are now working their numbers, working their Excel sheets to figure out how fast is this really growing. I believe we will see a larger number in the first half of 2026. So when we come back in Q1 or Q2, we will be able to share some more projections on that. With that, I'm happy to take questions, and I suggest we start in the room, Per. Per Burman: Yes. Any questions in the room? Markus Heiberg: So Markus Heiberg, SEB. I have 2 questions. I can take them one at a time. So the first one is on several competitors are flagging now supply constraints into 2026 and long lead times. How did that affect your Q4 and your outlook into the next quarters? Magnus Grenfeldt: So far, it has been mainly positive. We are clearly winning new accounts because some of our competitors, especially the larger ones are, of course, super focused on hyperscaler business. We have also seen some of our competitors coming into 2026 pretty much sold out, probably not completely, but to a large extent. That is, of course, positive for Smartoptics. The mid-sized players are turning to us for help to get deliveries. They need to connect their customers, and we have several wins of that nature. The good thing is that these are not decisions you take lightly. You don't bring in a new supplier for transport networks and optical networks and throw them out a quarter later because you're done and dusted and you can get deliveries from someone else. It is strategic choices that these people do to bring us in. And my expectation is that we will stay there for a very long time, just as normal. The only difference is that it's faster now. Markus Heiberg: So you didn't see any meaningful impact in Q4 or? Magnus Grenfeldt: Yes, we did. Markus Heiberg: And the second question is partly related because we see the surge in memory prices and also availability of components. So 2-parted question there is, how is that affecting the discussions with customers, the end-demand projects ramping up? Are they being impacted? And the second part of that is, of course, your own gross margin and how that will affect 2026? Magnus Grenfeldt: So I think it will affect nearly all our customer dialogues -- all our customer dialogues this year are, to some extent, going to be related to delivery performance and our ability to deliver. So it's going to be a very important topic to us. Stefan said that we have, in a disciplined way, worked through Q4 with our inventory. And if anything, I'm expecting our inventory to go up now. That's a good thing for us. If we can deliver, we will win business. And there are very long lead times, not only on memories, as you said, also on optical components, every optical component that sits inside our solutions is typically half a year lead time. So my procurement team is now working with Q3 and Q4 demand. That's, of course, a difficult task. But to me, it's more problematic if we sandbag that than if we have a slightly higher inventory and a little bit more working capital. That is not a big problem for me. So it's very important, no doubt. I think the margin impact of this will be marginal. I don't think that's where we should look. We should look at how much inventory we have and consequently, how much we can deliver. So far, so good. We still have very short lead times. We are operating with 4- to 6-week lead times typically, which is extraordinarily good in our industry right now. And of course, our ambition is to maintain that through the year. That's going to be a real power play in 2026 and 2027, I'm sure. On the other stuff, you mentioned memories, and I can just say that we're good for 1.5 years or something like that. So we have secured that position. Markus Heiberg: That's very good. So just one final follow-up there is on the gross margin. I think you mentioned that it will -- you expect that to be sort of flat into 2026 or you should look at the 2025 gross margin and that's a good guide for '26? Or are there other things that we have to keep in mind on the gross margin for '26? Magnus Grenfeldt: No, I think it's a good guidance. So 2024 is very similar to 2025. It's going to fluctuate over the quarters, as Stefan mentioned, but I think it's a good guide for the future now that we will operate in this range, 47% to 50% for the foreseeable future. Per Burman: Any other questions in the room? No. Then let's go to the call. So we have Christoffer Wang Bjornsen from DNB Carnegie. Christoffer Bjørnsen: Can you hear me? Magnus Grenfeldt: We can hear you. Christoffer Bjørnsen: Great. So just wondering, you have like an interesting comment on the East-West traffic. I think you're primarily and historically, your bread and butter has been metro area networks and more like, let's call it, North-South. So can you help us understand kind of what's prompting you to start talking about like within data center East-West traffic in that part of the network? Magnus Grenfeldt: Well, what's prompting me is that we're doing it with customers. We have a fairly large project in 2025, which is all about that connecting AI data centers to each other over a geographically dispersed area. So typically, what we're talking about here is probably below 100 kilometers between all data centers. So that's what's prompting it. Why is this important? Well, as as the knowledge and as the AI companies are developing their methods, they will need to distribute the workloads across many data centers for several reasons. One thing is the whole model routing or whatever you call it, right, where do you run a specific request? Where do you have the resources available to run a specific request? And then it's also, of course, a question of scale, how big data centers can you build? Well, there is an upper limit there. Although I have had the pleasure to see one of these data centers, they are huge. That was one of our neo-scaler customers that I had the pleasure to see. They are huge. But there is an upper limit, then you need to go to a second location and a third location and so on and so forth. and that will up the requirement for data center to data center or front end to front end or however, East-West type of traffic. So it's as simple as that. We're doing it. Christoffer Bjørnsen: But still kind of coherent pluggables for longer distances, like so it's between data centers, not kind of within the data center rack to rack. Magnus Grenfeldt: That's correct. What I'm talking about is between data centers, and it's absolutely coherent technology. In fact, it's our whole product portfolio, well, maybe with the exception of devices, of course. Christoffer Bjørnsen: And then on the inventory, so it's been kind of steadily growing through like sequentially over the last couple of quarters, but now it's down. So that downtick in Q4, is that a hint that you're expecting kind of lower top line momentum in Q1? Or is it more about just demand pulling so hard that you haven't been able to continue to grow the inventory? Some reflections on that. It seems a bit cautious and why? Magnus Grenfeldt: I think it's 2 things, Christoffer. One thing is that when we started Q4 on the 1st of October, our ambition was to optimize our inventory, of course. And I think at least I have kind of changed my mind on that topic. It is not that important anymore. The other reason is that -- so meaning we worked with inventory optimization for -- through the quarter. The other thing is, of course, that Q4 is a very big quarter, and we have delivered an awful lot of products in Q4, hence, inventory goes down before we can backfill it. Per Burman: Okay. Then we have Oystein Lodgaard from ABG on the call as well. Øystein Lodgaard: Congrats on the strong numbers. I have a couple of questions. Maybe we can start with, you mentioned on the call some new product launches, more advanced products than what you have in your product portfolio currently. Can you say what kind of products these are or what kind of use cases they are aimed at? Is that more data centers or ROADMs for telcos? Magnus Grenfeldt: Certainly. So if we look at the journey that we've been on for a number of years, moving from being basically 3, 4, 5 years ago, a point-to-point data center network provider into developing our ROADM portfolio, aiming first at the metro networks, then going after the regional networks. So one natural evolution for us now is to continue that journey, meaning improve the performance of our ROADM family to be able to do longer reach and also in the other direction, more capacity to introduce a broader spectrum, what's referred to as L-band technology, as an example. So more of that. If we look at our transponders, muxponders, the Layer 1 products in our family, more advanced versions of that. We have just released our 800-gig transponder now, which I think will become a high runner. We will develop more of those and more advanced versions of our transponders, muxponders more multiservice type products. Yes. And then, of course, continuing our efforts at the edge where we still see a lot of opportunities in the sort of low-cost, both ROADM-based and kind of active-passive type products. So it's across the board. And last but not least, our software platform, which today, I consider to be phenomenal and it is really becoming a mature tool for our customers to really take advantage of. We have a lot more to do on the automation, AI side. It's not necessarily AI, but certainly automation, data collection, multi-vendor, there is a lot of development that's ongoing there that I have really strong belief in the near future. Øystein Lodgaard: Perfect. And one other question on the near-term growth or kind of the growth momentum going into 2026, and it's a 2-part question. One is we've seen, like also was mentioned previously, several of your competitors have very long lead times. That's kind of a more -- something that has come up relatively recently. Does that mean that -- I guess there is big opportunities like you mentioned in customers switching providers to you because you are able to actually deliver on a short notice. Is that still ahead of us? Or did you get much boost from that in Q4? Magnus Grenfeldt: We did get boost from that in Q4 for sure. It was not -- I wouldn't say it was instrumental in any way. But these are typically mid-sized operators, those are typically the ones that suffer when this scenario happens. And it also happens to be a sweet spot customer type for the products we have, the kind of company we are, the responsiveness that we can offer them. It has happened. There are probably a handful of new accounts that we have won through Q4. But the world is big, and there are thousands of these, and it will continue, I'm sure. Øystein Lodgaard: And on -- do you still have some large customers now still ramping up, as new customers ramping up volumes with you, for instance, these neo-scalers, et cetera? Or kind of all those big customer wins at full pace already in Q4? Magnus Grenfeldt: No, I would say nearly all of them are ramping up, right? So it takes time to grow accounts. Most of the accounts that we have been talking about in the past, Crown Castle, WIN, all of those type of accounts that we have publicly talked about. I mean, there is still a huge growth possibility in all of those accounts as we qualify ourselves for new applications, as we become relevant for new type of network scenarios. And of course, as they grow their business, which they are on the back of data centers rolling out left, right and center. Per Burman: Perfect. We have a question on the portal as well from [indiscernible]. You aim for 2 to 3x market share for 2030. What market growth do you expect in the same period? Magnus Grenfeldt: Yes. I talked about that just a few minutes ago. I think it's a little bit early to say. So for now, I think 5% to 6%, and we will come back in the first half of the year as our friends at Cignal AI develop their models because that's what we're relying on for that purpose. So we're going to come back to that. It will not be lower. Per Burman: Perfect. Thank you. That was the last question. Magnus Grenfeldt: Then thank you very much. Have a good skiing holiday to all of you, Norwegians, and talk to you again in a quarter. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Full Year 2025 Earnings Release Conference Call. I am Sharon, the operator for this conference. [Operator Instructions] The conference is being recorded. After the presentation, there At this time, I would like to turn the conference over to Jean-Christophe Henoux, Head of Investor Relations. Please go ahead. Jean-Christophe Henoux: Thank you, Sharon, and a very warm welcome to everyone joining us today. We are here to dive into the Airbus Full Year 2025 Results, and I'm thrilled to be with our CEO, Guillaume Faury; and our CFO, Thomas Toepfer, with us to break down the numbers and take your questions. This call is planned to last 1 hour and 15 minutes, including Q&A. If you're joining us via the webcast, a replay will be available for you on our website. Speaking about the website, you can already find the supporting information package there that includes today's slides and the detailed financial statements. Before we start, let me remind you that we will be making some forward-looking statements today. I encourage you to take a look at the safe harbor statement in our presentation slides. It's important stuff, please have a quick read. And with that, let's get things started. Guillaume, the floor is yours. Guillaume Faury: Thank you, JC, and good morning, ladies and gentlemen. I'm happy to be here in Toulouse with Thomas to run you through our full year 2025 results. 2025 was a landmark year, characterized by a very strong demand for our products and services in both civil and defense. While we successfully navigated in a complex and dynamic global environment, our primary focus was managing supply constraints that created a desynchronization between production and delivery throughout the year. Against this backdrop, the year was marked by both resilience and record financials. In defense, we're observing great momentum and our large portfolio is perfectly aligned with the capability needs. We do this by delivering mission-critical solutions and being the long-term partner of choice for nations in Europe and worldwide. On the strategic front, we're advancing industrial consolidation with Leonardo and Thales to create a world-class space leader. This initiative is key to achieving the global scale and operational depth required in today's fast-evolving global market. In commercial aircraft, sustained global demand continues to drive the expansion of our industrial footprint. A major milestone in this journey was the acquisition of certain Spirit AeroSystems work packages with the closing on the 8th of December, which allowed us to take control of this production flow, and Thomas will speak more about it later. The A320 panel quality issue that hit us in December was also a significant event that put pressure on our ability to deliver in an already back-end loaded year. We took immediate steps to address the challenge, putting a strong focus on quality and therefore, unfortunately impacting 2025 deliveries. We expect the residual operational impact to be contained and spread mainly over the first half of the year. That said, our operations do not function in isolation. While we have secured a critical portion of our trajectory, some supply chain tensions continue, notably with the engine maker, Pratt & Whitney. On the A320 family, Pratt & Whitney's failure to commit to the number of engines ordered by Airbus is negatively impacting this year's delivery guidance and the ramp-up trajectory into next year. As a consequence, we now expect to reach a rate of between 70 and 75 aircraft a month by the end of 2027, stabilizing at rate 75 thereafter. In this context, I'm very proud of what team Airbus achieved. We delivered on our commitments, meeting our updated guidance with 793 deliveries. Our performance in the fourth quarter was particularly strong with 286 aircraft delivered, and we closed the year with a record year-end backlog. This result demonstrates our collective resilience and our unwavering focus on excellence in everything and everyone. Now looking at our 2025 financial performance. Our EBIT adjusted stood at EUR 7.1 billion, reflecting our commercial aircraft deliveries and the performance at the Helicopter and Defense & Space divisions. This is also reflected in our free cash flow before customer financing, which stood at EUR 4.6 billion. These results led to a record net income of EUR 5.2 billion that supports our 2025 dividend proposal of EUR 3.2 per share. With all that in mind, let's take a closer look at 2025. And moving to our commercial environment, starting with commercial aircraft. In 2025, passenger traffic expanded across all regions, while air cargo demand remained resilient. This year was another commercially successful year with repeat orders and key new customers in both the single-aisle and wide-body campaigns. We booked 1,000 gross orders, including 390 in Q4. On the A220, we booked 49 gross orders, and we see positive momentum. Looking at the A320 family, we booked 656 gross orders. This brings our backlog to 7,163 aircraft, out of which around 75% are for the A321. Moving to the wide-bodies. On the A330, we booked 102 gross orders, another strong year confirming the high demand for this very versatile aircraft. And finally, on the A350, we booked 193 gross orders, underpinning the good commercial momentum, and it was a record year for our freighter. Net orders amounted to 889 aircraft, including the 111 cancellation compared to the 1,000, which were largely anticipated and already embedded in our backlog valuation as of December 2024. Our backlog in units increased to a year-end record of 8,754 aircraft. At group level, our backlog stood at EUR 619 billion in 2025, including a strong book-to-bill above 1 for all businesses as well as the weakening of the U.S. dollar. Looking at Helicopters. In 2025, we booked 536 net orders compared to 450 a year earlier with a book-to-bill well above 1, both in units and value, including a strong contribution from the military segment as well as good order intakes from services. We celebrated orders of 100 Airbus helicopters by the Spanish Ministry of Defense, the largest helicopter purchase by this customer. Additionally, we want to mention the Super Puma family for which we signed a contract with the Royal Moroccan Air Force for 10 H225Ms in the second half of the year. We also saw Germany reinforcing their commitment by exercising the contractual option for 20 additional H145M helicopters. Finally, looking at unmanned air systems, Airbus has been awarded a contract from the French DGA for the production of 6 VSR700 systems, while also receiving a framework contract by the European Maritime Safety Agency for the Flexrotor, our modern vertical takeoff and landing uncrewed aircraft. Overall, we continue to see very strong momentum, in particular on the military market, and we remain focused on our responsibility to deliver on expectations, including ramping up. Finally, moving to Airbus Defense and Space. 2025 reflected one more year of record order intake, which stood at EUR 17.7 billion, corresponding to a book-to-bill of around 1.3. Key orders recorded in Q4 reflect several strategic wins, particularly in our Air Power and Space Systems business units. Starting with Air Power, we observed a good commercial momentum with Spain, including contracts for 18 C295s, plus the development and implementation of the new integrated training system for the Spanish combat pilots. Let me also mention that 2025 was an excellent year for the Eurofighter program. Notably, we recorded an order for 20 aircraft from Germany, the activation of 8 options from Italy, and we also welcome Turkey to the program with 20 aircraft. To meet this growing demand, the program has already announced the first production capacity expansion, transitioning from rate 14 to rate 20 per year. Moving to Space Systems. Airbus was selected by EUTELSAT to build a further 340 OneWeb low earth orbit satellites, LEO satellites, complementing the first 100 recorded in 2024. The 440 satellites will be produced at the Airbus Defense and Space Toulouse facility and will enhance the OneWeb first-generation fleet. In addition, we are proud to highlight a return to the market of OneSat satellites with an additional order from Oman's national satellite operator, providing its position in the telecommunications market, proving its position, sorry. Finally, within our Connected Intelligence business line, we continued to observe good order momentum throughout the year, in particular, in defense, digital and cyber. The success of the division is the result of our transformation efforts, which ensured an improved performance. As we move into 2026, we remain focused on the division's long-term competitiveness and profitability. Now let me say some words on FCAS, Future Combat Air System. The need for an ambitious European FCAS is unchanged. We believe an ambition of this scale can only be delivered through cooperation, fostering operational interoperability and life cycle synergies for European air forces. We believe that the deadlock of a single pillar should not jeopardize the entire future of this high-tech European capability, which will bolster our collective defense. If mandated by our customers, we would support a 2-fighter solution and are committed to playing a leading role in such a reorganized FCAS delivered through European cooperation. Overall, I want to emphasize the commercial performance of both Airbus helicopters and Airbus Defense and Space that delivered record order intake in value in line with our ambition presented in June. Specifically, defense orders, excluding the joint ventures, MBDA, Ariane Group, the order, excluding those joint ventures reached more than EUR 20 billion, meaning around plus 50% upside year-on-year, ensuring robust future growth. And now Thomas will take you through our financials. Thomas? Thomas Toepfer: Yes. Thank you, Guillaume. Hello, ladies and gentlemen. I'm now on Page 6 of the presentation, and I'll take you through our financial performance. Now as you can see on the page, our financial year 2025 revenues increased to EUR 73.4 billion, up 6% year-on-year, mainly reflecting the higher contribution from our divisions, the strong services volumes across our businesses and a higher level of deliveries, partially offset by the U.S. dollar depreciation. On R&D, as you can see on the upper right-hand side, our expenses stood at EUR 3.2 billion in 2025, slightly lower than in 2024 as we continue to benefit from the prioritization of our activities this year. And R&D is expected to increase in 2026 globally, in line with revenues, but notably to support the defense portfolio acceleration. On to EBIT adjusted on Page 7 of the presentation. Our financial year 2025 EBIT adjusted increased to EUR 7.1 billion from EUR 5.4 billion in 2024. And of course, let me remind you that in 2024, after the completion of the in-depth technical review of our space programs, we recorded a total charge of EUR 1.3 billion. In the full year of 2025, the higher commercial aircraft deliveries, together with a more favorable hedge rate and lower R&D expenses were partially offset by the impact of tariffs, of which the vast majority occurred in Q4. And the result also reflects a stronger performance in both divisions. The level of EBIT adjustments totaled a net negative EUR 1 billion, and you can see this on the right-hand side in the box, and the adjustments include a negative EUR 624 million impact from the dollar working capital mismatch and balance sheet revaluation, mainly reflecting the mechanical impact coming from the difference between transaction date and delivery date, of which negative EUR 47 million in Q4. It also includes a negative EUR 188 million related to the acquisition and integration of certain Spirit AeroSystems work packages, of which EUR 100 million in Q4, and it includes a negative EUR 105 million related to the Airbus Defense and Space restructuring recorded already in Q1. On top of that, negative EUR 73 million related to our A400M recorded in Q4 and finally, a negative EUR 56 million of other costs, including compliance and M&A, of which negative EUR 45 million in Q4. So all this takes our full year 2025 EBIT reported to EUR 6.1 billion. Now let me take a moment to bring some more clarity on the negative EUR 188 million adjustment related to Spirit AeroSystems. This notably includes a EUR 738 million gain resulting from the settlement of the so-called pre-existing relationship as described in our financial statements. In other words, the termination of the favorable contractual conditions. And this is offset by provisions for onerous contracts and an impairment of EUR 500 million related to the A220 program. And this A220 impairment is primarily linked to the impact of the acquisition of certain Spirit Aerosystems work packages with a revisited or revised projected cost structure and ramp-up trajectory for the program. The financial result was a positive EUR 268 million and mainly reflects the revaluation of certain equity investments and revaluation of financial instruments, partially offset by the evolution of the U.S. dollar. Now the tax rate on the core business continues to be around 27%. However, the effective tax rate is 21.9%, with positive effects from the revaluation of certain equity investments and from the settlement of the pre-existing relationship with Spirit AeroSystems, which both are not subject to income tax, and this is partially offset by the negative effects of the French surtax and the deferred tax asset impairments. For 2026, we expect the French surtax to be in the same order of magnitude as in 2025, and that is true for both P&L and cash-wise. So that the resulting net income is EUR 5.2 billion with earnings per share reported at EUR 6.61 and our full year 2025 EPS adjusted stood at EUR 6.89 based on an average of 790 million shares. So this strong EPS performance marks a historical record for our company and supports our proposal for a dividend of EUR 3.20 per share for 2025, corresponding to a nearly 50% payout ratio in the very high end of our recently updated dividend policy, and it also reflects the confidence in our future financial performance. Now on to our U.S. dollar exposure coverage, and I'm on Page 8 of the presentation. In the financial year 2025, $23.6 billion of forwards matured with the associated EBIT impact and euro conversions realized at a blended rate of $1.19 versus $1.21 in 2024. And in 2025, we also implemented USD 16.7 billion of new coverage at a blended rate of $1.19. As a result, our total U.S. dollar coverage portfolio in U.S. dollar stands at USD 75.8 billion with an average blended rate of $1.22 as compared to USD 82.8 billion at a blended rate of $1.21 at the end of 2024. And in 2025, as in 2024, we continue to streamline our U.S. dollar coverage and continued implementing collars with an addition of USD 3.9 billion in the financial year 2025. And here, let me remind you that the collars will, at this stage, remain at around a single-digit percentage of the overall coverage. And in addition, I would like to say that these collars are reported at their least favorable rate and as a result, increase the total blended hedge rate of our portfolio, hence, providing a protected view. And our portfolio is currently being adjusted by implementing some rollovers to reflect the delivery target for 2026 and the delivery profile. Now on to a more detailed look at our free cash flow on Page 9. Our free cash flow before customer financing was EUR 4.6 billion in the financial year 2025, and this mainly reflects the level of deliveries, the commercial momentum across all our businesses, resulting in healthy PDP inflows offset by the planned inventory buildup associated with the ramp-up across the programs. The A400M was broadly neutral from a free cash flow perspective in 2025, which is a success. And our financial year 2025 CapEx was EUR 4 billion, and this reflects the investments in expanding and upgrading our industrial footprint. And to support the ramp-up and the successful integration of the Spirit AeroSystems work packages, we expect our CapEx to continue to increase in 2026. The free cash flow was positive EUR 4.8 billion, including customer financing for EUR 0.2 billion, and we continue to see a diverse and competitive financial -- financing landscape. And currently, we expect sufficient liquidity to support our 2026 deliveries. Our net cash position, as you can see on the right-hand side of the chart, stood at EUR 12.2 billion as of the end of December, also reflecting a weaker dollar environment, and our liquidity is now at around EUR 35 billion. So in 2025, we delivered, in our view, very strong financials across the board in the context of many challenges. And with that, I would like to hand it back to Guillaume. Guillaume Faury: Thank you, Thomas. And let's start with commercial aircraft. In 2025, we delivered 793 aircraft to 91 customers. And looking at the situation by aircraft family and starting with the A220, where we delivered 93 aircraft, reflecting a strong growth. The ramp-up is ongoing and still paced by the integration of Spirit AeroSystems work packages and the balance between supply and demand. As we continue to make what I would call tactical adjustments on this ramp-up trajectory, we are now targeting a rate of 13 aircraft a month in 2028. Our teams continue to work on the road to reach breakeven, and we remain focused on engine durability improvements while ensuring operational efficiency. On the A320, we delivered 607 aircraft, of which 387 A321s, representing 64% of deliveries for the A320 family, 64% of A321s. We are very pleased that our newest aircraft, the A321XLR continued attracting new operators. This aircraft with its unique capabilities is proving to be a key asset, acting as a route opener for our customers. The ramp-up towards the monthly production rate of 75 aircraft is ongoing. In 2026, we see shortages of engines from Pratt & Whitney, not matching our needs nor our orders that will limit our aircraft deliveries, and this is really disappointing. In 2027, they must significantly step up their deliveries, which we expect. And as a result, we expect to reach a rate of between 70 and 75 aircraft a month by the end of 2027, stabilizing at rate 75 thereafter. So there were 93 A220s, 607 A320s. That makes a total of 700 single aisle and then again, 93 on the widebodies, easy to remember. So on widebodies, we delivered 93 aircraft, of which 36 A330s and 57 A350s, including the first deliveries to new operators. On the A330, moving forward, no change. We target to reach rate 5 in 2029 to meet customer demand, and you see this is a strong demand. And on the A350, no change either. We continue to target rate 12 in 2028. In a nutshell, we continue to work with all of our stakeholders, such as cabin suppliers, but more importantly, with our narrow-body engine suppliers, particularly Pratt & Whitney, to fully enable the ramp-up trajectory. Now let's look at the financials for our commercial aircraft business. Revenues increased 4% year-on-year, mainly reflecting the higher number of deliveries and growth in services, partially offset by the U.S. dollar depreciation. EBIT adjusted increased to EUR 5.5 billion from the EUR 5.1 billion in 2024, driven by the increase in deliveries with a more favorable hedge rate and lower R&D expenses being partially offset by the impact of tariffs. Page 12, looking at helicopters. In 2025, we delivered 392 helicopters, that's 31 more than in 2024. Revenues increased around 13% to EUR 9 billion, reflecting a strong performance from programs and services growth. EBIT adjusted increased to EUR 925 million, reflecting the higher deliveries as well as growth in services, as I said already. And let's complete the review with Defense & Space. Revenues increased 11% year-on-year to EUR 13.4 billion, driven by higher volumes across all 3 business units. This resulted in EBIT of EUR 798 million, also supported by improved profitability in line with the midterm trajectory and the results of the successful transformation plan. On the A400M program, a contract amendment was signed with OCCAR in the fourth quarter of 2025 to advance 7 deliveries for France and Spain and to further increase the visibility on the program's production. In light of uncertainties regarding the level of aircraft orders, Airbus continues to assess the potential impact on the program manufacturing activities. Risk on the qualification of technical capabilities and associated costs remain stable. And before we move to our guidance and key priorities, Thomas will go through the acquisition of certain Spirit AeroSystems work packages, which was completed, as we said, in 2025. Thomas Toepfer: Absolutely. As you have seen in December, we successfully closed the acquisition of certain Spirit AeroSystems work packages and transitioned to day 1, and we have begun consolidating the 5 new sites that are located in the United States, Europe and North Africa in order to secure operational stability and continuity. Regarding the financial outlook, our assessment has evolved as we gained control of this production flow. And while the 2026 EBIT adjusted impact remains consistent with previous guidance, the headwind in 2026 is slightly higher than what we had initially anticipated. And on free cash flow, we expect a further deterioration in 2026, mainly due to the transaction closing shift and the investment needed to support the ramp-up. And from now, these figures will be included into the broader program performance. The strategic rationale remains clear. The integration is fundamental to derisking the A220 and A350 ramp-up and to make sure that we are on a competitive trajectory. And with that, I would like to hand it back to you, Guillaume. Guillaume Faury: Page 16, on to our guidance. And as the basis for its 2026 guidance, the company assumes no additional disruptions to global trade or the world economy, air traffic, the supply chain, its internal operations and ability to deliver products and services. The company's 2026 guidance is before M&A and includes the impact of currently applicable tariffs. On that basis, the company targets to achieve in 2026 around 870 commercial aircraft deliveries. And EBIT adjusted around EUR 7.5 billion and a free cash flow before customer financing of around EUR 4.5 billion. And to conclude, I want to look forward. Our primary focus remains on the ramp-up with no compromise on the highest standard of quality in everything we do. On defense, the priority is to continue to strengthen our global leading position by leveraging our unique portfolio of products and our international footprint. It means playing a leading role in a fighter project, continuing the good momentum on military products and services as well as strengthening sovereignty and competitiveness in space. We are committed to reinforcing a strong commercial position across all our businesses, continuing on our leadership in commercial aircraft, defense, space and helicopters alike. Finally, we remain committed to leading the future of aerospace with a focus on the next single-aisle generation. Our vision for the future is anchored to our sustainable aerospace ambition, while we continue to deliver profitable growth. And before taking your questions, allow me to say a word to welcome this year, Lars Wagner and Matthieu Louvot to lead, on the one hand, our commercial aircraft and on the other one, our helicopter businesses. They bring deep operational expertise, industrial knowledge and a real strategic vision. And a big thank you and my sincere gratitude and congratulations to Christian Scherer for all he did over his 40-plus years at Airbus and to Bruno Even for what has been achieved at Helicopters under his leadership. All the best to you both. And now we are ready to take your questions. Jean-Christophe Henoux: Thank you, Guillaume and Thomas. We are now ready to open up the floor for your questions. [Operator Instructions] All right Sharon, let's get the ball rolling. Could you please explain the Q&A procedure for participants? Operator: [Operator Instructions] We will now go to our first question. One moment, please. And your first question today comes from the line of David Perry from JPMorgan. David Perry: I'm not used to being first. I just had one question, please. The guidance probably implies that the margin will be down in Commercial Aircraft in 2026. And I'm just wondering if that is due to any one-off items, maybe the spirit integration and how you see the margin kind of evolution thereafter, if you're willing to comment. Thomas Toepfer: So David, on that question, what we are seeing is that the margin in commercial is not particularly affected on a per aircraft basis, of course. But what we do see is that the delivery trajectory is lower than what we had originally anticipated absent the issue that we're having with Pratt. And on top of that, you're making a correct remark, we are having 2 headwinds that we have to keep in mind. One is the FX headwind, which is roughly EUR 0.02. You know the math. It's roughly EUR 150 million per EUR 0.01. So that gives you a rough EUR 0.3 billion of headwind. And secondly, we said we would face a low triple-digit headwind from the spirit integration. You can attach a number to that. And of course, those 2 items do play a role when you build the EBIT bridge from 2025 to 2026. Absent than that, you know that we said for R&D, we would expect an increase in 2026 as well. So of course, we're continuing our lead program. But on the other hand, we have to make the necessary investments in R&D for the future programs that we have on the agenda. So I would say those are the building blocks that you have to take into account for 2026. The margin on a per aircraft basis is healthy, and we're happy with what we have achieved in terms of order intake in 2025. Operator: Your next question today comes from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: The first question for me is on free cash flow. It does come across a lot weaker in 2026 than I was expecting. So could you go through the bridge a little bit? What are the big moving pieces that we can expect there? And then second question is the situation with Pratt. What can you actually do with this situation? And how is it impacting your thinking of engine supply and engine suppliers going forward? Thomas Toepfer: Let me maybe start with the free cash flow bridge. So the main item that you should keep in mind here is Spirit. And again, I'm coming back to what I said in the presentation. We see a deterioration relative to what we assumed before. Remember before, we said it could be up to a mid-triple-digit negative amount. We see this is going to be more negative, mainly because of the late closing of the transaction. So it's a spillover effect between 2025 and 2026. But of course, now with that effect, we're more talking high triple-digit amount in terms of CapEx and investments that we have to make into Spirit. That is the main item that you should keep in mind for the 2025, 2026 bridge. Other than that, there is continued investments into inventory that we have to make to make sure that our trajectory is intact. And finally, of course, the impact of Spirit is also negative on free cash flow because we are not excluding that we might have to build gliders depending on the visibility that we have on engine deliveries. So this is also a negative that we face. Other than that, I would say the positive come, of course, from the positive development of our divisions and the, as I said, good margin that we have on a per aircraft basis in commercial. Guillaume Faury: Maybe on the engine side. Well, that's the one difficult thing we have to face looking at 2026 is that we have a shortage of engines from Pratt & Whitney compared to what was expected and compared to accepted orders from Pratt & Whitney for deliveries of engines in 2026 for 2026 deliveries. That's the one significant thing we have to manage. We want to enforce our contractual rights, but that will obviously take some time. and we had to significantly reduce the number of aircraft planned for deliveries in 2026 due to that situation with some implications, obviously, on profitability and free cash flow. Our understanding is that it's an issue that will mainly impact 2026, probably to some extent, 2027. We are discussing with Pratt, obviously, as you can imagine, on a daily basis on those topics, and that should go away most likely after 2027. That's why we had to adjust slightly the perspective for reaching the rate 75. We believe we continue to pursue reaching rate 75 by end of next year. But due to the uncertainties on engine volumes remaining for 2027 from Pratt, we said that we will now reach between 70 to 75 A320 aircraft per month by the end of next year. So we have to sort of bite the bullet in 2026 of that very painful and unsatisfactory situation with impact on 2026, but working hard to restore a good situation moving forward, and that's the work ongoing with Pratt. Benjamin Heelan: Super clear. Just a very quick follow-up for Thomas. How should we think about the Spirit cash flow drag in '27 and into '28. Is there any color that you can provide how that high triple digit will evolve? Thomas Toepfer: I would say in 2027, with the guidance that we originally gave to you was the same as for 2026. So up to a mid-triple digit. There might be a small deterioration also in 2027. But again, I think the visibility is not super high for that. We're working hard to not make it too negative of a drag. The important thing is the focus on '26. Operator: Your next question today comes from the line of Ross Law from Morgan Stanley. Ross Law: So maybe a bit of a kind of bigger picture question. And just on why engine supplies are impacting the ramp-up. Obviously, I understand the impact deliveries, but not necessarily the manufacturing of aircraft. So is the softening of the ramp-up reflecting risk around Pratt & Whitney engine supplies medium term beyond 26? Or are there other bottlenecks that are driving the slight sort of ramp-up delay on A320. And then just one on Defense & Space. Good margin in the full year, especially in Q4. How sustainable should we view this? Guillaume Faury: I'll start with the first question. So the shortages of engines are impacting 2026 and to an extent that looks more limited, but still to be completely understood also 2027. That's the reason for slightly changing the moment of reaching rate 75, the fact that we intend to reach between 70 and 75 by end of next year is the Pratt & Whitney engine situation that is not limited by other supply issues where we have a ramp-up trajectory that is well supported. And beyond that point and the Pratt & Whitney issue, we continue to target the same rate 75, the stability and being supported by the supply chain. So it's really this one issue, unexpected issue, at least in the dimension and the timing where it comes that is impacting '26. We think to a more limited extent, 2027 and most likely not beyond. Thomas Toepfer: And on the margin of Defense and Space, you know our view is never over interpret the margin of a single quarter. So I would rather look at the margin of Defense & Space for the full year 2026 -- '25, which we found very satisfactory, and we think it is sustainable and will be improved. So my comment would be, you know we said Defense and Space will achieve a mid- to high single-digit margin by 2028. And I would say we are absolutely on track to achieve that and very pleased with what we have achieved already in 2025. Operator: Your next question comes from the line of Chloe Lemarie from Jefferies. Chloe Lemarie: Apologies, I was on mute. I have 2 questions, please. The first one is on the 2026 delivery guidance, which seems to imply A220 slightly below 60 per month. Despite commentary that production rate had been exceeding that level last year. So how are you dealing with suppliers, which were likely prepared for further ramp. Is just glider production the way to think about it. Or any other measures you're taking to mitigate this? The second one would be on FCAS. Could you remind us of the current revenues that you are generating from the program? Is it all NGF related? And beyond the NGF, what would be your involvement and the opportunity set there? Guillaume Faury: Yes. On the 2026 A320, we are in a ramp-up, and we'll continue to grow production rates compared to 2025. We will have to adjust the level of production and the expected number of gliders over the year as we navigate the discussion and the difficult negotiation with Pratt & Whitney on the volumes. We don't give up as we are not satisfied with the low level of volume on engines that they are committing on now, which is insufficient. And as I said, already below the order they had accepted for 2026. And it's very much also a function of the entry into 2027. So we're on the ramp-up on the A320. It's indeed a difficult situation to manage with the other suppliers that are ramping up according to the design, the designated trajectory. But again, we expect to grow significantly in 2027. And therefore, the long-term ramp-up or the midterm ramp-up is not challenged and reaching the rate 75 is in the cards, and we continue to count on our supply chain to deliver on this objective as we have the demand, as we have the industrial system in place and as the very vast majority of the supply chain is in line with this objective. Thomas Toepfer: And on FCAS, I mean, remember, it is a project in the early phase of the development. So there's no material revenues attached to it. The order of magnitude that I would give to you is a low triple-digit number, but that is, of course, mainly covering the cost that we're having in the development phase. So therefore, it's not a material revenue item in our OP period. Operator: Your next question today comes from the line of Sam Burgess from Goldman Sachs. Samuel Burgess: Firstly, just to return to the Pratt & Whitney conversations you're having. I mean what are the company actually telling you about the real bottlenecks that they are dealing with and their concrete plan to rectify them? Just any color there would be really helpful. And then the second one would be just around the Defense business, clearly performing very well and just continuing to see very high demand. I mean a lot has changed in the world and in particular, in European defense since you presented at the Paris Air Show. Have your expectations for that business evolved? Guillaume Faury: So on the Pratt & Whitney, which is the single more important topic we are dealing with. I think Pratt & Whitney have explained their situation and the challenge that comes from the number of aircraft so-called AOGs with their airline customers. This number has not gone down as fast as they were targeting and expecting and as the customers were expecting. And Pratt & Whitney want to allocate a large part of their efforts of their material and engines to supporting the fleet, negatively impacting Airbus in its ability to ramp up. We are very dissatisfied with this. We don't agree with this. They have to increase output more than what they've done so far to be able to serve both needs, but in particular, the needs of Airbus and residing on volumes on orders that have been accepted in the short term as obviously very negative consequences for us on managing the situation with impacts on our own ability to deliver our own profitability, of course, and managing the inventory and therefore, the free cash flow that goes with it. Therefore, the guidance we are delivering for 2026. As you can imagine, we're in dispute with Pratt & Whitney on this. We want to enforce our contractual rights, but this will obviously take time. And maybe for defense, Thomas? Thomas Toepfer: I mean for defense, yes, I would agree with you. Things are accelerating, and I would just reiterate what Guillaume said also in the speech, we had an order intake for Defense, if you take the defense part of helicopters and the pure defense part of Airbus and Defense and Space, excluding civil satellites, and it was over EUR 22 billion in '25, an uplift of 50% relative to the previous year. So I think that shows the good momentum. I would say we are at least on the trajectory with Defense and Space that we had laid out in Paris, but of course, it would be premature to give some new guidance, but we're very pleased with the trajectory that we currently have. Guillaume Faury: And maybe we can say that in our business in Defense and Space, on large systems, it takes time from order intake to delivery and therefore, generating turnover and profits, but it supports very much the long-term trajectory we have for Defense and Space and with the competitiveness of our products. So it's really putting us obviously on the high side of the trajectory. Operator: [Operator Instructions] And your next question comes from the line of Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: It's Ian Douglas-Pennant at UBS. First on -- you made some comments on your -- in your prepared remarks on the panel issue having impacts in H1. The delivery rate that we've seen in January and from what we can see from data providers from February seems to be tracking reasonably slow. Is that related to the panel issue entirely or in the vast majority of that slow, is that the panel issue? Or should we read other issues into that, including Pratt & Whitney? And my second question is, have you communicated with suppliers to lower their production rates for 2026 already? Or is that something you plan to do? Or will you not lower your communication to them, and that's why your free cash flow guidance is where it is because of inventory build? Guillaume Faury: So the January and February deliveries are indeed quite low. It is driven by the management of the panel issue, not only but primarily. It's not related to engine topics at the beginning of this year. Indeed, we have to manage the supply chain situation. It's a bit of a case-by-case, supplier-by-supplier adjustment as we want to continue to fully support the ramp-up in the outer years for the A320 as we want to best manage the situation with the supplier to not have shocks in their production rates or 2 nonlinear situations with the suppliers to maintain the reliability of the supply independently from the Pratt & Whitney situation. As we will navigate and continue to manage the relationship with Pratt and that discussion, we also want to preserve the possibility to have better news at a later stage and to get from Pratt more than what they're telling us today. That's the complex tension between ramping up with uncertainty on engines, but still the need to be there in 2027 and beyond with the right level of volume, the reliability of the supply chain that has done the investments, the ramp-up. So that's indeed the difficult tension that is reflected in the few numbers we give for the guidance that makes the operational management of the ramp-up trajectory for the 320 in 2026 and probably beginning of 2027 quite challenging. We want to smoothen these difficulties for the supply chain, but we have obviously to adapt here and there, case-by-case, supplier by supplier to optimize the situation. Ian Douglas-Pennant: Could I just ask a follow-up on that? So if Pratt & Whitney do not change what they've committed to or they're promising you today and continue this disappointment, how many gliders do you expect you'd end the year with? I don't know whether you want to give a precise number or just kind of rough indication, that would be very helpful. Guillaume Faury: I will not give a number, but what I'd like to say is we don't plan gliders for gliders. We do gliders when we are surprised in the short term by an issue and we can't put engines on planes that were already in the production pipeline or when we strongly believe or we reasonably believe that the engines we don't get at the point will come later. And in that case, we produce gliders voluntarily. But when we are in a planned trajectory of deliveries of engines in that case, with a little hope for change, we don't produce gliders for producing gliders. So that's why the ongoing negotiation, the ongoing discussions we have with Pratt are very important as we need visibility to plan. And today, we have given a guidance to the market for 2026 that relies on what we -- on the current status of the negotiation and the impact it has on inventory, on buildup of planes. And we'll see later in the year whether we want to end up 2026 with a strong limited number of gliders and how we anticipate some upside and the risk we're taking, that's today with a reasonable prudence in the guidance we're giving, but it's obviously something that will be managed over the year. We are just in February at the moment. Operator: Your next question today comes from the line of Douglas Harned from Bernstein. Douglas Harned: First question is on the A350, and we've only seen 2 deliveries so far this year. Could you help us understand what rate you want to be at for the year? And are the -- is the shortfall primarily due to Spirit issues, interior certification or just interiors falling behind? So first question on the A350. And then second, if we go back to last year on the A320 family, the problem was engines from CFM. Can you update us on how things stand right now with respect to the LEAP? Guillaume Faury: Yes. Maybe I'll start with this one. So the issues we had last year with CFM were linked to the sequence of deliveries over the year. As you remember, they had some industrial challenges. There was a 7 weeks strike at Safran as far as I remember, and we found ourselves with the shortage of engine on the short term with the understanding that came through later in the year that CFM would recover and finally deliver on the number of engines we were expecting by around mid of November. This is what happened. That led to a very backloaded year in terms of delivery or contributed to a very backloaded year of delivery, but this is now behind us, and we are with the LEAP on a nominal situation where we get engines when we need and when we expect to get in 2026 the number of engines that were committed by CFM, and they have not modified their outlook, their projection for 2026. So we think we have a reliable source of engines from Pratt & Whitney -- sorry, from CFM from the LEAP this year contrarily to Pratt & Whitney. So the engine issue that we're expecting for 2026 are solely on the Pratt & Whitney engine when it comes to the A320 family. On the A350, no, I have no specific warning when it comes to the ramp-up. You know that we had a lot of deliveries in the last quarter and in the last month of 2025. So we focused very strongly on those deliveries, and we have now to resume a normal pace of deliveries for the planes in general for the A350. The very backloaded and very challenging industrial situation we had end of last year is negatively impacting the beginning of the year. So we have a rather slow start. It's not very satisfactory, but it doesn't impact the ability to deliver the rates and the number of planes we expect for this year, at least from what I can see today. Operator: [Operator Instructions] And your next question today comes from the line of Olivier Brochet from Rothschild & Co. Olivier Brochet: I would have 2 questions, please. The first one, continuing on the previous one on the A350. Can you share a bit more about the signals that you see for production. Seats have been an uncomfortable spot for the industry. Spirit is a challenge to integration. Engines have been so far no problem at all for A330 and A350. Do you have any concerns there? Any comfort on the contrary that you could share? And the second question is, you mentioned that you would be happy to have 2 aircraft for NGF. Do you have any view on what the French position is on that topic, please? Guillaume Faury: So starting with the A350. So 2026 is a year of ramp-up of the A350. Indeed, we had difficulties with interiors, mainly with seats in the past 2 years that has impacted the ability to deliver engines, but not impacting the ramp-up itself. It's not impacting the ability to produce an A350 aircraft. It's impacting the ability to do the customization, the cabin and interiors and then to deliver to customers with the full cabin completed. We find solution one by one in that case. And in many cases, it's also between the airline and its interior or seat supplier in the frame of what we call BFEs, so buyer furnished equipment coming directly from the equipment supplier to the airline. I don't have specific warnings when it comes to the ramp-up of the 350 contrarily to what we had 2 years ago, where we had to actually postpone by sort of a year the start of ramp-up because of the Spirit situation. What we have from Spirit going from last year to deliveries this year is supporting the plans we have. So it's all about execution, obviously, this year, and I'm not suggesting there's no complexity in what we do on a wide-body aircraft. But I don't have, at this point in time, significant warnings when it comes to our ability to ramp up on the A350. On the FCAS, well, we have not said that we would be happy with 2 fighters. What we've said is, would it be the demand of our customers. That's a scenario that we could live with and that we would support in the frame of European cooperation. We are deeply convinced of the need and the relevance of European cooperation in this future combat air system capabilities. That's what -- that's what we think we do reasonably well. We're here to serve cooperation programs, and we are ready to take a leading role if the program has to move in the direction that is not the one of today. So we are a bit in a wait-and-see mode to see how things will move forward on the NGF. Operator: Your next question comes from the line of Ken Herbert from RBC. Kenneth Herbert: Two questions. My first question is, how confident are you now that you've owned the Spirit assets for just a few months here that the guidance fully reflects the downside risk on both EBIT and free cash flow? Or could there be incremental risk as you continue to invest and dig into that business? And then my second question is, again, just on the A350, can you give any more specifics on what kind of ramp we should see this year in deliveries as you think about still hitting 12 in 2028? Thomas Toepfer: So maybe let me start with the Spirit question. I would say we have a reasonably good visibility because as you said, it's only been 2 months that we really own the business, but we have been in -- at the Spirit side with many people already before. So I would say the assessment that we have made is mainly a deterioration for free cash flow, and that is because of the late closing and the spillover of things that already should have been done in 2025, but that now have to be done in 2026. So therefore, I would say that deteriorated number is part of our guidance, and I see limited downside risk with respect to a further deterioration of Spirit because our visibility is reasonably high into where we are with respect to CapEx needs, but also other things that we have to invest, be it people, be it systems, be it processes. So therefore, I would say the downside risk from Spirit on the financials should be maintained. Guillaume Faury: On the A350 question, well, we give a guidance of around EUR 870 million for 2026. And as usual, we don't split it by family. You can think of the A350 coming from the rate of 5 to 6 in the past 2 to 3 years as far as I remember, to 12 ideally in a sort of quite linear way. And we want to see a material increase on that trajectory already as soon as in 2026. Operator: We will now go to the next question. And your next question comes from the line of Christophe Menard from Deutsche Bank. Christophe Menard: I had 2. The first one, going back to Spirit, can you also give us an update on the EBIT impact on Spirit in '26 and '27? And also, my understanding was you got the compensation in 2025, so the kind of the bridge approach in a way on Spirit at the EBIT level. My understanding was it's EBIT adjusted, not necessarily EBIT reported impact or actually, I mean, the -- it's within the EBIT adjusted also if you could mention or give some details on this. And the other question, it's a rather candid question, but you're mentioning the issues with Pratt deliveries. Is there any way to actually increase the volume of LEAP deliveries in 2026 and 2027 to kind of offset the current situation? Or it's, so to say, already set in stone the production schedule? Guillaume Faury: I'll start with the second one and give a bit of time to Thomas to tell the story of spirit, which is not an easy one moving from '25 to '26 and '27. On the engine issue, we have obviously discussed a lot with CFM on the possibility to get more engines already in the past. They have accepted already to increase the volume of LEAP. They don't want to do it more now for 2026 than what they had accepted because they have their own challenges and constraints to manage. They have also the in-service fleet support to provide. And I guess they have also to respect their commitments to other customers. So that's not something that will help, unfortunately, for 2026, at least that's not something CFM is ready to commit on now. We'll continue to have that discussion with them as we move forward in the year. And I told you that we are managing production with the hope that we could improve the picture at a later stage. But I think CFM has been quite clear that 2026 comes with little hope. That's something that could play a role in 2027. You saw that we said from 70 to 75 by end of 2027. I continue -- we continue to target 75 by end of 2027. And would CFM be capable of providing a bit more in '27 compared to what they have committed to us that could contribute to reaching that objective. Spirit? Thomas Toepfer: Spirit. So again, back to what have we said on the EBIT adjusted impact for Spirit in 2026 and '27. We said it would be a low triple-digit impact negative. And I can fully confirm that for 2026. So plug in a number that is in that range. For 2027, it might be slightly more negative than that, but still within, let's say, a low triple-digit range. Operator: We will now take our final question for today. And the final question comes from the line of Robert Stallard from Vertical Research. Robert Stallard: A couple of final questions for you then. First of all, on staffing levels, you've talked about this in the past, how you've been hiring in advance of the ramp. Does that change in 2026 given the 320 adjustment? And then secondly, on foreign exchange and the weakness in the U.S. dollar. At what point does this become a structural issue for operating margins and could require mitigating action? Guillaume Faury: Starting with the staff. Actually, we have already adjusted the staff hiring, the speed of growth in 2025 for 2026 to stay slightly ahead of the curve, but probably a bit less than what we had done before, being satisfied with the way the staff was serving the ability to ramp up. Indeed, we are currently reviewing, that's an ongoing discussion at Airbus, what needs to be adjusted for 2026. Obviously, slightly lower volumes than we were expecting or significantly lower volumes than we were expecting. But as I said earlier, with a view that 2027 should be very much -- pretty much similar to what we had expected, maybe with some adjustments. And therefore, the need to manage that dent into the production ramp-up on the A320 this year as we want at a later stage or not to create opportunities, would we get more engines or create -- accept to have gliders by the end of this year as we enter into 2027 to support the 2027 deliveries. So it's an ongoing discussion. We will adjust. The extent to which we will adjust and the timing is still something that we are working on. Thomas Toepfer: And on the U.S. dollar, I mean, let's distinguish between the short term and the long term. Obviously, in the short term for 2026, we are well hedged, and therefore, it's not an issue for 2026. And I would say almost the same is true for 2027 because we do have sufficient hedging in place. I think your question is more in the long term. My answer to that would be, of course, let's look at the current spot rate, which is still more favorable than what we have in our hedge book. So there is still quite a bit of headroom that we have before the spot rate actually becomes worse than what we have in our book. And secondly, yes, we're actively looking at what are mitigation actions. One is, of course, the general efficiency. This is why we continue to work on the lead program and make sure that we have sufficient headroom in terms of the margin that we produce. And secondly, of course, we're constantly revisiting how can we better balance the dollar revenue/euro cost mismatch. However, we don't want to run into the risk of mitigating maybe the FX exposure, but then running into other exposures, be it suppliers or other things. And so therefore, it's a careful balancing act when it comes to incurring more dollar costs that we don't run into other dependencies that we don't want to have. But the question, how can we mitigate a potential long-term dollar depreciation is certainly something that we're looking at operationally. Operator: That concludes our Q&A session. I will now hand the call back to Jean-Christophe for closing remarks. Jean-Christophe Henoux: Thank you, Sharon. That brings our session to a close for today. We really appreciate you taking the time to join us. If you have any further questions, please don't hesitate to reach out, just drop an e-mail to Olivier Vitor or myself, and we'll get back to you as quick as we can. Thanks again for your interest in Airbus. We are looking forward to catching up with you very soon again. Q1 '26 earnings release will take place on the 28th of April. Have a great day, everybody. Guillaume Faury: Thank you, everyone. Bye-bye. Operator: Thank you. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Good day, everyone, and welcome to SkyCity Entertainment First Half 2026 Results. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to Jason Walbridge, Chief Executive Officer for SkyCity Entertainment Group. Jason Walbridge: [Foreign Language], everyone. I'm Jason Walbridge, Chief Executive Officer of SkyCity Entertainment Group. Welcome to SkyCity's presentation of our interim results for the financial year 2026 we announced to the NZX and ASX this morning. Before I begin, I'd like to acknowledge the tangata whenua of our SkyCity sites, Ng?ti Wh?tua ?rakei, Waikato Tainui, and Ngai Tahu, and acknowledge the Kaurna people, the traditional custodians of the land in Adelaide. With me today in Auckland is Peter Fredrickson, our Chief Financial Officer; and Callum Mallett, our Chief Operating Officer. On the call today, we will be going through the first half 2026 financial results presentation, and there will be time for questions at the end of the presentation. Let's move to Slide 5 for an overview of our results. The result is consistent with the full year 2026 guidance we provided in August 2025, and which we reiterated at our AGM in October. I'd like to call out some specific numbers. Visitation remained steady across the group, with the small reduction due in part to changes in the way we measure visitation and the introduction of Carded Play. Revenue was down 2.4% or $12.3 million, with total gaming revenue down 6.3%, or $19 million, with lower revenue across both gaming machines and tables. The lower gaming revenue was predominantly due to the introduction of Carded Play across our New Zealand casinos that went live in July 2025, and, pleasingly, is in line with our expectations and guidance. We also experienced a lower level of activity in premium play compared to the prior period. Growth in nongaming revenue, particularly in hotels and food and beverage, was a highlight for the half. The lower revenue flowed through to a reduction in both reported and underlying EBITDA. As we have reported previously, the difference between these 2 numbers for this half is the $13.4 million of B3 costs incurred in Adelaide. The increase in costs was in a number of areas, including increased investment across our AML and host responsibility areas, particularly in Adelaide, as I just mentioned, as well as costs associated with the opening of the NZICC and technology costs, some one-off legal fees, and higher costs of sale associated with the growth in nongaming revenue. Group cost-saving initiatives are being implemented, as previously advised, and our focus is on managing the cost base to the business conditions without compromising our customer offering. Underlying EBITDA of $85.5 million is just over 28% lower than the prior period, and we will provide further detail on these factors throughout the presentation. Underlying net profit after tax is also lower than the prior period, while reported net profit after tax is nearly double the prior period due to one-off adjustments made in both periods. Overall, the reduction in our first half 2026 earnings is not where we want to be, but reflects the transitional period and is in line with our expectations for the full year 2026 guidance we have provided, noting we expect to see a greater second half skew to our earnings than -- as previously outlined. Our debt metrics remain in line with our guidance and are below our covenant levels. Turning now to Slide 6. Since we spoke to you in August, we have been very focused on progressing the key initiatives we outlined in the financial year 2025 results presentation and the accompanying capital raise documents. The first half of financial year 2026 reflects a planned period of operational transition for the group, and the team has been working very hard on the key projects, and I'm happy with the progress that we're making. We've made good progress during the half identifying and implementing a range of cost-saving initiatives to partially offset cost increases, and we expect to deliver further savings in the second half in line with the targets provided in August. This is a significant focus of the organization. I will talk more on these initiatives shortly. We are progressing with our plans to monetize assets and have 99 Albert being marketed for sale. Work is also underway looking at further opportunities to release in the order of $200 million from asset monetization proceeds over the next 12 months. A significant event was the opening of the NZICC on the 11th of February, with the first live event held on the 12th of February. This is a major milestone for SkyCity, and indeed for Auckland and New Zealand, and we now have a truly world-class convention center. Whilst it has been a complicated and drawn-out project for everyone involved, to have it finally open is a wonderful achievement, and we now look forward to welcoming the large number of visitors coming to the many events already booked and in the pipeline. The initial feedback has been incredibly positive, and this gives us confidence about the opportunity for a meaningful increase in visitation across the precinct. We've spoken with you previously about the move to Carded Play across our New Zealand casinos. This is a very significant change for our business and was successfully rolled out in July last year. This involved an incredible amount of work by many members of the team, and the impact on our EBITDA is in line with our guidance. As part of the rollout, we've also launched a new loyalty program called SHOW by SkyCity, which has been well received by our customers, with many existing customers changing over to the new program, along with the many new customers that have signed up. Lastly, we are still awaiting the CBS outcome from the Martin Report released last year. Turning to Slide 7. This slide updates the key areas of focus for the group under the 6 key pillars we spoke about in August last year. I don't intend to speak to this slide in detail, but note we're making good progress against each of these pillars. Our strategic priorities are unchanged, optimizing the core business, focusing on our customers, and getting prepared for online gaming. The critical enablers within the business that will allow us to achieve these priorities are risk transformation, people and culture, and digital transformation. A key area of focus is the reset of our New Zealand and Adelaide operating models, ensuring we have the appropriate cost structures in place, having regard to the current operating environment now and into the future. Callum will provide further detail on some of the changes we are making in this area. We're also reviewing our spend on technology and have already implemented a number of cost-saving initiatives with more to come. We continue to look at further cost efficiencies where appropriate, whilst ensuring we don't compromise compliance, customer experience, or our long-term capabilities. These cost savings will support an improvement in our second half earnings and into financial year 2027 and beyond. Turning to the next slide. In August last year, we outlined an intention to target the release of $200 million of capital from the monetization of assets within 12 to 18 months. We had already identified the commercial office property at 99 Albert Street as a noncore asset, and real estate firm CBRE has formally commenced marketing the sale of this property. SkyCity holds a significant portfolio of assets on its balance sheet, and it's actively assessing monetization options across individual assets and potential combinations. External advisers have been engaged, and the program is well advanced, and we continue to target in the order of $200 million in monetization proceeds by February 2027. In evaluating the various options, we are carefully considering strategic alignment, the maximizing of value, transaction sequencing, and relevant external dependencies. The car park concession has not yielded any credible proposals to date. And whilst it's disappointing not to have progressed a transaction, we remain open to credible proposals going forward. We will keep the market updated as we progress these various initiatives and are focused on achieving the appropriate outcome for our shareholders. Turning now to Slide 9. As I mentioned earlier, Wednesday last week was a significant day for SkyCity as we formally opened the NZICC, with the New Zealand Prime Minister cutting the ceremonial red ribbon. As we've spoken about in the past, the NZICC is New Zealand's largest convention center and will allow us to attract major international conferences, previously unavailable to New Zealand, as well as being able to host numerous events, theater, and musical performances. Looking into the future, the level of bookings we have confirmed for the remainder of financial year 2026 is very positive, with over 110,000 visitations, with still more to potentially come. This gives us confidence in delivering an increase in revenue and earnings across the Auckland precinct in the second half of the year, particularly our hotels, food and beverage, Sky Tower, and car parking operations. Looking into financial year 2027, the combination of events confirmed, and in the sales pipeline, with visitation growing significantly, it's a very pleasing outcome and shows that we have a facility that is attractive to both domestic and international customers. The opportunity from this increase in visitation has the potential to be a significant driver of earnings growth for our Auckland precinct, and we are well advanced with our strategies to ensure we take full advantage of this opportunity. For example, our hotel reservations team can see the future event pipeline and the expected room night demand, and we'll manage booking activations to ensure we maximize the average room rate opportunity. We've put in place various playbooks for the different types of events that will be held in the NZICC, and how we will set up our food and beverage outlets. There's certainly going to be a steep learning curve in the early stages, but the teams are well prepared for this. I'd like to note that the total cost of the development, including the NZICC, the airbridges, the adjacent laneway, and the over 1,100 additional car parks and the Horizon by SkyCity Hotel, all remain in line with the previously provided guidance of approximately $750 million. This is a fantastic achievement for the team involved in the development of these assets. We also expect the financial year 2026 outcomes for the NZICC, provided in August last year, will finish moderately positive to our earlier guidance, again a testament to the great work done by the team involved in the preopening phase. Turning now to Slide 10 and the implementation of Carded Play. Now that we've had Carded Play in our New Zealand casinos for over 6 months, I'd like to share with you some of the insights we're now seeing. Pleasingly, we've been able to maintain high customer satisfaction levels throughout the implementation process, and this was a key focus for our team, recognizing the significant increase in potential friction we added to how our customers interact with us. We've continued to see a change in our customer mix, as previously unCarded Players have signed up for cards. And importantly, Carded Play is giving us much better visibility into who our customers are and how they engage with us. Pleasingly, we're still seeing a steady sign-up of new customers, with around 4,000 per week during December. We're also seeing strong take-up of the SHOW loyalty program, with a high proportion of Carded Players now participating in that program. As an example of the benefit of Carded Play in our Queenstown Casino, which is a very popular tourism destination and previously had a much lower level of Carded Play to our other properties, we now have much better visibility into the mix of domestic and international visitors, which allows us to be more targeted in our marketing. The increased level of host responsibility and AML requirements has seen an impact on the level of play from some of our VIP players. We are now looking to further refine the way we interact with our customers to ensure we meet our regulatory requirements and minimize the impact on the customer experience. Our loyalty programs include tiers, as with many loyalty programs, and we're looking to be more specific in how we manage the customer value proposition across those tiers, ensuring our customers understand what is available for them. As we progress our online opportunity, having account-based play across retail and online will be an advantage for us alongside our nongaming activities, we believe, will be a compelling offering to an already significant customer base. Turning now to Slide 11. As mentioned earlier, visitation has dropped marginally across the group, which in part reflects the way we are measuring visitation now that we have Carded Play in our New Zealand casinos. On this slide, we have shown the combined impact on EBITDA per visitation from a range of activities, including the implementation of Carded Play in New Zealand, preopening costs for the NZICC, preregulatory investment in our online business, and the increased cost base in Adelaide. Looking forward, we expect the NZICC to support increased visitation and spend across the Auckland precinct over time, which will support growth in earnings going forward. Our current focus is on addressing the cost base to minimize the margin impact while ensuring we maintain the service levels to provide the experience our customers expect. Turning now to Slide 12 and our online gaming business. The New Zealand government is progressing the process to enable the legislation and regulations required for the regulation of online gaming market in New Zealand. The time line has pushed out approximately 5 months since we last spoke, with the current expectation providing for licenses to be issued from the government from the 1st of December 2026, with licensed applicants only able to continue to operate from that point and all unlicensed operators having to cease operations by June next year. There is still a significant amount of detail to be worked through. As I mentioned before, the Online Casino Gambling Act is expected to be passed into law by the 1st of May this year. We are transitioning to our new platform partner, along with the application of a Malta gaming license. We have been continuing to build out our capability in Malta in a very measured way and managing the phasing of the investment giving delays -- given the delays in the government time line. The delay in that time line will likely defer the receipt of revenue until the latter part of financial year 2027 when compared to our previous expectations. The financial year -- excuse me, the financial results for our online operation in the current half continue to reflect the uneven playing field we have referred to in the past. The regulation of the online gaming market in New Zealand is necessary in the current gray market structure, as market participants failing to provide the protection and the support for customers as provided for under the proposed legislation. We see this as a significant opportunity for ourselves over time. But right now, our focus is on being market-ready, disciplined on our investment in this area, and aligned with the regulatory framework. I'll now hand over to Peter Fredricson to discuss the group financial results in more detail. Peter? Peter Fredricson: Thanks, Jason, and good morning, everybody. Jason's already commented in general on the P&L results for the group, and Callum will go through the operating results of each of the individual CGUs shortly. So in starting on Slide 14, I won't spend a lot of time on the results, per se. What I will highlight is the fact that the underlying EBITDA for the period is very much in line with where we expected it to be, with the outcome from MCP, again, very much in line with what we had expected. We will see an approximate 43%-57% half-on-half skew in FY '26, primarily driven by preopening costs for NZICC incurred in the first half, more than offset by revenue coming through from that business in the second half. We are also expecting to see Auckland precinct revenues positively impacted by visitation from the NZICC in the second half with at least 110,000 visitations in the half currently visible through our bookings. Increased hotel occupancy and ADR as a result of the NZICC operating from February through to June also provides its own increased contribution to that second half skew. In respect to those items below the EBITDA line, I did want to comment on 2 noncash significant tax adjustments that go through the profit and loss. First, with the recently identified and expert-confirmed increase in capital expenditure for the railway building in Adelaide over the next 10 to 15 years, we have taken a view that increased tax depreciation will put the full usage of tax losses in Australia out beyond 12 years. Whilst the $180-odd million of tax losses will remain available to the business to use against taxable profits going forward, we deemed it prudent to remove these from the balance sheet. So here, you will see a $32.5 million charge to tax expense in the P&L in that regard. On completion of the NZICC, accounting standards require us to credit the deferred license value of $246 million that you will have seen as a current liability in the June 2025 balance sheet against the building value in fixed assets. This has the further impact of delivering a credit to tax expense of $43.6 million, somewhat offsetting the impost of $129.6 million that was charged to tax expense in FY '24, reflecting the change in legislation at that time that removed the ability for companies to depreciate buildings for tax purposes. Effectively, these 2 noncash tax adjustments offset each other for the half year. Moving to Slide 15. What I wanted to touch on here is the balance sheet metrics post the equity raise in August of 2025. As noted then, the increased debt associated with the buyback of the car park concession and various fines paid in respect of our businesses would likely have driven our debt covenants dramatically higher in FY '26 and could have led to a potential ratings downgrade through the December half year. With covenant metrics of 2.83x for the half and expected to land around 2.7x at year end, we remain focused on the delivery of a minimum $200 million from asset monetization to ensure positive go-forward metrics, reduce debt, and to meet expectations of removing the negative outlook to our credit rating by February 2027. Whilst we have no debt maturing prior to May 2027 and whilst we retain appropriate levels of liquidity and ample covenant headroom, we will likely look at potential opportunities for refinancing the May 2027 retail bond in coming months. Moving now to Slide 16. We did want to point out that even with the first half delivering only 43% of what we expect to be full year underlying EBITDA, absent the final $39 million, including retentions paid for NZICC CapEx in the period, we were able to deliver positive operating cash flow of $56.1 million in the first half, funding some $36.5 million of BAU stay-in-business CapEx. With no more than $34 million -- no more than around $34 million of BAU CapEx expected in the second half against underlying EBITDA that we are guiding to be materially above first half actuals, we are confident of delivering significant real positive cash flow for the full year in FY '26 on a post-BAU and NZICC CapEx basis. With that, I'll hand over to Callum. Thank you. Callum Mallett: Thank you, Peter. Good morning, everyone. Turning to Slide 18 and our Auckland property. We were pleased to see overall visitation across our Auckland precinct was up 2% on the prior period, with growth in our food and beverage outlets and hotels leading the way. The implementation of Carded Play has impacted gaming visitation along with the ongoing AML and host responsibility enhancements we have been making. As Jason mentioned, we are pleased with how the rollout of Carded Play has gone across our New Zealand properties with the financial impact in line with our previously provided guidance. Auckland experienced a lower volume of premium play compared to last year, and we are reviewing our strategy with the small but important customer segment. We have not observed any noticeable change in customer spending behavior. Therefore, we have been active with promotions, sponsorships, and events to drive visitation. Initiatives, including Super Rugby sponsorship, Christmas at SkyCity, and food and beverage pop-ups have helped keep visitation strong. We remain very focused on ensuring our cost base responds to changes in our revenue, and the team is constantly looking at ways to further reduce costs, including operating hours, renegotiation of supplier contracts and staffing levels. We are wary of cutting costs such that our service levels are impacted, and we continue to monitor customer feedback very closely. We've also been preparing for the opening of the NZICC, ensuring we have a precinct-wide proposition for the anticipated growth in visitation. We know the NZICC guests will be looking for a wide variety of experiences depending on the type of event they are attending. Ensuring we attract these guests pre and post events to our hotels, food and beverage outlets, and gaming and attractions is critical to our objective to drive revenue and increase our operating margin across the broader Auckland precinct. Turning now to Slide 19. The Hamilton result was in line with our expectations. And pleasingly, Queenstown was ahead with both casinos completing the successful rollout of Carded Play in July. The visitation change in both gaming and food and beverage is primarily due to a change in how we measure our visitation across both casinos with the key driver being the introduction of Carded Play, allowing us to more accurately track player metrics. This does make a direct comparison with the prior period less relevant, but you will also see a corresponding increase in spend per visitation. The management teams are working hard to increase revenue, but also ensure we have the appropriate cost base to support the current market conditions. A highlight in Hamilton was the opening in December of an outdoor gaming balcony expansion. Whilst early days, we are pleased with this enhancement to our customer experience offering. Queenstown is benefiting from an increase in international visitors helped by strong Trans-Tasman aircraft capacity, plus an improvement in domestic tourist numbers also. The Queenstown casino license was successfully renewed for a further 15 years from December 2025, when we also celebrated its 25th birthday. We are in the early stages of completing the process for the Hamilton casino license renewal, which is due in 2027. Turning to Slide 20 and our Adelaide operations. It has been a difficult period for our Adelaide business. Within the gaming operations, we have seen a continuation of the churn in VIP customers, offset by the addition of lower value customers. The key issue in Adelaide was higher costs due to the increased investment in AML and host responsibility capability, some one-off costs, and the tax impact of higher main gaming floor revenue. Adelaide management is implementing a significant cost out program, including workforce reduction, with benefits expected to be seen in second half '26. The team has worked hard to ensure that the B3 program is operationally on track with some costs pulled forward from FY '27. Whilst gaming revenue has been relatively flat after adjusting for lower premium play volume, we have seen encouraging performance from the food and beverage and hotel departments. Eos Hotel benefited from citywide event visitation, which drove both occupancy and average daily rate higher with this impact flowing through to our food and beverage operations. The Adelaide team opened Huami in October, utilizing existing space to further increase visitation to the precinct, and we celebrated the Adelaide casino's 40th birthday during the half. We expect to implement mandatory Carded Play into Adelaide from December this year. Thank you. And I'll now hand back to Jason. Jason Walbridge: Thanks Callum. Turning now to the outlook for the remainder of financial year 2026 on Slide 22. We are reiterating the financial year 2026 guidance provided in August last year and confirmed in October last year for underlying EBITDA in the range of $190 million to $210 million, and reported EBITDA in the range of $170.6 million to $190.9 million, which includes the full year B3 costs. We're also broadly comfortable with current market consensus earnings expectations for the financial year 2026. It's also important to note that we have guided to a second half skew in earnings in financial year 2026. As I spoke about earlier, the opening of the NZICC provides a significant revenue growth opportunity for both the Auckland precinct in the second half, and we do expect to benefit from operating leverage due to the increase in revenue, delivering an improvement in our overall margin. Cost savings across the group, particularly in Adelaide, will also support an improvement in our second half earnings compared to the first half. I would note, we have not seen any noticeable change in customer spending habits in the January 2026 trading period. As Peter has spoken to, the financial year 2026 reported net profit after tax will reflect the impact of the recognition of the Australian tax losses and the tax adjustment relating to the NZICC deferred license value that were part of the first half result. We expect CapEx for the full year will be in the range of $100 million to $110 million. And just lastly, before we move on to the next slide, I'd like to acknowledge Peter Fredricson, who will be leaving SkyCity on the 1st of March. Peter has played an important role during a period of significant transition, and I'd like to thank him for his contribution. I'd also like to welcome Blair Woodbury, who will be joining us as Chief Financial Officer from the 9th of March. We're looking forward to working with Blair as we continue to progress the business through its next phase. Turning to the next slide. I'd like to finish this presentation by talking to the medium-term outlook for SkyCity and refer to the Future of SkyCity slide. We are making good progress working through the key initiatives that will determine the future of our business, a future that, in our view, has the potential to deliver a path to earnings growth, improved cash flow, and returns profile. We aspire to be a gaming leader, delivering connected customer experiences across entertainment precincts and online gaming. Most importantly, we expect to drive sustainable earnings and strong returns for our shareholders in the future. We're a business with high-quality assets and a strong market position that provide a solid foundation for future returns. We continue to make significant progress in creating an operating model that ensures we meet our regulatory obligations, has the appropriate level of invested capital, and delivers an acceptable return on that invested capital. Growth will come from the opening of the NZICC, recovery in customer spend per visit in New Zealand as the economy recovers, and the large opportunity presented by the regulation of the New Zealand online gaming market. Thank you for listening this morning, and we will now take questions. Operator: [Operator Instructions] Our first question comes from the line of Kieran Carling with Craigs Investment Partners. Kieran Carling: First question is just on the deterioration in Adelaide. Can you split out what drove the 9.5% increase in OpEx between AML costs, the gaming tax, and one-offs? And just give us a steer on the extent and the phasing of your cost-out program and what we should expect in the second half? Callum Mallett: Yes. Thanks Kieran. It's Callum here. So when we look at that bundle of costs in Adelaide, from a one-off perspective, there was about 30% of that was one-offs, and then the rest was a mixture between the tax changes from VIP gaming down to main gaming floor, and some cost of sales from the revenue, and then from the uplift to do with compliance and regulation there. So where we're at with the cost out is there's already a number of roles that the team there have made changes to. And the business is still looking now at what other operational changes can be made around the business to remove costs, whilst obviously making sure that we're focused on revenue. So the B3... Kieran Carling: Just as a follow-up... Callum Mallett: Sorry, Kieran. Kieran Carling: Just as a follow-on to that. That's helpful. But can you give a steer on what we should expect in that second half run rate with your cost-out in place? Callum Mallett: Look, we're still doing that work, Kieran. And it's a key focus for the team, but not something we can go into detail today on Kieran Carling: Next question, I just want to drill into the NZICC a bit more. So appreciate there's still a lot of uncertainty there. But I'm keen to understand how you're thinking about the cost base and the opportunity. So firstly, what criteria does an event have to meet to be included in your pipeline because we've gone from 250,000 events in the pipeline at your last result to potentially 500,000 now in FY '27? Also keen to understand what your fixed cost base is that you're expecting in FY '27? And then just finally, what level of visitations or events you think are needed to get the center to break even on a stand-alone basis? Jason Walbridge: Kieran, Jason here. I'll take the first part of it, and then I'll get Callum to talk more specifically to the operations. Look, we've got a tremendous pipeline ahead of us. The team have done a great job. We've got 110,000 visitations confirmed for this financial year. And as you'll see in the presentation, really good line of sight on FY '27. Last week with the official opening, as a consequence of the profile and attendance by a lot of existing and prospective customers, we were able to book 20-some events for groups of up to 250. So that gives you an idea of some of the types of events versus the Coral Reef Symposium, which is our largest event, that will be in town in July this year. And they're guiding us to attendance north of 2,500 delegates. So there's quite a range of different events that we're able to attract with the venue. Callum Mallett: Yes, Kieran, to your other question. So the first driver, obviously, we want all events to break even at least and make a profit within the box. But a really key driver, obviously, is visitation to the overall precinct. So the team have a very structured process with different events because obviously, all of the different events come with different revenue opportunities even within the box. And so that is key. As a good example, this weekend, we've got a public open day. We won't get any revenue from that, but the team have 5,500 people registered to come through. So obviously, the ability for us to leverage across the precinct and across Auckland is significant from that. And then from a breakeven metric perspective, as we've said before, our goal is to break even within the box. And that is an absolute goal the team have for FY '27, but obviously much too early for us to be able to confirm how we're tracking that. Kieran Carling: But when you say that an event is in the pipeline, what criteria does it have to meet to be in the pipeline as opposed to confirmed. Callum Mallett: Yes, sure. So the pipeline is where a customer has come in, obviously, generally done a site visit, the team have started planning for it and given a quote, and that is in the pipeline. As a good example for the pipeline in FY '27 -- sorry, in FY '26, we've confirmed around 75% of business so far. Kieran Carling: And yes, so I don't want to belabor the point, but back at the full year result, you said there were 250,000 events in the pipeline and you were forecasting, or you were assuming it would be breakeven on a stand-alone basis. You've now got up to potentially 500,000 events if you execute on the whole pipeline. So does that put you above breakeven on a stand-alone basis? Or you just think that all events will be roughly breakeven. I just want to understand what the fixed cost base is of the convention center. Jason Walbridge: Kieran, Jason here. Obviously, as we scale, I think the economics change. It's just too early to guide you on what we think could happen if we convert this full pipeline. We're just being very, very successful at the moment on growing the pipeline, which is great news for us. We've literally been open 7 days, and so we'd like to get some more operating time under our belt here, and we can certainly talk to you more about that when we do full year results later in the year. But right now, at the moment, our stated objective that we shared with you in August is breakeven for the box and then driving cross-precinct benefit, hotels, food and beverage, restaurants, and gaming Kieran Carling: I'll just squeeze in one last question on the asset monetizations. So you've alluded to the fact that the car park sale process hasn't gone as planned and you've got advisers engaged to review other assets. Can you give any more detail there as to what assets you're looking at? Or I guess, to phrase it differently, are there any assets that you're excluding or are not up for sale? Callum Mallett: Yes. We've previously shared that we've looked at all of our commercial property that we own in Auckland. So we've listed 99 Albert. We're obviously looking at our other commercial property. We've been focused on car parks. Our advisers have been working with us, and we're well advanced in looking at other options. Nothing more to share at this stage, and we'll certainly be back in touch if and when the Board makes decisions on what we will do there. But I just want to reiterate, we are committed to monetizing $200 million worth of assets in the next 12 months before this time next year Operator: Our next question comes from the line of David Fabris with Macquarie. David Fabris: I've got a couple of questions. So firstly, I know it's a short window, but can you just talk through trading in early second half '26 versus first half '26 in Auckland, so sequentially? And just with the NZICC, I know you touched on it in the prepared remarks, you made a couple of comments there in the Q&A just then. But can you show us or talk to some framework for how we think about hotel occupancy rates and room rates? You've got a lens on bookings there. And then can you share any insights on the flow-through revenue benefit to nongaming and gaming as the NZICC ramps up? Jason Walbridge: David, good morning. Jason here. I'll take the first couple, and I'll get Callum to fill out some of the hotel metrics for you. Look, in the first few weeks of the second half of FY '26, we've seen no discernible change in customer behavior or spend patterns. We've just opened the convention center in the last 7 days, as I mentioned before. So that's obviously going to have a big change to visitation for us over the next few months. So it's really just too early to tell if there's going to be any meaningful change there. We're really focused on getting that box open, lots of visitors, and then getting them across the sky bridge and into our hotels, restaurants, and onto the casino floor. Callum do you want to talk about expectations around hotel metrics and occupancy? Callum Mallett: Yes, sure. David, how are you? So the Auckland market, as we know, from a hotel perspective, has had excess inventory. Prior to COVID, obviously, the market was going well. Then obviously, a number of properties opened up on the back of NZICC opening. So Auckland occupancy has traded just below 70% as a market for the first half of the year. Our 3 hotels have traded in mid-70s. And we expect that in the next half to grow to above 80%. So we're expecting good growth in occupancy. We're also expecting our average rates to go up about 10% on the back, obviously, of what the NZICC will bring us. And outside of the NZICC, there's also a good number of events coming into Auckland now, more so than what we were seeing a few years ago. So things are building well. And obviously, as Jason has alluded to, there's quite a significant split in revenues from first half to second half. And certainly, hotels is one of those key drivers. As far as other areas that you asked on the NZICC impact, we are expecting to see an impact in food and beverage and the tower and car parking and then minimal impact, but still positive in gaming as well. As we've spoken to before, one of the key things that we need to drive from that extra visitation is our operating margin. So we know that our visitation has been reasonable across the last year, 2 years because we've had a visitation drive, which has meant we've kept that base of staff on. And now we see -- and what we hope is that we'll see that visitation increase without us needing to demonstrably change, in particular, our labor levels. David Fabris: And next question. I may have missed this in the documents released today, but with the one-off costs above the line in FY '26, can you walk through what was booked in the first half individually for the NZICC preopening costs, if there were any online readiness costs? And then can you just share what's expected in the second half for both of those, as this is going to be helpful to really understand the true underlying cost base? Peter Fredricson: Yes, David, look, we haven't got those numbers at that sort of level of detail for you. What we've said is that the NZICC, we probably have spent about a couple of million bucks in the first half on preopening costs that we weren't able to capitalize. And what we'll have in the second half is a significantly higher cost base because that will be driven by the 110,000 people that are going to visit us and have to be serviced. So the cost base goes up and the revenue comes as well. We think that we're probably another couple of million bucks negative in the second half in that regard. Online, as we said to you last year, we have an ongoing spend in the business that you'll see in the documents today, and that has shown us an outcome of $3.8 million of spend in the first -- in the second half -- sorry, in the first half versus last year's $3.2 million. That's primarily driven by the fact that we are quietly progressing towards a regulatory environment, and therefore, we're increasing expenditure, increasing our team in the online business. It's not -- we have not spent as much as we had expected to do in that first half because of the 6-month delay that was afforded us by the government pushing the legislation out. So you'll see those numbers there. They're slightly higher than last year. We expect them to be, again, slightly in line with the guidance that we gave for the full year, probably short by $1 million or so. David Fabris: And just one last question from me. Can you just talk about what the business is doing with AI at the moment and what's planned? I mean I'd assume that there's some significant efficiencies and cost benefits in time. It would be great to hear any of your thoughts or comments on this. Jason Walbridge: Yes. David, Jason here. Yes, we've got some initiatives underway with the utilization of AI with a number of our technology partners. I would say -- I would characterize it as we're at the early stages of that work, and we'll see more focus come this year and into next year. AI is a big part of the online world, and our platform partners are already quite advanced there. The slot analysis and marketing platforms that we're investing in at the moment have significant AI-enabled functionality that we'll be taking advantage of in the next few months as well. So it's certainly an area that we're putting more focus and effort on. But we're just -- we're investing very consciously and carefully given the capital constraints that we've got at the moment. So those are -- that's a couple of examples for you Operator: Our next question comes from the line of Adrian Allbon with Jarden. Adrian Allbon: Perhaps the first one's probably for Peter. Just in terms of the capitalized interest, was that about $16 million for the half? Peter Fredricson: Look, we'll come back to you. I don't have that number off the top of my head. I'll come back to you with it, Adrian. Happy to have Craig touch base with you on it. Again, it's -- the interest that was being capitalized is everything that's available to us or that's required of us by the standards. And given that we didn't -- we've capitalized interest up until the handover of the building to us in early November. Adrian Allbon: So maybe if I ask it slightly different. In the second half, are you expecting -- there should be hardly any capitalized interest presumably, right, because all the facilities are over. Peter Fredricson: None, none. And maybe I'll expand on that question further and say this. We've guided to between $100 million and $110 million of capital -- of CapEx in FY '26. We don't expect there to be any significant CapEx in the second half for NZICC at all. We effectively have -- apart from some retentions the final retentions that will be paid in FY '27, we've spent something in the order of $39 million of capital on NZICC prior to its opening on the 11th of February. Everything from here in terms of capital in respect of NZICC is de minimis. Adrian Allbon: Just on the 99 Albert Street, are you able to give us an indication of what the book value is of that asset? Peter Fredricson: Not really. We're not in that position. And clearly, the building is now in the hands of CBRE for marketing, and there's -- we'll see what we see. Adrian Allbon: Just -- maybe this is more for Jason on this point, and to follow on from what Kieran was asking. But I mean, like the whole investment properties, which include more of that commercial corner was sort of $84 million, I think, at the last -- at the full year accounts. Like in Albert -- 99 Albert is a subset of that. It's still a reasonable bridge until the -- for the $200 million, excluding -- if you exclude the car park concession. Are you able to color it in a bit more for us? Because it's obviously quite a key kind of metric for new people looking at the stock. Jason Walbridge: Adrian, yes, of course, more than happy to. Yes, we're -- as you say, we're sitting on a number of commercial properties here in Auckland, 99 Albert is one of 3 or 4. So we've listed that and that sales process is well underway. As I mentioned in my remarks, we've got external advisers engaged. So we're looking at obviously the rest of the commercial property, as we've indicated for some time now. We've got the car parks, albeit we haven't had any credible proposals to date. We still remain open to interest if it exists. But we've got our advisers looking at different options that we could potentially pursue that will maximize value for our shareholders and achieve that $200 million target that we've set. Transactional sequencing and external dependencies are part of the considerations at the moment. I expect in the coming months, we'll be able to share more as we make more progress on that. But we are well advanced. And we still -- we remain committed to achieving that $200 million by this time next year. Adrian Allbon: Just in terms of obviously, the retail bond at $175 million, I think it is, what sort of -- I mean, that's obviously a key liquidity event. I don't think it's due until May '27. But what sort of size are you looking at for renewing that? Peter Fredricson: Look, we've only just started talking to advisers in the market in respect of what might be available to us, Adrian. Clearly, we've got -- one option would be to roll that bond or to at least offer current investors in it an ability to roll into something that's a similar structure to that. At this point in time, how much it is, it will very much be dependent on the funding that we raise out of the $200 million in the coming months. And so again, as Jason said, there's a little bit of a process here that in terms of timing of various things. We would typically want to be in the market between 6 months and 12 months ahead of that redemption of that bond to refinance it. But we might not necessarily need to be if we bank proceeds from an asset sale in the next 3 to 6 months. So at this stage, it's not going to be more than $175 million, and it's likely to be less depending on how much money we bank because we just don't want debt instruments out there when we've got lots of cash sitting there on deposit. Adrian Allbon: No, I think that's understood. Just coming back to the spend levels. If I just sort of trace back across, I guess, the disclosures that you've been providing more recently on visitation and spend, it feels like the big drop down in spend was sort of the FY '24 to '25 year, and what you're sort of signaling is you haven't really seen any noticeable change in that, including across the first half and into January '26. Is that factually correct to start with? Jason Walbridge: I think when you adjust for Carded Play, it's been reasonably steady, stabilizing would be perhaps a word I would use to characterize it. Obviously, Carded Play has had an impact. We've seen signs of the New Zealand economy stabilizing, and there's obviously recoveries in different sectors across the country. And as of yet, we haven't seen any noticeable changes flowing through in consumer discretionary spend. Adrian Allbon: And just -- so as a follow-on to that then, when you start to look at that Carded Play analysis for the first half, are you saying -- can you comment on any of the trends? I think the business historically, certainly through the tables business, has been quite cyclical to small businesses and cyclical industries. Is that something that you're saying? Or can you comment on anything that you're seeing as you look through the layers, particularly for Auckland? Callum Mallett: Adrian, it's Callum. If we just look at Auckland, yes, there's the MCP impact. Yes, there's the continued regulatory uplift that continues. But you're right, as we look into particularly that local premium play, there's no question that across the 6-month period, feedback from customers was that some have pulled back as they spend more time in their businesses themselves. So to your point, hopefully, as the economy improves, obviously, we would to see that business return or that spend level return. But to Jason's point, as yet, haven't seen that. Adrian Allbon: And just -- so that -- but that would be mostly observable in the tables, would you say, that cyclicality around small businesses and cyclical industries? Jason Walbridge: No. I think it will be most likely in our more premium rooms off the main gaming floor, but I think it is tables and AGMs. Adrian Allbon: And just -- look, I noticed that the premium tables in Auckland have generated a negative revenue, which is lower volumes and negative hold. And you've commented in there that there's a segment strategy review underway. Can you share a little bit more detail as to what you think has caused that and what you're planning to do about it? Jason Walbridge: Yes, absolutely. So obviously, our regulatory uplift has had an impact on that segment. Secondarily, moving money internationally has got more challenging over the last couple of years, and so that has impacted our customers. But also, we have pulled back from that business as far as how proactive we have been, what table differentials we've been willing to offer, et cetera, really focused obviously on, a, our uplift; and b, as part of that, the implementation of Carded Play. So now as we've cycled through that and now as we see that aircraft capacity coming back, which is still only back to 90% international visitors into New Zealand from what it was pre-COVID, these are all things that we think we can just work a little harder in that space and be a little more proactive than we might have been. So that is the changes that we'll look at, without trying to signal that we see that as a significant growth area for our business. But obviously, when you look at the number, as you point out, we don't want to continue in that business delivering a negative EBITDA. Adrian Allbon: And maybe just while I've got you, Callum. Just I know -- I can't remember if it was you or Jason spoke about you've got this sort of well-etched playbooks for capturing the ICC different events as they come through. Are you able just to give us a couple of examples of that? Like I think we get the hotel side of it. But what are you doing -- because you've been relatively constrained in terms of operating hours on some of the F&B and stuff like that. So what are you doing? Maybe if you can give us a couple of different examples of the playbook. Callum Mallett: Yes. Perfect. Yes. So if we look at different examples of the playbooks, I'd say this on Friday night, just gone, we hosted 660. And so that playbook was let's make sure that Onyx Bar is staffed and ready for pre and post. Let's make sure that Federal Street, Depots, MASUs, et cetera, are ready for that influx at an earlier time, ideally for drinks, maybe even a meal. And then afterwards, how are we making sure that we push those customers, yes, to the Onyx, et cetera, but then to Flare Bar. So, for instance, the offer that was given to customers prior to an exiting was a 15% discount at Flare Bar, obviously, to the appropriate customers to push them onto the main gaming floor for a drink and then whatever other entertainment they might find when they're there. So that is one of the playbooks that we'll have for that nighttime event that's within the NZICC. When we go to this weekend, for example, it's a slightly different playbook as we'll have hopefully up to 5,500 people through. That playbook is very much how, in and around that activity, can we encourage them to go up the Sky Tower, how can we get them across F&B, -- all Black All Blacks Experience, et cetera. And so for this weekend, as an example, we have a passport that offers discounts across the wider precinct to obviously encourage those customers to do more activities than just visit the NZICC itself. So a couple of quick examples there, Adrian. Adrian Allbon: And do both of those get activated through their SHOW Card or do you e-mail them? Callum Mallett: Yes, SHOW Card is an option that they can use. But for some of those customers who may be visiting with a family, it's QR code and then a physical passport to allow them easy access across the site with offers. Operator: Our next question comes from the line of Paul Koraua with Forsyth Barr. Paul Koraua: Team just a few quick questions. I'm sorry to labor the point, but back on asset monetization. So you're talking about $200 million in the next 12 months. 99 Albert Street has been called out, but we know the sort of midtown office, not fully occupied market is going to be pretty tough. So say you get $30 million to $50 million for that, that's like a 0.25 turn on your net debt to EBITDA. Where is the rest of that going to come from? And obviously, you call out your other commercial property, but really the only thing of value left is the hotels. So is that what the strategy is going forward? It might not be an outright sale, but a monetization strategy of the Auckland hotels? Jason Walbridge: Paul, Jason here. We're really focused on the commercial buildings, as you've already called out. The car park sales, we haven't given up hope, but we acknowledge that it's been a process running for a period of time. And so we've got external advisers working with us around a range of different options. And it could or couldn't include some of the things that you've called out today. That's the work that we're doing. We do believe that we've got some very attractive assets that we can absolutely monetize in these next 12 months to deliver that $200 million of benefits. And I expect, if not before, we will definitely be able to provide some quite tangible updates at the full year. Paul Koraua: Yes. I guess the point is, it was ago at this result in the first half '25, we talked about asset monetization. And what's changed since then? Obviously, you're talking about a wider scope of assets you're looking to sell now. But is some of the price expectations a little bit more realistic now? Or has the market improved? It doesn't really feel it from a property standpoint. Jason Walbridge: Yes. We certainly have gone through a journey with the car parks. There's no doubt about that. In terms of valuations, we believe that we're trading into a stronger commercial market today than we were a year or 2 years ago. We've obviously just opened the convention center. We've got CRL opening right outside the door of 99 Albert later this year, and we've got an improving New Zealand economy. So we believe that all of those things increase the value of our assets going forward. And our goal here is to maximize value for our shareholders. And so we want to go about this in a very systematic manner, and our external advisers are helping us through that decision-making process. Paul Koraua: Yes. So then I guess maybe just the last point on that is the counterfactual is if you don't get $200 million of asset sales done in the next 12 months, what does that mean in terms of where Sky City? Does is does that mean your dividend gets delayed a little bit more? Or does that mean that other options have to be looked into? Jason Walbridge: I'm confident we will get some assets away. We've got some very attractive assets within our portfolio. We're well advanced on the work, as I mentioned before. So I think we're confident that we will deliver on that commitment around that monetization of $200 million. Paul Koraua: Maybe just moving on then. So in the second half of this year, you spoke to some of the factors, which means that it will be stronger than the first half, the 43%-57% skew. Is any of your thinking around the second half around change in spending behavior? Or have you expected that to be flat through Auckland? Jason Walbridge: If you're asking about any uplift from New Zealand economic improvement, we haven't factored that into our second half. And so -- and our guidance -- our guidance is based on the benefit from the New Zealand International Convention Centre and that cross precinct benefit into our hotels and our food and beverage and entertainment principally as well as continued operation of our core businesses, yes, just continuing to work hard on delivering customers what we know they want Paul Koraua: Yes. That makes sense. And then your NZICC visitations were 110,000 for the second half. You guys obviously make some assumptions in there about what you think the average spend of those visitors will be. Could you maybe just shed some light on where that sits versus the current spend per visitor or EBITDA per visitor in the Auckland precinct? Do you think it will be additive to that average? Or do you think it brings it down? Jason Walbridge: Yes, we certainly do think it will be additive. It's a different mix of visitation that the NZICC will bring to us in Auckland, both domestic and international, more business visitors than perhaps we normally get as a consequence of conferences and the likes and their spend levels typically are higher. Callum do you want to add anything else to that? Callum Mallett: Yes. Jason's bang on, Paul. So from a domestic, international delegates, a number of them have been with companies paying or associations paying to visit, they definitely have a higher spend per day than, for instance, a leisure holiday maker. That said, the majority of conferences of scale, both from an international perspective and a domestic perspective, start kicking in, in earnest in FY '27. The second half of FY '26 certainly has some conferences, but it's a number of events, shows, balls, and dinners. And we still expect those customers to have a higher spend per customer across our nongaming businesses than we might see today, but not to the same degree that we're expecting from FY '27 onwards Paul Koraua: That makes sense. And maybe just 2 final questions. First, are you guys concerned at all about the gaming visitation numbers in New Zealand? Obviously, you've changed the way that you're doing that in other New Zealand that category, but some of those visitation numbers were quite stark. Jason Walbridge: Yes. Gaming visitation in New Zealand was primarily impacted by Carded Play. So we anticipated with the introduction of Carded Play is that the revenue impact would come from a reduction in some players, either because they've chosen not to play with us because they don't want to have to go through the sign-up process. They may become more aware of their spend levels, and moderate their spend accordingly or through our compliance programs, we may determine that that customer is not a suitable customer for SkyCity. So that's really what the visitation -- the gaming visitation number is reflected. What we have seen positively is an overall growth in the number of customers that have an account with us. And most of those customers have been at the lower-mid tiers, and that's where we certainly have seen growth. But that growth hasn't necessarily offset those changes at the VIP tiers that we spoke about earlier Paul Koraua: And then final one. Adelaide, obviously, you touched on has been quite challenging. Cost-out process is obviously underway, but you also have mandatory Carded Play coming in December. That's going to have quite a big impact on a business that's already under pressure. How -- at what point is there potentially not a sustainable business there? Jason Walbridge: Yes. We're continuing to work very, very hard on that business. It is going through a challenging phase at the moment. The team are very, very focused on ensuring the compliance program progresses, and we are operationally on track at the moment, and at the same time, really managing costs. So there's some good work being done there to right size that cost structure. With respect to Carded Play, we've obviously gone through tremendous learnings here in New Zealand, and we're able to take those learnings and apply them into Adelaide. And we actually think we'll be better prepared, as you would expect, in Adelaide with the rollout with the introduction of the SHOW by SkyCity loyalty program. So we're working really hard to minimize that Carded Play impact at the end of this year. With respect to the commercial viability of that business, we look beyond June next year when the B3 program completes and those costs come out of that business is we certainly have a viable business. So the focus right now is getting through that compliance program, tightly managing costs, and providing a service for our customers that enables us to maintain visitation. Encouragingly, the South Australian government is very, very focused on tourism and events, and we've seen a very strong calendar of events over the last period and looking out into this year, more and more events. And in fact, LIV Golf, I think, is kicking off right at the moment. And things like that really drive visitation across our precinct, and we certainly benefit from that in the nongaming revenue area. Callum Mallett: And Paul, I'd just add to what Jason said as well. Yes, we expect an impact from the introduction of MCP, but we already have a manual process -- more manual process for mandatory carded in our VIP space. So the customers are used to that. And some of the feedback that we're getting, particularly in our Queenstown property, is that a number of Australian visitors have an expectation now that when they go into a casino, they need a card. So that's not to say that it won't have an impact. But certainly, there are some advantages to us not needing to roll out until December from a customer perspective. Operator: And our last question comes from the line of Tom Maclean with UBS. Marcus Curley: It's Marcus Curley speaking. Just 2 quick questions. Just extending that answer, if you can. Could you give us any color in terms of what you think the impact of Carded Play in Adelaide will be given the Auckland experience? Callum Mallett: Marcus, it's Callum. So if you remember for New Zealand, we guided to 15-rough percentage points of uncarded revenue. We expect because of what Jason and I just spoke about, but [indiscernible] and obviously, there being more competition in the Australian market than there may be in New Zealand. We think it's 15% to 20% of uncarded revenue is a fair guide. And today, we're tracking at about 65% Carded Play across the Adelaide business as a guide. Again, all of this, just like in New Zealand, these are assumptions, but pleasingly, our assumption for NZ was relatively accurate. So that's where we're at for Adelaide. Marcus Curley: And then secondly, I know you've probably sprinkled this answer through the call today. But if I look at the full year guidance relative to the first half result, let's leave seasonality to one side, you broadly need $30 million worth of extra EBITDA in the second half relative to the first half, if my numbers are right. Could you just bridge that at the high level? It sounds most of it's cost, but I'd just be keen if you could bridge it between revenue and cost and split that down where possible. Jason Walbridge: Yes, sure. Marcus, Jason here. Obviously, having the NZICC open for 4, 4.5 months, so there's the revenue there from those 110,000 visitations. There's an expectation that we benefit in hotels. So in our modeling, we've made an assumption of how many of those people stay with us. As a consequence of all of those visitors, occupancy levels will be higher. We expect that to put upward pressure on room rates, and we benefit from that as well. And then obviously, they're going to need somewhere to have some meals. So we expect them to join our food and beverage operations as well. And then there's a very small assumption there around gaming. So we've got clear line of sight on a bridge to those sorts of numbers that you talked about through the number of hotel rooms that we expect to sell, the number of covers in our restaurants that we expect to sell and how we believe we're going to be able to continue to tightly manage our cost structures in that environment to deliver the uplift to stay within our guidance range. Marcus Curley: Would you be able to... Jason Walbridge: Sorry, I was just going to add, it's not all in Auckland from the NZICC. Callum's spoken to the work that's going on in Adelaide as well. So we do expect some of that uplift in the second half to come from the hard work in Adelaide. Sorry, go ahead. Marcus Curley: So it sounds more than half -- let's just call it the midpoint, if you get to the midpoint, more than half of that would be Auckland driven as opposed to Adelaide cost out? Jason Walbridge: Yes, yes, definitely more than half. Yes, that's correct. Yes, the majority would be Auckland. The NZICC is the big driver for us. Operator: Thank you. And this concludes our Q&A session. I will turn it back to Jason for final comments. Jason Walbridge: Well, thank you very much for your questions today and your ongoing interest in SkyCity. Much appreciate it. And I look forward to catching up with some of you over the coming days and weeks. Thank you very much for your time. Operator: This concludes our conference. Thank you for participating. You may now disconnect.
Anita Addorisio: Good morning, and welcome to Lifestyle Communities investor analyst conference call. My name is Anita Addorisio, Company Secretary of Lifestyle and moderator for this call. This webinar will be recorded for the benefit of those who are unable to attend today, and the webcast will be available upon request. Please be advised our conference call will strictly be limited to 1 hour. Due to the number of attendees, we will endeavor to address as many questions as possible during this time. We encourage you to contact the company via the Investor Center available on the company's website should you have any queries following today's update. Our presenters today are our Chief Executive Officer, Henry Ruiz; and Chief Financial Officer, Angela Farbridge-Currie, who will provide an update on the FY '26 half year results as released to the market this morning. Also joining us today is Clare Lewis, Investor Relations. This will be followed by a Q&A session, for which I'll now outline the procedure as presented on your screen. [Operator Instructions] Please note that questions received function, which are of a similar nature will be grouped and answered at the appropriate time. I now invite our CEO, Henry for his presentation. Over to you, Henry. Henry Ruiz: Thanks very much, Anita, and good morning, everyone. Thank you for joining us for our FY '26 half year results. I'm joined today by Angela Farbridge-Currie, our CFO; and Clare Lewis from Investor Relations. Moving to our purpose. Our company purpose is to reimagine a Way to Live for independent downsizers. We develop and manage architecturally designed low-maintenance homes together with resort style communities that allow downsizers to free up equity from their previous home and live the life they want. Moving to a business snapshot of our results. Our first half results are summarized at a high level on this slide and show we are strongly executing against our plan to get strong to grow stronger when the property cycle turns. The first half reflects a business that is operating with discipline and focus through a challenging market. We delivered statutory profit of $15.8 million, generated positive operating cash flow of $41.2 million and continued to materially strengthen the balance sheet, reducing net debt to $323.6 million, down from a peak of $490 million in May. Importantly, we're seeing early momentum as our refreshed Way to Live strategy embeds. New home sales improved materially, recording double-digit growth in sales with 110 new home sales and 128 new home settlements. Our annuity income stream continues to grow with 4,256 homes under management, recording $25.3 million of gross rental income, up 11.9% and customer satisfaction is trending positively. We have also enhanced our attractiveness to new prospects by introducing choice on when to pay the management fee, upfront or when they sell. And we have a healthy portfolio and pipeline of over 5,700 homes. At the same time, we have remained deliberately cautious, selling through built inventory, rightsizing the land bank, and restructuring our debt facilities to provide longer tenure and flexibility. At the 31st of December, the fair value of our investment properties was $898.1 million. While the Victorian property market remains challenged and the timing of the VCAT appeal decision is uncertain, our focus is clear: Supporting our homeowners, protecting cash flow, and positioning the business to emerge stronger as conditions normalize. With that context, I will walk you through our results before handing to Angela for the financial detail. Moving to our results snapshot. So going a little deeper on our results, you can see we have had a pleasing market response to the launch of our Way to Live brand campaign, which has landed well with new prospects and our existing homeowners. Net sales from new homes improved materially from the prior period, up 12% from the second half of FY '25, 110 versus 98; and a market improvement from this period last year, up 168%, 110 versus 41. New home settlements were lower than the first half of FY '25, 128 versus 137, driven by lower sales rates over the last 18 months and the lapse period between sales and settlement timing, as almost all of our customers need to sell their pre-existing homes before moving in. Annuity revenue from rental income continued to grow to $26.7 million, driven by new home settlements and inflation-linked rental increases. That said, the total annuity revenue was slightly down on the previous period due to the deferred management fee not being collected on contracts impacted by the VCAT decision, which remains under appeal. Following the settlement of planned land sales and ongoing inventory realization, we are pleased to report a further reduction in our net debt balance, down from $460.5 million at June 2025 to $323.6 million at December, as I just highlighted. Our operating profit after tax was $16.1 million, reflecting a period of transition as lower new home settlements from earlier sales cycles flow through. Margins were compressed as we intentionally sold through built inventory and deferred management fee revenue was impacted by the VCAT decision, alongside interest costs associated with the land bank. Closing out this half, we opened 2 new impressive club houses at our Ridgelea and St. Leonards -- The Shores communities. Moving to the property market. The Victorian property market has shown signs of improvement this half, however, still lags national trends and continues to face into some headwinds into the second half. As you can see from the figures on the right, sourced from Cotality, the value of dwellings in Melbourne increased 0.8% over the quarter and 4.8% over the December 12-month period, placing it at the lower end of capital-city growth. The pace of growth in home values lost some staying through the end of 2025 and into the early months of 2026. The slowdown aligns with the dent in consumer confidence in December as inflation tracked higher and given the RBA's posture towards monetary policy. Total listing volumes in Melbourne were down 12.6% from December 2024. And as recently as the past few weekends, option clearance rates are still in the low 60s. Moving to a business update and strategy recap. So with that property market context, as I mentioned at the opening, our company purpose is to reimagine a Way to Live for independent downsizers. It's brought to life through 3 strategic pillars. The first is to be the go-to-choice for downsizers, committed to mastering both sides of the sales process, the inquiry to appointment journey, and supporting homeowners through the process of selling their existing properties. The second pillar is to be renowned for the homeowner experience in our communities by investing prudently in high-quality amenities, digitally enhancing our communication methods, and a consistent experience that empowers homeowners and strengthens referral advocacy across our communities. We refer to our third pillar is powering our growth engine, by embedding capital discipline, market-led product and pricing strategies, refinement of our home designs to ensure product market fit with the aim of agility across cycles and sustainable financial returns. Now translating our operating pillars to value refers to how we create value for shareholders and our homeowners through 4 key operating pillars that work in tandem in a virtuous cycle. We refer to these pillars as Way to Live, Way to Grow, Way to Build, and Way to Operate, and I'll take them one by one. Way to Live refers to our focus on delivering a truly outstanding homeowner experience while doing it more efficiently with the goal of improving our operating margins to drive value to our annuity book. Way to Grow refers to the sales and marketing engine that ultimately drives the company's settlement rate. We are aiming to grow our net sales levels over the coming years as the property market strengthens. Way to Build refers to us reengineering the development process to deliver quality homes and community amenities that help enable efficient capital recycling at a sale price of 80% to 90% of the median of the catchment area with the aim of enabling the company to sustainably grow. And Way to Operate refers to our focus being market and homeowner centered and managing our corporate overheads commensurate with the longer-term growth ambitions of the business. The subsequent updates from this presentation are organized into these operating pillars. Moving to Way to Live, the homeowner experience. As part of our homeowner-centered operating philosophy, we continue to work in closer partnership with our homeowners. We use data-driven insights to inform prioritization, community action plans, and decision-making. We've introduced consistent communication frameworks and elevated our transparency. Key trends, as you can see on the right, indicate we are on the right path with strengthened trust indicators and the shift to more scalable and positive engagement from homeowners. Overall, customer satisfaction continues to improve from each 6-month survey period, improving from 75.7 as at March 2024 to 78 at September 2025. Moving to Way to Grow, the deferred management fee model for existing homeowners. In July 2025, we changed our deferred management fee to be consistent with the findings of the VCAT ruling handed down on the 7th of July 2025. For new homeowners entering into a residential site agreement with Lifestyle Communities, the deferred management fee is now calculated on the homeowners' purchase price. As previously announced, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined irrespective of the outcome. The key advantages of offering the new deferred management fee model to all existing homeowners after the VCAT appeal enables homeowners to be in a position to make a fully informed decision. We anticipate this offer will generate substantial goodwill and sentiment amongst the homeowner community. Any goodwill generated is anticipated to contribute to homeowner satisfaction and harmony and protect and strengthen a strong sales referral rate. This approach assists with our continued strengthening of the Lifestyle Communities brand and reputation. Whilst reducing potential litigation and regulatory risk that may be associated with offering the new deferred management fee model prior to the outcome of the appeal. As a reminder, on the VCAT case, Justice Woodward decided on 2 key elements as follows: one, the Residential Tenancies Act does not prohibit a deferred management fee. Two, the deferred management fee must be an amount capable of being accurately calculated as at the date of entry into the residential site agreement. Justice Woodward consider that because the original deferred management fee clause was calculated as a percentage of the homeowners sale price, which is unknown at the time of entry into the agreement, it is therefore unable to be calculated as an exact amount and therefore, void. This is the key point that is under appeal. That said, to reiterate, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined, irrespective of the outcome. As set out in our FY '25 results presentation, if 100% of existing homeowners as at the 30th of June 2025 were to move to this new model, the estimated potential adjustment to the carrying value of the deferred management fee component of investment properties would be up to $117 million. Lifestyle Communities also advises it has received a notice of listing from the Court of Appeal, the Supreme Court of Victoria. The applications for leave to appeal and the appeals, if leave is granted relating to the orders made by President Woodward in VCAT will be heard by the Court of Appeal on Tuesday, 23rd of June 2026. The court will then deliver its decision in due course. So just to repeat, the date for the case to be heard will be on Tuesday, the 23rd of June 2026. The court will then deliver its decision in due course. Moving to Way to Grow, the introduction of choice and expanding our market opportunity. To recap, for new homeowners entering into a residential site agreement with Lifestyle Communities, the management fee is now calculated on the homeowners' purchase price. Further to that, new homeowners can now choose when to pay the management fee upfront or when they sell. Lifestyle Communities aims to have a best-in-market model, providing choice to customers to either free up cash now and pay later or buy with no exit fee. Buyers can choose when to pay their management fee either 10% upfront or up to 20% when they sell. Soft launch took place in December 2025, with full rollout now in market. And to date, we have had 5 upfront management fee contracts signed with the first settlement having already taken place. I will hand over to Angela to talk to our Way to Build and development pipeline. Thanks, Angela. Angela Farbridge-Currie: Thank you, Henry, and good morning, everyone. In relation to our development pipeline, during the period, we completed the settlement of the 4 land sales previously announced as part of our strategy to right size the land bank and carry 4 to 5 years of supply. Following the divestments, we retain a well-balanced portfolio that supports the next phase of the development pipeline as existing projects complete. Our portfolio and pipeline now sits at 5,750 homes with around 4,250 currently occupied and a further 1,500 homes remaining in the pipeline. In the graph to the top right-hand side of this page, you can see that 756 of these homes remain in developing communities and a further 738 homes remain to be developed from the retained land bank. As we deliver the pipeline, we will continue to be market-led in our pricing strategy, which will impact development margins in future periods as we follow the cycle and work through the existing projects. However, as we've previously noted, the ongoing drivers of demand for the sector remain and continue to intensify. We have an aging population in need of downsizing solutions against the backdrop of housing undersupply with additional pressure being felt due to lack of affordability. The delivery of our pipeline and future projects plays an important part in addressing each of these issues. Moving to an update on our debt facility restructure. As we previously announced, we've taken proactive steps to restructure our debt facilities, rightsizing down from $571 million to $375 million. The new facilities became effective in January 2026, and simplify the financing structure, following a reduction in the lending syndicate from 4 to 2 lenders, while providing longer tenor with no ICR covenant until the 30 June 2028 reporting period. The new facilities are provided by PGIM Inc., one of the world's largest pension funds and a provider of long-term debt and one of our existing lenders, National Australia Bank. While the balance sheet has delevered since the May 2025 peak, the transaction provides ongoing funding flexibility as the business navigates the recovery in the Victorian property market. Under the revised facilities, during the ICR relief period, a review event will occur if the number of new home settlements at each reporting period fall below certain thresholds, which for FY '26 is 185. The loan-to-value ratio was also varied down to be less than 55% during the covenant relief period and steps back up to less than 65% from the June 2028 reporting period. Due to the longer tenor of the PGIM facility, the weighted average cost of debt is expected to increase. However, this is expected in part to be offset by a reduction in unutilized facility fees due to the lower facility limits. Our new facilities have been supported by 2 high-quality lenders in NAB and PGIM. We value their support and their commitment and thank the exiting financiers for their support in the Lifestyle communities journey. Henry Ruiz: So moving to our business performance in to new home sales. We observed sales volumes continuing to rebuild throughout the first half with 2 quarters of sequential growth, as you can see on the slide. Our recovery in sales has delivered double-digit year-on-year improvement in the first half with total net sales of $110 million for the period. Pleasingly, the conversion rate from face-to-face appointment to sale has also improved from a historical run rate of approximately 22% to now being circa 26%. We have maintained a continued focus on site activations to drive more prospects to visit and experience the communities for themselves. As we look further ahead to the second half, with short-term economic uncertainty, we have observed some consumers are beginning to show some hesitation in committing to listing their current properties for sale, signaling a softening in market sentiment. Moving to resales performance. Our established resales area has observed the strongest level of resales in recent periods with 98 sales. We play an important role in helping our existing homeowners sell their properties when the time comes for them to sell out of one of our communities. Lifestyle Communities resale approach utilizes a dedicated in-house resales team and a unified approach across both new and established sales. It is an empowered sales process where homeowners are in control of the asking price and the home presentation. Notwithstanding that a great bulk of these 98 sales did not create a deferred management fee revenue event following the VCAT decision, it does bring the next turn of the new management fee into play with new homeowners creating value. The number of homes on market has decreased from 56 at the 30th of June 2025 to 50 at 31st of December 2025, which represents approximately 1.2% of the portfolio, consistent with historical run rates. Moving to our inventory optimization. As we highlighted earlier, one of our key strategic initiatives is to reduce excess inventory levels in line with our optimal range. The team has been laser-focused on selling completed homes with some targeted adjustments to our pricing to meet the market. We have also paced our build rates to match sale order rates to minimize further inventory buildup. Since the 30th of June 2025, we are pleased to report we have realized a circa 30% reduction in unsold inventory. As at the 31st of December 2025, we are carrying 180 unsold completed homes, down from 257 reported in June 2025. As at the 31st of December, there are 9 unsold homes currently under construction compared with the 12 that were under construction in June 2025. In addition to the above, $31.2 million of completed homes are sold and awaiting settlement. Looking ahead to the second half of FY '26, the team will continue to drive this strategic initiative. Moving to our annuity income stream. Ultimately, our strategy is to sustainably grow the annuity income generated from the number of homes under management, and these are indexed at the greater of CPI or 3.5% per annum. For the first half of this financial year, total annuity revenue was $26.7 million, which includes gross rental income of $25.3 million, up 11.9% from the first half of FY '25. This growth does not include deferred management fees related to the VCAT impacted contracts, while the appeal is ongoing. As a reminder, for all new customers, the upfront management fee is 10% of the purchase price or a deferred management fee, which increases at 4% per year capped at 20% of the purchase price. Average tenure of established settlements during the first half of FY '26 was circa 7 years. I will now hand over to Angela, to talk through our financial results. Thanks, Angela. Angela Farbridge-Currie: Thanks, Henry. Turning to the income statement. As Henry noted, we reported an underlying profit -- operating profit after tax of $16.1 million prior to statutory accounting adjustments. The operating profit is down by approximately 28% from the prior half year, impacted by lower new home settlements and development margins, which I will touch on shortly. The operating profit has also been impacted by lower DMF revenue following the VCAT decision and a greater portion of interest costs expensed this half year relating to the land bank, which as per accounting standards are not capitalized until the development works commence. The operating business continues to grow with site rental revenue increasing 11.9% from the prior corresponding period, supported by an increase in homes under management and annual rent increases, which were effective 1 July. Development margins were lower this half year at 11% due to targeted price adjustments to meet the market. However, they are tracking in line with the second half of FY '25. Lower margins are expected to continue for a period of time as we work through the inventory position and recovery of the Victorian property market. With regards to costs, you'll note that there's been an increase in sales and marketing costs from the second half of FY '25, which is driven by the launch of our Way to Live brand campaign. Corporate overheads saw modest growth of 2.5% from the prior corresponding period contained to inflationary levels. We'd like to draw your attention to the statutory adjustments at the bottom of the table, which are comprised of fair value adjustments on investment properties and some final adjustments recognized relating to land sales. We've provided a full reconciliation of these items on Page 34. In relation to fair value adjustments to 31 December, we have recorded an operating fair value uplift attributed to settlements and rent increases of $21.3 million. These are shown as Categories 1 and 2 in the table to the left of the page. In relation to Category 2, uplift at settlement, I would like to highlight that the adjustment of $11.2 million was lower than prior periods due to the reduced DMF values per home of $18,000 versus $64,000 in the prior period following the VCAT decision. The reduced DMF value per home reflects the impact of the VCAT decision on existing contracts and each site rolling on to DMF on entry price at the next turnover event. You will note in Category 4 at the bottom section of the table that there have been fair value adjustments relating to VCAT proceedings of $5.2 million. This represents the fair value of contracts that are not impacted by the VCAT decision and the value has been recognized on the basis that these amounts can be charged. And finally, in Category 5, there's been a further $3.3 million of adjustments relating to land sales, in particular, residential lots at the St. Leonards development, which were contracted for sale in the period. Moving to the balance sheet. As Henry mentioned, the focus on selling through built stock has resulted in a 30% reduction in the number of unsold homes in the system from 30 June and in turn, a reduction in the carrying value of inventories on the balance sheet. We expect further reduction in the carrying value of inventories in the coming period. Staying with assets, both assets and investment properties have reduced following the completion of the land sales, noting that the reduction in investment properties is due to the sale of Ocean Grove 2, but is offset by the fair value increases for the period. These land sales in conjunction with working capital realization flow through to a reduction in borrowings with the debt balance decreasing to $353 million at 31 December and net debt of $323 million once cash balances are taken into account. Debt levels are expected to reduce further over the balance of the financial year as inventory continues to reduce. Turning to the cash flow. Despite the lower level of settlements in the period, we are pleased to report positive operating cash flows of $41.2 million, up from negative $12.9 million in the first half of FY '25. The improvement is a result of a reduction in development expenditure, which reflects both disciplined management of build rates and our developments in progress passing the peak development spend phase. More specifically, in the first half of FY '25, infrastructure works by way of clubhouse builds were ongoing at Phillip Island, Riverfield, Ridgelea and St. Leonards - The Shores in addition to civil works at Ocean Grove 2. In comparison, infrastructure works for this half mainly related to the tail end of Ridgelea and St. Leonards - The Shores Clubhouse builds, which welcomed homeowners in October 2025. The bottom section of the cash flow provides a reconciliation from operating cash flows to statutory cash flows. You can see that $102 million of cash flows were received from the land sales in the period with a flow-through to repayment of borrowings, which totaled $110 million for the period. Looking ahead, we anticipate full year positive operating cash flows as projects continue their capital recovery phase, which is expected to flow through to a further reduction in borrowings. I will now hand back to Henry, who will take you through the outlook for the second half of the year. Henry Ruiz: Thanks, Angela. So we continue to execute in FY '26 against a clear plan with the right team in place. We are focused on getting strong and positioning the business for the next development cycle. Disciplined execution is well underway against our refreshed strategy. Our enhanced marketing approach and refreshed brand position has launched and is already bearing fruit. We are maturing our sales approach to focus on both sides of the market, helping prospects purchase a home in one of our communities and assisting them to sell their existing home efficiently. Our balance sheet deleveraging is well progressed, and we have restructured and rightsized our financing arrangements with longer tenor and flexibility. We continue to sell through built stock and have rightsized our land bank. And while the VCAT decision timing remains unknown, we are focused on our homeowners, continuing to drive satisfaction with more work to be done. Just to recap, our new home settlements pipeline status as at the 16th of February 2026, we have completed 163 new home settlements. We have 202 total contracts on hand and of the 202 contracts on hand, 98 relate to homes that are expected to be available for settlement in FY '26. Of these 98 contracts available for settlement in FY '26, 28 customers have unconditional contracts on their current homes and are booked to settle prior to the 30th of June. 49 customers are actively marketing their own homes for sale and have not firmed up a booking date as yet. And 21 customers have placed deposits and are yet to list their homes for sale. In the second half, shareholders can expect to see further deleveraging of the balance sheet and full year positive operating cash flow as we continue to target inventory reduction and knowing that our communities in progress have passed their peak development spend phase. As we highlighted, communities in progress contain sufficient supply. So no new project launches are planned in this financial year, subject to market conditions. We will continue to be market-led in our development and sales approach. Due to the lag between sales and settlements, lower prior period sales rates will flow through to future settlement numbers. Despite some near-term market headwinds, the fundamental drivers of demand for independent downsizer living options remain strong, including an aging population, decreasing affordability and the availability of suitable properties. As we continue to mature our platform as one of the longest-serving land lease operators in this country, we are well positioned to realize the long-standing potential. Thanks for listening, and I will now hand back to Anita for any questions. Anita Addorisio: We now welcome your questions, and we'll commence by addressing verbal questions before taking written questions. [Operator Instructions] So first up, we do have Murray Connellan from Moelis Australia. Murray Connellan: I was hoping you could give us a little bit more color on sales rates at the moment. It looks like if we -- if we look at the update that you guys put out at your AGM on the 19th of November, there have been, if my math is right, about 32 net sales in the last 3 months. That's obviously, going to be affected by the Christmas period, though, so probably not necessarily reflective of a proper sort of monthly sales rate. Could you just give us a little bit more context around level of inquiry at the moment, how that's changed over the course of the last 6 months and where we are today? And then how -- I guess what that pipeline looks like, please? Henry Ruiz: Sure. Thanks, Murray. Look, I think if you reflect on our typical December-January period, there's obviously seasonality in that, and it tends to be a lower inquiry and sales period. I think what we have seen is that's been magnified somewhat with some of the uncertainty around the economy. Inquiry rates are holding up well, like we are still booking appointments, but people making a decision is really the point of inflection. We're also seeing a slight skew towards properties that are established at slightly lower price points. So that's what we can see at the moment. We're trying to control what we can. And so we're continuing to drive hard around, like we said, targeted price adjustments for stock that is on the ground and continuing with our marketing campaign that we know is bearing fruit, but the consumer confidence piece is something that we have a watch on. Murray Connellan: Then just touching on your pricing strategy as well. You've obviously been in a sort of strategic mindset that is quite strongly focused on reducing that working capital balance, reducing those inventory numbers. Do you think you might be in a position to start being a little bit more margin focused again as we look ahead and I guess, noting that the balance sheet is in much better shape? Or would you still be focused on, I guess, getting those inventory numbers lower and closer to targets and I guess, more of a focus on working capital still rather than margin? Angela Farbridge-Currie: Yes. Thanks, Murray. You are right. We will remain focused as we move forward with that strategic initiative of continuing to focus on a reduction in the inventory balance, and that will continue to see us work on meeting the market with regards to the pricing, to continue with that targeted price adjustment strategy to cycle through that inventory and recover the working capital. Henry Ruiz: Then moving a little bit further out as we start to build -- we're going to be data-driven. So I mean we've got very good insights now around what is selling well in terms of property type configuration and price based on location. So you can imagine that is what we will start to build towards that will improve margin. And the other thing we said strategically is that as the market improves, we will follow the market up. So we will, yes, reflect the market both in its down cycle, but we're looking forward to the up cycle as well. Murray Connellan: Has the way that you build and the -- I guess, the cost inputs changed materially in the last year? Angela Farbridge-Currie: Not materially in the last year. Obviously, the bit of a heat has come out of the construction pricing, but we are probably facing into a cycle where, particularly in Victoria for a period of time, our construction costs might outpace the cost of house growth prices. Anita Addorisio: We have a question from Connor Eldridge. Connor, can you please advise who you represent? Connor Eldridge: It's Connor from Bell Potter here. If I'm right, I'll go ahead with my question. I was just curious around the comment you made around the trading conditions down in Victoria, particularly the comment just around that you're seeing recent signs of softening. I was wondering if you can just expand on that a bit more and if that's, I guess, the rate hike causing that or what in particular are you referencing there? Henry Ruiz: Yes. Look, I think it's a confluence of a number of things and not to overstate that comment, but it's really just around our demographic and prospects coming through are probably -- if you look across the market and people considering selling and if this is the right time for them to sell, are probably the most cautious as a demographic. The second part is it's the one opportunity for them to crystallize almost lifetime of work value. So as they look around and see that properties are staying on market for longer and maybe not achieving the prices that they were hoping for, that just gives them a moment for pause. But like I said, the level of interest in moving into the community stays high, the key consideration for them is, can I unlock enough equity as part of the transaction, which we know, and that's why we've got the deferred management fee model is very attractive to prospects coming into our communities. Connor Eldridge: Yes. Great. Maybe just one more for me. Just, I guess, in light of the current environment and conditions on the ground, is there a, I guess, a metric that we should be thinking about in terms of like your, I guess, target level of completed unsold inventory moving forward? Angela Farbridge-Currie: You'll see in the deck, we talk about our optimal inventory levels and seeking to maintain around 15 to 20 homes per site. Now that will obviously vary depending on the stage of a community's life cycle. So -- and you'll also see based on current inventory levels that there is some further work to go. While there's been good progress made to bring those inventory levels down towards our more optimal level, there is further work to go to reach those targets. Anita Addorisio: Next, we have [ Miriam Prichard ] from UBS on the line. Unknown Analyst: Can you quantify the level of discounting that is currently being offered to clear inventory to optimal levels? Angela Farbridge-Currie: Yes. Thanks, Miriam. Ultimately, the level of discounting will vary on a community-by-community basis. And at the moment to date, there has been -- and you'll also -- if you look at the movement in our development margins, you can get a feel for potentially the size of some of those discounts. It does vary, but ultimately, on average, stays within around the single-digit percentages. Unknown Analyst: Perfect. And just on sales and marketing intensity, where do you see that normalizing over time? Angela Farbridge-Currie: So we did take steps. You'll note that our sales and marketing costs are down from 2024 when I think they are around $22 million, and that came down to around $15 million in FY '25, and we are ultimately traveling broadly in line with that this financial year-to-date, noting that there has been some increase in spend from the prior half because of the launch of our brand refresh strategy as well. And we do -- while we don't expect a material change in the second half, probably some slightly lower spend given that spending was more skewed to the first half. Unknown Analyst: Just last one for me. Thanks for providing your customer satisfaction score. How would that be indexing relative to peers? Henry Ruiz: That's a really good question. It's actually very hard to get comparative stats across the peer set. The one thing I would say is our referral rate is a very important part of our sales process, both direct referral as well as a lot of our homeowners almost act like salespeople when people walk through the door and experience the communities. And we typically have spoken about that sitting around that 40% to 50% range. So we can only talk to our data, that would be a question that you would have to ask them. Anita Addorisio: We now have a written question that has come in from [ Carl Tan ]. In consulting existing homeowners, have homeowners ever raised the option of abolishing the DMF altogether? Henry Ruiz: Thank you for the question. Look, all of our homeowners on the way in understand our business model. And one of the key attractive elements of it is their ability to free up more cash as they enter into the community. So it's less about what our existing homeowners have raised. I think what we have learned is that there are some prospects that were discounting us as a potential destination because they were not in favor of having a deferred management fee model. So like we outlined, we have decided to offer choice. And so now we offer people that want to release more cash on their way into the community or some people want to take that off the table for the benefit of their children or other reasons, or they're just in a financial position where that helps them, whether it be with their pension or other financial needs. So really, the key message is we're now catered for both, and we think that expands our market opportunity and attractiveness. Angela Farbridge-Currie: Thank you, Henry. We actually have no further questions at this point in time, either through the live or the Q&A box. So based on that, ladies and gentlemen, we have reached the end of this Q&A session, which brings us to the conclusion of this conference call. We thank you for your attendance today and invite you to contact the company via the Investor Center available on the company's website should you have any questions not addressed here today. Thank you all so much. The webinar will now end.
Operator: Thank you for standing by, and welcome to the Medibank Half Year Results 2026. [Operator Instructions] I would now like to hand the conference over to Mr. David Koczkar, Chief Executive Officer. Please go ahead. David Koczkar: Thanks, and good morning, everyone. Thanks for joining us today. I'm coming to you from Naarm, the home of the Wurundjeri Woi-wurrung people, and I pay my respects to their Elders, past, present and emerging. I'm joined by our executive leadership team, including our CFO, Mark Rogers. This morning, we'll talk to Medibank's results for half year '26. So first to the highlights on Slide 5. This is another good result for the Medibank Group. Our performance reflects improving customer engagement and our progress in driving the health transition. We've delivered on our growth commitments, with improved momentum in our health insurance business and strong growth in Medibank Health. Medibank Health's continued positive performance is enabling us to reinvest with confidence to support its future growth. And we recently took our next important step in health, finalizing our acquisition of Better Medical, establishing one of the largest primary care networks in the country. So let's turn to Slide 6 for customer highlights. As the cost of living remains challenging for many, we've continued to provide more value to our 4.3 million customers. We saved our customers around $105 million in out-of-pocket costs, another $3.3 million by using our no gap network and $23 million in rewards was earned by Live Better members. And importantly, we're seeing our Medibank and ahm customers accessing more of the health services we deliver through Medibank Health. 55% of Medibank resident policyholders are now engaged with our health and well-being services, which reflects our differentiation, but also how we're able to bring the best of Medibank Group to support our customers' health. Amplar Health delivered 70,000 virtual health interactions to Medibank customers and saved 100,000 hospital bed days through its home care services. And as we meet more health needs of more customers, customer relationships strengthen, which further improves our retention performance and supports our growth in health. So now to Slide 7, which shows an overview of our key financial outcomes. Look, I won't go through all of them, but a particular highlight for me is the resident policyholder growth of 1.9%, with growth in the last half, more than double that of last year, including improving momentum in the Medibank brand. And while we've seen slightly lower policyholder growth rates in our nonresident business for a few years ago, our performance remains better than market, especially in segments where we are focusing our efforts to grow. And it's very pleasing to see Medibank Health having another very strong half of growth. In line with our healthy capital position, we are delivering to shareholders an interim fully franked ordinary dividend of $0.083 per share. So now to Slide 8. As we progress our strategy, we continue to take important steps to deliver our 2030 aspirations. Our improving experiences are really resonating with our customers, patients and our people as we continue localizing services and empowering our teams to better support our customers. We've continued to build momentum in our health insurance business, growing both brands and expanding in our priority segments, including families, mid-tier, covers and those new to the industry. This includes a 67% increase in corporate joins year-on-year and a record number of nonresident workers now as customers. Key to our strategy is to change the way people experience health and wellbeing, like our expansion of our 24/7 Amplar Health Online Doctor service to our resident customers and our Detox at Home program in the community. And having now established a national network of 168 clinics, we've continued to prioritize our expansion in primary care, investing in the experience of GPs to support early intervention and multichannel delivery. And we're improving how we work, embedding AI tools and processes throughout our business. And our adoption is accelerating. For example, in 2025, we had twice the rate of adoption of AI that we had in '24. And next year, it might be more than 5x that amount. We're able to drive value from this space due to our strong customer relationships, our data and our capabilities. And we continue to strengthen our foundations, maturing our risk culture and approach to support our people's decision-making, enhancing security and our technology platforms and improving productivity. Also we can continue to deliver better outcomes for our customers. So now over to Slide 9. We're very conscious that many consumers are doing it tough, including with the recent interest rate increase and recently announced increases to premiums. However, despite the challenging environment, the resident health insurance market remains buoyant, including continued strong growth in younger customers choosing to go private. Recent research showed a continued increase in the number of people who see health insurance as offering value for money. And with increased waiting list for elective surgery in the public system and the benefits of adult dependent reform to continue, we expect resident growth rates to remain well above pre-pandemic levels. Consumers continue to seek greater value and are switching brands and products together, including choosing lower levels of cover. With this changing mix and more people preferring treatment outside traditional settings, growth in private hospital claims utilization is decreasing. And while some of the unsustainable commercial behavior from other funds has eased, pockets of heightened competition remain, including aggregator practices that could drive up the cost of insurance for consumers. In response to all this, our disciplined approach to growth and differentiation across our 2 brands remains unchanged. We are driving momentum by growing in our target segments, prioritizing growth in direct channels and focusing on retention, which for us has improved by 21 basis points year-on-year to September despite industry lapse rates actually going up by 70 basis points. We're continuing to work constructively with hospitals, shaping partnership agreements to incentivize shared outcomes to drive the health transition, which pleasingly is continuing to gain momentum. In FY '25, we gave hospitals around $37 million to support this shift. And in the first half of this financial year, we've already provided around $20 million. The nonresident market has adjusted to recent migration reforms with worker numbers increasing. Student numbers have stabilized, but we expect the market to continue to grow. We're also seeing more students and workers become residents. Transitions, we are well placed to support through our life cycle management investments. And with the strength of the health and well-being support we offer and the extensive university partnerships we have, we remain an insurer of choice in the student market. Now to Slide 10. Australia has never spent more on health care, and yet in some parts, the system is failing the community. As productivity in health care remains sluggish, and health care costs continue to outpace inflation, the call to action for reform could not be more urgent. Out-of-pocket costs are rising, patients are waiting longer for care, clinicians are under pressure and avoidable hospitalizations are around 30% above the OECD average. Not only does this impact the quality of life of millions of people, the recent data also shows it drained around $7.7 billion from the system. Governments, operators, clinicians and patients know the system is under strain. But despite the shared understanding, the pace of reform is far too slow. So we will continue to advocate the change because it is in the national interest. But efficacy alone won't fix a system that is deteriorating faster than many decision makers are responding. International experience shows us that when this happens, the private sector must lead. And in the absence of meaningful system-wide reform, as we have done for several years, we will continue to take the lead in driving the health transition that is needed to sustain our system. And in the last few months, pleasingly, others are recognizing the needs of this action, too. For example, St. Vincent is committed to delivering half its care in homes or through virtual and digital platforms by 2030. Our work with the South Australian government has seen their continued commitment to expand care options for public patients outside traditional hospital settings. And we are seeing many others now embracing the change that's needed. And in the private system, the federal government is supporting this approach given their ask of the sector to design, lead and implement the changes needed through the CEO Forum. So we will keep working with hospitals, health professionals, corporates and other funders to accelerate the change needed. Investing in well-being, in prevention, in primary care and accelerating the shift to virtual community and home-based treatment settings. And as you know, this is not new for us. It's out of this desire to change the system to keep it one of the best in the world, but we are growing our health business. And now Slide 11. Primary care is one of the most critical areas that need change. As the front door to Australia's health system, it needs to adapt to the changing health needs of the country. Patients are waiting longer, paying more and too often entering the system once health problems are already entrenched. These outcomes are the result of a traditional model designed around reactive, episodic care rather than proactive, connected and comprehensive support. The sector is just not set up to support the future health needs of the community. Through our majority interest in Myhealth and recent acquisition of Better Medical, combined with our existing Amplar Health GP nursing and our health offerings, we now bring together one of the largest primary care networks in the country. And working with our partners, we provide the tools, the technology and the time, clinicians need to focus on prevention, reduce low-value activities and better support their patients. We are investing to grow virtual channels to improve access, to support better continuity care and to meet the changing expectations and preferences of patients. And these investments matter for patients and they matter for clinicians. And as we have seen in other countries around the world, a focus on proactive and planned care supported by technology and an integrated care team is a more sustainable business model and one that can better address the challenges of the health system under strain. I'll now turn to Mark to ask him to run through the details of the results. Mark Rogers: Thanks, Dave. Good morning, everyone. This result demonstrates how we're balancing resident policyholder growth and gross margin. It shows continued earnings diversification and includes reinvestment for growth. The key financial highlights include group operating profit up 6% to $381.7 million, with solid growth in resident health insurance an important contribution from nonresident and continued strong momentum in Medibank Health. Investment income was impacted by the lower RBA cash rate and the increase in other income and expenses includes higher M&A costs. Nonrecurring cyber costs were lower, and we expect FY '26 costs to be around $35 million and that the IT security program will largely be embedded. And underlying EPS, which normalizes investment returns was $0.108 per share, which is in line with last year. Slide 14 covers the health insurance results. Despite the challenging economic environment, the business remained resilient, we continue to see benefits from our disciplined approach to running our business, including lower hospital utilization growth and an improved risk equalization outcome. We are also seeing policyholder growth skewed to lower tier products with impacts to revenue and claims largely offsetting. Gross profit was 4.4% higher with 4.3% revenue growth and gross margin stable at 16.2%. Operating profit increased 3.5% to $361.5 million and the operating margin remains at 8.5%. Our expenses were up 5.4% to $329.4 million and the expense ratio was 10 basis points higher at 7.7%. The increase in operating expenses reflects inflation, volume impacts and ongoing investment, partially offset by $3 million of productivity savings. And nonresident commissions were up in line with premium increases with the resident commissions broadly in line with last year despite higher ahm aggregator joins. We expect expenses in FY '26 of between $690 million and $695 million, including $10 million of productivity savings. We continue to target a stable to modestly improving expense ratio, but balances with investing in growth where this makes commercial sense. Moving to Slide 15. The resident health insurance market remains buoyant, with policy shareholder growth in the 12 months to 31 December is expected to be slightly lower than the 2.1% growth we saw in the 12 months to 30 September. Cost of living pressures continue to impact the industry, with switching rates remaining elevated, customer growth skewed to lower tier products and aggregators increasing their share of industry joins. Whilst the unsustainable competitive environment is moderating, pockets of heightened competition remain. Pleasingly, we're seeing increasing momentum in the business. Over the last 12 months, policyholder numbers increased 1.9% with Medibank and ahm growing 0.8% and 4.9%, respectively. This includes 0.9% growth in the last 6 months, which is more than double the growth in the prior period. The acquisition rate of 5.6% is 40 basis points higher, with improvement in the Medibank brand from investing in differentiation and an enhanced digital experience in ahm. Despite the higher industry switching rate, retention improved 10 basis points with the improvement in ahm particularly important. Key areas of focus for the remainder of FY '26 include further improving retention, deepening brand differentiation and increasing focus on acquisition in priority segments and channels. Now turning to Slide 16. Resident claims expense increased at 4.9%, and risk equalization provided a 50 basis point benefit to net claims growth, with some of this benefit expected to be timing related. Resident claims growth per policy unit increased 20 basis points to 2.5%, with the 310 basis point increase in extras, partially offset by 120 basis point decrease in hospital. In hospital, the increase in inflation reflects private hospital indexation investment in product benefits and the increase in New South Wales private room charges. The negative hospital utilization growth reflects prior period claims favorability due to COVID impacts and customer growth due to lower tier products. And the increase in extras includes the ahm limit rollover and utilization and inflation increasing following a period of subdued demand due to economic and COVID impacts. And in the second half, we expect private hospital indexation to remain elevated and negative hospital utilization growth to continue. Whilst the risk equalization timing benefit will unwind, we expect this to be largely offset by higher New South Wales private room charges now being fully embedded. Slide 17 details health insurance performance, which shows continued growth in both resident and nonresident. In resident, our disciplined approach to growth resulted in gross margin being maintained at 15.5% with revenue and claims growth per policy unit of 2.5%. Growth in revenue per policy unit was down 30 basis points, with a high average premium increase offset by higher revenue mix impacts. The revenue mix impact of 150 basis points is similar to 2H '25 and reflects increased investment in Live Better, customer growth skewed to lower tier products and strong growth in ahm policies. And subject to no material change in the economic environment, we expect revenue mix impact for the full year to be better than 1H '26. Solid nonresident revenue growth has continued with average policy units 1.4% higher and revenue per policy increasing 3.1%. Policy unit growth was lower than in the prior period, with lower student visa approvals and modestly higher lapse. However, we expect the recently announced increased student visa approvals and new opportunities in the workers segment support acquisition into the second half. Gross profit increased 6.9% to $55.6 million, and gross margin was up 80 basis points to 35.6%, with an improved worker margin, partially offset by tenure impacts on student margin. Nonresident remains an attractive market and in the second half, we'll build on emerging opportunities in the student and worker segments and continue to invest and differentiate our offering to grow market share. Turning to Slide 18. Medibank Health segment profit increased 28.5% to $48.3 million and operating margin was up 10 basis points to 17.7%. Revenue grew 27.5% with the increase in community and acute, reflecting strong volume growth and increased ownership of Amplar Health Home Hospital and good strong customer growth in wellbeing. Gross profit was up 21.6%, with the reduction in gross margin due to additional investment in Live Better and mix impacts, partially offset by efficiency benefits in community and acute. And whilst expenses increased with growing scale, the expense ratio was 250 basis points lower with improvement across all 3 segments. We continue to see strong organic growth potential in the business with focus areas for the remainder of FY '26, including meeting more health needs at more customers, scaling existing services with a broader set of payers and realizing synergy benefits across our primary care network. We aim to augment this organic growth with further M&A that scales and expand geographic coverage in primary care and adds capability in well-being and virtual care. Now on Slide 19, we've shown a more granular breakdown with the financial results for our 3 Medibank Health segments and the key customer metrics driving performance. In the well-being segment, Live Better members increased 13.6% following investment in the proposition and reward points give back offer. In primary care, consultations increased by 2.8%, with an increased proportion of these being undertaken virtually. And in community and acute home health admissions were supported by strong volume growth in publicly funded programs and increased capacity in our transition care service. Moving to Slide 20. Investment income was down $19.6 million, with a $5.7 million and $5.8 million reduction in the growth and defensive portfolios, respectively. The decrease in the growth portfolio reflects lower income from all asset classes other than property and the lower RBA cash rate was a driver of the reduction in the defensive portfolio. Other investment income was also lower, following the payment of the final customer giveback in September last year. We expect further impact in the second half with lower cash holdings due to funding the Better Medical acquisition, we'll adjust credit, duration, and liquidity settings in the defensive portfolio to help offset this impact. And of course, the recent increase in the RBA cash rate will also be helpful. With lower earnings on cash, underlying net investment income was down $11 million. The underlying net investment return decreased 26 basis points to 2.74%. And the annualized spread to the average RBA cash rate increased to 184 basis points. Moving to Slide 21. The health insurance business continues to be well capitalized. Capital is at 1.9x PCA and the capital ratio is 13.8% of premium revenue. We continue to hold additional capital to offset the $250 million APRA supervisory adjustment, and this is why the capital ratio is above the target range of 10% to 12%. The Better Medical acquisition was the main driver of the change in the capital position in this period. The increase in Medibank Health capital employed includes $163.5 million cost of this acquisition. The acquisition was funded from our unallocated capital, with this partially offset by strong capital generation. We are also well placed to fund further inorganic growth. The unallocated capital position supports our FY '30 Medibank Health earnings aspiration of at least $200 million. And we have capacity to raise Tier 2 debt to support growth above this level if further attractive opportunities arise. And given the strong capital position, the Board has declared an interim dividend of $0.083 per share, which is a 6.4% increase and 76.8% payout of underlying net profit after tax. And to finish, a few comments on our outlook for FY '26. Our resident health insurance outlook is unchanged. We aim to grow resident market share in a disciplined way, including further growth in the Medibank brand. We continue to expect growth in resident claims per policy unit of between 2.6% and 2.9%, and expected our proactive approach to claims management will differentiate us from the rest of the industry. Our nonresident outlook is also unchanged. And finally, we've updated our Medibank Health outlook. We expect FY '26 organic operating profit growth to be similar to 1H '26 plus an additional circa $6 million contribution from Better Medical in the second half. And our M&A pipeline remains strong, and we have both the appetite and financial capacity to pursue further strategic opportunities. I'll pass back to David to make some closing remarks. David Koczkar: Thanks, Mark. Now over to Slide 24, just for us to wrap up. We're a resilient company, and we're a growing company with strong customer relationships, positive momentum and a clear vision for the future. We remain focused on the needs of our customers and patients. This shapes our strategy and drives our performance. As we continue to strengthen our foundations and deliver greater value, choice and control in health. We are seeing this reflected in our growing health insurance momentum and Medibank Health going from strength to strength. Despite the economic challenges, the health insurance market remains buoyant. And through our work across both private and public systems, investing in prevention and delivering more innovative care models, we are driving the health transition. While this change is emerging more broadly, more must be done to accelerate it. So we will continue to champion this and work with governments to advocate for the reform needed to keep health care in Australia affordable, accessible and among the world's best. We are on track to meet our FY '26 outlook and continue delivering value for customers and shareholders. And finally, our achievements are only possible because of the amazing people at Medibank. And I thank them for their ongoing commitment to creating the best health and wellbeing for Australia. So now it's -- over to you for any questions you may have. Operator: [Operator Instructions] Your first question today comes from Nigel Pittaway from Citi. Nigel Pittaway: I just wanted to ask about sort of what you expect for claims inflation maybe a bit beyond second half. I mean, obviously, at face value, the rate increase that was announced this week does seem quite a lot ahead of your sort of 2.6% to 2.9%, you're guiding to in the shorter term. So I was just wondering if we could get maybe a little bit more color as to what was the basis behind that level of rate increase and whether or not that is actually related to what you expect for claims moving beyond this year? Mark Rogers: Yes. Thanks for your question, Nigel. At 10,000 feet view in terms of '26 versus '27 are probably 2 major factors to call out. The first one is we know we'll have a COVID tailwind this period, reflecting the fact that the FY '25 claims were $74.8 million below expectations. So we've had a utilization tailwind in this year. That's worth about 100 basis points on claims. We also know New South Wales private room rate will cost us 20 basis points this year, and that will then be fully embedded in our claims line. So the net of those 2 impacts, Nigel, is about 80 basis points, and that will be the single biggest difference between '27 and '26. Nigel Pittaway: And then I mean, obviously, you're saying the revenue mix, as we're now meant to call it, will improve in second half. I mean is that sort of your ongoing assumption beyond that as well? Or... Mark Rogers: So Nigel, the revenue mix -- the trend in revenue mix is going to depend on how fast we're growing and where we see growth. So provided we don't see any further deterioration in the economic environment or our growth rate doesn't increase significantly and the mix of that growth either, that's a reasonable assumption looking forward. Nigel Pittaway: And then maybe just -- I mean, maybe further to that, I mean, obviously, you've been prepared in this period to pick up some, as you described, the lower-tier products. And I will see most of your growth is still coming through ahm. So I mean, is that sort of what we would expect moving forward? I mean you are still saying you want to grow the Medibank brand, but it seems although that's still reasonably tough to do in the sort of areas that you desire to grow in. Can you make just a few comments about how you're feeling about that sort of revenue growth mix moving forward. Mark Rogers: We actually had a slightly more positive on the policyholder growth trajectory for the half, Nigel, with Medibank growing at 80 basis points, which is well on what we've seen in the prior period. In fact, Nigel, for the full year, I'd probably expect the Medibank growth rate to be slightly higher than the half and ahm to be slightly lower. So actually, we're really happy with the Medibank trajectory. David Koczkar: Yes. I think the notion that Medibank or ahm plays in a certain tiering is not quite correct, both Medibank and ahm support a very, very different set of customers who choose -- yes, slightly different mixes. But in the current environment, people are looking for more value and particularly looking for more value in their health, and that's part and parcel of the Medibank proposition. So that's really what's driving the growth and in particular, our focus on our target segments, which are also growing and we are growing in like corporates like families, those new to the industry. As we know, the second half is always a bigger, new-to-industry in the first half. So actually, with the core brand metrics of Medibank, very strong, I think despite the economic conditions, I think the Medibank brand momentum, we feel very confident about continuing. Nigel Pittaway: And then maybe just finally, I mean, obviously, the government in its sort of PHI premium rate increase announcement is still talking about this hospital benefits ratio climbing to sort of closer to 90%. I mean are you expecting to have to do anything moving forward to sort of encourage that development? David Koczkar: There's a lot of talk about the ratio. We -- our benefit -- our hospital benefit ratio is higher than the industry average and is likely to slightly improve. But look, I think -- the ratio is just -- is one way of looking at health. Actually, the real question we should be asking is the absolute cost of delivering health to the 14-or-so million people that have private health insurance. We still have to ask ourselves the question, why is it 30% more expensive to have a knee replacement in the private system than the public system? Why is it twice as expensive in Australia to have a hip replacement than in Northern Europe? Why is the pacemaker 4x the price in the private system than in the public system? I think they are the questions that probably occupy more of our minds as we think about sustainability system than the ratio itself. Nigel Pittaway: Yes. I mean, obviously, you've made those points for some time and the government is still focusing on it, but yes. Operator: Your next question comes from Julian Braganza from Goldman Sachs. Julian Braganza: Just a further question on downgrading. I just want to be super clear on the composition of the number. Just how material is the investment in Live Better versus growth in lower-tier products, just in that 1.5%? And also, what gives you confidence that, that downgrading will be better in the second half of '26, just given the higher premium rate increase that's coming through? So I just want to understand that a little bit better. Mark Rogers: Julian, I might just rephrase it as revenue mix because it is important because there are 3 components that make up revenue mix. The first component is what you call downgrading, which is existing customers changing the cover. The second component is where we see policyholder growth. So the mix difference between customers that leave us and customers that join us. And the third component is where we invest. And that investment could be in Live Better, it could be in discounts, it could be in offers. If I point you to the second half of '25 and the movement in revenue mix in the second half, you'll see that coincides with us increasing our policyholder growth number, and that was the major driver of that movement. If you go to the first half of '26, revenue mix impact was 150 basis points, and it was 130 in the second half of '25. The majority of that increase was as a result of Live Better investment in offers. So you can see the bigger impact was in the second half and that related to where we saw growth and the less significant impact was relating to investment in Live Better and Offers. Why do we get comfortable? So the investment we've made is now fully embedded in our revenue line. And so unless we look to invest more to grow even more, it's unlikely that will repeat. And the impact we saw on the sales and lapse mix in the second half, again, if we don't increase our growth rate significantly or the market doesn't shift significantly, we're not expecting that number to deteriorate significantly. I would call out, it's important you can't just look at revenue mix. You've got to look at revenue mix and claims mix because those lower-tier products where we're seeing growth, they come with a lower revenue per policy and lower claims per policy. So really, going forward, it's about the jaws in the business, Julian, not just the revenue mix. Julian Braganza: That's super clear. And then just to unpack that hospital inflation number of 4.6%. Just to be super clear, just what component of that is investment in product benefits. Is it the flip of the benefit on utilization from the claims favorability? Or is it less than that? So I just want to be very clear on what is that underlying inflation number ex the product benefits that you're making -- investments you're making. Mark Rogers: I'd probably direct you to the New South Wales private room rate cost because that had a 50 basis point inflation impact in that 4.6%, Julian. The investment and product benefits was less than that. Investment and product benefits is ongoing. Obviously, we can increase it or decrease it given where the claims trajectory is, but the New South Wales private room rate impact was the single biggest uplift that we saw across the 12 months. Julian Braganza: That's clear. And then just the last question on hospital utilization. Even after adjusting from the claims favorability as you sort of flagged utilization is still quite benign and negative. Just want to be clear what's driving that? And how sustainable given it's consistently surprised quite positively. Mark Rogers: Thanks for calling that out, Julian, because it's a really important feature of the result. Utilization growth was 2.8% negative. And you rightfully called out that around half of that is -- reflects the COVID tailwind that we had from the prior year, which is a one-off, but the remaining 50%. So almost 1.4% contraction in utilization is ongoing. And that's linked to a couple of factors in addition to the skew to policyholder growth in lower-tier products. We're also seeing the benefit of our risk selection. So where we grow and how we grow, through which channel at which time I think we're getting favorable selection bias in our claims, and we're seeing that come through in risk equalization. And I wouldn't underestimate the impact that hospital partnership agreements are having. So we're paying higher indexation in exchange for where we've got lower utilization growth with our partners, and that's contributing. So I wouldn't expect anything other than the COVID one-off impact to be significantly varied going into '27. Operator: Your next question comes from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I ask around the comment around resident commissions remaining in line despite the increasing aggregator presence. Can you explain a little bit about how you manage to do that? Mark Rogers: So the commission depend on which aggregator that you're selling through, and it also is dependent on the premium per policy. So as we've seen growth due to lower tier products in bronze and silver, the revenue that we get for that policy is lower and the commission we pay as a consequence is lower, Andrei. Andrei Stadnik: Slightly dry question. But just in terms of the tax rate, should that normalize going forward towards 30%? Mark Rogers: That's not a dry question. I'll leave for questions on tax, Andrei. So thank you. Probably 2 components on the tax rate this half. I think one of those we've mentioned before, so the losses from our joint venture hospitals are actually after tax losses, so we don't get a tax shield on that. And then a number of the M&A expenses are nontax deductible. So you saw an uplift in M&A expenses this year in the first half. And as a consequence of that, that's at a higher nondeductible component expenses. Operator: Your next question comes from Siddharth Parameswaran from JPMorgan. Siddharth Parameswaran: A few questions, if I can. Firstly, Mark, I just wanted to be clear on where you're expecting that revenue mix downgrading figures to come in the second half. I mean you say it should be lower. But the first half was materially higher than my assumption, and I presume consensus as well, whilst the claims inflation was broadly in line with what you had. I was just keen if you could help us understand both those 2 metrics, the claims inflation per policy where you've held the guidance, first half is slightly better than that guidance range. Where do you think you'll end up for the second half and for the full year within that range? And also just the -- same for the revenue mix downgrading impact because it makes quite a difference to the trajectory of margins. Mark Rogers: Yes, sure. I probably won't look to narrow that 2.6% to 2.9% guidance for you, Sid. But what I'd say is where we land in the range will depend on 2 factors from a claims perspective. Firstly, the risk equalization timing benefit that we saw in the first half. How much of that unwinds into the second half. And then secondly, where we see policyholder growth. So if we see policyholder growth toward -- in the higher-tier products, you'd expect claims inflation to be towards the top end of the range and then your revenue mix impact would be lower. And if you see it at the lower -- if you see growth in the lower-tier products and you expect claims to be lower and revenue mix impact to be higher. What we're thinking is provided we don't see any deterioration in revenue mix impacts, which is not our expectation. A flat jaws outcome in the business is very plausible. And to the extent there's any variation in that during the course of the second half, we obviously have opportunity to reinvest if claims are lower than we expect or other contingency options if claims are higher than what we expect. Siddharth Parameswaran: Yes. Sorry. So to be clear, flat jaws is what you're saying is a reasonable possibility in terms of the second half versus the first half? Mark Rogers: Very plausible outcome, Sid. Siddharth Parameswaran: Yes. For the gross margin because there's a step-up in expenses, right? So just want to be clear what we're seeing. Mark Rogers: I didn't make any comment on expenses, but I'm happy to. So... Siddharth Parameswaran: No. Yes. But I mean your guidance second -- yes, I just want to be clear that the jaws comment was on gross margin. Mark Rogers: Yes. The jaws is on revenue claims per policy. Maybe a few comments on expenses movement in a range of $690 million to $695 million. The uncertainty within that range is where nonresident policyholder growth lands and therefore, the commissions we paid. So if it remains at the top end of that range, you'd expect stronger, particularly student joints during the course of the second half and if you at the lower end, then probably a lower growth rate. And the uncertainty is how does the opportunity on visa approval increases actually land in the portfolio in the second half. Siddharth Parameswaran: Great. Okay. Just a second question, just on the claims inflation. I just wanted to make sure, were there any contributions from reserve adjustments or anything from the past? And also, if you can just comment on just the risk equalization benefit and what you are expecting -- what happened in the period, what you're expecting going forward? Mark Rogers: There was a modest release out of reserve for both resident and nonresidents. Some of that's actually been reinvested into the business during the course of the year. So I think outside of the COVID benefit of $43.6 million. The result is effectively a cash claims result. So I'd just add that $43.6 million back to your claims trajectory and that should give you a pretty good view of the cash result. Siddharth Parameswaran: Wasn't there a $19 million reserve release, I mean I thought there was... Mark Rogers: Yes, that's what I just meant. Yes, that's what I just called out. That was spread across resident and nonresident, but we've reinvested some of that during the course of the year. We've also struck our 31 December claims provision. Siddharth Parameswaran: So that will impact second half versus first half on claims inflation. You've reinvested so that will... Mark Rogers: We reinvested during the half. So Siddharth, I've looked through that. And when you consider the accounting versus the cash, you should be focusing on the $43.6 million COVID benefit from the prior period is the difference between cash and accounting. Did you want to comment on -- I think you asked on risk equalization. Siddharth Parameswaran: Yes, yes, yes. Thanks. Mark Rogers: Sure. So really, that's linked to the Medibank brand rather than ahm. What we're seeing is a better net recovery for Medibank. So Medibank received out of the pool. Ahm pays into the pool. So what we're seeing is some of our younger and higher claiming customers being more prone to lapse. So we end up saving the risk equalization charge that accrues to every policyholder, but those customers aren't -- the claims aren't typically risk equalizable because of their age. And so that's driving that positive skew for the Medibank recovery rate. And that's a trend we've seen -- we saw it in the second half of last year and to a lesser extent, the first half of last year as well. Siddharth Parameswaran: And just a final question for me. So if I take your 5.1% rate increase that you've got, and if I'm to look forward, I mean, you're basically saying that you don't think the downgrading should get any worse. And what I'm interpreting as well is that the inflation shouldn't get any worse either. So if I just take that 5.1% subtract let's say, 1.5%. I mean are you basically saying you can tolerate inflation per policy of -- what is that? So yes, 3.5%s that you saying to hold margins the same? Mark Rogers: That's probably not a bad way to look at it, Siddharth. I guess the way I think about it is, we had 2.5% claims growth. We know that the COVID benefit is about 1%. And so that's the difference between cash and accounting is 1%. So that's a cash claims growth. So everything else being which is obviously provided your revenue mix impact is not above 150 basis points, then again, a stable gross margin outcome is very plausible. I think the big question is where do you land in the range for FY '26 because obviously, that sets a foundation for '27. Siddharth Parameswaran: Got it. So yes, COVID benefit plus the -- if the inflation holds at that level, you can hold gross margins, but... Operator: Your next question comes from Andrew Goodsall from MST Marquee. Dan Hurren: Sorry, it's Dan Hurren. Andrew has just been pulled away on another call. Look, I ask questions. I guess it's going back to Nigel's question and the Health Minister comments around the premium increase. And I know you talked about the cost of -- the unit cost of care. But I mean, specifically, the minister wants to stop hospital closures as we understand it. So what do you think is actually -- what can you do to actually keep the minister happy there? David Koczkar: Well, I think the statement of expectations that was published last year was very helpful to guide the market in terms of setting, their settings to meet those expectations. I think we were very happy with that clarity. In fact, I think we met all of those expectations in getting our premium proposal approved. I think through the CEO Forum, which I'm an active member of, we are talking about how do we set up a sustainable system where the system can thrive. What's very important that principle in those discussions is that it's not about any single player, it's about the system. We also know that the shift of care from acute hospitals to more fit-for-purpose settings, both short day in the community, we are far behind other countries and a lot of focus is on how do we encourage that health transition. There's a recognition that, that means that hospitals will need to change. There will need to be some either reconfigurations of current assets or growth in other regions or sectors. A part of our partnership approach that we have led the industry on is to share and incentivize that shift, which we've talked about today with an increasing number of hospitals participating in those partnership agreements. It covers about 80-plus percent of our benefit outlays, and it's an increasing investment that we're making to make that shift. So that was part of the expectations set, and that's what we're delivering against, and that's really the conversations at the CEO Forum. I mean the fact is, right now, we have too many beds in the system in the wrong spot and not enough in some spots. Utilization is too low and the Australian consumer shouldn't be paying for that. So everyone is completely aware that -- this is why it's called a transition. It's not going to happen in one day. It needs to happen more quickly. But I think, as I said before, there are many in the system who have brought fresh thinking and a more longer-term view that are saying and recognizing this change happening and now they're changing their business models to deliver against it. Dan Hurren: David, that's helpful. Can I just ask one follow-up. Sorry, one different question, in fact. Looking at the trend in aggregators, not just in your results today, but right across the industry. And your comment that you can grow the Medibank brand in the second half. Could you just talk about the relative impact of aggregators across your 2 brands? Does it -- is it skewed to one or the other? David Koczkar: Yes, very much so because we don't have Medibank on the aggregator. So it's 100% only applicable to the ahm brand. Medibank, we've been very conscious to focus growth on our direct channels. And in fact, as a total group around 70%, 75% of our joins our -- for those joining are direct. So that's a real strength of ours. And we are continually investing in both retention. We've shown today our improving retention rates versus the market that is deteriorating. So that's the best way to grow is to keep the customers you've got. It's 1/3 cheaper to do that than acquiring in the open market. And the second is to work selectively where it makes sense to grow via aggregators. Aggregators share in the market has slightly increased. So we're always thinking about how we grow in a disciplined way. We'll always work with aggregators, but not where their terms and conditions are unsustainable for the long term for both us and the system. Dan Hurren: So Medibank is more about retention in that second half. Your comments are explained more by retention and growth. David Koczkar: So I mean, Medibank has the best retention rate of the major brands and one of the leading retention rates in the market. But Medibank is also about growing in the segments we've talked about today, those new to the industry, particularly families and particularly corporate. I think I shared our very strong momentum, for example, in the corporate market with a [ 6% to 7% ] growth year-on-year in join. So plenty of headroom for growth for Medibank, but the retention as a company is a very important source of growth that we pay much more attention to perhaps than others. Operator: Your next question comes from Freya Kong from Bank of America. Your next question is from Vanessa Thomson from Jefferies. Vanessa Thomson: I wanted to ask a little bit more about the hospital situation as well. I think you called out that $37 million was paid to hospitals in addition last year and $20 million in the first half, if I heard that correctly. I just wondered what your expectations were for FY '26. David Koczkar: Yes. So just to clarify those comments, and I might maybe hand over to Milosh to also explain sort of how our partnership agreements are working. But we had -- we have 3 elements to our partnership agreements. There's the base indexation. There's the partnership investment, and there has been historically one-off hardship payments that were really designed to support hospitals in need through the COVID period. So the $37 million last year is the amount we're paying in the partnership elements, which are incentives that when we sit down in these agreements, we set objectives jointly with our hospital partners. And if they're achieved, then we pay that at-risk element. And that payment was $20 million in the first half on top of $37 million last year. I think when you look at the total -- that total amount versus the total claims line, it's quite a material part of our claims line. And so we are really putting a lot of emphasis on this transition through these partnerships, and they are working well for us. So I might hand over to Milosh just on the general hospital partnerships and how we're seeing those partnerships evolve. Milosh Milisavljevic: Yes. Thanks, David. Vanessa. The partnerships, as David said, covering over 80% of our benefit outlays and they're growing in number and scale. So the proportion, as you can tell, is going in how much of that indexation and payment to hospitals is coming through funding for partnership initiatives. And we're obviously doing it for a number of years now, and we're starting to see those benefits come through our claims line, but also customer health outcomes. And to give you an idea, they range from shifting care models to lower length of stay and short stay, growing our no-gap network that also addresses cost to customers. It creates a proposition that's very compelling, maximizing prosthesis savings from the more recent prosthesis reform that reduces low-value care utilization in the system and also accelerating new care settings like home care, virtual care that help avoid complications and readmissions. So all of those are part of that $20 million, and it's growing in absolute terms, but also in relative terms compared to the total indexation number. Vanessa Thomson: And just following through then, we've seen the significant challenges for the hospitals, labor availability, wage inflation, clinical care costs. I just wondered what sort of color you're getting from the private hospital ventures that you have. David mentioned before, too many beds in the wrong place. Given that you've been able to be more strategic, I just wondered how that looked from your perspective with respect to your hospitals. David Koczkar: Yes. I think we've probably set a very different sort of relationship paradigm with hospitals over the last well -- the last 10 years. And there are challenges in the system. There's challenges in our business. We've all had to think differently about how we take pressure off premiums and how we drive the transition. So I think our conversations are data-driven. They're looking to the future, and they're all about preserving access now in the future for our customers. So really, it's enabled us to have these more forward-thinking conversations. There are some pressures in the system, and we are paying indexation rates as an industry, the highest we've paid in more than 10 years. So the industry has responded, us included, to pay more to hospitals than indexation, but we're requiring change as well. And so that's a bit of difference. And when we sit down with hospitals, it's a constructive set of conversations based -- driven on data. Operator: Thanks very much. Thank you. Your next question comes from Freya Kong from Bank of America. Freya Kong: I hope this works now. I just wanted to ask about the 2026 price rise again. So your 2025 adjusted cash claims inflation is around 3.5%. How do I bridge this to the 5.1% price rise you're going to get? I guess what I'm trying to ask is if utilization benefits will be shared even more with the private hospitals going forward and the claims inflation outlook is a bit higher. Mark Rogers: Freya, so the bridge between the cash claims number and the premium increase is the revenue mix impact. And so it was 150 basis points for the half. So that's the simple bridge between the cash claims and the headline premium. Freya Kong: Great. That's helpful. And then on growth in nonresidence business, which went backwards in the period. Is there anything that you're concerned about there? Where did the lapses come from? Or has competition picked up? Mark Rogers: Yes. So let me start on the lapse. That was in the student portfolio, and this reflects the fact that we had coming out of COVID, 2 very high origination years. And most student courses are 3 years. So we're just seeing that natural graduation of those students. Probably the focus in the second half is really around the student visa approval numbers and if they increase, we expect the policy unit growth to increase. In fact, I think over the last 12 months, we probably went backwards in student policy somewhere between 3% and 4%, still winning share, but that overall market has been contracting. So we've got opportunities in the workers segment, which is already growing pretty strong. We had double-digit growth in the last 12 months, and then we've got the opportunity to kick off the growth again in the second half of students subject to the visa approvals. Freya Kong: Great. And just finally on your thoughts around medium-term uses of unallocated capital. I think based on your Medibank Health plans, you've got around $140 million additional capital to deploy in the next couple of years. Your unallocated capital is already sitting at around $190 million and likely to keep growing. So I'm just wondering what you think or thoughts are around that? Mark Rogers: We spoke about Medibank Health in the presentation and the focus was on primary care and both scaling and expanding geographic coverage. I think that is the most likely in the short-term use of capital. Obviously, there'll be opportunities in the broader virtual care space and in well-being, but following the success on the Better Medical acquisition, so the probability is that the next investment will be in primary care again. Freya Kong: I guess my question is just beyond what you've allocated for Medibank Health up to 2030. What other uses of capital do you see? Mark Rogers: Well, I'll start with that current aspiration, which is to grow earnings to $200 million. And that would require us, as you said, to invest capital up to that $700 million level. And then that would effectively expand the unallocated capital. Then we've got opportunities to further grow your primary care network or invest in the well-being space as well. And then you can't discount that if there's capital that we can't invest it, we return it to shareholders. David Koczkar: And look, I think in the very long term, but all these 3 segments in health, well-being, primary care, community and acute care, all of those 3 in terms of absolute revenue of the market potential are larger than private health insurance. So when we get there, well, we are already a meaningful share of those markets, but there'll be more headroom for potential growth where it makes sense. Mark Rogers: And the one that Dave and I've been talking about quite a lot with Milosh is what happens to the PHI industry in FY '30. So we've seen one -- a reduction of one player in the PHI market, which is consolidation [indiscernible] in New South Wales and Queensland Teacher Fund consolidation. That's the first we've had since we've come out of COVID. When you -- consolidation would be most [ health funds ] are now who had been running in an environment with low claims and high capital. We know that's starting to unwind. We know we've got the new financial standard of CPS 230 that comes in on 1 July , formalized, 1 July next year. So I think the thing we're discussing is that what does the industry look like in FY '30. How do we play out, what happens to the industry through shifting market share organically versus is there a consolidation opportunity at the right price. And that could be a use of capital longer term, Freya. Operator: [Operator Instructions] Your next question comes from Kieren Chidgey from UBS. Kieren Chidgey: Most of my questions have been covered. But the one was -- can you just circle back on was sort of this view of cash claims inflation, Mark, you're sort of talking around the 3.5% number. But when I look in your financial statements at your cash flow, the payments on a per unit basis seem to be up around 4.8% on PCP. So it seems like we're sort of more trending in that 4% to 5% range on a payment per policy basis. Can you just help me reconcile why that's not a better guide to sort of how claims growth is going to move going forward? Mark Rogers: Cash flow can be heavily impacted by processing speeds on claims, and we've seen a marked speed-up of lodgement of claims, and we -- as the best we can increase the speed in which we pay those claims, Kieren. So I think that's probably a better view to look at the 3.5% and just go through the cash flow. You can look at what the outstanding claims liability is at 31% versus the prior period, and you will see the claims on hand is quite a lot lower. That's a phenomenon we're seeing across the whole. I mean most PHIs have seen that. And if you listen to the [ Ramsay ] call, they will talk about that in their cash flow conversation as well. Kieren Chidgey: Also just on the claims numbers, there seems to be some sort of risk margin sort of release in the period. Can you talk to that? And on the risk equalization, I just want to be clear on the $17 million benefit from first half. When you say that may unwind in the second half, are you talking about a neutral outcome? Or are you talking about sort of a full sort of unwind? Is it a negative 17%, so you're flat over the year? Mark Rogers: Thanks, Kieren. You've gone through the financial statements very quickly, well done. The risk margin point, we haven't changed the probability of efficiency. What's happened is as the claims in hand has dropped and there's a consequential impact to the risk margin in hold. So claims on hand down whatever that reduction is, multiply that by 12.2%, and that's why you've had a reduction. Look, I would still expect to be a modest receiver on risk equalization for the full year. Obviously, it depends on what the other 34 funds do and how much we grow relative to the market, but I'd still expect to be a modest receiver. Operator: Your next question comes from Andrew Buncombe from Macquarie. Andrew Buncombe: Just one for me, dovetailing with that question that was just asked, you've retained your probability of adequacy then, I know I ask this question every half, but all of your peers have unwound that already. What do you need to state to drop that number going forward? Mark Rogers: Yes, it's a great question, Andrew. And look, there's no basis -- there's no need to change it. It's just whether or not the claims experience supports changing it. We are seeing and why we didn't change it this half. We are seeing, I think I mentioned to one of the other questions, I think with Kieren's question, we are seeing slightly more volatility in monthly cash payments in claims because of payment speeds. And whilst that persists, I think we'll take a prudent and conservative approach to maintain the current percentile. Operator: Your next question is a follow-up from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I just ask around the health segment. So some of the bulk billing GP changes came through November last year. How are those going to be impacting the health segment given your focus on GP clinics? Mark Rogers: Good question. So if you think about billing, we're typically receiving a higher payment on MBS and likely charging a customer a lower co-pay. So at a consultation level, don't expect a material impact, and we didn't see a material change in our average fee per contract during the half. It's probably more where you've got clinics that go to total bulk billing, you expect to get a practice incentive, and we should see some benefit of that during the course of the second half. Operator: Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Goodman Group FY '26 Half Year Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions] Joining us today is CFO, Mr. Nick Vrondas. I would now like to hand the conference over to your speaker today, CEO, Greg Goodman. Gregory Goodman: Thank you very much, and good morning, everybody. Goodman Group has delivered operating profit of $1.2 billion for the first half of FY '26 as we continue to provide essential infrastructure in supply-constrained markets around the world. We're building into strong demand for city locations across both logistics and data centers. Large scale logistics customers are targeting productivity and efficiency gains through increased automation and consolidation. And data center customers require low-latency, high connectivity, which they are committing to with unprecedented levels of CapEx spending forecast across the sector. Goodman is set to benefit from these structural shifts given the quality and location of our sites, our power capacity and our track record of developing complex infrastructure. Power, sites and capital are critical to being able to build into demand and provide delivery certainty for our customers. Our power bank has grown from 5 to 6 gigawatts on sites we own across 16 global cities. The increase is primarily in Australia and Continental Europe. And importantly, we've been advancing planning and preconstruction works on sites around the world to provide speed to market. In the quarter, we commenced 90 megawatts fully fitted project in Sydney and we're on track to have data center projects, providing around 500 megawatts underway by June, taking work in progress to approximately $18 billion. We're also partnering with large investors to fund multiyear development programs. We established a $14 billion data center development partnership in Europe and $2 billion logistics partnership in the U.S. with one on the way in Australia. This is consistent with the capital partnering approach we've taken for over 30 years. Our engagement with data center customers is progressing well across multiple sites, with negotiations well underway to provide a range of deployment options. We expect commitments in 2026 as we commence construction on sites and others get closer to their ready-for-service dates. Enquiry and activity across several logistics markets is also increasing, and we expect this to translate into development activity over the next 12 months. I'll pass on to Nick for a few comments. Nick Vrondas: Thank you, Greg. Let's turn to Slide 18 to run through the numbers in the usual way. We'll first cover the items that relate to our cash-back measure of earnings, which we define as operating profit. As usual, this excludes unrealized fair market value movements on properties, mark-to-market of hedges and the accounting fair value estimate relating to our employee long-term incentive plan. These are the items at the bottom of the table that get us to the statutory profit. Our operating profit for the half of $1.2 billion was a little higher than we had expected when we spoke to you at the September quarterly. We had early timing of development and performance income recognition in the half, which were not expected until the full year. As you analyze these results, please keep in mind that FX movements had a $33 million negative impact on the translation of our foreign-denominated operating income before interest compared to the prior period. This was offset with a commensurate benefit in our borrowing costs. This is the result of realized costs on our debt and derivatives, which is how our hedging strategy is designed. I'll call out the impacts on the line items as we go. Looking specifically now at the movement in investment earnings. These are up by $54 million overall, and that's after a $5 million adverse FX impact. Direct property net rental income was $59 million higher. This was due mostly to the increase in assets held directly on the balance sheet following the reorganization of our investments in the Americas. If you go back to June 2024, we had $1.4 billion of directly owned assets. It got to $5.1 billion by June 2025 with the December '24 reorganization of our U.S. investments. It subsequently reduced to just over $4 billion with the creation of a new industrial JV in North America. So this was a $3 billion increase in the weighted average capital employed in this segment when comparing the 2 periods. The bulk of our investment income, which comes through our co-investments in the partnerships was down $5 million, mainly due to FX. The partnership reorganization and the other capital movements reduced investment income by $10 million, which was nearly totally offset by the $9 million contribution from the like-for-like income growth. Again, if we go back to June 2024, we had $13.7 billion of current investments. This reduced to $13 billion at December '24 following the North American reorganization. It then grew back to $14.7 billion at December '25, mainly due to the creation of the new partnerships. Overall, it's a reduction in weighted average capital employed of around $0.5 billion compared to December 2024 half year. Over time, we want to grow this part of the business as we continue to expand our portfolio of assets under management and our investment in it. The creation of new partnerships and the ongoing growth of the existing ones should support this. The portfolio remains 12% under-rented, and we see this continuing to support NPI growth going forward. There is scope for a significant portion of the directly owned assets to create new partnering opportunities over time. This will reduce our direct investments and NPI, but increase our co-investment income in partnership from partnerships and our management income. At the same time, it will provide cash to fund our expansion. Management income was $137 million lower than the prior corresponding half. Of that, a $5 million FX -- adverse FX impact was the main driver -- but the main driver was the recognition of transactional and performance-based revenues. Following the exceptionally strong prior corresponding period, they were down $160 million to $79 million. We encourage you to look at the annual averages as a proportion of stabilized third-party AUM. Our total portfolio stood at $87.4 billion at the end of December. Of this, $75 billion was in external assets under management. And of that, stabilized third-party AUM averaged $69 billion in the period. That's up over $4 billion from the prior corresponding half year. As a result, base management income was $26 million higher on a constant currency basis. Total fee revenue for the period as a percentage of average stabilized third-party AUM was just over 0.9% this half, which is broadly in line with our expected average over the long term. In terms of the outlook for this segment, we expect our third-party stabilized AUM to grow over time as we complete more developments and make new acquisitions net of divestments and the value of the portfolio grows. Our realized development earnings for the half year were down $36 million on the pcp. FX rates had a $26 million adverse impact. So aside from that, the result was largely in line with the prior period. Several things are moving around, but we're managing activity to maintain our profit and return targets. On the one hand, development volumes have been lower. The average annualized production rate was around $6.3 billion this half compared to $6.6 billion in the pcp. At the same time, a larger portion of activity has been initiated directly on the group's balance sheet. That means a greater portion of the development gains can be reflected in our operating results rather than a share of revaluation gains. Yields on costs on the new projects are also increasing. This is commensurate with the longer-dated periods to stabilization of data centers. Moving forward, we'll be progressing more data center developments and are now on what should be an upward trend in activity levels. These projects will, on average, be in WIP longer than our historic projects, so the impact on production rate will not be linear, but should still be positive. The pause we took also means that there is a resynchronization happening that is resulting in a lower volume of completions in the short term. All other things equal, this should correct over time. Given the increased project duration and the leasing time frames, we also expect higher-than-average margins to compensate. At the same time, we expect to continue to originate a significant volume of work on the group's balance sheet. So we'll have the opportunity to crystallize a greater portion of the gains in operating profit. The expected yield on cost in our WIP has increased to over 8%, which is now more than 70% data centers. These estimates are based on our current expectation of commencing data center projects on a fully fitted basis. These projects are largely uncommitted from a lease perspective. So the expected yields are forward projections based on the fit-out funding and commensurate lease type. The current level of pre-leasing is reflective of the stage we are at in the data center expansion and the long lead times to completion. It also reflects the group's desire to optimize the timing of contracting with prospective customers. We are compensating for this by retaining low financial leverage. We did, however, have $2.5 billion of developments completed this half, 87% of which are already leased. Demand from logistics users for quality buildings in strong locations is also picking up, which we expect to start to contribute to growth in WIP in the future years. The diversion to data centers as a better use of our sites is, however, occupying a greater portion of our opportunity set now and expect it to continue to do so in the near future. So over the course of the full year, rising activity level is expected to result in an increase in income from this segment on a sequential half-over-half basis. We remain enthusiastic about the prospects for development demand overall, which bodes well for future revenue as well as growth in AUM. There's been a moderate increase in our underlying operating expenses but that was offset by a higher capitalization due to the rising activity levels on balance sheet. Capitalized costs are part of the cost basis of the assets when we calculate our operating profit. There was also a slight FX benefit. Net interest income increased by $63 million compared to the pcp. Gross interest paid on our loans was $14 million higher due to rising interest rates and the impact of the refinancing of our bonds, which resulted in a slightly higher WACD than the pcp. There were, however, a range of other items that more than offset this. There was a $33 million benefit on the FX hedge to earnings that I mentioned earlier. We also earned $48 million more interest on the cash and derivatives due to the higher interest rates and cash holdings. Our directly owned development assets have increased, so capitalized interest is up by $31 million. The cost of borrowings on our loans is currently around 4%. But considering our interest rate and currency hedges, the net WACD is around 1%. As far as the nonoperating items are concerned, we had over $250 million of unrealized valuation gains in the half, which represents the group's share of around $900 million of gains across the entire portfolio at the 100% share. That's before the $335 million deduction for the now realized prior period valuation gains. We treated these the same way as previous periods, so I don't propose to repeat that methodology here because I think everyone's across it by now. So after the deduction for the prior period gains, and accrued costs, the net result is a deduction from profits of $112 million, which is what you see in the table that reconciles to OPAT. The weighted average cap rate is currently 5.03% on the stabilized assets in the portfolio, and we are very comfortable with that. Another customary area of difference between operating and statutory profit is the fair value movement of hedges. The currency strength in December gave rise to a $150 million increase in the value of our FX hedges but you can see a $325 million decrease in the FCTR. More than offsetting this was a decline in the value of our interest rate hedges, which came about because we have a large volume of fixed receiver swaps to partly fix the income on cash deposits and FX hedges. That's why we end up with a net loss of $48 million in the reconciling table. As usual, we exclude the LTIP accounting costs, but we include the tested units in the denominator when calculating our operating EPS. That's when they actually impact on securityholders. A few remarks now regarding the balance sheet on Slide 19. Wholly owned stabilized assets have decreased since June 2025 for the reasons discussed earlier. On the other hand, even after accounting for the debt funding portion of the acquisitions by the partnerships, our share of the stabilized assets within them were up on a constant currency basis. Compared to June, our development holdings are up from $5.6 billion to $6.5 billion, which represents our share of the developments in partnerships as well as the wholly owned properties. This is consistent with the higher capital intensity of the new projects as well as the higher portion originated on the balance sheet. The directly owned portion was up by around $100 million to $4.2 billion. This was a result of $200 million of net investment, partly offset by the FX translation. This incorporates the impact of the movement of some of the European data center properties from the group to the new development JV but also demonstrates the amount of investment we're undertaking on the balance sheet. The share of development capital in partnerships was up by $1.4 billion to -- from $1.4 billion, sorry, to $2.2 billion, which was largely influenced by the European DC development JV formation. This is progressing as expected at the time we raised equity last year. Our aim continues to be to initiate more projects to give us an opportunity to have meaningful discussions with both customers and investors alike. We aim to continue to bring partners into the developments at the appropriate time to manage risk, capital and returns. Just looking at the other major movements now. Overall, we generated around $1.2 billion of cash-backed earnings through our operations this half. Nearly $600 million of this is reported through the statutory operating cash flow statement, which is up by around $200 million from the pcp. As usual, however, the statutory statement of operating cash flow includes outflows associated with the expenditures on development inventories. A portion of these of our earnings also arise from transactions that are included in the investing cash flow for statutory reporting purposes. That's either because they are in our investment property under development and not in inventory or they were sold from within our partnerships. This is not unusual for us either. So the combined effect of these development activities accounts for over $200 million of the difference between operating cash flow and operating profit. There's always a difference between the timing of distributions and fees received and income or expenses recognized in the partnerships, and that was around $100 million this half. Capitalized costs and other working capital movements created another $100 million difference. And the usual impact of the incentive payments was $200 million. Over the full year, timing difference can be smoothed out but the issue of the investment back into the business is symptomatic of a growing enterprise. The classification of certain transactions in investing cash flows is also a source of permanent differences. Our retained earnings are designed to contribute to funding such investments, which is consistent with the design of our long-term capital management plans and the distribution policy. That's a good point. Turn to Slide 20. Gearing is 4.1%, which is slightly lower than it was in June, and we have $5.2 billion of liquidity, including cash and undrawn lines. That's after we funded acquisitions and CapEx, and we repaid EUR 300 million on the maturity of one of our corporate bonds. As we said before, we'll operate our gearing within a range of 0% to 25% with the level to be set with reference to the mix of earnings and activity. We're very comfortable with where we stand at this time. In fact, we have capacity to increase gearing and remain within the bounds of our FRM policy objectives. This is consistent with the strategy we laid out a year ago, with the aim to build out more data centers and fund the growth whilst maintaining a strong balance sheet. As we continue to partner with investors, it will enable us to recycle capital to bring forward development capacity more rapidly. Over time, we expect to hover around the midpoint of the gearing range once we get further into the data center construction activity. That's all for me. Thanks, Greg. Gregory Goodman: Thanks, Nick. Demand for digital infrastructure in our markets is expected to materially exceed supply over the foreseeable future. Goodman has a significant opportunity to develop into this demand. given our metropolitan sites in the supply-constrained markets, our power bank and our very strong capital position. The scale and location of our powered land bank is rare. Construction-ready powered sites take many years to acquire plan, secure power, undertake infrastructure works and ultimately deliver. We're putting the infrastructure in place to carry out our program over the next 10 years. Also on the logistics side, we're moving forward with larger deployments for customers as they consolidate and invest in robotics and automation to enhance their productivity. The remainder of FY '26 will see us growing work in progress, supported by Goodman's strong balance sheet and our capital partners and the right structures and opportunities to actively rotate our capital. And in closing, now I'd like to confirm our target to deliver operating EPS growth of 9% for FY '26. Thank you, and Nick and I can now take some questions. Operator: [Operator Instructions] And our first question comes from Lauren Berry with Morgan Stanley. Simon Chan: It's actually Simon Channy. I used dial-in code. First question is just for a bit of housekeeping. At the half year, I think, Vrondas, you alluded to this, I think you were thinking about a 40-60 split of EPS for this year. In your prepared remarks, you talked about how you just got some early timing of development performance income in the first half. Does that mean the 40-60 split is out the window now? Or should we still assume a 40-60 split notwithstanding the $1.2 billion you delivered in the first half? Nick Vrondas: So Channy, so the full year target is still the same number but some has come forward. So yes, 40-60 is now not 40-60, but the end target is unchanged. I hope that's clear. Simon Chan: Yes. Okay. That's good. How much of that early recognition or early timing was to do with the establishment of the European JV? Or has -- or will all the profit for European JV come through in the second half? Nick Vrondas: Look, it's a little bit because we had some fee revenue that we would have earned from the beginning. So there was a little bit of catch-up with the closing of part of the transaction, but it hasn't all come through yet. But remember, I mean, that was all in the guidance. We discussed that in August or maybe in September, I can't remember. So yes, there was a little bit of that, but there were other items as well. Simon Chan: Yes, fair enough. Can you guys walk me through your program of works now going forward? So I guess, 3 parts of my question. One, how much of that 497 megawatts on Slide 14 is actually WIP at the moment and how much of it isn't? And then going forward, say, over the next 12, 18 months, should we expect potentially more establishment of data center development JVs as you activate more of pipeline? Or is it, no, no, we've got the partnerships we need, put the queue back in the rack and it's just more about building? Like how should we think about your program of works? Gregory Goodman: Yes. First one is easy one, around 370 Yes, that's in WIP. Simon Chan: 370 of the 497? Gregory Goodman: Yes, that's about $10 billion of $14.4 billion. It goes to about $18 billion in June. And so there's a pickup in regard to, obviously, about another 100 or so coming in. And that's primarily around the starts in Europe. But we've activated about [ 1.82 megawatts ] of 1,926 megawatts in total, so you've activated those sites. So there's another 1,332 megawatts on that slide. which is important to note because that's obviously the pipeline that will be coming through in other years as we start these other programs. Yes, exactly. So we're going to $18 billion in June, and that's not being heroic on industrial. And on the industrial side, first time I've seen billion-dollar buildings, and we'll be doing some big industrial projects all around automation and robotics. And we're talking 100,000 meters plus sort of buildings with very, very extensive robotics and operations inside them, which is then a consolidation of a number of sites into single sites, and that's happening pretty well in all locations around the world. So don't underestimate as well the industrial pickup. And I think that's running at about $4 billion of work in progress at the moment out of the $14 billion. That could be a surprise on the upside as we go into late '26 into '27. Now the second question, which I've -- could you just repeat that? Simon Chan: Program of works. You've done a lot of partnerships already, Japan, Europe, you reckon you'll get Australia done. But is that it? Or as you roll out the rest of your pipeline, you will be seeking to establish one of these new partnerships every 18 months, et cetera. Is that how we should think about? Gregory Goodman: Yes, we're good. We're good at the moment. And moving forward, there will be long-term holding structures rather than development partnerships. There'll be transfers. Work in progress will go into assets under management, I think, as Nick was talking about. So if you sort of think there's $20 billion of work in progress running through to the end of the year, a lot of that as keepers for us because of the locational quality of it. Those over time we'll roll into longer-term holding partnerships and things like that. So yes, it's been the same, Nick reminded me the other day for 30 years. I had 20, but he reminded me of my age. And we'll effectively be continuing the same thing we've done and making sure though we've got the capital and the strength of the balance sheet around the world because one thing you need when you're developing the size and scale of what we're doing globally, you need a lot of money, right? So we're very conscious of that. We went ahead of it. We want to stay ahead of it. We will stay ahead of it. And that is one of our competitive advantages, particularly in the data center sector, where Goodman has been and is very good at partnering capital around the world and the biggest capital partners in the world. That is extremely important for our program and our strategy over the next 5 to 10 years. And I wouldn't underestimate that, and it's going to get harder, not easier for people. Simon Chan: My last question is just on our customers. You got any got any update for us on that one. I guess the reason for the question is it's actually more question to add. Have you guys taken a view internally on AI. You're talking to a lot of customers but then I guess you also know that some AI proponents may be more successful than others. And I guess the quality of the counterparty is very important given you're in the long-duration asset class. So what I guess what's your view on AI internally? Gregory Goodman: Look, the first point is the big customer negotiations and the big volume sites, it's all hyperscalers, right? So I think that's made that very, very clear. And yes, we're adopting the AI products that are relevant to our business. It's going to drive productivity. And this is a 10-year year game, and it's changing the world. And that's just a fact, right? Now whether it all goes in a linear fashion, and it grows at the same rate. I think that's all very, very debatable. But it's a revolution and an evolution all around the world, and we're all adopting it, some has different paces, but yes, we're adopting it. Operator: Our next question comes from Cody Shield with UBS. Cody Shield: Maybe just to expand on one of Channy's questions here around the partnerships. So if you're set, just with respect to Vernon, how are you thinking about that asset and an approach that you'll take there? Gregory Goodman: I'll talk about that a bit later. We are pretty deep in discussions about that at the moment. So we'll leave that for a couple of months. Cody Shield: Okay, sure. Maybe just turning to the Australian DC partnership. Would this only include assets currently in development? Or would you looking to have a combination of existing developments and other sites with approvals and power and so on? Gregory Goodman: The one we're doing at the moment is Tyman, which is already started. Cody Shield: Okay. Sure. And it would just be Tyman, it wouldn't be any of the other thoughts around Sydney? Gregory Goodman: No. Look, we're dealing with partnerships on reality. So if you sort of map what we did in Europe, we spent a number of years getting all the sites ready. We brought in a partner as we were going vertical, right? So there's no delay in regard to starting them. We're starting them. We bring in the capital. We're ready to start. So we're not waiting 6 months and saying maybe what if. Capital comes in, we're starting and then the clock is ticking on the return. Yes, so short enough, do it. Same approach for the customer. It's being built. We're now in discussion with the customers because we can give them a delivery date of '28 or whatever the day might be for the first data hall. That's the way we're running it. Cody Shield: Okay. Great. That's clear. Maybe just a last one on -- sounding like Tokyo, one of those multibuilding campuses, how would something like that progress? I mean I imagine once you do the preparatory work the second and third building come along a bit quicker than the first. Is that right? Like what would the time line of something like that look like? Gregory Goodman: We'll wait and see, but we're right into our big gig site up there at the moment. It is great side, not a lot of power in Tokyo. This is the biggest one in Tokyo and yes, good demand. Operator: Our next question comes from Mithun Rathakrishnan with CLSA. James Druce: Yes. Greg, you might have James Druce here. And can we -- just on the 0.5 gigawatts that were sort of starting before June, can we just talk to the construction contracts? They've all been locked down now. Have they -- what's the remaining to do there? Gregory Goodman: What's remaining to do there? Well, yes, there's a lot of contracts. You're talking billions and billions of dollars. Some have been locked down, some have been started, and some are just in the final pieces of negotiation, right? So no, we've got contractors. We're down to signing contracts and moving on with the prices locked in. James Druce: Okay. And is there -- I mean the data center industry is going to be more complex in terms of development. How do we think about the right time now to actually bring in a tenant? Is it as fast as possible? Or do you want to kind of get all your ducks lined up, get all the MEP equipment done? Or how do you think about sort of the right timing for that? Gregory Goodman: Yes. Look, it's iterative. It's different on different sites depending on the demand signals. So you play a site maybe in Amsterdam differently than you'll play a site in the U.S. where there might be more supply. So it depends on where you are, right? But you need to be building to a design where you've got flexibility. You need to be building to a design, you can build into the demand so you can shorten up the delivery period. So if people are placing orders for '28, you've got to be able to deliver in '28. If you want to deliver in '29, well, you better wait 12 months and then you're probably taking a deal in '29. So build into it, get your essential infrastructure out of the way, make sure you got your buildings coming out around the slabs and sticks are going up effectively and you're building to a design or a program, which is flexible. Now on some sites right now, as we're starting to build, we are having the negotiations, and we are actually designing it to those customers. And there's some AI inferencing in some of these now where you've got waterloops and then you've also got air. So we're sticking to it right now, but it will depend on where you are and what you're doing in the different countries and the demand signals. So there's no one shoe fits all feet. Some feet are bigger than others. James Druce: Can we just talk to -- I mean on Slide 15, it shows the Japan partnership there for the 1 gigawatt. I mean we sort of known the thing there. But I mean, how does that kind of roll out in terms of fundraising for GJCP. And how much of that is actually covered today? Gregory Goodman: Look, it goes building by building. We've got approvals for our first phases. We're doing from the partnership, the partnership then we'll have assets. Those assets as they're stabilized, we'll be in more of a stabilized Goodman partnership. And that's exactly what we've been doing in Chiba, same MO, right? So look for the same approach. In Japan, we've been doing this for a while. I think the team there is very good at this, and we've been doing -- I think we're just finishing our fourth data center in Chiba right at the moment, quite frankly. They are all '50s and rolls off quickly, but 50s are big, right? Just to be clear. Operator: Our next question comes from Adam Calvetti with Bank of America. Adam Calvetti: Greg and team, I mean is there a timing into the 5 additional ones that you're going to be commencing in the second half? I mean what type of fully fitted data center are there? You've got 3 types, whether it's run by the customer, yourself or an operating partner. Where are these ones going to land? Gregory Goodman: Most of them are fully fitted to a mechanical, electrical and plumbing, the MEP program, that's primarily it. But we'll be operating some. A lot will be self-operated by hyperscalers. And there might be a colo where we may be doing a joint venture as well. So yes, there's going to -- we'll hit all those boxes, I think. Then there's some shells that are probably popping in the second half, we don't have on the page, where we're going to deliver some shells to some hyperscalers as well. So you're going to see the whole topography across the board. And it's really important to emphasize that I think we have been doing for a while, but I'll just reemphasize it again today, our competitive advantage at Goodman is around the infrastructure, right? We don't desire to operate everything in the world, and we won't be. There's a number of hyperscalers that want to operate their own facilities, and we're very happy about that. We want to build them world-class infrastructure that then fits for us for a long-term investment, which is also we've got to be very clear. We're building to own and bring investors in. So we need something at the end of the day that actually is saleable and investable, right? So white elephants, that's not what we're about. And I think you might find that's a discipline that Goodman brings to the long-term ownership that may be very critical as we move forward over the next 10 years with so much capital required for the sector around the world and the rotation of capital, you can only rotate it if you got something investable at the end. So a big discipline on that. Adam Calvetti: Okay. That's very clear. And then, I mean, the power banks increased about 1 gigawatts split between Australia and Europe. Can you just comment maybe on how you're seeing demand in those 2 markets and returns? Gregory Goodman: Returns in Europe are very good. They're in line, I think, with what Nick is talking about. And Europe is short of infrastructure in those major markets we're in. So we're building into a very, very strong demand market. But the discipline around building them and getting the buildings up in the air, we are very well equipped because we've got a very, very good development team around infrastructure in Europe. And where you're going to get caught or stuck is getting out of the ground, right? Once you get out of the ground and you got your orders in for all your equipment, it's then a program and we're very good at running programs. We're very good at building basically complex pieces of infrastructure, and we'll be building multistory buildings around the world for highly automated buildings, big customers of 120,000, 130,000, 150,000 meters, right? We've got disciplines internally at Goodman around building these things, which is world-class, and that is one of our competitive advantages. Adam Calvetti: Greg, maybe just to focus in on Australia with 0.6 gigawatts of increase there. I mean I've been hearing that hyperscaler rents in Melbourne have stagnated. How are you seeing the Australian market? Gregory Goodman: All right. Look, I think let's just see what's real and what's not firstly. There's a lot of promises but let's look at the deliveries. So we're focused now, for example, in Melbourne on '28 deliveries, right? So let's work that through. And I think you'll find there's good demand in Australia, but we're going to be sensible about how big that demand is relative to the U.S., which is 70% plus of the global market, right? So we're building into places like Japan, we're building into places like Europe, where there's big demand signals and we'll -- we've got some great sites in Sydney, Western Sydney, Melbourne effectively and North Sydney. So we're in the best locations. And let's just see where we end up. Yes, because we're playing globally, we've got a lot of options and optionality to push U.S. a little harder, Europe a little harder, back off in some other markets if we think there's a supply issue. But even in Australia, honestly, the infrastructure and the timing is still difficult. And it is difficult everywhere in the world at the moment. Operator: Our next question comes from Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: Could you just talk about Stage 1 in respect to 2 things, please, when you expect the project to reach practical completion and be able to generate income. And secondly, the strategy for the leasing, is the intent to lease all of the capacity to one hyperscaler. Would you expect it to be multi-tenanted as in 2 or 3 or more tenants? Gregory Goodman: Yes. Good question. 2028, we'll be delivering the first power available. And I suspect being a 5-story building, very complex, it will be multi-tenanted. That's my view. But that's not to say we don't have demand for whole buildings over a series of time or a series of years. Bear in mind Macquarie Park is becoming difficult. Most developments on the North Shore are either not occurring or delayed, right? So to have something coming out of the ground, which we do now, we're having serious conversations, but we're very happy to manage and operate it over multi-floors, but we're also happy to do a whole building deal depending on the economics and the deal we do. Benjamin Brayshaw: And perhaps it's a question for Nick. Could you provide some color on how many sites have been sold down into the European partnership to deliver the forecast revenue for the vehicle? And how many are remaining on the balance sheet to be transferred? And will that transaction happen in the second half? Or will it be phased over time? Nick Vrondas: Yes. So the ones that have gone in already were the Frankfurt and Amsterdam properties. And the 2 Paris properties will go in, in this half. So that's all that's contracted at this stage. Benjamin Brayshaw: And just finally, in relation to Stage 1, the site, has the ownership transferred to the balance sheet from out of the partnership? And will the establishment of it has -- would the establishment of a partnership to potentially give rise to a trading profit or an uplift on the carrying value when that is settled? Gregory Goodman: I don't think we're commenting on that, but yes, it has transferred and partners will come into the 50%, I suspect that Google, I think, is the plan and partners will come in to the other 50%. But yes, I don't think we'll make any comments on uplifts or anything like that. Nick Vrondas: No. I mean it's not that big either. It won't be much of a needle mover. Operator: Our next question comes from Richard Jones with JPMorgan. Richard Jones: Just following up on Ben's question. Is it fair to assume that the bulk of the land value uplift in Europe across, frankly, Amsterdam has been booked and the 2 Paris project uplift will come in the second half, Nick? Nick Vrondas: Look, we're not commenting specifically, but yes, generally, that is a fair estimate, yes. Richard Jones: And Greg, just interested in your comments about automation and robotics and industrial projects. Are you looking at funding that for the tenant as well? Gregory Goodman: No. No. I think the same approach as we've taken with a lot of the big sheds we've taken. But once you go gate-to-gate, the $1 billion investments but the buildings and the land and where it's sitting, we would be in $600 million, $700 million, and then there is the fit-out components that might be anywhere between $100 million to $500 million in, it's all going robotics. Warehouses in Slide 5, you won't have anyone in them effectively. And some of our big customers are already planning on that, right? So when they pull the trigger on full robotics, warehouses, probably not today, but they've got the technology now to do it, and that's the way it's heading. Most of our big warehouses, we need 6, 7, 8 megawatts of power. So that's the same power discipline using the data centers actually we're using also and have been using around big industrial buildings. So when I talk about essential infrastructure and the ability to get these things powered up and plan them, the discipline around both actually is very, very linear and very parallel and that's why Goodman as an operator of the sand and development in the sector, there's some big competitive advantages we've got around infrastructure because we've been doing that infrastructure for many, many, many years. So I think we're in a really, really good spot to do both and effectively don't underestimate, as I said before, some of the work in progress on industrial because they are getting bigger. And there are 6 buildings going into 1, and that is going to drive productivity and will drive costs out of business over the long term, and they are big customers with big budgets. Richard Jones: And can you clarify what the returns look like on those big industrial projects? Gregory Goodman: Yes, they're good. So you look at our averages, I think we're throwing out between anywhere between 7s and 9s, it's in there somewhere. Richard Jones: I have one more. A quick one, one more quick one for Nick. Just what would be the capital commitment from a CapEx perspective you'd anticipate for the balance sheet in the second half? Nick Vrondas: I don't have that number at my fingertips. And about $0.5 billion, I think, is broadly where I think it's at but that's based on the kind of current projects. That's excluding sort of any acquisition -- new acquisitions or anything that hasn't been sort of identified yet. That's just what's in the pipeline. Operator: Our next question comes from Callum Bramah with Macquarie. Callum Bramah: Apologies if I've missed it somewhere in the announcement, et cetera. But I just wondered, as I understood it, the 2 near-term completions for the data centers with LAX01 and then Hong Kong, I just wanted to know about the customer commitments on those. And if you could give us an update on progress and when we should expect that to be completed? Gregory Goodman: LAX01 is not on completions, yes. And what else do we have in completions? It's just popping in this month. Nick Vrondas: It's mainly industrial items in the completion. So none of the data centers ones were in the completion. Gregory Goodman: The next one to complete is in Chiba, which will be shortly. Callum Bramah: Apologies, I might have asked clearly, but just in relation to the data center projects, when are you expecting to get a customer commitment for L.A. and so I think, was it Hong Kong 9? Are the 2 that are kind of nearer term in completions that are going out? Gregory Goodman: The Hong Kong, 2 months. Yes. So Texaco, we're going fully fitted, so it's going to be a while away yet. That's the plan. And the other one in Hong Kong is already committed. In regard to LAX, we're in discussions at the moment. Bear in mind, we have our first power bank available sort of running towards the end of this year. So we're in good shape on that one. And our view on that, that's a multi-customer building and a full operational building, right? So that will fill up over a period of time as we deliver the program on that one. But look, there'll be more about that in the next month or 2. Callum Bramah: Okay. And that's on track for powered shell completions still in June? Gregory Goodman: No. We're going to actually have our first data already by -- before the end of the year, right? So we're building full mechanical, electrical and plumbing outcome there. Nick Vrondas: The shell -- I think you got to distinguish between the shell and the fit-out. So yes, on the shell, but we're moving them through to the fit-out of the MEP and having progressive available ready for service for the data halls, which will happen, as Greg said, progressively from the second half. Callum Bramah: And I think maybe based on prior conversations, there was an expectation of maybe getting customer commitments 12 to 18 months in advance. Is there a change in that because of the market dynamic or a strategy or a tactical play for Goodman? Are you able to just give us a bit of color about timing on those customer commitments? Gregory Goodman: Yes, yes. It is topography, right? So the LAX01 is going to be multi-customer. You're talking anywhere between probably 1 meg to 10 meg. So we're talking to a customer at the moment that's the higher number. They might take the first bid to power. We got -- it's an operating asset. So that's very different to doing 100 megawatts or 200 in a different location where the customer will want to go earlier. The one in LAX is ready for service and you're leasing it as you go. Time is going to be very, very similar to that as an operating asset will lease it as we go. And there will be some other assets that are going to be effectively pre-committed. We might be starting some earthworks, there might be some transformers and things like that. But there's some big ones we're actually working on at the moment, which are effectively we're designing for those customers. Even though we might have started a few of the earthworks and getting it ready yes. So you'll see both of those types of deals being done, depending on where they are and what they are. Callum Bramah: And if I can just push my luck with one more. Just in relation to the Paris assets going in, which based, I think, on your earlier comments, Nick have yet to go in. Can you just clarify the drivers of the timing of when they go in and maybe what your current expectations are? Nick Vrondas: Yes. So you might recall there were CPs that related to local municipalities in the main that was the main reason the municipalities have pre-emptive rights. And so there's just a regulatory notice period, Q&A, so they can understand the basis of the terms, and then they notify you. So on one of them, we have subsequently been notified. And so the settlement of that, the process for the settlement of the first one has -- is about to be initiated so that will close within the next month. And then the second one is very, very close behind. So yes, expect well and truly before the end of June to have closed those 2. Callum Bramah: And is that across the entire project site or just the first data center, if you like, of the campus? Nick Vrondas: No, the whole thing. Operator: Our next question comes from Tom Bodor with Jarden. Tom Bodor: Just picking up from one of the comments you made about Callum's question, where you do have multi-tenanted facilities such as L.A.? What do you assume for a time frame to stabilization post completion? And where do you see stabilization from an occupancy perspective? Gregory Goodman: Something like that, you could knock that off in a couple of years effectively on the -- as you build it through. So there will be another 12 months in building out the MEP and during that time, I expect you've got most of it done and then there might be the tail at the end. But yes, over a couple of year period would be more than enough time unless you let it to one customer, of course, and then it will take a pragmatic approach to it and take maybe floor by floor over a period of time as they require it. Tom Bodor: So when you pick PC, what's your sort of broader working assumption for these multi-tenant facilities in terms of occupancy and what time frame post-PC do you sort of say it getting to fully let? Gregory Goodman: Look, I think within 12 months, you'd be you'd be aiming for, but you're going to get -- you're delivering the floor by floor, right? So I think LAX01, we got 6 meg, I think 6 megs available. Shortly, right, so we can deliver that and then just move through it in a pragmatic way. So you're spending capital as you go. It's not all spent at that point and you keep spending it on the way through as you need to do that. Tom Bodor: Yes. That's clear. Just a final one for me. There's obviously a huge amount of capital required to develop these facilities as you've highlighted. So a long away, but how do you think about pricing and capital demand for core data centers? Do you think there will be an ultimate takeout at the end? Or do you think a lot of your partners just want to develop the core and sit into the partnerships long term? Gregory Goodman: They're all approaching it differently depending on their view returns, development returns are obviously a lot higher. So there'll be partners that want to click the development returns and move through. Then there's the whole scenario whether a platform value is more -- is worth more than the sum of the parts, which I've got a bit of a view on, which I won't share here, but I think you'll find that, that's starting to play out as well at the moment. So there's a number of different combinations. We're super focused on making sure we've got something at the end that people want to be in, and it's going to have a good growth profile, and it's a good piece of infrastructure investment. And that's why you won't see us owning and holding assets in faraway locations. We're going to be bull's-eye. I think they call it eyeballs, some of the eyeball locations, some of our U.S. friends effectively. So we want to be where we've got flexibility around the buildings, great locations, low latency type facilities that we think over the next 10 years are going to be the best for residual value and for terminal value. Operator: Our next question comes from [ Claire McHugh with Green Street ]. Unknown Analyst: So just to ask more big picture, given this is a 10-year and beyond story, as you strategize internally regarding, say, music stops or a true bear-case scenario, it's everyone's paradox type events, et cetera, how are you positioning the brownfield data center pipeline? Like what would be the next best alternative use for the land? And how does that profitability profile compare? Gregory Goodman: Yes. The good question. The sites are in industrial sites. So for example, we're in planning in Melbourne, Western Sydney, they're industrial sites at industrial loan values. So if, for example, demand wasn't strong enough, we'd flip it around and build a good to oil shed that might be in demand. So we do have flexibility. We're not over our skis in paying big, big prices to land around the world for data centers and there's no options. We do have optionality around everything we're doing because in the main, the 6 gigawatts of sites and to be clear, we're working on double that as a global portfolio, but the 6 we put on the page, which is in secured and advanced, we own it. And where we have bought it, in the last 12 months, we bought the land and then we've grabbed the power cable, right? So we're not lifting the cost basis on these things to the point where we don't have an alternative use in the main. So that's the off ramp. The other off ramp is, to be quite frank, is capital and that's called equity. The amount of leverage that's being raised around the world is all good until you can't get it. So we're making sure we've just got a lot of equity, what we're doing sensible. We're doing it with some of the biggest partners in the world and we can build through for customers even if the debt climates and things change. What our big customers want to know is that can you build it, can you deliver it and can do it in a way where we're going to get a high-quality product and there's not a financial issue on the way through? Now we've all been around or certainly here a fairly long time, and we know things change. We know capital markets change. We know debt markets change, right? So we're building something that's sustainable, resilient and we can deliver for our customers and we can deliver over a long period of time. So yes, be very pragmatic, sensible about what we do. But what we can do, we can do it in volume, and we can do it globally and that is tremendously attractive to our customers. Unknown Analyst: That's helpful. I would have thought resi might be in there on some of them, but yes, I appreciate industrial's bread and butter. Just another one on the economics of the European partnership. So I appreciate there's a stage path to recognizing development profit and profit share. But just focusing on the land uplift that would have been achieved, is it still fair to think about data center land values at around sort of the $4 million a megawatt of critical IT capacity or sort of that 3x to 4x comparable industrial land based on this deal. Are you seeing values edge higher given the depth of demand? Gregory Goodman: Generally speaking, I won't talk about the land values on this deal because I think people try and run comparatives. And quite frankly, we've looked at a lot of land deals and they're at a certain price, but they actually don't have power even though they do have power. So I think it's the big, big differential so I'd be very careful about quoting land rates and things that have been selling, very different if it's shovel-ready and you can go vertical with your slab and your sticks and you can go up as opposed to something that might be right and it's a very, very, very big difference. But I've got to say generally, power infrastructure is costing more money. It is taking more time and. Affectively, you could expect that the cost of these things is going up, not down. And that applies to land as well. So the infrastructure, the basic infrastructure around the grids around the world is it's getting limit long in many, many places. So everything is costing more money around the infrastructure. And the other point is if you look at the demand that's required globally, I don't think we've got enough production. We don't have enough infrastructure to even supply that ambition. And I think that is a concern that's been voiced by a number of big customers around the world or proponents of AI platforms. But very hard to compare land values because they're all at very, very different stage of readiness, put it that way. Unknown Analyst: Yes, no worries. So this was more around land value of power, ready-to-build land. And it just really stems from, obviously, when we're underwriting the value of Goodman, a lot of the value stems in the value creation from the data center pipeline, which where there's land value, which is transactional, but also intrinsic value or platform value. So I'm just trying to sense check how we're evaluating the value of the land. Gregory Goodman: Yes, I understand. So we're not going to help you too much today, sorry. Operator: Our next question comes from David Grace with Evidentia Group. David Grace: Greg, you've got work in progress of $14.4 billion heading for $18 billion. Current yield on cost of 8.1% and just interested where you see yield on cost trend into as you continue to add long-duration projects to the pipeline? Gregory Goodman: Yes. Look, it moves up effectively. So I think it will be depending on how much industrial we do because that will be a little lower. But you can see it moving up from that 8.1%. I think the -- just on the commencements, I think that was through 9%. So yes, a little move up over time depending on that mix. But look, it's healthy. So I go back to the growth here on cost is one thing. The quality of what you're doing is another thing, right? And we are very conscious of the quality and the location because the billions and billions and billions you require and 6 gigawatts, so then ends up at $140 billion of end value on the sort of mix we're doing at the moment. You need a lot of money, right? So you need to be building stuff that you can partner and own that is a good investment. So our eyes on making sure that we have a residual value. We have a terminal value, we have an investment value that is going to hold up over time. So that means you need good sites, resilience, flexibility, all those things above, so you build some -- you build a piece of infrastructure that's not a 5 years run and done. David Grace: Yes. So can I imply from that then that the $18 billion WIP should actually increase just given the nature of the long duration of these projects? Gregory Goodman: Yes. Look, it will -- look, I don't think it's any surprise if it's $18 billion in June with the duration of the projects that it goes higher, it's going to go through $20 billion. I think that's how far through that will depend on how successful we are in regard to -- around the customer side a bit, I think. So we'd regulate it and monitor it but we've got to make sure and we have -- we've got the capital so think we can work through it. We're dealing with some of the biggest companies in the world, all the biggest companies in the world, not some off. So we've got to make sure that we've got sustainability, we've got resilience, we've got capital, and we can deliver over long-term time frames, multiple countries, multiple languages, but you're dealing with the same customers. So yes, it's going to be pretty interesting. Operator: Our next question comes from Andrew MacFarlane with Bell Potter. Andrew MacFarlane: Just a quick one for me. Just interested in terms of turnkeys and power shell, just how you're thinking about it, one versus the other? And I guess whether there's been any change as you've progressed through data centers in time? And I guess the second leg of that would be kind of what you're seeing in the little rate wise and yield on costs is that factoring in thinking of what product are you doing? Gregory Goodman: Yes. Look, down this part of the world running up Asia Pac, just as a general comment. The customers are wanting a data center ready facilities. So that leads us into the MEP build outs and what have you. And pretty well most of the discussions, if not all, in Asia Pac around fit-outs. We're having the same conversation in the Hong Kong at the moment where we're doing a shell that will go through to a full build out. Japan is the same. And down in Australia will be the same. Europe because hyperscalers are doing less of their own builds. So they expect in Europe full build-out program. So everything we're looking at in Europe is a full build-out with MEP and delivering floor by floor effectively. So that's that. The U.S. is different because you've got a lot bigger build-out programs of the hyperscalers. It's the major -- majority of the market globally. And you'll see us with big shell programs but you'll also see us with operating buildings like the program we have in L.A., that's 150-meg gate-to-gate program, maybe up to 200-meg effectively that you'll see those potentially being all operating buildings because of that location and what we're doing. So you'll see more shells in the U.S. plus some operating. Europe will be very much operating MEP type facilities and down Australia, we'll be filling the buildings up with mechanical and electrical facilities for the customers. A lot of it's going to be heavy on infrastructure, yes. Andrew MacFarlane: And sorry, Greg, are you seeing any change to hurdle rates or yield on cost returns? Gregory Goodman: No. But we're very -- like I said, we're very disciplined in understanding that you don't survive in this industry unless you can deliver a good product for investors long term. You can't rotate your capital unless you do that. And then the Goodman investors for putting out the capital at Goodman Group needed to return on their capital. So unless you get that all right, the machine stops. So I think you can be fairly assured we're doing it with the appropriate margins to make sure that machine keeps on going. Otherwise, we don't have a rotation of capital and Goodman Group shareholders don't get a fair return. Nick Vrondas: Andy, though, I mean, you would expect that if you're just looking at yield on cost on mark-to-market value of land, you would expect that something that's fully fitted would have to -- you'd have to compensate with a higher yield than something that's core shell. If you mark-to-market the value of the land like-for-like, theoretically, that is what you should expect, if that's the nature of your question. Operator: Thank you. I would now like to turn the call back over to Greg Goodman for any closing remarks. Gregory Goodman: Thank you very much, and good morning. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Michel Aupers: Good morning, everyone, and welcome to the Royal BAM Group Analyst Meeting. My name is Michel Aupers, Investor Relations Manager. I'm pleased to have you with us today. The meeting is hosted by our CEO, Ruud Joosten; and our CFO, Henri de Pater, who will take you through the key highlights of BAM's full year 2025 results. The presentation slides are available on our website. After their remarks, we will take your questions. I draw your attention to the disclaimer here. Ruud, over to you, please. R. Joosten: Thank you, Michel, and good morning all. On the front page, you see an image of one of our flood protection projects in the U.K. Along the Norfolk coastline, we replaced aging timber groynes with new rock groynes, significantly strengthening coastal defenses for our local communities and the Norfolk broads. We began this project in October '24 and successfully completed it in June '25. It's a good example of the impactful work we deliver to protect people, nature and vital infrastructure. Let's start with the key points over 2025. The group has delivered a strong performance in 2025, reflecting the success of our strategy and our core strength in the energy transition, transportation and Dutch residential markets. First of all, our '25 results show a very solid top line development. Revenue increased by 9% to more than EUR 7 billion with consistent disciplined growth across both divisions. This underlines the strength and focus of our current portfolio and the progress we have made. We also delivered a substantial improvement in our adjusted EBITDA margin, increasing from 5.2% a year ago to 5.7%. This reflects our disciplined execution and our continued efforts to further lower our risk profile and drive profitable growth. In 2025, our reported adjusted EBITDA increased by 20% to EUR 400 million. And we're also proud to present a net result of EUR 211 million, a strong increase compared to the last year. All our activities contributed strongly this year, demonstrating the resilience and effectiveness of our business model. We also continue to make solid progress on our legacy projects. In 2025, we handed over the final school project in Denmark, completed the Co-op Live arena in the United Kingdom and saw the successful opening of the Silvertown Tunnel in London. In December, we started handing over the first section of the new children hospital. These milestones mark an important step in closing out our legacy portfolio and further strengthening the foundation of our company. Regarding the Fehmarnbelt tunnel project in which BAM holds a 12.2% stake, the consortium continued to engage in constructive dialogue with the clients. We expect to emerge the first tunnel element in the first half of this year. Our other key performance indicators also remained solid. We maintained a strong financial position by focusing on projects with an attractive risk/reward balance, along with effective cost and working capital management. This has resulted in a robust solvency and further strengthening of our cash position. It's good to see that our order book was maintained at a high level of EUR 13 billion. A substantial part of our recent project wins aligns with our strategic objective to expand in sustainable solutions while we remain focused on the quality of our order intake. Continuing to strengthen our safety culture remains a key priority. We made further progress in embedding our group-wide safety program, and we continue to invest in development of our people to ensure BAM remains an employer of choice. Finally, our leadership in sustainability was reaffirmed once again. We received the prestigious CDP Climate A rating for the seventh consecutive time, underscoring the consistent efforts to mitigate climate change and our long-term commitment to responsible business. Looking ahead, for 2026, BAM expects to deliver further growth in revenue and adjusted EBITDA. With that in mind, let's continue to the next slide, where I will highlight how our solid performance translated into meaningful shareholder remuneration. We intend to distribute circa 55% of our net income to shareholders. We are proposing a dividend of EUR 0.30 per share over 2025. This represents a 20% increase compared to the EUR 0.25 paid over 2024. We will supplement this dividend with a EUR 40 million share buyback. This program is supported by our strong operational performance and solid cash position. Share buybacks executed since 2023 have already reduced the number of shares entitled to dividend by almost 7% at year-end 2025. Taken together, BAM will return EUR 357 million to shareholders in the period 2023, 2026. This demonstrates the disciplined execution of our capital allocation framework and our clear commitment to sustainable value creation. Looking beyond '26, further share buybacks will depend on our balance sheet structure and the strategic opportunities available to us. We will continue to take a disciplined value-driven approach that supports both our long-term strategy and attractive shareholder returns. Now let's look at the performance of our 2 divisions. Hart van de Waalsprong is the sustainable and vibrant new city center of Nijmegen North, a place where homes, shops, workplaces and green public spaces come together. You will also find there the first energy-neutral shopping center in the Netherlands. Together with our co-developer, we delivered there 524 homes, nearly 12,000 square meters of commercial space, 2 parking garages and a high-quality public realm. The project was completed in 2025. In the Netherlands, we delivered a strong performance. Revenue increased by 8%, and our adjusted EBITDA rose sharply from EUR 161 million to EUR 250 million, reflecting a solid margin of 7.2%. This improvement was driven by the high activity level in nonresidential construction and our civil engineering operations in the Netherlands also continued to deliver strong results, and we saw excellent momentum in our housing activities. Home sales increased by 27% to 2,354 units, supported by several larger transactions with institutional investors. Overall, these results highlight the strength and resilience of our Dutch platform. Let me take you through our Dutch residential property development portfolio, where we are seeing promising traction and clear opportunities for further growth. In 2025, we invested significantly in expanding the development pipeline of our Dutch residential property activities, which now comprises around 30,000 homes. We secured an attractive development pipeline for the next years, and we reinforced our position as one of the leading residential developers in the Netherlands. During the year, we added approximately 5,500 homes to our portfolio. This included strategic positions in [indiscernible] and Amsterdam. With the acquisition of Gebroeders Blokland, we strengthened our portfolio of land positions and residential projects across South Holland, Utrecht, [indiscernible]. This portfolio includes land and building rights for roughly 2,400 suburban homes. Together, we can accelerate the joint sales, expand our combined network and optimize our project pipelines. We also see an increasing focus on large-scale area development. In 2025, the Ministry of Housing and Spatial Planning together with local authorities and market partners identified 24 breakthrough locations where construction can be accelerated, representing a potential of 150,000 new homes. Our strategic positions in or near many of these areas allow us to contribute meaningfully to faster housing delivery. In 2025, our total investment in Dutch property developed increased by circa EUR 100 million to EUR 640 million. Moving on to the U.K. division, U.K. and Ireland, I have to say. In Waterford, Ireland, we are delivering a 207-meter sustainable transport bridge, a key element of the North Quay public infrastructure project. This low-carbon pedestrian and cyclist focused crossing will connect the city center with the North Quays district and support Ireland's largest urban regeneration program. Designed with an opening span for river traffic and built using reduced carbon materials, the bridge reflects our commitment to sustainable future-focused infrastructure. In the U.K. and Ireland, we also delivered an excellent performance. Revenue increased by 10%, and the division achieved a substantial improvement in profitability with adjusted EBITDA rising to EUR 160 million. This is an increase of 40% compared to last year, and it translates into a margin of 4.7%. I'm particularly pleased that Construction U.K. returned to profitability. This reflects a disciplined project selection and solid operational execution. An important milestone was the finalization of Co-op Live, one of the most significant and complex venues delivered in the U.K. in recent years. Our civil engineering activities in the U.K. and our activities in Ireland continue to perform robustly even compared to the particularly strong year 2024. Now Henri will elaborate on the financials. H. Pater: Thank you, Ruud, and good morning, everyone. What you see on this slide is one of our key contributions to the future of the Dutch energy system, the new high-voltage connection between Borssele and Rilland. This project sits within our EUR 367 million multiyear framework agreement with TenneT. It's a strategic investment aimed at strengthening and expanding the national electricity grid, ensuring it can support a steadily increasing integration of sustainable energy. It underscores our disciplined execution, our leadership in the energy transition and our enduring partnership with TenneT in developing a more resilient and future-ready network. As Ruud has already said, we are reporting a strong adjusted EBITDA result of EUR 400 million. And in addition to this strong result, it's also worth pointing out our strong order book of EUR 13 billion and a further improvement in our solvency, in line with our expectations. We are showing a strong cash position of EUR 0.9 billion, which is an improvement of EUR 120 million compared to a year ago. These strong results have been achieved through solid performance across all our activities and confirm that we are effectively executing our strategy. Let's zoom in on some details of our income statement. Our total turnover has increased by 9% and it's very encouraging to see that both divisions and Belgium are contributing to the top line growth, which has been achieved largely organically. Comparing our results with last year, we see an EBITDA growth of 20%. This improvement is not only based on growth in revenue, but also shows even more clearly that we are benefiting from a strong margin, in line with our strategic principles. The divestment of our remaining stake in Invesis, which was formally completed on the 25th of March last year, had no further impact on the results in 2025. Our depreciation and amortization amounted to EUR 158 million. This represents an increase compared to last year, which can be explained by our ongoing investments in sustainable modular solutions, including the further electrification of our plant and equipment and is fully in line with our plans. Our financial result improved slightly compared to the year ago, showing a result of more than EUR 10 million. And this is mainly due to a lower-than-expected interest cost in the property business, our strong cash position and the payment agreements related to the Invesis divestment. The adjusted items in the income statement related to reorganization costs, positively offset by the reversal of impairments within our property business. The tax charge amounts to EUR 38 million. This represents a tax rate of 15%, which reflects the recognition of additional tax losses to be used in the next 5 years to offset Netherlands profits. The strong result in 2025 also indicates that going forward, tax rate will gradually increase. The bottom line shows a delivered net result of EUR 211 million, which translates into earnings per share of EUR 0.81, a substantial improvement with regard to the EUR 0.31 a year ago. Let's take a look at the cash flow statement together. Our strong operating results translate into a strong cash flow of EUR 354 million. We can see that the cash flow from our working capital is slightly negative, noting that this amount includes a net investment of EUR 55 million related to investments in property. This amount is lower than the EUR 90 million we reported in the first half of this year, which can be easily explained by the higher number of transports of sold homes in the second half of this year. It goes without saying that we are very pleased with the development of our trade working capital efficiency over the past year. This percentage has improved slightly, but is now stable for the second year in a row. The net cash flow from our investment activities was limited to EUR 4 million. And the most important elements are investments in our CapEx in line with our plans of EUR 83 million, payments received in the amount of EUR 108 million relating to the Invesis divestment and the payment for our previously announced purchase of WL Winet. Next, it's good to look at the cash flow related to financing activities, which amounts to EUR 198 million. This amount consists of the payment of our dividends amounting to EUR 66 million, the purchase of shares amounting to EUR 50 million and the remaining part related to leases and a small increase in property funding. It can be concluded that our total cash position has increased by EUR 120 million over the past year to the previously mentioned strong level of EUR 0.9 billion. Let's now look at our financial position. As you can see, our net cash position after loans and lease obligations is EUR 501 million, which is an improvement of EUR 61 million compared to last year. We have just explained a slight improvement in our trade working capital, which means that we are now looking at shareholders' equity, which has increased by EUR 62 million compared to a year ago. The explanation for this is as follows: We have earned a net income of EUR 211 million. We had a negative effect of EUR 24 million related to the exchange rate. And as explained earlier, we paid a total of EUR 160 million in dividends and share buyback, and we have an effect related to the post-employment benefit obligations. Next, it's good to look at solvency, which has been further strengthened compared to last year. And finally, we can also see on this slide that our return on average capital employed has increased. This is a positive result that demonstrates strong financial effectiveness. Now back to you, Ruud. R. Joosten: Thank you, Henri. I would like to conclude with the market trends and our outlook for the full year '26. Here, we show you a photo of Deleers in Belgium. At Project Deleers in Anderlecht, we are creating a modern vibrant district that brings living, working and learning together in one integrated development. BAM Kairos as developer and BAM Interbuild together with partners delivered a state-of-the-art school campus and childcare facilities. This project reflects our capability to shape inclusive communities and deliver long-term value for the city and its residents. We are pleased with the developments of our order book, which has maintained at a high level of EUR 13 billion. This while we continue to focus strongly on order book quality and selective tendering in key markets where we have a proven competitive advantage. Now over to the market trends. In the Netherlands, the residential market remained strong, driven by stable consumer confidence. The nonresidential market is cautiously optimistic, specifically in the education and office sector. In Civil, there are many attractive growth opportunities driven by the energy transition and the transport market. There remains a strong rationale for essential investment in energy transition, infrastructure, defense and sustainable and affordable homes. The Dutch coalition agreement, Aan de slag or Getting to Work, creates opportunities to move forward such as building faster, increasing grid capacity and improving our roads, bridges and [indiscernible]. We also see opportunities in it to achieve the goal to build 100,000 homes per year, but it does require decisiveness, clear choices, collaboration and investment. The construction market in the United Kingdom is expected to strengthen, supported by the government's continued focus on energy security. The government's 10-year infrastructure plan is ambitious and defense investment is also set to increase. The recently approved U.K. planning and infrastructure bill has the potential to accelerate approvals for major projects. In London, commercial planning activity is rising with growing emphasis on retrofit developments. In Ireland, the EUR 275 billion national development plan is expected to provide a significant boost to the construction sector. Delivering complex infrastructure projects and new homes are essential for creating thriving communities. But this requires stability, clear planning and commitment beyond short-term political agendas. Now over to the outlook for the full year. We continue our disciplined contract and risk management approach, which is a fundamental priority with our strategy to enhance our financial performance and predictability. For 2025, BAM expects to deliver further growth in revenue and adjusted EBITDA. Thank you for your time. We are proud of the set of results we've just presented to you. In our view, these numbers emphasis that our strategy, focus, reform and expand is paying off. Now let's go to your questions. Unknown Analyst: Firstly, let me address the loss I do see in your German, Belgium and international business units. You mentioned that U.K., Ireland, Belgium did well. So it seems that you still booked a loss in Germany or international. So could you share some additional information about this EUR 9 million EBITDA loss? R. Joosten: Yes, that is true. That line is kind of a combination of the Belgium result and some legacy items we still need to solve. In this case, one of the 2 legacy items we still had in Germany that was settled not so long ago during the year. And yes, that balances that out with the, let's say, the positive result in Belgium. Unknown Analyst: Okay. Secondly, you made a nice improvement in the Netherlands and the U.K. There's not a Dutch construction company listed in the Netherlands making an EBITDA margin more than you do in the Netherlands. Is that something you -- is it a targeted margin for you? Is it realistic for you to also generate such a profitability? U.K. is a different story, different structure. But if I just look at your Dutch operations versus those of the Rosmalen base one, is there a major difference why you could not or should generate a similar margin? R. Joosten: Of course, I fully respect our competitors, including our friends from Rosmalen, but it's not up to me to discuss their results. Of course, I'm here today to discuss the BAM results. Of course, we try to improve margins. We also try to improve revenues. It's also in the outlook for this year. We see good development of the financials of the Dutch division. And of course, it's very difficult to compare the exact mix of activities with the different companies. So that's maybe a game I'm not going to play. So I look at the individual, let's say, segments of our business and try to maximize results there. I see a lot of opportunity to increase revenue and to look at profitability. Of course, this year, we also had a good growth in revenue. So that's also the balancing act of looking for attractive projects with higher margins and lower risk. So that's a balancing act we are playing. I'm really happy with the 2025 results because we saw this organic growth in the division with improvement of the margin. And of course, we are aiming further margin improvement going forward also for the Dutch division. Also one of the reasons why we invest heavily in property. In the last year's financials, you see a big increase in investment in property, normally leading also to a higher margin in the balance. But there are a few thoughts, I think, on looking at our margin. Unknown Analyst: You sold much more homes than what you indicated because you expected more or less -- the guidance was more or less flat, but you clearly beat that number. Has home sales been brought forward into this year? And are you also willing to provide a guidance for what you expect for this year, excluding this Blokland acquisition? R. Joosten: Yes. Of course, also selling of homes is kind of a mixed bag of homes over the year. You have the -- that's more, let's say, out of the city homes, family homes, but you also have a lot of -- and that's getting more important in the Dutch market, apartments, smaller apartments as well. And you saw that in the last part of the year, our sales numbers were heavily impacted by some deals with investors, a few bigger deals that gave a real push to the number of homes in the last quarter, especially. So no, we brought nothing forward. That are deals that are developed over a longer period and then they appear at the moment -- in this case, at the end of the year, pushing the end of the year. And then that leads to a big increase, can be a few deals that can make a difference of hundreds of homes. So we are very happy with the development. More importantly, of course, we are investing strongly in property to have a structural increase of our home sales for the next years. The Blockland acquisition was important in that sense as well, leading to approximately 200 additional homes a year. So looking for these kind of opportunities is important to have a structural increase of the number of home sales. Unknown Analyst: And then lastly, for the moment, I think this one is for you, Henri. We do see depreciation edging up quite a bit lately. It has not so much to do with your capital expenditure in tangible and intangible assets, but much more to the lease liabilities. So could you provide some guidance for this year, what we should expect for CapEx and lease liabilities and depreciation. H. Pater: Yes. If you're talking about the depreciation, indeed, as you compare it to a year ago, an increase, but it was also based upon temporary site accommodations, which were required by the client and causing a higher depreciation and a specific element in our energy sector. We are expecting for 2026, you're talking about CapEx more or less similar numbers like we are now reporting for 2025 and the same for [indiscernible] as well. Martijn den Drijver: Martijn den Drijver, ABN AMRO. I would like to start off, as I usually do with the guidance. You mentioned in the press release, earnings visibility continues to improve, solid high-quality bidding pipeline, continued discipline. If I take out the claim settlements in Germany, your EBITDA margin was closer to 6% than the reported 5.7%. So I was wondering what is keeping you from providing an update on your medium-term targets? Is that the usual under-promise, over-deliver bump strategy? Or are there other elements at play? R. Joosten: No, that is clearly part of it. We like to be very predictable in that sense on how we communicate, especially at the beginning of the year. So normally, in this meeting, we are always a bit cautious on giving an outlook for the whole year. And then during the year, based on performance, we will give you more detail in the outlook. That's what we do every year. And in that sense, we like to be predictable going forward. On the other hand, indeed, we are in the last year of a 3-year strategic cycle where we promised the market a 4% to 6% margin window and more than EUR 6 billion company. In 2025, we delivered already EUR 7 billion and almost 6%. So that brings us into the situation where we have to rethink strategy going forward. And that's what we are doing now. So probably by the end of the year, early '26, there will be a new strategic window announced to the market with our new strategic financial targets for the market as well, including capital allocation strategy for the years to come. So we try to keep -- to stick to that kind of rhythm every 3-year, let's say, an updated strategy. Of course, we're happy to see that we already touched our targets in 2025, but it's no reason now to jump to conclusions. For this year, we are rethinking our strategy. It is working over the last couple of years with big improvement. Also happy to see that our shareholders are profiting from that too with the biggest increase, the most successful share in the mid-cap last year. I think they are seeing that this strategy is working. And of course, we try to, in that sense, under-promise and over-deliver again also for the next phase of the strategy. But we're doing our homework for that right now. Martijn den Drijver: Got it. Then my second question is on BAM Construct U.K. Would you be willing to share -- if you take out the facility management part and the property development part, but roughly, you can use ranges if you like, on how that unit has performed in 2025 relative to 2024 just so we can get a bit more clarity there. H. Pater: Yes. So back in the days of the first half of 2025, we already achieved a positive result in that Construct U.K. arena. In the second half of 2025, it improved further. And if you take out the revenue related to facility management and also the EBITDA part of that, then the difference is roughly 0.2%. That means that Construct U.K. on its own is already delivering a very strong result, and we are expecting a further improvement in 2026 as well. Martijn den Drijver: That is indeed a strong performance. And just one follow-up, a tiny one on [indiscernible] question. I think this settlement in Germany was the final one, right? With this settlement, the whole BAM Germany warranty element is gone? H. Pater: There were 2 settlements. First of all, it was related to an old project like we discussed and also explained in the first half of 2025. And the second one was indeed related to BAM Deutschland entity, and that was the so-called SPA share result mechanism together with the buyer. And then there is still a receivable in our balance sheet, which is also explained and disclosed in our annual report, which we are discussing with the customer from -- back in the days in terms to solve that topic as well. Martijn den Drijver: Got it. Okay. And then on the Civil U.K. performance, maybe we've gotten a little bit too enthusiastic. But I was wondering if you could clarify why the EBITDA margin actually performed the way it did. The U.K. civil engineering market is quite buoyant, but yet the EBITDA margin declined year-on-year. Can you explain that to us? What happened there? Unknown Executive: Yes, I can start and maybe you can help me [indiscernible] of projects [indiscernible] projects. R. Joosten: Sorry for that. I was just saying it has to do with the phasing of big projects. In '24, we had some finalization in the mix more than in '25 where we started up some of these bigger projects. And then you can see that in the finalization of a project, normally the margin goes up. And in the beginning, there's a more conservative look at these projects. So in the mix, it looks like a negative development, which is absolutely not true because we see in the order book going forward an increase in margin for these projects. But that's how we, in IFRS used to, let's say, estimate these results of these projects. I see fantastic revenue growth over the last 3, 4 years. I think it doubled the business almost, the Civil engineering U.K. So it's a star performer in the group. But I think that's a bit the explanation. But Henri, I'm looking to you as well... H. Pater: That's the complete story indeed. I'm really pleased also with the developments over there as well. And the difference between 2024 and 2025 is roughly EUR 10 billion. On that high level of revenue, that's quite normal and normal pattern also in this business. Martijn den Drijver: Got it. And then one question on industrialization, BAM -- BAM Flow. First part of that question is, did it contribute positively to EBITDA in 2025? And my second question is, how should we think about that activity going forward? R. Joosten: Yes. I think in all honesty, that is still a development, let's say, part of the strategy. We started up the factory late '24, I think. So we were really in the market in '25 for the first time with, let's say, real homes. So it's not an EBITDA contributor at this moment in time. That will take probably this year to get to that kind of numbers. You need to, of course, also convince the market that these are fantastic homes to live in. We have now several people living in these homes, and they're pretty excited about it. But it takes some time in a country where people are very much used to concrete and stone houses. Of course, you need to take some time to change that kind of conservative issue, if you can call it like that, attitude towards these houses. We are convinced that these houses are, let's say, more convenient to live in from an atmosphere point of view. But it takes some time. And it's not, let's say, financially a big issue. Of course, we want to make it EBITDA plus as soon as possible. But for the long term, it's really important to build these more sustainable homes that indeed take out CO2 from the air instead of emitting CO2 into the air. And yes, I think that is a big opportunity. And of course, we are not the only ones in the market to do that. And together, I think we will develop that culture in a positive way and get these homes in the market as soon as possible. Martijn den Drijver: Just one short follow-up. Is there any other industrialization plan ongoing that we should be aware of? R. Joosten: Yes. I think it's a broader item in all construction. So also looking at nonresidential, you see that more and more, let's say, parts of the building are industrialized and coming from factories before they are installed into, for example, the new ABN AMRO office that you saw is coming, you see parts of that coming from suppliers from their factories directly. It also has to do with all kind of cables, for example, cable channels that come from factories, you don't see that, but it's all industrialized. It comes, let's say, ready-made into the building and is then installed. So this is a more broader development also in infrastructure, apart from only the wooden homes. Simon Van Oppen: Simon Van Oppen, Kepler Cheuvreux. I have a follow-up question on Construct U.K., good development there. And you mentioned project selectivity. Could you please give some more color on what drove this strong development also in terms of project selectivity and how this is progressing into 2026? R. Joosten: Yes. Let's say, after the disappointing results earlier '23, '24, we decided to reshape the strategy for Construct U.K. cost-wise, but also strategy-wise, much more focused on, for example, education and health care in the U.K. going from midsized projects with now and then, let's say, a special in the commercial field. So that portfolio is now much more clear, way to go for. And luckily, the U.K. government is investing heavily in these frameworks as we call them, for health care and education, where we are, let's say, participating in for the long term. So it's partly looking for that new portfolio that gives us the trust and confidence that margins will go up in the near future. And it was also, let's say, finalizing some, let's say, legacy projects that we still had where Co-op Live, I think, was by far the most important one. Now that combination of profitable projects, cost drive and ending Co-op Live led to the performance in 2025. And you see indeed, like Henri is saying, an improvement in the second half of the year. So indeed, getting to a more normal profitability already in the second half. And we trust that, that will then increase in this year as well. Simon Van Oppen: And could you share roughly how much education and health care within Construct U.K. makes up of that specific division or what you are targeting to achieve? R. Joosten: I don't think we have that percentage on hand. We have to look that up. H. Pater: Yes. But I think it's mainly looking back education at this moment in time and some commercial wheels. Leontien de Waal: Leontien de Waal, ABN AMRO. A few questions from my side. First one is defense and energy security opportunities. You mentioned them both for U.K. and the Netherlands. Are there any difference in, I would say, margin perspective concerning those opportunities? R. Joosten: Difficult to say. I think the defense is probably a different segment than the energy security segment of our market. In Defense, it's also a very wide range of activities. I think there's still a lot of development to do to get that really developed by governments and bring it to the market. We're already doing some important jobs in the defense sector. For example, the new head office of the Belgium Army in Brussels near to the NATO building. We are building together with others. It is a EUR 350 million building. But it can also be -- indeed investment in infrastructure can also have now a defense kind of character as well. It can also be a hangar for planes. So it's a very wide range. It's also housing for soldiers, something that was neglected by governments for decades. And now we need huge investments to get that to, let's say, an acceptable level for people to live in. So margin-wise, of course, we will be very critical there as well and have, yes, let's say, the same kind of criteria for margin as for other projects. So I'm pretty positive there that especially when there is speed required, yes, then also we need to see, let's say, margins linked with that in our portfolio. In the energy transition segment, yes, we see good margins because the parties, our customers there, they see how scarce our capabilities and skills are and are willing to come to realistic pricing if they can trust our delivery. And that's the same in the U.K. as in the Netherlands. Leontien de Waal: So there are no big differences in margin potential considering the 2 regions, no big differences. R. Joosten: No, I don't think so. I don't think so. I think it's the same. You see the same kind of project. It's very nice to see, for example, that National Grid, which is a kind of TenneT for the Dutch-speaking audience, comparing to TenneT in the Netherlands. Yes, we are doing for them the same project as we do for TenneT for National Grid. So for example, a land station, bringing energy from the sea, wind energy to consumers on land. So these projects are, let's say, copies of each other and very nice to see that now we brought these companies together with our teams to learn and to get some synergy from these projects. But I don't see a big difference in margins now. Leontien de Waal: Okay. Maybe to stick to grid congestion a bit. Concerning your property development portfolio in the Netherlands, how much of the development portfolio is impacted by grid congestion, especially as there's what was a huge message from TenneT last week concerning 3 provinces in the Netherlands and acute stop was communicated to happen maybe this summer, start of this summer. How does that affect your property development portfolio? R. Joosten: Well, I think it's a very valid point, that's one. We also have the nitrogen issue as well in the Netherlands. These are things that are not helping. In BAM, we see it like that, there could be a huge acceleration of homebuilding in the Netherlands if these things were not there. Everybody wants that acceleration. And of course, that would be very profitable for companies like BAM if that would happen. We are pushing and pulling and trying to drive this, let's say, decisiveness in provinces, in communities, but also on a national level to take these barriers out of the way. But it's a pretty complex game in solving nitrogen, solving the congestion. In solving congestion, of course, BAM can play a role. We are doing that in several regions. But yes, again, it needs central direction, I think, to make this happen. So I don't see it as, let's say, a major issue for our actual numbers, but it would be very good, of course, for acceleration of our numbers. That's more, I think, how also, together with our partners in the market and our competitors in the market, we are looking at this. Yes, if you want to build more homes, you have to have some decisive action because you can talk about regions where you need acceleration or breakthrough areas or all kind of building 10 cities. But it's easy to say that. But to have the real central direction and government decisions to make it happen, including nitrogen, including congestion, including necessary infrastructure to these homes, yes, that takes a lot of different decision-making, I think. And that's over the last year is not happening in the Netherlands. Leontien de Waal: It's a complex issue. Could you give an indication how much -- which percentage of your property development portfolio is related to those provinces in the Netherlands who are impacted most at the moment? R. Joosten: Yes, that's difficult because indeed, you have the nitrogen issue, you have the congestion issue. Of course, we try to then balance that out. And if we see issues there with these 2 elements, we try to rebalance the portfolio into different directions to still deliver these kind of numbers. And until now that works out fine. For '26, that will work out fine. But yes, longer term, of course, these issues need to be solved. And of course, we are hoping that the new government will take a decisive action there as soon as possible. Ministers will be appointed on Monday, I think. So let's see what happens. Leontien de Waal: Last question from my side. You mentioned high activity level of nonresidential activities in the Netherlands, especially. In the outlook for 2026, you used the words cautiously, optimistic. Could you elaborate a bit on the nonresidential opportunities in the Netherlands? What kind of segments? Will it be new build? Will it be renovation? R. Joosten: Yes. You saw that over the last couple of years, it was very difficult to -- for the office market, for example, was really, really difficult, 0 activity or almost 0 activity. There, we see cautiously some activity coming back to the markets -- to the Dutch market anyhow, but also in London, we see the same issue, which is positive. So that's why we're cautiously optimistic about some investment also from institutional investors in nonresidential. Yes, in '25, we had a very good year based on a very good portfolio in the Netherlands. And we see some good wins there as well, for example, with De Sax, for example, in Rotterdam, which is also in nonresidential, but it is in a way residential as well because there are 900 apartments in that building. But also some other wins and some possible wins that we see in our agenda. We see a kind of positive development in 2026 for nonresidential as well in the Netherlands and in the U.K., indeed. Based on our participation in the frameworks, we're also having a very cautiously positive view on U.K. nonresidential. Dirk Verbiesen: Dirk Verbiesen,[indiscernible]. Question on the outlook and the property development in the Netherlands. Maybe, let's say, 2,000 houses sold in '25 was a bit of a normalized number. As you said, a few hundred were sold to investors in the later part of the year. Taking that as a base for '26 in your outlook, what do you expect in number of houses sold as an assumption in that? And also on average prices sold '25 versus '24? And what do you see in those trends -- in that trend looking at the project pipeline? R. Joosten: Yes, difficult indeed because these things are heavily impacted by the mix of homes and deals with investors that can make a difference of hundreds of homes. We're cautiously optimistic there as well, looking at you as well, Henri, for this year with the number reached over '25. Looking at developments over the next couple of months, I don't see a big difference there in prices of these homes in '26 as well. So there, I see still positive developments looking at pricing in the market. The number, yes, probably better to, after Q1, look at that and give you a better idea on that one. But yes, is it normalized? Strategy is anyhow to increase the number of home sales for BAM, and that's why we do the property investments. How it exactly will turn out in '26 for me, at this moment in time, I don't know. H. Pater: No, indeed. So I think it's not needed to deduct all kind of one-offs from the sold houses in 2025. So we see it as a normal figure. Dirk Verbiesen: Okay. Maybe then on the energy transition, National Grid and TenneT. If you -- can you share what kind of revenues you are realizing in those, let's say, specific segments as it also looks very promising maybe for the next decade plus. What do you realize in those fields? H. Pater: Yes. That's a really valid question. So if you are looking through the lenses of sustainability projects, roughly 15% of the revenue currently is related to those kind of topics. So we are moving much faster in that direction, which is really helpful, also taking into account that it's really profitable and helpful also to drive our EBITDA in the right direction as well. Dirk Verbiesen: And then on the legacy projects, you mentioned some specifics on the children hospital and sections being delivered to the customer in the coming weeks, I think, even. When is this project? Can you remind me when should it be fully completed and delivered? R. Joosten: Well, we mentioned first half of the year. So before summer, we need to deliver the whole hospital. We want to deliver the whole hospital. Sixth floor has been delivered to the customer, and that's really helpful because then they can fit it out with their beds, but also very high-tech equipment that are now, let's say, bringing into the hospital, which is really positive. They're very excited about the building. So it's pretty high quality, which is good to say, after many, many years of construction, the good news is indeed that handing over and commissioning is now in process. I think that's an important step. Dirk Verbiesen: And in financial terms, there was no negative impact anymore over the course of '25. H. Pater: No, we settled. Maybe you remember there was a claim somewhere in 2024. The result at this moment in time is stable. Dirk Verbiesen: And then the Fehmarnbelt, yes, because it's such a recurring topic. Can you give some more details? You said, yes, we are in discussions. We have 12.2% in the consortium. First elements are completed or delivered. So where are you in this process on the construction side and also in the discussions with the client? R. Joosten: Yes. I think that's absolutely true. And I think we -- since a couple of years, we're pretty transparent on this legacy portfolio we still have from the past. So probably 5 years ago, we had something like 23 of these projects on the agenda. So we had long discussions with you guys all the time about these projects. This year, it's very important indeed like the new children -- National Children Hospital, I have to say, will be delivered to the customer. We have still the Brisbane project where we deliver a metro system to the city of Brisbane in Australia that will be delivered in Q -- well, let's say, first half year '27, I have to be careful. So also in the last phase of the project. And then remaining is the famous Fehmarnbelt tunnel between Denmark and Germany, very complex, huge project. We have 12%, a little bit more. And indeed, like with all these big projects, yes, we are in constant discussion with the customer on how to proceed and how to look at the risks and how to look at the timing of the project. Today, we see the first immersion planned for first half year. So we are now preparing everything to make that happen together with local authorities. And I think that's a big moment. If that happens, that proves as well that this whole system can work. And then for the next 4 years, this will be part of this element or this project will be part of these meetings because there is something like 4 years planning to immerse all the 92 elements of the tunnel, resulting in an 18-kilometer tunnel between the 2 countries. Dirk Verbiesen: But let's say, on timing of -- so discussions with the clients on finding a solution within those 4 years? Or what should we expect for that? R. Joosten: Probably you will have these discussions throughout the whole project. Of course, what we try to do is to work together and get this as efficient as possible into the sea. But it's pretty complex and many, many elements are linked to this from a sustainability point of view, from a planning point of view. You have the German government. You have the Danish government. It's pretty complex. Not many tunnels like this were immersed in the world of this size. So I expect this to be, let's say, highly on my list of activity for the next 4 years. Dirk Verbiesen: Okay. And maybe to round up, in your order book of EUR 13 billion, what is the amount of the legacy portfolio? R. Joosten: Looking at U.S. [indiscernible] it's pretty small, I think... H. Pater: Yes, pretty small. As I already said, Brisbane is mostly done. So if you're talking about the delivering of that metro, that's still about commissioning. So the construction work is done. So no big amounts left there. Yes, and then still a 12.2% stake related to FLC. Dirk Verbiesen: But you can't say in euro million terms, what is? H. Pater: Not talking about... R. Joosten: I think far below the 10%... Dirk Verbiesen: Far below the 10%. And children's -- yes, Children's Hospital is also close to... H. Pater: That building is already, as explained, complete. It's about commissioning. So the construction work is done. And phasing [indiscernible] hospital [indiscernible] journey. So you need more time to deliver all those stories. So also the remaining part in our order book is really limited. Martijn den Drijver: Martijn den Drijver, ABN AMRO with a few follow-ups. Well, I guess some pretty specific questions. I'm going to continue a little bit on that front. Completion of the Children's Hospital and commissioning and transfer, should we read that as a final settlement is also quite near? Or can those discussions, mediation or perhaps even arbitration linger on, continue a bit longer than the official handover? How should we think about that? H. Pater: Yes. So normalized such a case, you deliver the hospital and then there is a final moment in terms of building up your total documentation, your final account. Then we need to submit it to the client, and then there's at least 2 to 4 months discussion about the content and all those kind of stuff. And then still a question how to move forward. Do we have then a final settlement? Or is there still kind of a conciliation part of that process ongoing as well. Martijn den Drijver: Okay. And taking that into account, that dialogue is still constructive. Now that completion is nearing that parties are taking perhaps a stricter stance given the... H. Pater: It's always strict. There's quite [indiscernible] component part of it as well, but it's still constructive. Martijn den Drijver: And then on the tunnel, I understand your cautiousness, Ruud. But the way I read it is that if you can immerse, the trench issue must have been solved. If you immerse, the client has accepted the installation vessel. So some of the hurdles must have been resolved up until a certain extent. That doesn't mean that the discussion about potential costs related to the delays have been resolved. But it seems as though things are moving in the right direction. Is that the right way to think about it? Or should we really be more cautious in... R. Joosten: Of course, I would wish to say yes to that question, but it's pretty complicated because the trench, of course, is also 18 kilometers. So of course, the immersion is now on the first element is, let's say, 200 meters. So there's still work to do also on the trench, I think, going forward. I don't think that's impossible to do, but I'm cautious because of, yes, technicalities are complex on that trench. And let's see what happens when we start to emerge more elements. But it's an important moment. I fully agree with you. Of course, if that works, then indeed, let's say, the system then proves it can work. That is important for all of us, I think. Martijn den Drijver: I know that VINCI is the lead contractor within FLC. Are you as BAM consulted on every step on every discussion that you're having with [indiscernible] or even the Danish government? R. Joosten: Absolutely. I'm personally involved there, yes, to a large extent. Martijn den Drijver: Moving on. On your trade working capital, if the proportion of nonresi is moving in the right direction and your infrastructure projects and the grid related is moving in the right direction, what would be a normal guidance then for trade working capital? I would assume that it actually becomes more negative. H. Pater: First of all, we are really happy with the current status. [indiscernible] has already said that the fact that we are now stable for 2 years in a row and expecting for the upcoming period of roughly minus 12% as a kind of a proxy. And I think it's still a healthy number relating to this type of industry. Martijn den Drijver: Okay. So no major movement at that level. Got it. And then my final question, I couldn't derive the actual amount of the restructuring charge. Was it a material amount in 2025, the restructuring charge? H. Pater: Yes, a very small number. Martijn den Drijver: Okay. Then I'm not even going to ask what it is about. H. Pater: Neglectable. Unknown Analyst: [indiscernible] a follow-up from my side. You have signed a cooperation agreement with Rolls-Royce SMR for the U.K. and for the Netherlands. Why have you not signed an agreement, a global agreement to offer your services? And what has now become -- with Hochtief also joining this market arena, has it become a threat to you that they might take business outside of the Netherlands and the U.K.? R. Joosten: No. We have a very specific role in that group of companies. We deliver a patented structure that is necessary or that has the function of protecting the buildup of the reactor. And that's our contribution to this whole system, which then will be removed when the final structure is there. That's the only thing we do in this system, and that's why we were selected by Rolls-Royce to be part of this. So there will be other people involved in the total theme -- of set of things that are necessary to build a reactor like that. But we are the partner for that part of the construction. Unknown Analyst: Only for the U.K. and for the Netherlands? Or have you signed a new agreement that you will service them throughout Europe? R. Joosten: No, that's still not clear, to be honest. I think we are still in the phase of getting some evidence that this can work. So there are discussions on building a few of these reactors in the U.K. and some of them in Europe. But it's also a strategic decision we have to take further on for ourselves because we have a very clear strategy to focus on the U.K., Ireland, the Netherlands and Belgium. So any movement outside these regions will be an important decision we have to take. Unknown Analyst: I understand that, but this is really one specific product, which you build and then remove -- how would say, [indiscernible], but you can build up somewhere else in Europe as well. For example, in Czech Republic, you most likely will build the first one. To have a head start, I would presume that would be very attractive to service. R. Joosten: That is true. I think it's a repeatable model. But again, I think we are more focused now on getting these things on the road -- to show on the road, to say it maybe with some disrespect because these are nuclear reactors. This is not an easy product, of course. And I think it's really important to have some evidence that this can work, I think especially for the U.K. government as well, where we will be the partner. I think there is time enough for us to think about, let's say, strategies outside our core markets. [indiscernible] really not for tomorrow. Unknown Analyst: No, no, no. But we're also looking at the long term for BAM. But again, hopefully [indiscernible] might have become then a competitor in this respect? R. Joosten: Well, that depends then on the very long-term discussions on implementation outside our core activities. I don't know. We have the patent on this system. So we have it in our hands to make that decision strategically going forward. Michel Aupers: Maybe final question. Martijn den Drijver: Yes, two. Again, Martijn den Drijver for ABN AMRO. If you take EUR 7 billion as a basis, 6% EBITDA, roughly EUR 400 million in EBITDA, you take out EUR 80 million CapEx, EUR 100 million in leases, EUR 60 million in taxes, you add back some trade working capital flowing. I'm not assuming any M&A, of course, you get to a free cash flow of roughly EUR 200 million. The real question is, why are you so careful with the share buyback? Why just EUR 40 million? Your balance sheet can bear much more than that, and you can even do that on an annual basis if the market continues to operate at this level or you improve. So how did you get to the EUR 40 million? H. Pater: Yes. As already alluded to also in previous meetings, we do have our capital allocation strategy, which is built upon 4 pillars, looking to our solvency, also our equipment, what is needed to improve our equipment. It's about M&A activities, land bank and indeed the dividends and share buyback. If you look to the total of dividend and share buyback, it's a similar figure compared with a year ago in total and paying 55%. You know about the acquisition there with regard to Blockland, which we are going to organize in the remaining part of this year. And we need a bit more flexibility also for land bank acquisitions as well. So I think it's not really a cautious approach. I think it's a very, how to say, realistic approach. Martijn den Drijver: Okay. Got it. And then just a final almost bookkeeping question, but provisions and pensions resulted in a positive cash inflow in 2025. How is that possible? What did you provision for? H. Pater: Yes. Looking to the provisions, we see an increase there, not using it at this moment in time. And that has mainly to do with the fact that our revenue, as already said, growth over time. I think in the last 2 years, roughly 12%. That means your normal warranty related to our obligations with regard to our built environment is also growing as well. We are not utilizing it. Michel Aupers: Maybe, [indiscernible], the final question, yes. Unknown Analyst: On the Fehmarnbelt, just from my understanding, the work that you've done over the past period, and let's say, the revenues recognition, of course, is there. But in terms of billing and cash payments by your client, are you on track? Or is there a significant amount of stuck in work in progress because of the ongoing discussions? R. Joosten: Yes, we never go into details on specifics on projects. That's our normal policy, but it's also out of respect for our JV partners and our customer and the negotiations we are in or discussions we are in. So maybe later, we can come back to this one. But for now, we don't go into the specifics of this project. Unknown Analyst: And maybe as a last one, the EUR 13 billion order book now versus EUR 13 billion last year, do you sleep better because of the EUR 13 billion as it is today in terms of quality and visibility that you have? R. Joosten: I sleep better because we had a revenue of EUR 7 billion. So if you look at the EUR 13 billion, you have a revenue of EUR 7 billion and you have again EUR 13 billion. That's a pretty good performance. Unknown Analyst: And in terms of overall quality? R. Joosten: Well, we see the quality improving margin-wise, slowly, but steadily. And of course, people expect that to grow maybe even faster. But these are thousands of projects. So to get the whole chain of margins up, yes, that is a long-term game. It's a marathon. And steadily, but slowly, we see that improving, less risk, higher margin coming through the P&L. That's how we play this game. Simon Van Oppen: One last question, please. Simon Van Oppen, Kepler Cheuvreux. I was wondering on your, let's say, recurring business, long-term maintenance contracts. Can you share roughly for the Netherlands, but also U.K. and Ireland, how much of your revenues is related to more recurring revenues? R. Joosten: Yes. More and more, we see, of course, like in the facility management, you have long-term contracts. So there it's easily to calculate. But more and more in all our other businesses like civil engineering, for example, you see that we have long-term relationships with, for example, SSE in Scotland and with TenneT in the Netherlands is that recurring revenue in definition. For us, it almost is because we see already the pipeline for the next 5 to 10 years. Same with companies like Enexis, for example, in the Netherlands and the local energy providers. We also have 10-year kind of contracts. In Contract U.K., you see more and more that our business is in education, like Henri is saying, these are frameworks. Is it recurring. From a definition point of view, we can debate. But in that framework, we see for 7 years, for example, business coming to us not per default, but it happens like that, of course. So more and more, let's say, our business is in a long-term kind of approach. Also the number of customers is decreasing all the time, and we are focusing on less customers with long-term frameworks or long-term contracts. Sometimes we have a one-off project that can happen. We are not against it. But strategy is to work within these frameworks and have, let's say, fewer customers with long-term relationships. The percentage, well, I think it's already a big percentage of our revenue today. I don't have it behind the comment, but... H. Pater: Yes, that's a bit depending upon the definition of [indiscernible]. But I think in the meantime, quite a significant number. Michel Aupers: Okay. Thank you very much. Ladies and gentlemen, this brings the meeting to an end. We hope to welcome you in the near future. Thank you, and have a good day.
Operator: Thank you for standing by, and welcome to the Sandfire Resources H1 FY '26 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Brendan Harris, Chief Executive Officer and Managing Director. Please go ahead. Brendan Harris: Good morning, everyone, and welcome to our financial results for the half year. As always, our executive team is here with me today, and I'll pass to Megan very shortly to walk you through the all-important numbers. But before we start, I'd like to acknowledge the traditional custodians of the land on which we stand, the Whadjuk people of the Noongar nation as well as the First Nations peoples of the lands in which we conduct our business. We pay our respects to their elders and leaders past, present and emerging. Starting with safety. We finished the period with a group TRIF of 1.3, down from 1.7 at the end of FY '25. While this outcome moves a step closer to our goal of having a workplace that is free from injury, the number of high-potential incidents in our business remains a concern and highlights the importance of the work we're doing to further strengthen our internal system of risk management and control. Of course, from a cultural perspective, the regular reporting of these incidents is an important indication that our efforts to build an inclusive environment where every employee and contractor feels safe to stop work and speak up is starting to take hold. More broadly, our 2 high-margin mining operations in Spain and Botswana really proved their worth in the period as the copper market firmed and their valuable byproducts of zinc, lead and silver, further enhanced their competitive cost position. And it was by no means our best half operationally. While MATSA started the year well, building further operational resilience and consistency, it's been somewhat more challenging. As you know, at Motheo, where we brought forward planned maintenance and were impacted by a temporary drop-off in mobile fleet availability to finish the half at a collective 46% of annual production guidance, having delivered 48,600 tonnes of copper, 49,000 tonnes of zinc, 3,500 tonnes of lead and 2.4 million ounces of silver for copper equivalent output of 72,100 tonnes. But of course, that's only part of the story. We've always said we want to be judged on our ability to deliver on all aspects of the mining value equation. And in this regard, we have done well to control costs across an extended period that has been characterized by broad-based industry-wide inflationary pressure. And our track record remains intact as we have retained annual guidance for underlying operating unit costs, production and capital expenditure at both MATSA and Motheo. Quite simply, our focus on the basics and fiscal discipline is keeping our house in order. I'll leave our broader financial highlights and achievements for Megan to summarize, which should also help you gain an even better understanding of our approach to capital management. But before I pass over to Megan, I'd like to formally introduce the formidable partnership we formed with Havilah Resources to advance the Kalkaroo Copper-Gold project and establish an exploration strategic alliance across the highly prospective Curnamona Province in South Australia. Under the terms of these agreements, we now have an exclusive right to earn an 80% controlling interest in what we believe to be one of the best copper and gold greenfield development opportunities in Australia that has the potential to become a large-scale, long-life operation ideally located in a preferred jurisdiction. Kalkaroo is an exciting opportunity for our shareholders that firmly reestablishes our exploration and development footprint in Australia. We expect to commence an extensive infill and extension drilling program at Kalkaroo once we have established camp facilities and received the required approvals, which are expected in the June quarter, if not sooner. Make no mistake, we plan to move prudently but quickly to test the full extent of the Kalkaroo copper and gold deposit and establish the value maximizing pathway for its development. In this regard, we are uniquely positioned. We have the balance sheet, we have the technical teams, and we have a proven and match fit projects team that only recently completed the successful construction and commissioning of Motheo. With that, I'll hand over to Megan. Nicholas Read: Thank you, Brendan, and good morning to everyone on the call. I'm pleased to present our financial results for the first half of FY '26. As Brendan touched on, we have delivered 72,100 tonnes of copper equivalent production for the 6 months to 31 December 2025. This performance, coupled with healthy pricing for our key commodities delivered revenue of $672 million, a record for a 6-month period, which would have been some $23 million higher, if not for the impact of the hedging program associated with the MATSA acquisition, which was fully executed by the end of the period, leaving all future sales fully unhedged and giving the group a pure exposure to commodity prices. The combination of record revenue and good cost control delivered underlying EBITDA of $304 million and an underlying profit of $107 million, which has more than doubled since the last half for a statutory profit of $96 million. Digging deeper, at Motheo, despite the somewhat challenging start to the year, we delivered a robust set of financial results, with underlying operations EBITDA largely unchanged at $161 million for a still healthy operating margin of 57% as strong commodity prices mitigated the impact of lower-than-expected production. Motheo delivered an operating unit cost of $43 per tonne, marginally below our annual guidance of $44 per tonne, impacted by mining contractor and labor costs and the previously advised 50% increase in power tariff. At MATSA, underlying operations EBITDA increased by 37% to $184 million at a 47% margin, primarily driven by higher commodity prices and lower TCRC, which more than offset a 15% increase in underlying operating costs that were impacted by recent strength in the euro to U.S. dollar exchange rate, an increase in costs associated with recovery improvement initiatives and the release of working capital as ROM stocks were consumed for an operating unit cost of $87 per tonne, which is broadly in line with FY '26 guidance. Below the line, our D&A expense of $144 million included $113 million of MATSA and $30 million of Motheo, which decreased by 6% in comparison to the prior corresponding period, primarily as a result of lower mining rates. We expect our D&A expense to rise in the second half to reflect the planned increase in throughput at both MASTA and Motheo. Our overall underlying net finance expense of $11.4 million decreased by 58% compared to the prior half as the group experienced a significant $16.2 million reduction in net interest and facilities fee expenses to $9.3 million in the half reflecting the injection of $301 million into our balance sheet across the prior 12-month period and the lower margins at our corporate revolver facility provides. The rise in the group's profitability led to an increase in our underlying income tax expense to $42 million for an underlying effective tax rate of 28% which continues to be impacted by the limited ability to recognize benefits associated with tax losses in Australia and the U.S.A. On the topic of tax, subsequent to the period end, we paid our inaugural tax installment for Motheo of $11.6 million, following the utilization of carryforward tax losses, a reflection of the operation's strong cash generation and buoyant commodity markets. Looking ahead to the second half of FY '26, we expect cash payments to step up, trending toward our effective tax rate in future years. Total capital expenditure across the group increased by 14% from the prior half to $112 million as the strength of the euro and commencement of activity to construct our new tailings storage facility at MATSA and incremental investment to support the optimized 5.6 million tonne per annum throughput rate and ongoing A1 drilling and PFS costs at Motheo saw an uplift in our level of investment. The group's balance sheet has been fundamentally transformed. Strong operational performance, buoyant commodity markets have delivered a $489 million into our balance sheet over the past 2 years. This is a significant leap forward for the group's financial position when you consider that our balance sheet had peak net debt of $481 million, just 21 months ago, and we are now sitting on a net cash position of $13 million. In accordance with our capital management framework, excess capital will be deployed in a manner that maximizes TSR and our per share metrics. In simple terms, this means that any discretionary investment alternatives will need to compete with shareholder dividends and share buybacks. The agreement that was struck with Havilah Resources are a good example of this framework in practice and has seen an initial AUD 31.5 million cash payment to Havilah subsequent to period end as part of the Stage 1 payment and a further AUD 15 million cash payment has also been made subsequent to period end to fund exploration in the Curnamona province. These additional commitments were an important consideration for the board when contemplating the recommencement of shareholder dividend while balancing preservation of the group's strong financial position ensuring that any distribution doesn't move the group away from its targeted net cash position. With this in mind, no dividend has been declared in respect of half 1 FY '26. As Brendan touched on, we've retained annual guidance for underlying unit costs, production and capital expenditure of both MASTA and Motheo. However, we have incrementally increased group capital expenditure guidance by $10 million to $240 million to capture the planned ramp-up of activity at Kalkaroo and guidance for exploration and evaluation expenditure by $5 million to $51 million to reflect both the planned commencement of regional exploration in the Curnamona Province and additional activity to keep the Black Butte project moving forward following completion of the PFS in December. Turning to future concentrate sales. Our recent tender for Motheo concentrate was well received by the market, and we secured approximately 75% of calendar year '26 and calendar year '27 sales with a select number of customers at TCRC terms, which reflect the prevailing market. The high number of participants and competitiveness of the bids reflect the tightness in the concentrate market and the quality of the Motheo concentrate. We expect these positive outcomes to benefit our C1 unit cost in half 2. Our strong financial position and growing profitability continues to give us confidence for the future, and we will remain financially disciplined. With that, I'll hand back to Brendan. Brendan Harris: Thanks, Megan. Look, as you rightly said, we're in a strong position, and we're not taking our foot off the accelerator with a lot of hard work needed to ensure we make good on the commitments we've made for the remainder of the year. And can I stress that we expect volumes in the second half to be weighted toward the fourth quarter, like last year, with a circa 47-53 production skew, I say that again, 47-53 production skew across the first half -- sorry, third quarter and fourth quarter as access to high-grade ore at both MATSA and Motheo is progressively established across the period. Turning to exploration and evaluation development. We remain on track to declare a maiden reserve at A1 in the fourth quarter. While the initial infill and extension drilling program produced modest results, as I mentioned on our recent quarterly call, we have commenced the second phase of drilling to test for further continuity of mineralization at depth, which is shaping up as an important driver of the economics. We also expect construction of a dedicated 21-megawatt solar facility to commence in the coming months at Motheo, which will provide up to 33% of the operation stationary power requirements from midway through FY '27. Importantly, construction of this solar array is underpinned by sound economics, a robust risk assessment and our commitment to decarbonize. Separately, we expect to complete the review of our 87% shareholding in Sandfire America, which, as you know, owns 100% of the fully permitted Black Butte copper project before we report our results in August. The recent release of the pre-feasibility study outcomes for Johnny Lee and mineral resource estimate for Lowry confirmed the economic case for the project development, and our review is primarily considering the materiality of the project and feasibility study outcomes within the context of the growth we've achieved in the 11 years since our initial investment was made. So as I said, we've got our foot down, and we're building momentum across all 4 pillars of our strategy. We have the right team, we're producing metals, the world needs to electrify. Our global portfolio is becoming increasingly cost competitive. We have the right balance sheet for the time, and we're now very selectively deploying capital to opportunities that have a favorable risk-reward equation and the potential to generate an excess return for our shareholders. Thank you. And with that, let's go to questions. Operator: [Operator Instructions] The first question today comes from Daniel Morgan from Barrenjoey. Daniel Morgan: Brendan and team, so on your remarks, Brendan, you mentioned just a skew for the second half of production. Can I just clarify? I think you said 47-53 split from Q3 and Q4. Is that both assets? And also at MATSA in the mine sequence, is there a copper dominance or zinc -- obviously, you're going to have a lot of movement around the ore sources? Brendan Harris: Yes. Look, good question. So let me deal with the first part. And I know, Jason, you got to talk about MATSA and obviously, the nature of the polymetallic there. So when I talk about that split, I think, Dan, as you work through your numbers, you'll see very quickly that MATSA is much more balanced across the third and fourth quarter to make those numbers work. It's probably somewhere in the order of 48-52, 49-51. It will be in that order. And then obviously, the differential is Motheo. Motheo naturally has a more significant skew because as we open up the A4 ore body, we really get access into that high-grade ore. And because of the fleet availability discussion we had, of course, at the quarterly call you'll be mindful that we progressively start to release more high-grade ore from the T3 pit as well. So hopefully, that gives you a sense as to how that should play out. It's not a perfect sign, but we're just trying to give you a bit of a sense of how that balance will work across the quarter. And maybe, Jason, if you can go to MATSA in terms of the polymetallic. Jason Grace: So if we look at Dan, the split between copper-only ore and also poly ore for the year, we had originally planned around about 1 million tonnes of the 4.6 being copper-only ore. If you look at it half to date, we're sitting around about 550,000 of copper ore mined. So largely, that proportion that we've seen in half 1 will be maintained through the half 2. But if you look at Appendix A from the quarterly there as well, it will give you an indication there around our guided grades for the year and particularly for Q2. We expect to see copper-only ore probably increase slightly in terms of copper grade. And overall, probably a slight increase in zinc grade going into the second half as well. Brendan Harris: Yes. Maybe just to round that out and turning back to Motheo, and Jason, feel free to add. If you think about it, Dan, remember, we brought forward maintenance because of the issues we had in the SAG mill. That was planned for the second half. So not only do we expect to see some of the best grades coming out of Motheo in that fourth quarter, particularly with T3 and A4 providing a benefit. But we are expecting a high throughput rate in that period as well, which will obviously, by definition, be above the average of the year of 5.6 million tonnes. So -- and again, the last thing I would add, as you know, pretty typical in most processing plants as we push higher grade material, we'll get higher recoveries. So all of those things we anticipate it working for us and really provide that kicker in the back end. Daniel Morgan: It would be remiss of me this week to not mention silver. BHP obviously has done a big silver stream. Just wanted to hear your perspectives on your silver revenue highlighting it? And how can you maximize the value of it for shareholders? Brendan Harris: Thanks, Dan. We did anticipate we might get a question or 2 about silver. Topical at the moment for all sorts of very good reasons. Look, I guess the first thing I'd say is I'm certainly not going to comment on BHP and what they have done and the reasons they're in. But I would just make a general observation that a large diversified mining company is very different from a mid-tier emerging global copper producer with primarily 2 high-quality operations, high-margin operations and 1 development option beyond Black Butte being Kalkaroo, that we're going to accelerate with regards to activity on the ground to hopefully move us towards the confidence in time to develop and make an investment decision. I've said many times that I believe in the space that we operate. Our job is to be effective risk managers. And I think it's really important, therefore, this concept that I've talked about, about suppressing beta. Our job is to suppress beta, reduce risk, reduce volatility and be safe, consistent and predictable with a fundamentally simple strategy. And I think ultimately, that's what delivers the rating. Now obviously, we keep all things on the table. And I think one's got to be careful ruling things out in perpetuity. But primarily, what that means in this regard is that a stream for us would increase beta. It would increase the underlying cost structure of our assets, it would make us more vulnerable through the cycle and ultimately, should lead to a higher cost of capital. Now of course, you can realize capital upfront for that. The question is then what you do with that, but you've got to be very careful in the context of knowing you have effectively a liability but you also have much less resilience to commodity prices and macroeconomic volatility. So look, we still stand by the premise that we want to give our investors largely pure exposure to the commodities that we produce. We think that's why they own us. We want to very much do everything we can, well, which is -- has the typical levels of volatility. Our operations have the typical complexity that exists in mining that we do everything we can to enhance our cost position, our byproducts play into that. There are a core difference and point of difference with respect to a number of the large Andean producers, which are not less with byproducts. Typically, some have -- some might have a little bit of gold, but not a lot of byproducts. And it's the silver and in MATSA's case, the additional lead and zinc that really keeps those assets well positioned on the cost curve and we think that will serve us best across time, and we think it will certainly help us with our ultimate rating that the market ascribes over time. Operator: The next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: Brendan, Megan and team. Firstly, just a couple of clarification questions up front, please. Brendan, your comments around the solar facility at Motheo, I assume that's being done off Sandfire's balance sheet with a PPA in place, but maybe you can just confirm that firstly, please? Brendan Harris: Yes, it's effectively a third-party lease agreement. And the way it works in the current sort of energy price environment, it really leads to no meaningful impact on our P&L relative to the current status quo with regards to how power prices, et cetera feed through. What I would say, though, is we think it's not only something that's the right thing to do also aligned with our commitment to decarbonize, but it actually plays an important part in mitigating risk against further power tariff pipe, but also any grid instability. Ben Lyons: Awesome. And secondly, Megan, just taking into account your comments around the Motheo concentrate offtake. And I think you said approximately 75% of calendar '26 and '27 sales have been locked away at TCRCs terms, which reflect prevailing market conditions. Could you possibly just elaborate on what you're seeing with regards to prevailing market conditions at present, please? Megan Jansen: Ben, thank you for that question. And you heard that correctly, we've locked in approximately 75% of our concentrate sales for calendar year '26 and '27, and we do refer to having secured prevailing market conditions. As you'd be aware, market pricing has been TCRCs in that negative territory, in recent months, ranging from sort of negative $50 per ton to upwards negative $100 per ton and so it's reasonable to assume within that range is there about where we've landed for calendar year '26. Calendar year '27 is a little bit more kind of intricate, if you like. It's a combination of the market pricing that we've seen in recent months, but then there's also links to benchmark. So I think for calendar year '27, a more conservative approach is probably the best way to think about modeling that TCRC benefit beyond calendar year '26. Ben Lyons: Great. looking forward with the final question, just on Slide 27, great to see some of your plans coming to fruition, so early for the Kalkaroo opportunity. And I can see you've got in place there, a number of proposed drill collars. I guess maybe the first question on that schematic would be just the interplay between the couple of granted mining leases there and then there's an MPL, which I think lots onto a multi-purpose lease down in the Southwest quadrant. And how those drill collars align with historical drilling. Basically, just trying to get a sense of how much confirmation drilling is planned versus extension and infill going forward? Brendan Harris: Yes. Look, thanks, and I'll take that up front and then Jason obviously, Ian Kerr, the master mind behind. Obviously, the construction and development of Motheo, he's basically been moved across onto this permanently now. That's what when I referred to a match-fit team. We're quite blessed to have that capability, it's not just Ian, it's his broader team and all the support around him. If you look at that schematic, a couple of things to note. You'll notice that the grade is in effect the saprolite gold resource and the sulfide mineral resource. You can see a large part of that drilling, Ben, is really to test that extent. So this ore body remains open at depth and along strike in multiple directions, primarily the southwestern edge. Beyond that boundary, obviously, we've got plans to initially test it, but it appears to us that there's at least 2 of open strike. It's currently defined over about 3 kilometers. So what you'll note is that primary objective initially is to really get out there and understand what the true scale of this ore body is. And test I guess our underlying assumption that this ore body has the potential to grow substantially and support a very large-scale operation, low cost, large-scale mining fleet, high productivity ideally located next to already installed infrastructure, highways, rail, available renewable energy in the area, et cetera, et cetera. So that's really the plan. So most of it is really step out. Now of course, over time, if we get the results that we would expect to see, then in time, we will also look to increase drill density. We would think a minimum 50-meter type spacing. And that's currently at around about 100-meter centers on average. So over time, that will also evolve. But again, largely a plan initially to really test our thesis of the scale of opportunity that exists here. Now I would just say that we're also through due diligence, we've been lucky enough to look at some of the work that other third parties did to go and, I guess, assess some of the historical data on a bit of a term, twinning drill holes and they actually saw high correlation and replication of original results. And that's led us to believe the most important thing is to get out and understand the ore body and do new work rather than start off trying to replicate results that seem to us to have been to some extent or seems to have already been done. So Jason, maybe just test anything else on that? Jason Grace: I think you've covered it really well. The only thing I might add there, Ben, is Havilah have drilled and prior involved parties as well have drilled a lot of RC drilling with some diamond drilling. We've also done a lot of work on looking at whether there is an inherent potential bias there between the different drilling techniques. And at this stage, we believe that RC is a good representation of the ore body as we stand at the moment. So as part of our drilling program, we will be doing a mix of RC and diamond drilling. So obviously, with diamond drilling collecting very good structural, lithological, and metallurgical data and then RC being able to step out very quickly and rapidly assess the size and scope and the detail of this deposit as well. Brendan Harris: And then maybe just to round that out, -- and this won't be lost on you, but just maybe for the benefit of others, that this is a sedimentary copper deposit. It's highly metamorphosed and cooked. As we've said before, the mineralized zone, the main sort of prize is it looks like a chair, it's cooked that much. But the key point being is that we have no indication of any discontinuity of the sedimentary layer. That's what we need to test. And that's what that -- particularly that drilling as we move out towards the Southwest is designed to do because that's, again, a big part of the prize for us. It's an ideally dipping portion of the stratigraphy. It's what lends itself to a low strip ratio. And as we mentioned, it also lends itself we believe, to large-scale bulk mining equipment, which will bring with it significant benefits from a productivity and efficiency point of view. Ben Lyons: That's very helpful. And Brendan, just the final part was just the relevance of that MPL versus the ML that I'll hand it on. Brendan Harris: Yes. Look, so a number of these things are a function of the past. There are different configurations that have been considered in terms of where specific infrastructure might replace things like workshops, camp facilities, tailings dams and so on and so forth. As we work through the entirety of this project, I think a lot of those things will evolve. Indeed, we anticipate along with Havilah, but in time, we will seek to add to the, call it, the acreage that the MLs actually cover and/or have additional MPLs because it's likely as we hope that the opportunity grows in scale that we will actually need to look at alternative areas for some of the infrastructure that I've mentioned. There are also off this map. There are borrow pits and things where there are applications in already such that we can get access to aggregate and other forms for building and construction zone. So yes, look, we look forward to at some point in the not-too-distant future once we've got a meaningful presence up there, providing opportunity for analysts and investors to go up and get a feel for the ground and obviously how we think things will evolve over time. Operator: [Operator Instructions] The next question comes from Adam Baker from Macquarie. Adam Baker: Brendan, I was just wondering if you could make a quick comment. Just looking at some of the news in February, Spain had a pretty wet month. Just wondering if there's been any impact to MATSA throughout this period? Brendan Harris: Yes. Unfortunately, that's something we see time and time again. These major weather-related events are becoming more common. And I guess, in some ways, they would say are consistent with a lot of the modeling that was undertaken many, many, many years ago, particularly in the mid-latitude of higher frequency and intensity of these storm events. Jason, I'll just hand it to you. Jason Grace: Firstly, Adam, if we look at it, there's been thousands of people quite heavily impacted by the very heavy rains. And while it wasn't as dramatic as the October 2024 range that we saw last winter, this one is more of a cumulative impact of heavy rains across multiple seasons. So what we've seen, particularly in the Southern Spain area around Andalucia, A lot of the water storage facilities in that region have filled up in the previous winter and not really being drawn down. Now what we've seen is -- then heavy rains come in. We've got a lot of those water storage facilities where they're overflowing straight away. And what we've seen as a result of that is very heavy impacts to communities down close to the coast. So Huelva itself has had thousands of people impacted. And a number of our people and their families are obviously impacted by that given that we draw people as employees and stakeholders for our site at MATSA from that region as well. Now stepping back towards the mine itself. Our MATSA team have managed this event really well. Last year, in between the 2 winter-rainy seasons, we invested in the construction of a south tailing or water storage dam which set us up really well for water management during this period. And the team have managed that very, very well. If you look at overall impact to operations, we've made sure that we've utilized those new facilities well. The only real impact that it has had to us is that we've -- once again, what we see when our ROM area gets very, very wet, the ore gets saturated, and it impacts our crushing and our ability to put the ore up the conveyors during that time and get it through the mill. So we've suffered a reduction in throughput rate in the first half of February, but we're recovering well from that at the moment, and we don't expect that there's any material impact for the full year for MATSA. Brendan Harris: I think the way I put that timing difference, it's more of a frustration, but given the way that the mines configured on the processing facility, as Jason said, we don't expect that to be a permanent impact. But I think the bigger issue is just for our people, and that creates some level of stress in any organization in any region. Good question, though, Adam, thank you. Adam Baker: And just following up on Kalkaroo, maybe Slide 28. Clearly, quite a large array of tenements here, close to 9,000 square meters. Just wondering, it looks like you've done -- it looks like Kalkaroo has done quite a bit of work regards to the JV's perspective and you've kind of got walk-up targets to put drill holes into. Can you just make a quick comment on what you're seeing outside of the main Kalkaroo deposit with regards to mineralization and deposit formation? Is there anything in particular you're looking for? Or should we just assume this is a regional kind of exploration target? Brendan Harris: Look, I'll say something slightly facetious to start with. There's an old exploration geologist. We all know that sometimes the worst thing you can do is put a hole into something. It's the best way to turn something from a target to nothing. But look, the reality is this opportunity is clearly anchored by Kalkaroo. We don't say lightly that we think it's the best undeveloped copper-gold opportunity in the country. That's our view. Now to be tested, others to judge. That's our view. That's what we're doing, what we're doing. We've structured the deal in a way that we think really puts the risk reward in our shareholders' favor. It mitigates risk, provides a lot of opportunity. But it is absolutely right to say that the broader tenement package and the prospectivity of the Curnamona Province has also played significantly into our thinking. If you think about our strategy and you step right back, what do we like about our business? It's that we not only have MATSA, it's that we have a basin opportunity in Iberian Pyrite Belt and have a significant land holding. We like the Kalahari not only because we have Motheo and modern processing hub, but we have a very large land holding just under 10,000 square kilometers or soon to be. That provides an enormous opportunity for future discoveries. What we like about Kalkaroo and Curnamona, one, Havilah has got the most experience in the basin. What they don't know about the Curnamona really is not worth knowing. They have the large land package. It gives us that basin opportunity. And as you said, they've done a lot of work over a long period of time, and there are walk-up targets. Now again, drilling those targets, time will tell. There's a little bit like what we see in the Kalahari. You're looking for a lot of these sedimentary type deposits, which means you will find a lot of copper. What you're trying to find is aggregation of high-grade coupled with continuity. We think that there are some very, very attractive targets and time will tell. But we think this is going to be $30 million over 2 years of money well spent. Operator: At this time, we're showing no further questions. I'll hand the conference back to Brendan for any closing remarks. Brendan Harris: Look, I know I say it a lot, but it's a very busy day. We'll see how many companies have reported this morning. We do appreciate the effort you go to, to understand our company and help others. And of course, we really appreciate everyone who's dialed in today. We are, as obviously, keeping our foot to the floor. We've got a big second half in front of us. We want to be held to account. We are committed to delivering on our guidance, and we look forward to speaking with you again in April, if not before, at either BMO in Miami or on our road show as we move around the country. But thank you again, and have a great day.
Operator: Good morning, and welcome to the Air France-KLM Full Year 2025 Results Presentation. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Benjamin Smith, CEO; and Steven Zaat, CFO. Please go ahead, sirs. Benjamin Smith: Okay. Thank you very much for your introduction, operator. So good morning, everyone, and thank you for joining us for the presentation of Air France-KLM's Full Year 2025 Results. I'm joined today by Steven Zaat, Group CFO; Anne Rigail, CEO of Air France; and Marjan Rintel, President and CEO of KLM, whose mandate has just been renewed for another 4 years. Congratulations to Marjan. I'll start with the key highlights on the year followed by Steven, who will walk you through our financial performance and outlook for 2026. I'll then wrap up with closing remarks on our 2028 ambitions before opening the floor for Q&A. Okay. Moving on to Slide 3. Let me begin by recalling that we are executing our strategy in a consistent and disciplined manner across all the pillars of our strategy, and this execution is translating into tangible and encouraging results. We are reinforcing our market position, notably through the proposed increase of our state in Scandinavian Airlines System, strengthening our footprint in the Nordics and enhancing connectivity to key North American and Asian markets. We continue to improve profitability with our operating margin reaching 6.1%, reflecting stronger revenue generation and rigorous cost control. Customer satisfaction and brand value remains strong, as reflected by multiple international distinctions across the group, including Air France being named Best Airline in Western Europe by Skytrax for the fifth consecutive year. Employee engagement continues to improve, our Employee Promoter Score up 33%, reflecting the strong commitment and professionalism of our teams, supported by targeted action plans. We are also accelerating technological simplification, retiring more than 200 legacy applications to improve efficiency and agility. Finally, the sustainability stays fully embedded in our strategy, fleet renewal remains a cornerstone of our transition plan with next-generation aircraft now representing over 35% of the fleet alongside SAF blending, significantly above regulatory requirements. Now moving on to Slide 4. Let me now turn to our full year 2025 performance. In a demanding environment, Air France-KLM delivered strong execution translating into positive results on multiple fronts. We carried nearly 103 million passengers, which is up 5% year-over-year and the first time since COVID that we have surpassed the 100 million passenger marks. Group revenues reached EUR 33 billion, up 4.9% year-on-year, an all-time high for our group. We delivered an operating result of EUR 2.0 billion, an improvement of EUR 400 million compared with 2024, marking the highest operating results in our history. At the same time, we generated EUR 1 billion in recurring adjusted operating free cash flow up EUR 800 million year-on-year, reflecting solid cash conversion. Our balance sheet continues to strengthen with net debt to EBITDA stable at 1.7x well within our target range and equity increasing by EUR 1.6 billion to EUR 2.4 billion. Overall, 2025 demonstrates how disciplined execution is translating into structurally stronger financial performance. Yes, beyond the numbers, it was also a year defined by significant commercial achievements. Slide 5. Modernizing our fleet remains a top priority for value creation. The integration of new generation Airbus A320neo family aircraft at Transavia and KLM delivers a superior customer experience while significantly reducing our environmental footprint and operational costs. At the apex of the market, we continue to redefine luxury travel. Air France unveiled its new La Premiere experience, the ultimate expression of comfort and sophisticated service and further enhanced the onboard offering. We strengthened our inflight entertainment through new partnerships between Air France and Canal+ and Apple TV+, bringing premium content to our long-haul customers and enriching the onboard experience. KLM is now among the first European airlines to offer free Internet on flights within Europe and simultaneously both Air France and KLM continue to expand and enhance their high-speed WiFi offering to meet growing customer expectations. Our pursuit of excellence is equally reflected on the ground with the opening of our new Air France Chicago O'Hare lounge and refurbishment of our Boston Logan lounge, we are offering an elegant environment anchored in French hospitality. Collectively, these initiatives demonstrate our unwavering commitment to strengthening the prestige and appeal of our brands at every touch point of the customer journey. Turning on to Slide 6. Last year, Flying Blue, our loyalty program celebrated its 20th anniversary, a milestone that highlights the enduring strength of our loyalty program. Over 2 decades, Flying Blue has evolved into one of Europe's leading airline loyalty platforms, now surpassing 30 million members worldwide. Growth has been particularly strong in recent years with membership doubling since 2022. Today, Flying Blue connects customers across 40 partner airlines, more than 100 commercial partners and over a dozen co-branded credit cards, embedding the program into members everyday lives well beyond travel. This scale translates into both engagement and impact. In 2025 alone, 1.2 billion miles were donated by members to NGOs, representing roughly 2.5% of annual miles issued. Importantly, Flying Blue has been recognized by point.me as the best airline loyalty program for the second consecutive year, a distinction that underscores the strength of our value proposition and the trust of our customers. More than a loyalty program, Flying Blue is a cornerstone of our commercial strategy, driving customer retention, premium engagement and long-term value creation. Moving on now to Slide 7. We continue to advance our premiumization strategy through targeted investments across the entire customer journey. Since 2018, our focus on cabin renewals, high-speed connectivity and upgraded global lounges has significantly strengthened our value proposition. These efforts are now driving a structural shift toward a more premium revenue mix. In 2025, our top-tier cabins La Premiere and Business accounted for 28.1% of total revenue, up from 26.9% the previous year. Meanwhile, our premium economy offerings branded premium at Air France and premium comfort at KLM have surged to reach 8% of revenue, showing significant growth over the last 2 years. Collectively, premium cabins now generate more than 36% of group revenue. This evolution is underpinned by strong commercial momentum. In 2025, La Premiere revenues grew by 17% and business revenues by 9%. Our premium economy segments saw even more dynamic growth with revenue up 18%. Crucially, this expansion was achieved while maintaining stable load factors, demonstrating the robustness of demand for our midterm premium offering. Additionally, our direct online revenue grew by 9%, further enhancing our distribution efficiencies. This continued shift toward a higher value mix remains a key driver of profitability and long-term value creation. Our focus on a more personalized customer experience continues to drive exceptional growth in ancillary revenue across all our airlines. In 2025, ancillary revenue reached EUR 2.1 billion, up 23% year-on-year, following a 26% increase in 2024. Air France and KLM generated EUR 1.2 billion in ancillary revenue, while Transavia contributed EUR 800 million reflecting solid momentum and continued expansion of revenue stream beyond traditional ticket sales across the group. Growth was broad-based across all segments. Seat selection delivered double-digit growth for the second consecutive year supported by more dynamic and personalized options. At the same time, hand luggage performance strengthened further, particularly at Transavia, supporting continued revenue growth. This sustained expansion remains an important contributor to margin improvement and revenue diversification. Moving now to Slide 9. We continue to make significant strides in our sustainability journey underpinned by disciplined investments in fleet renewal and staff. As highlighted earlier, new generation aircraft now represent 35% of our fleet. These aircraft are the primary lever of our decarbonization strategy, more fuel efficient and contribute to reducing both CO2 emissions and noise footprint. In parallel, our SAF blend reached approximately 2.9% total fuel consumption, significantly above current regulatory requirements. Our efforts are also recognized externally. We received a gold medal from EcoVadis, placing the group in the top 98 percentile and our CDP Climate rating improved from a B rating to an A rating. Collectively, these achievements demonstrate measurable progress and reinforce Air France-KLM's position among the leaders in sustainable aviation. Moving on now to Slide 10. In cargo, more than 90% of bookings are now made through digital channels, powered by our myCargo portal, which has evolved into a comprehensive end-to-end service platform. The global rollout of our CRM360 system has been completed across our network, enabling more consistent, efficient and customized customer support while opening the door to AI-enabled services. We were particularly proud to receive the airline of excellence in Europe Award from the World Air Cargo Awards, recognizing the quality of service delivered by our teams. Turning to engineering and maintenance. We secured more than 30 new contracts, bringing our total order book to EUR 10.7 billion. We also continue to advance next-generation technologies, including LEAP industrialization and new test cell capabilities and expanded our industrial footprint with the opening of a new APU facility in Amsterdam, and our expertise was further recognized by the European MRO of the Year Award from Airline Economics. These achievements highlight how innovative and customer centricity are strengthening our long-term competitiveness across both cargo and MRO businesses. With that, I'll now hand it over to Steven, who will walk you through further detailed financial results. Over to Steven. Steven Zaat: Yes. Thank you, Ben, and good morning, everybody. As you can imagine, despite all the rain, which we have the last days, I'm very happy to announce that we have broken the EUR 2 billion ceiling in terms of current operating income. I think getting the margin up by another percent closer to the 8% margin in a very difficult geopolitical context is really an achievement. If we go to Page 12, you see that our revenues are going up by 5%, so growing to EUR 33 billion. That led also to the 6.1% margin, which we currently have. And if you look at the operating result, you see, of course, we had a big tailwind of our fuel price. But at the same time, we could increase our unit revenue by 1% especially by our premiumization strategy on which I come back and which was explained by Ben. And then at the same time, we have really, really, really a strict cost control in the company. We are now at a unit cost of 1.2% year-over-year. That is at the low end of guidance where we started at the beginning of the year, which was between 1% to 3%. So we are very satisfied by getting our efficiency up and also to getting, let's say, all the transformation really finding it back now in our results. On the net result, we have a record here with EUR 1.8 billion. We have to be honest, there's EUR 700 million related to unrealized foreign exchange results, but still EUR 1.1 billion driving net results, driving up our equity and that gives us more leverage also to take out this hybrid equity out of our balance sheet. If we go to Page 13, you see the results per business. So very strong performance on the network. I come back later also on Q4, but we see on the yield. This is driven especially by premiumization and a very strong North Atlantic and South American market. That is on the passenger side. On the cargo, it's a little bit a mixed bag. So it is more or less flattish. But don't forget, in Q1, we had a plus 16% related to, let's say, all the discussions in the U.S. about tariffs and we ended Q4 with a minus 11% because the Q4 in 2024 was up 20% by the election. So there is a lot of impact quarter -- year-over-year. But all in all, despite all the tariffs and all the challenges over there, we were able to keep the unit revenues stable in our cargo segment. Then on Transavia. Transavia, we grew by 15%. We had a size unit decrease of 1.7%. The results are down EUR 52 million, which is split between Transavia Netherlands and Transavia France of 50-50. There are several reasons. First, we take over the slots in Orly. So we grew significantly our capacity and these routes needs to mature before it become, let's say, profitable. Then second, we have a lot of transition costs related to that we move from the 737 to the A320s, which is not an easy transition and may be more difficult than what we expected ourselves. And last but not least, we had a very difficult summer and it was very hot, and there is less appetite to actually fly in to other places where the sun is shining -- if the sun is already shining in your backyard. So all in all, I think it was a complicated year for Transavia, but we keep ongoing. And I think we are -- also, if you look at the Q4 results, we see that we're getting a better momentum in place. And at the end of March, all the slots are transferred to Transavia and Orly and we get to a more stable picture over there. On the maintenance, we are getting closer to the 5.6% margin, which we had in 2019. We grew our revenues externally by more than 10%. This is fully driven by our engine activity. It's really, really, really doing very strong. The communication is still on the components business where we should grow further our margins and there's still an opportunity to go in the coming years. So all in all, the 6.1% I'm pretty happy and also, of course, with the 2004 results on the operating results, it's not 2005, which is my favorite [indiscernible], but we are getting -- we were getting close to that fund. If we then go to the picture between Air France and KLM. So KLM -- sorry Air France benefited from the premiumization. And of course, we had the Olympics impact last year. So we grew our operating result by close to EUR 400 million. On KLM, it is stable. We have more benefits actually from back on track. So it's at least EUR 450 million, but we had a lot of headwinds. We had a Schiphol increase of the tariffs, which costed us EUR 100 million in landings and takeoff charges and around EUR 150 million also on the revenues because we have to charge higher charges towards Schiphol. The whole Schiphol environment profit is EUR 250 million. I don't know if you saw the results of Schiphol, but they should be very happy with it. They have a margin of 26%. But unfortunately, it's over the back of our airline. And then on top, we have, let's say, more connecting passengers on KLM and especially lower connecting traffics from Africa and from Asia. There was a yield pressure in the low-yielding segment, which is bigger at KLM than it is at Air France. If we then go to Flying Blue, I think it grows and it growth, as Ben already explained, the program is very successful. We grew another EUR 18 million despite the fact that the dollar is weaker and that has a significant impact on our Flying Blue profitability, but we grow our volumes over there. So it's good to see that we get more and more positive results from this business segment. And there's more to come in 2026 because then we also fully implemented our P&L, the new American Express deal. If we then move to Page 15. So if you look at the cash flow, we are very happy that we are now having a recurring adjusted operating free cash flow above EUR 1 billion. We still have these exceptionals which are coming in, which cost us around EUR 500 million related to the deferred social charges and the wage tax. But if you take all -- if you take that out and you take all the cash out, which we have, we have EUR 1 billion, which we generate by the business. Then if you look at the net debt, then you see that it's still going up with EUR 1 billion. There's EUR 300 million, which is related to this hybrid convertible. And there is, again, the EUR 500 million of these deferred social charges and the wage tax. So that's EUR 800 million. And then you see that especially the new and modified lease that is quite high that has to do with the introduction of the A320s and the A321s because we needed a lot of direct leases to start up and to transfer quickly the 737 transfer at Transavia and at KLM towards the A320. That has an impact of around EUR 800 million on this net debt. And then on top of it, we renewed our 787-9 operational leases, which had an impact of more than EUR 300 million. So this is an exceptional high number. We know that it will come down in the coming years, and we are more or less, let's say, in the range of the EUR 1.4 billion, EUR 1.5 billion for the years to come. So on Page 16, you see that our strengthening of the balance sheet and also the simplification is working. We have now a cash at hand of EUR 9.4 billion, significant above our targeted liquidity level. We had the lowest credit again with the new issue of the bonds, which we did in January, which was very successful with the coupon below the 4%. And with that, we are continuing the simplification of the balance sheet. So we paid the Apollo bond. We paid the hybrid convertible. We did one issue of a hybrid, and we will pay the next Apollo bond, which is due in July 2026. And then we are simplifying our balance sheet, having less of the hybrid quasi equity in. And at the same time, the strong net result generation, which you have seen over last year will strengthen the balance sheet to do that. So it's good to see that we have now an equity level of EUR 2.4 billion, which is exactly at the pre-COVID level, and we will support that further with our net results. Let's then go to the quarter. So if we go to Page 18, you see that we have, let's say, more or less a stable results. We already indicated the impact on the cargo unit revenue. So we spoke about double-digit decline in cargo unit revenue terms, and we are let's say, at a minus 11%. Don't forget, again, that we had an uptick of 21% in Q4 2024 in the unit revenues of the cargo. So the cargo unit revenues are still very strong. But of course, there is these impacts of these tariffs and these elections in the U.S. So if you take that out, you see that we have improved further our results. First, on the unit revenue, again, I come back that is driven fully by the cargo. On the unit cost, you see that we reached a minus 1.1%, which is very promising, but we had some positive incidentals year-over-year. And then if you look at the net results, EUR 600 million better. Again, there was this unrealized foreign exchange of EUR 300 million. And also we benefit from the tax assets we have on our balance sheet. So we don't pay the full tax to, let's say -- we don't pay the full income tax because we still can use 50% every time of our tax asset. If we then go to Page 19, you see that the network, still the unit revenue going up with 2.2%, excluding currency, and then there is the minus 11% on the cargo. So that stabilized the network result for this quarter. Transavia, despite the fact that they grew with 22% and a unit revenue decrease of 6%, you see that the operating results at least improved, which is not very easy in, let's say, in the winter months of October, November, December. So we are happy with the Transavia result, but we need to improve that further to make sure that we are getting to our profitability target of 8% in 2028. If we then go to maintenance. So I think in Q4 '24, we had a big benefit of delivering a lot of engines in Paris and in Amsterdam. So we are now actually stabilizing the results, but there is still room to improve in the coming quarters because we still have components contracts, which we should make more profitable as we used to before the COVID. Then on Page 20, so Air France, slightly down, mainly driven by a higher fuel price and a high ETS cost. And we should not forget that we had a very high unit revenue last year on the passenger business side over there. On KLM, we see that we improved our results. It's good to see that the unit cost reductions are really coming in now with the Back on Track program and it's promising also to see forward in the years to come to get KLM at a better result in terms of operating margin than they are today. And then on Flying Blue, 24% margin, EUR 40 million, again coming in. So very strong result also in Q4 on our Flying Blue, and it's promising also to see that for the quarters to come. If we then take a step back and we look at the world map, so it becomes a little bit like a broken record, to be honest. But you see the premium, the premium and North America and Latin America are driving up actually this unit revenue. So in the first and business class, you see that the load factor is up close to 1% and the yields are up 4%. On the premium economy, we have 8% growth in capacity. There's a little bit of a mix impact, which drives the load factor down, but still the yield is up 6.8%. So we see a unit revenue increase over there of 4%. And then the economy, that's more and more difficult. You see a 1.4% gap. We see -- if you look at the map, and we come back on it later, you see that it is more difficult with all the traffic towards the U.S. to fill, let's say, the connecting traffic towards the U.S. The point-of-sale U.S. is doing very strong. So there's a lot of passengers coming from North America to Europe. But the other side, it's getting a bit more difficult. But all in all, I think if you look at the North America with a load factor reduction of 0.5% and an increase of yield of 6%, it's still very, very strong. Latin America, 91% load factor, a 10% capacity increase and a yield increase of more than 2%. So also still very, very strong. And then if we move to the East, it's also good to see that the East is doing better. So we grew our capacity with 6%, but we see also that we have strong yields over there. And we see the yields which are strong in China. They are strong in Japan. They are strong in Korea. So everything what's Asia related is very strong. On the Middle East, we took back capacity. So that has an impact, of course, on the yield. So we could also drive up the yield. So Asia is really, let's say, promising if you see where we were in the fourth quarter. And then in the middle of the picture, you see Africa. Africa is getting more difficult. It's more, let's say, less attractive for people from that region to go to North America. And you see that also if you look at the point of sale mix. So Africa is actually not a big part of those flows on the North Atlantic, but they are down year-over-year. And if you look at their percentage with 23%. So all this growth of the U.S. is actually coming from the U.S. point of sale, which is up 3%. Europe, you see down with 2% and also Asia and India are down with 4% to 5%. So this connecting traffic towards U.S. is getting more difficult if you compare it with a year ago. And then last but not least, at Transavia, I already spoke about that the short and the medium haul, still difficult. We have flattish yields, but we know that the costs are going up there. We have the increase of the soft cost. We have the increase of the ETS cost because we are losing ETS rights, and you see also that the load factor is down 1.5%. Then let's go to the unit cost. So you can imagine that we -- after a long, long, long, long period, we had, for the first time, unit cost decrease. So that is that was very good. Let's first start at the left side. You see the productivity brings in 2%. So that is really a strong indicator that our transformation and all the programs we have in our companies are working. You see also that the fleet renewal brings 0.6% in fuel efficiency. And then you see what we call other, 0.6%. And we had a lot of -- and I don't know if you remember, in Q4 '24, our unit cost went up with 4%. We had a lot of incidentals in that period. So I think if you take it all together, it was EUR 60 million. And we have a lot of good news this year actually in our unit cost. So that I think if you take them all together, you talk about a range of EUR 100 million, which is impacting actually this unit cost performance. But all in all, I think the left side shows that we are doing very strong in keeping the transformation going and delivering the unit cost improvements, which we see in our company. And then, of course, there's the premiumization, but that drives also the unit revenue. So that has an impact of 0.6%. And we still have these charges in ATC and airport charges, which are hurting us for 0.7%. Let's then go to the year 2026. So it started not very good. We had a terrible weather in Amsterdam that had an impact of EUR 90 million in the first quarter. If you look at that EUR 90 million, around, let's say, 80% is related to KLM and Transavia and the other part is related to Transavia France and Air France, so especially a high impact on KLM. We -- if you look at the unit revenues, which we have, you see that the unit revenues in the first quarter, excluding ancillaries, et cetera, so it's the NTR is down 0.4%. Air France is still up 1.5%, less impacted also by the snow. But if you take KLM, they had a unit revenue of minus 3.8%. If you take out the snow, you come to plus 0.5%. And if you would apply that also to the total unit revenue, we are up 1.1%. So still, the demand is there. We had a hiccup, let's say, in the operations in Amsterdam, which costed us quite some money. But it's good to see that the, let's say, the underlying trend is still very positive. And if you look at the forward bookings, it's more or less in sync what we have seen in the last quarters, we are below what we were the year before. But on the long haul, you see that we already -- there's only a 1% differential. And there's always for us, let's say, a trade-off between yields and load factor. And we have a very aggressive revenue management manager to driving up the yields in our system. Let's then go to Page 25. So the fuel bill, EUR 6.9 billion in 2025, EUR 6.9 billion in 2026. So nothing is really happening. But the jet fuel price because we grow our capacity, I will come back on that later, is still coming down, and it's good to see that we have already hedged 62% of that volume. And then you see on '26, we are increasing the tenor of our hedges. So instead of hedging 6 quarters ahead, we are hedging 8 quarters ahead if you start at the quarter. And that brings that we are now have a total exposure hedged of close to 90% of a 1-year consumption. I think this is giving us robustness in this very, let's say, dynamic world, you could say, also in terms of fuel price. So we are getting closer to our European competitors, and I think we are very close to the ones which their head office is in London. If we then go to the capacity outlook, you see that we are reducing, I think, compared to what we initially thought during the Investor Day. We are now at 3% to 5%. We still will grow the long haul, which is our, let's say, backbone of our profitability with 4%. The short and the medium haul, we keep that stable. We are not growing there anymore. We are trying actually to improve our results, and we are keeping the capacity stable for the next year. And then Transavia still going up with 10%, mainly coming from upgauging of the fleet. And at the same time, we still have a quarter to transfer the activities in Orly from Air France towards Transavia. So that results in a capacity outlook between 3% to 5%. On Page 28, you see our total outlook. So the unit cost is guided at 0.0% to 2%. So there is the premiumization in which is 0.5%. We still have higher ATC cost, by the way. We still see high cost on Schiphol for another quarter. So that drives us that our unit cost despite the fact that we had a very good unit cost even down in the fourth quarter that we are between 0% to 2% for the year to come. And as we are disciplined as we were this year, we were getting more to the left than to the right side of that picture. But it all depends on the completion factor and of course, all the things which we need to further implement on our transformation because there is still inflation in the system. But it's good to see we have the CLAs actually now in. We closed [indiscernible] for Air France, and we have the CLAs in place for KLM for the majority of the stuff. And then on the net CapEx, you see a EUR 3 billion, which is in line what we had last year. So we are moving and we are still disciplined on our CapEx, although we still want to renew our fleet. And then on our leverage between 1.5 and 2, and we are now at 1.7. So we are quite comfortable with that, which drives me to our outlook. So we keep the same ambition. So we want a margin above 8%. We want a significant positive adjusted operating free cash flow, which you see that we're already realizing in 2025 if you take out this prepayment of the wage tax and the social charges in France. We keep on focusing on reducing our unit cost. It is not easy in this inflationary environment. We will keep on going to reduce that because that will improve our robustness in our business. And we are aiming on our leverage to have an investment grade for Fitch, we already have it, and we are very much in the safe zone over there. And we see that on S&P, we are moving really on the right track towards that investment grade. So we guide for 2028. We never guide in the year where we live because the circumstances are too uncertain to guide for. So that is a nice trajectory from the current 6% towards the 8% in 2028. With that, I give the floor to Ben. Benjamin Smith: Okay. So final slide here. Thank you, Steven. 2025, I'll say again, was a solid performance. We're quite pleased in a very demanding environment, in particular with the unique charges and taxation and airline focus in the Netherlands and in France. But the execution was well disciplined, and we've delivered both revenue growth and improved margins as we've just been outlining. Premiumization is clearly gaining traction. Our robust cash generation reflects improved profitability and strict investment discipline, and we're also delivering on our sustainability commitments via both fleet modernization and increasing SAF adoption. Looking ahead, we will continue to execute our road map with rigor and consistency with priorities on accelerating KLM's transformation, playing an active role in European consolidation and advocating for a level playing field. So these are the 3 main focus areas for us looking forward to 2026. Our ambition is to build a future-proof European champion, one capable of competing globally in a fair and transparent environment. So with these strong foundations and disciplined execution, we're carrying the momentum into 2026 with full confidence. So thank you for your attention, and we're now happy to take any questions you might have. Operator: [Operator Instructions] The next question comes from Harry Gowers from JPMorgan. Harry Gowers: A couple of questions, if I can. First one, Steven, can I just confirm what you said on the unit revenue going in Q1? I think you said to date that Q1 network total unit revenues are down minus 0.4%, but excluding the Schiphol impact it's up plus 1%. Was that correct? And then also, are you talking about network specifically and also ex currency? Second question just on the ex-fuel unit cost guidance for 2026, the range is obviously flat to plus 2%. Maybe you can give us a little bit of color on what scenario you're kind of baking in, which would lead you to being towards low end and flat? And then what sort of scenario would lead you to being at the higher end of plus 2%? Kind of what are you building into your guidance at both ends? And then final question, just on your EBIT margin guidance of over 8% by 2028, I mean anything you can say so in terms of progression to get there? I mean, will it be a linear journey from the 6% that you reported in 2025? Steven Zaat: So first, it was not Q1, what I said it was January, just to make sure. It is indeed the network ex currency and just our net ticket revenue, so excluding ancillaries. And you're right, let's say, if you take the January numbers, it is minus 0.4%. But if you take out the snow you get to plus 1.1% in terms of unit revenue in January. So it's not the full quarter. But to be honest, the first weeks of February were also not too bad. But I don't want to guide on weeks because then we get because then we get -- because there's always a week over week comparison, which is difficult. So I give you the number for January. Then on the unit cost, I think it is fully driven by the operations. So as long as we keep the completion factor and the operations going well, then we get more to the left side of our range. Of course, if we don't make the completion factor and we have a lot of compensation costs due to the fact as we have seen also in January, then of course, it drives up our unit cost. So I think it's all about execution. I think on the transformation, we have the programs in place. That is a journey which is not a one-day journey. So we -- it's just an ongoing procedure or operation, but the real unit cost difference comes from the execution in our operation. And for the long-term guidance, I'll give the floor to Ben. Benjamin Smith: So look, in 2018, where we were -- if I go back to 2018, where we were with Air France sitting at 1%, 2% margin and the very difficult transformation we went through with a clear strategy, and we're quite happy to see the results and how that's been panning out, and that was a linear sort of straight line. And KLM was starting the transformation or a new transformation effort from a much higher position. I'm not sure how close you are following, what's going on specifically in the Netherlands, but we've had an enormous increase in cost of operating at Schiphol. There's been a sharp increase in taxes related to transportation that have been imposed by the Dutch State and with a relatively high level of inflation, the pressure on cost with our staff has also gone up. So we've got some very good plans in place. We have to relocate the -- how the network is set up to make sure it's sized correctly for the new environment, which we're operating in. But I'm confident that we can get the margins up at KLM to ensure that, that contributes to our ambition of at least an 8% margin in the near term. Operator: The next question comes from Alex Irving from Bernstein. Alexander Irving: Two for me, please. The first is on the Air France medium-haul fleet. Now you've still got A220 deliveries for the next 2 and a bit years, then those are done. By when do you need to place the next order given the aging Seals you have? Is the main trigger for that an A220-500 program? Or if not, then what are you looking for to make that decision? The second question is on distribution and specifically how you're approaching the decision about whether and how to sell through large language models. Are you planning to engage directly with LLMs using an API or to rely on GDSs and travel agents continuing to pay commissions? When do you think you'll sell your first trip through a large language model? Benjamin Smith: Okay. Alex, so on the fleet front, we've decided to go exclusively with the Airbus A220s for -- to fly the entire medium-haul mainline fleet at Air France. We hope to have between 90, 95 examples in place before the end of the decade, replacing the entire Airbus Seal fleet. We are going to also look probably sooner rather than later at a replacement for our long-haul Boeing 777-300ER aircraft when you look out at how the order book looks at both Airbus and Boeing. So there's -- there are 2 options there. So on the fleet side, that's what we're looking at. At KLM, the decisions have been made and the 777-300ERs are much newer. And as you know, Transavia, we've made the decision. On distribution, we're still not 100% clear on which way we're going to go. We have some very unique markets in Africa, which don't fall into the categories that a lot of North American airlines deal with and some of our European competitors. We have a big exposure to Western Africa. And these are -- this requires a specific type of distribution, which we need to fit into our overall distribution strategy. Operator: The next question comes from Stephen Furlong from Davy. Stephen Furlong: It's more of an overview question to Ben. I mean I would have thought my view is that 2026 is a very important year for the group to get you -- set you up for the greater than 8% margins in 2028. I think, Ben, you called it in New York earlier in the -- in January, a pivotal year. You might just go through if we look to the end of the year, what would be your wish list at the end of the year, both organically or inorganically in terms of the group? And then what would be the biggest challenge you think this year or anything that would worry you in terms of operationally or anything else, restructuring, et cetera? Benjamin Smith: Okay. Thanks, Stephen. The strategic plan that we started out in 2019 at Air France has not changed. We've done the bulk of the domestic overhaul, which will be -- the plan will be completed in the next month. So that looks like we're in good shape to complete that. Of course, this was the biggest money-losing region of our network in 2019. So that is panning out as we'd hoped. The introduction of the replacement of the slots at Orly from being used by our regional operator HOP! and Air France by Transavia activity that takes some time to adjust. We were flying on average smaller gauge airplanes and we're replacing those with high-capacity or higher-capacity densified A320, A321 aircraft. So that adjustment and transition hoping goes as quickly as possible so that we're able to take advantage of the slot-constrained Orly airport and the cost structure we have at Transavia. So on that side, if I look at domestic France and the Orly operation and the ability to take some of those slots that we're operating today at Orly and move those to more of a European focused network and have something more comprehensive at Orly that we can offer to customers, that would be a big win for us. So we've got a time line over the next 2 or 3 years from a profitability perspective on what our ambitions are for Transavia. But as I've said many times before, the Transavia results, particularly in France, have to be looked at in context with what we've been able to restructure at Air France. So we are saving a couple of hundred million by pulling Air France out. Of course, it's Transavia that has to cover those flights, simultaneously reducing capacity in France and redeploying the use of those slots to European destinations and then going up against some very tough low-cost competitors. However, with the cost structure of Transavia being pretty much in line with our main low-cost competitors at Orly and with the advantage of the 50% slot portfolio and the Flying Blue affiliation, we've got a very good customer offering. So that's the -- that's on the Orly front. At CDG, continued simplification and -- both from an operational and maintenance perspective with reducing the types of fleets. We'll have the last of the Airbus A330-200s out of the fleet. The standardization of the cabins and the modernization of the existing fleet will almost be complete, so we can continue to drive pricing premiums, which we're seeing are working quite well. And that's why you're seeing the increased performance in the revenue -- on the revenue side at Air France. And if we can continue to improve the relationship with Aeroports de Paris, the airport operator that handles the -- or is responsible for both CDG and Orly Airport, which is much, much better now. So we're aligning our CapEx -- or their CapEx plan with our needs. So the operating environment at CDG should bring down cost significantly because it is a very difficult airport to operate a hub from. So that's at the -- on the airport front, and we can maintain the competitive cost structure of that airport and the taxes that the French state imposes on the airline industry, which we've been able to do so far despite the unstable government environment here. So on France, there's quite a few difficult items or elements that we've got to navigate through. But so far in 2025, the team under Anne Rigail have been able to do so and the result is, as you've seen, has been above expectations. So for 2026, it's pretty much the same. At KLM, we have a few more headwinds with also an unstable government, which has put in place a lot of incremental taxes that we were not expecting. So Marjan Rintel and her team are doing their best to temper those and even reduce these taxes. We're lucky that we have a new Minister of Finance and the Minister of Infrastructure, which is much more friendly to aviation. So we're reasonably optimistic that we can get some improvements. And the Schiphol Airport charges, this is our #1 objective at KLM to help reduce costs. If we're not able to significantly do that, we're going to have to seriously look at the operation and the hub that we operate there and what we're able to do profitably with the assets and the network that we have. So it'd be very -- I'd be very happy if through 2026, we could get some more clarity on what we can and can't do at Schiphol and that we've got more, I'd say, more assurance that our situation at Paris remains as it is today. And then also last point here is with SAS that we're pretty much completed our transaction and the takeover by the end of the year. So long answer there, but those are the 3 elements we're looking at amongst our carriers. Operator: The next question comes from Jarrod Castle from UBS. Jarrod Castle: Three as well. Are there any negotiations which are worth highlighting during the next 12 months for any of the airlines? And any concerns around that? Secondly, just coming back to AI. You signed an agreement with Accenture. I wonder, Ben or Steven, if you could just go through the buckets of where you see the use cases internally. I'm not necessarily talking distribution, but what makes it exciting for you? And then -- okay, I guess thirdly, the ETS price of carbon has been very volatile. So just an update on hedging. And then just related an update on how you see CORSIA developing, and all these environmental headwinds coming your way? Benjamin Smith: Okay. On the on the CLA labor agreement front, at Air France, there are no significant negotiations that are planned to take place in France. However, things do come up. But as we see today, things are relatively stable in France. And as I said, we don't have anything scheduled next year. There are some big agents that do come up in 2027, which we're laying the groundwork. And hopefully, we can get those agreed to earlier rather than towards the deadline. At KLM, we have constant CLA negotiations that are continuing. But with the situation at Schiphol and with the cost structure that we have at KLM today relative to the unit revenue, we've got to work with the union there to come up with a model that can get us back to the profitability levels that we need at KLM. So there's -- I would say they're not necessarily scheduled, but they must have -- they must -- these are new negotiations that are part of the transformation model that needs to take place. Steven Zaat: And then on the AI. I think AI is everywhere. So we will use it in our administrative process. We will use it in revenue management where we have a big project running. So it is not to say that we have only one part where we will use AI. So it is -- we have an approach where we have a discussion on, let's say, at the total group level, where we are going to invest in AI, but it is very also decentralized in all the executions within the operations. So it is -- I could say it is in every domain where you can talk to if you talk about customer management, if you talk operations, if you talk about commercial. I think it's not one domain, and therefore, we explore with Accenture further where we can implement further our AI. On ETS, we are, let's say, rebuying the ETS rights 1.5 years ahead. So we are fully hedged on that fund for 1.5 years. And then if you talk about CORSIA, CORSIA is a little bit -- it's a very difficult, how can I say, system. There are not a lot of projects. So we are just looking which projects where we can invest the money, but there are not that many. So we are a little bit skeptical about the execution, but it is there. I don't know what will happen in the U.S. So that is also important to see. But all in all, we have the, let's say, the provisions for it to invest in it. And we need more projects actually which are really helping this planet. All in all, the cost levels are not that high at the moment, it is not the same as putting sustainable aviation fuel in, which is, let's say, the first trigger together with the fleet, how we decarbonize let's say, our operation. But it should be there at a certain moment coming, but we need to have the projects where we have full confidence in that it is helping our planet. Operator: The next question comes from James Hollins from BNP Paribas. James Hollins: Two for me, please. Just picking up on your comments there, Steven, on U.S. outbound, U.S. inbound, is it a case that U.S. outbound from Europe is getting worse? I think you were talking about some softness there. Is it just a late bit difficult? And maybe a comment also on U.S. inbound. Is that potentially getting stronger as we head into or heading through 2026? And a slightly annoying question, but do you expect to reduce your Q1 losses year-on-year even with that weather issue costing you EUR 90 million? Steven Zaat: James, let's first start at the -- your last question. So I don't guide on anything. But of course, we are -- the ambition is to go to 8%. So that also means that we are trying to reduce our losses in the Q1, but don't forget that the seasonality is getting bigger in our industry. So -- but of course, it is not that on itself, we have an ambition to grow our losses in the first quarter. The situation in the U.S., let's say, if I look at the point of sale and I come back on what has happened in Q4. So the total revenues in the U.S. were up 9%. Then there was a 12% growth from the point-of-sale USA. So really, really strong and only 7% in Europe. So you see that Europe and especially Northern Europe. So if you look at Scandinavia, Germany and also the Netherlands, I think you see, if you look at the how popular the U.S. is currently in those countries, it is at a very, very low level. And that impacts, of course, also the appetite to go to the U.S. But there's another element on the U.S. It's extremely expensive to go there. So the inflation is very high over there despite the fact that the dollar is coming down, it's still much cheaper to get in a hotel in Europe than if you go to a hotel in the U.S. for the same quality. Then on Africa, so if you look at the -- 9% up, we are in revenues and Africa point of sale is down 16%. So you see really a significant impact over there, but we should also be modest on it. The share of, let's say, the point of sale of Africa on our U.S. is only 1.8%. It's not very big. And then we see, indeed, also India and Asia a little bit in the same way, so only 4% up in terms of sales, but with the growth of 9%. So that's a little bit of mixed bag. So we still see a stronger point of sale U.S. both in corporate and both in leisure, and we see a declining demand in Europe. But as you can see, at the end of the day, our unit revenue is up 6% year-over-year -- or sorry, the yields are up 6% year-over-year. So it is still very strong. And we all know that the point of sale of USA has the strongest price. So by definition, it's more favorable to move to the U.S. point of sale than the point of sale in Europe or elsewhere. And then the -- yes, I think that's it. Yes. So I hope you're happy with my answer, James. More I cannot say. James Hollins: No worries. Just given you mentioned it, maybe just some general trends on corporate travel, if you could, please? Steven Zaat: Corporate travel is just holding like it was. So it is not getting stronger year-over-year, but it still is the same share of percentage. So corporate travel is doing well, in line with all the other revenues, but not stronger than leisure. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask -- you gave us in the deck, the advanced loads for Q1, I know it's obviously early days, but how does it look for the summer for Q2 and Q3? Is that level of lag, obviously, on lower numbers? Is that stable? Or is there a bigger gap this year? Second question might come to SAS. Is there any information you can give us on the progress through the competition policy process to take SAS on? And also, whilst I see you don't want to give us guidance on what it would cost. But can you just remind us of how that process works and also whether your leverage guidance that you gave us, is that inclusive potentially of having SAS on the books at the end of the year? And the third question, with Dutch airport policy, I think I read that there are plans to open a reliever airport for Amsterdam. Petrus Elbers always used to laugh at me because I couldn't pronounce it probably, but it's Lelystad or something like that, isn't it? Do you think that's going to happen? And is that good or bad for you guys? Steven Zaat: Yes. The summer Andrew is very far away, especially for French people and Dutch people. They are just thinking about their skiing holidays so not so much in into, let's say, the holidays of the summer. But if I look at the summer period and I look at the booking load factor, let's say, July, for instance, is close to where we were last year. So that's not even a gap, but we talk about numbers of what is it, just 20% of our planes, which is filled so it is very low. We are late bookers in our home countries due to, let's say, our relative good schedule in terms of holidays. Then on SAS. So we had the first discussions with the EU so it's going on, and we are still aiming to get it done at the end of 2026. So we had more than 100 questions. We are very nicely answering them, and we are discussing with the EU. It's more an information session at the moment that is any other discussion. They need to get a full picture what is the competitive landscape in Europe? And specifically, what is the competitive landscape in Scandinavia together with Air France and KLM. Then what is the cost? So what we have a formula, which is actually that we pay for the shares what is actually the EBITDA multiple in the market. So that is our EBITDA multiple, the one of IAG, the one of Lufthansa and the one of Finnair. And then we have an EBITDA, which we multiply and then we deduct the net debt, the same as you do in your modeling actually. And indeed, if you look at the leverage, we take into account also as it will not have a big impact on the leverage because the results of SAS are not that bad at all. I cannot disclose them, but in total, it will not have a significant impact on our leverage. And then the question on Lelystad, I give to... Benjamin Smith: Andrew. So as you know, in 2019, Schiphol was saturated in net capacity and Lelystad was planned to open, and there were discussions of even raising the cap at Schiphol. So Schiphol was at 500,000 movements and there was a discussion to go to 525,000 movements, and discussions about opening Lelystad airport, which was built and laid. So now we're sitting at 478,000 cap movement at Schiphol. We'd like that pretty much locked in stone so we have some visibility. We have much higher cost at Schiphol than we had in 2019. We do believe that Lelystad will open with 10,000 movements so we're not looking at a lot of movements today at a lower cost operation. So to answer your question, is it good or is it bad for us? I think when you look at the whole picture, we want visibility on both the number of slots at Schiphol will be available in the short to medium term? And what is it going to cost us to operate at Schiphol in the short to medium term. I think once we have that, we'll be able to take a position on Lelystad whether it's good or bad. Operator: The next question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: I try to get answers to 2 questions. First is really on Airbus. Airbus today said they will scale back deliveries somewhat due to engine issues, and at least judging by Airbus share price reaction that came as a surprise to the market. So what do you currently factor into your unit cost guidance for 2026 and the margin guidance for 2028. In terms of Airbus deliveries, do you kind of already have today's Airbus announcement in that? Or might there be a bit of headwind if there's less planes deliver and there's maybe more what type of sedation in the engine market? And the second question really would be on the EU point-of-sale Atlantic traffic, you kind of said you already answered or said everything you could say. But I was looking for any signs maybe of improvement from the very depressed levels of EU point of sale. I believe Q4 last year, there was not yet really an impact from U.S. politics that only kind of emerged in Q1 2025, really. So if you are now looking at bookings, EU point of sale into the U.S. especially from France and Netherlands. Do you see an improvement compared to the depressed level we see in -- we saw in 2025? Or is it still very much unchanged or even a deterioration on that one? That's my 2 questions. Benjamin Smith: Okay. Marc, so a couple of things. We were lucky that we have quite a number of unencumbered planes, older generation airplanes, which gives us some flexibility for delays that we may incur from Airbus or Boeing. We took a very lengthy delay with the deliveries of our last Boeing 787 aircraft. We just received our last 787-10 at KLM a couple of years late. So we're pleased that we've now got the entire 787, both -9-10 order book now completed for Air France and KLM. For the -- on the Airbus side, Airbus A320s, we ordered the airplane with the CFM LEAP motor, CFM LEAP engine, the Pratt GTF. So that is one of the big road blocks for Airbus to deliver. Here again, we have 737s at KLM and A320ceos at Air France that are either owned or unencumbered that we can continue to fly should we encounter any delivery delays on the 320neos powered by CFM LEAP engines. We have taken some delays over the last 2, 3 years. So we have been managing. So it's not new. We have to take a few extra months. It's not the end of the world for us. We have been on a big fleet renewal for the last 5 years and so we've got some good experience in managing either engine delays or the airframe delays and also difficulties in integrating new technologies such as -- we've got some challenges on the Airbus A220 fleet and how that impacts the operation and how we can handle it. So I think -- so far, we don't see any change in our assumptions for 2026 on the fleet front. And then point of sale Europe on the transatlantic, our position on that. And what we've seen has not evolved in the recent weeks. It is -- we do see some softness, but it is being offset by stronger point-of-sale U.S. Operator: The next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: So I want to come back on this, but how much is your U.S. point of sales for the transatlantic routes? Is it fair to assume it's close to 50%, asking this just to make sure we understand how much of the headwinds Europe represents for the group right now? And maybe a follow-up on this is what are the yield differences for the U.S. and the European point of sale for the transatlantic routes? That's my first question. And then my second question is about the cost benefits can you quantify how much of the KLM cost benefits you guys benefit in 2026 versus 2025? And should we see more of this cost benefits in the first part of the year or in the second part of the year? Steven Zaat: So let's say, the point of sale U.S. is around 56%, already, really a strong foothold. The yield difference, I don't know by heart. So I don't want to mislead you by that, but I know from the past, it was quite significant. And we have also seen that the U.S. pricing has gone up. So I don't have the answer on that one, to be honest. And on the cost benefits, we will see that, let's say, it will gradually go -- you have seen in this year we have -- it started actually more in Q3 and Q4, but we also expect that the cost benefits will probably more. I think it will be more evenly spread as what we have seen last year. But we have a [ triple ] specifically, which is still charging again an increase year-over-year in the first quarter, which we will not have in Q2 to Q4. So there is maybe more the difference than what we have seen this year. Operator: The next question comes from Ruairi Cullinane from RBC Capital Markets. Ruairi Cullinane: Yes. I found the comments on the level playing field for airlines globally, pushing that. Interesting given you are using more tax mandates. Is that something we should expect you to continue to do? And then secondly, just because it is such a substantial impact on the quarter. Is the tax impact purely a function of the DTAs that were mentioned in the prepared remarks? Steven Zaat: Ruairi, welcome to our group of analysts. We are very happy that you follow us from now. So thanks for that. Yes, RBC, yes. Yes, we are very happy with you, Ruairi. Just one quick, can you repeat your last question, please, because we could not fully understand the question. Ruairi Cullinane: Yes. Yes, it was just on the EUR 354 million sort of income tax impact in the quarter. Is that -- I mean you mentioned the DTAs in your prepared remarks, but I wondered if there's anything else notable there? Steven Zaat: Okay. So first on the SAF, let's say, we have a mandate. So we -- of course, we fulfill our mandate because that is automatically more or less done. Then on top of it, we will sell SAF to the markets to our corporate customers and to our, let's say, directly to the passengers. And then, of course, also on the cargo, we sell our SAF. We consumed, especially in the Q4, a high level of SAF in the Netherlands, because there were HBE credits. So jet fuel was more or less the same price as SAF. So that is why we had a very high volume at KLM in the fourth quarter on sustainable aviation fuel. If you look at the income tax, so it is driven actually by the fact that we are making more profits in France so we can make more use of the tax asset. And at the same time, we revalue the tax asset based on our, let's say, profitability trajectory, which we have agreed with the Board. So those 2 elements, which is driving up that tax. We still have, let's say, every time we have to pay tax there is a 50% credit, then you know that there is an additional tax in France, which they say it's temporary, but it has now been extended again, but that has a very marginal impact at around EUR 11 million impact in 2025, but it will grow because our profitability will grow, and they also take 2 years into account so we have more profitable years to take into account. But it is mainly coming from revaluating the tax asset and the use, of course, in the year 2025. Operator: [Operator Instructions] The next question comes from Jack Rayburn from Bank of America. Unknown Analyst: Standing in for Muneeba this morning. A couple of questions, please. Maybe picking up on the U.S. point of consumer or point of sale again. What gives you confidence on the strength of the U.S. consumer continuing in 2026? And how are you viewing transatlantic industry capacity and potential yield implications? And maybe touching on TAP Portugal, if there's any late developments on that? And if you have any issue with the minority stake. Thank you. Steven Zaat: Yes, why are we confident? Let's say, I don't say that we are confident or anything, but still every time we are surprised by the strong foothold of the point of sale of U.S. Of course, it's a very dynamic market. There's a lot of things happening over there. Of course, some people are worried about recession, et cetera. But still, the prices are much different in Europe than over there. And as already said, probably the lower dollar at a certain moment will also help a bit of traffic towards the U.S. especially in countries like the Netherlands, where they look very carefully at pricing and to make use of that. So all in all, I think, let's say, the booming on the North Atlantic even exceeding our own expectations, and we still see very strong bookings coming in out of the U.S. Then on TAP, now you know that there were 3 parties qualified for the process, one of them is us. And we are working on a nonbinding offer, which we will bring in before the deadline, which is at the beginning of April. So that is where we are, not any further, and it takes time to, let's say, get a real offer on the table. Operator: There are no more questions at this time. So I hand the conference back to the speakers for closing remarks. Benjamin Smith: Thank you, operator. And thank you, everyone, for your questions, and we look forward to speaking to you at the end of Q1. Operator: Thank you for your participation. The call is now over. You may now disconnect.
Rachel Arellano: Okay. A very warm welcome to everyone both here in the room and for those of us joining us remotely. I want to begin by acknowledging the traditional owners and First Nations peoples who host our operations around the world and pay my respects to their elders, past and present. We are pleased to be here today with our CEO, Simon; and our CFO, Peter Cunningham, to present to you our 2025 full year results and this will be followed by a Q&A session. There are no planned fire evacuations today. So if you hear the alarm, please follow instructions from the fire wardens here at the London Stock Exchange. With that, I'd like to ask Simon to the stage. Simon Trott: Good morning all to those here in London. And of course, also those joining us online. So I'll start with safety. And this evening, I'll fly to Guinea to spend some time with the team at Simandou. As you'll no doubt be aware, last Saturday, one of our colleagues died at the mine site. We've achieved a great deal at Simandou, but this tragedy underlines that we have more work to do to ensure that everyone goes home safely at the end of every shift. Safety is the foundation of our business and nothing is more important than the people that work around us. And we must be able to safely operate in different jurisdictions around the world like Guinea. The leadership team and I are determined to learn from this tragedy, and we're taking some immediate actions. We've stopped all site works and construction activities. We started an independent investigation with both internal and external experts. And in addition, we will appoint an independent safety advisory panel. This will consist of leading safety practitioners from both industry and academia together with experience Rio Tinto Alumni. It will provide additional guidance and support to our team as we complete construction and then move Simandou into operations. As we put in place these actions, we will reflect further on the lessons from our colleague's death. With these thoughts in mind, I'll turn now to our financial results. We're making clear progress towards our mission of being the world's most valued metals and mining business. The results today are underpinned by a stronger, sharper and simpler way of working, which will lift productivity as well as lower cost, enabling us to cut complexity and focus on the right opportunities. Our operational performance was strong in 2025, and we delivered an industry-leading 8% equivalent increase in copper equivalent production, setting annual records for both copper and bauxite. Our Pilbara mines rebounded strongly from the cyclones at the start of the year and set production records from April. And while volumes increased, our copper equivalent unit costs reduced by 5%. These results also show the value of diversification. Underlying EBITDA increased by 9% to $25.4 billion. The increases from both copper and aluminum were a particular highlight. Self-help was also a feature as we unlocked a $650 million run rate in annualized productivity benefits. And I'll talk more about this shortly. Finally, the dividend. We achieved stable underlying earnings of $10.9 billion, and we will return 60% of this to shareholders equating to $6.5 billion. Now stepping back. We've got the right assets in the right commodities and we're well positioned to deliver growth in the years ahead. Over the next decade, we expect strong growth from aluminum, lithium and copper with steel demand remaining resilient. At the same time, across the board, supply is constrained, with sector CapEx 50% lower than its 2013 peak. Now Rio has got the people, the capability and the projects to meet this demand. And we're achieving this through operational excellence. This is driving our strong production performance, putting us on track to deliver our ambition of 3% CAGR for copper equivalent production through to the end of this decade. As part of our stronger, sharper, simpler way of working, we're also driving operational outcomes and structurally reducing costs. We will achieve the $650 million annual run rate in productivity by the end of this quarter. And with this strong start in 2026, we will deliver cash improvements materially above this Q1 run rate in 2026. Of course, to drive the growth that creates value for our shareholders, we need to deliver on our projects safely, reliably and at scale. And in 2025, with Oyu Tolgoi, Simandou and our in-flight lithium projects, we executed some of the most technically challenging mining projects on the planet. That underground development at OT is now complete, fully invested and the growth is ramping up. And we're on track to deliver, on average, around 500,000 tonnes of copper per year between 2028 and 2036. In December, we also achieved our first shipment of high-quality iron ore from Simandou, and we will deliver 60 million tonnes per annum of iron ore as we fully ramp up. And in lithium, we're progressing our in-flight projects, targeting capacity, 200,000 tonnes per annum by 2028. We're delivering tangible outcomes today. And we have the project pipeline to extend growth well into the 2030s with copper at its core. That includes projects like La Granja in Peru, Resolution in Arizona, Nuevo Cobre in Chile, which I'll visit shortly. And I've asked our exploration team to narrow their scope and put copper front and center. And so we're now directing 85% of our exploration budget towards copper. But we are clear-eyed about the task. No matter how amazing the geology, this effort must translate into value-accretive projects. And finally, capital discipline, the bedrock of strong and consistent shareholder returns. Rigorous capital allocation guides every investment decision we make. All projects must compete for capital and every dollar we invest must create shareholder value. The same standards apply to how we manage our portfolio. As we said at Capital Markets, we will deliver $5 billion to $10 billion in cash proceeds from our asset base. And we're now actively testing the market for RTIT and the Borates businesses. To sum up, we're achieving both returns and growth. Returning cash to shareholders and at the same time delivering the largest number of greenfield projects of any of the diversified miners, whilst retaining the industry's best growth options. That same discipline underlines how we approach any major portfolio decision. So let me touch briefly on the discussions we had with Glencore. We went under the hood with a singular focus on whether we could create value for shareholders. We considered what we could bring to the table and the extent to which we can generate incremental value across a combined portfolio. We had constructive discussions between the two teams. Ultimately, we concluded that we could not reach an agreement that would deliver value for Rio Tinto shareholders. Now as you might recall at Capital Markets Day, I said we would look at M&A opportunities that are disciplined lens, and that's exactly what we've done. And the same focus on value will continue to guide us. With that, I'll hand over to Peter, who will take you through the financials in more detail. Peter Cunningham: Thanks, Simon. At our Capital Markets Day, we set out a clear pathway to increase volumes, reduce costs and release cash from our asset base, all of which will strengthen our balance sheet and drive future returns. In 2025, the improvement in our financials was largely driven by volume growth, a function of our ongoing drive towards operational excellence and higher copper volumes from OT. Today, we are reporting nearly $3 billion of volume improvement year-on-year. Cost discipline was also good and we started to deliver substantial reductions late in 2025. These will flow into our results in 2026 and will be enhanced as we implement systemic improvements across our business. More on that later. Our net debt increased to $14.4 billion as we absorbed the Arcadium acquisition, and falling slightly in the second half of the year due to our strong operating cash flow. The balance sheet remains in good shape, and gearing is modest at 18% with future capital release initiatives set to further strengthen our position. Once again, we're paying out 60% of our underlying earnings as dividends. Let's now take a closer look at our markets. Now there are two key messages here. Firstly, the resilience of iron ore; and secondly, the positive correlation of our other products with the energy transition. Iron ore remains supported by Chinese steel export growth and a structurally balanced market. As Vivek outlined at our Capital Markets Day, the cost curve remains steep and is supported at the top end by over 100 price-sensitive producers from more than 20 countries. Copper and aluminum prices both rose 9%, but average prices don't tell the whole story. Copper ended the year 44% higher than 12 months earlier; and aluminum, 17% higher. The demand growth picture is not uniformly strong. Traditional areas, such as construction, remain weak. But the backbone of growth is the energy transition, particularly around power systems and electrification. The energy transition, combined with supply constraints and reinforced by investment inflows, is driving the market strength. Lithium also ended the year with strong momentum as markets came back into balance earlier than expected. Battery storage demand is emerging as a fast-growing pillar of the energy transition with growth now outpacing EVs as renewable scale and grid firming becomes critical. It continues to surprise many market commentators to the upside. Turning now to our EBITDA composition over the last 2 years. Iron ore EBITDA was down 11%, but the copper and aluminum more than offset this. Our portfolio gives us the ability to allocate capital to shareholder returns and to grow with confidence, recognizing our best returns come from improving our existing assets and reducing our cost base. At the CMD, we announced $650 million of near-term productivity benefits, driven by stronger operational discipline, a streamlined organization and a sharper focus on the portfolio. For the past few months, we've reshaped our organization, rescoped and stopped work. By the end of Q1, we will be into our next phase of the program, which is larger in scale, multiyear and steps us towards full potential. In the Pilbara, we're looking at different ways to operate our system, focusing on contingency stockpiles and optimization of our asset shut sequencing. This will enable increased asset throughput and smarter use of spend across the mines. For copper, we're driving productivity of underground equipment and operations in both development and production areas while improving metal recoveries in the concentrators. In aluminum, we're focused on sharpening day-to-day operational discipline, strengthening smelter stability, improving maintenance quality and raising contractor performance to ensure operational consistency year-after-year. And centrally, we're reorganizing our operating model to clarify accountabilities and streamline workflows. We've already redefined our closure operating model, optimizing R&D spend and are driving further improvements in sustaining capital projects. Now we expect the value uplift to be materially more than the first phase with programs advancing in 2026, as we scale up to deliver further in 2027 and 2028. Let's now unpack EBITDA through our standard waterfall. For the first time in many years, we experienced minimal net impact from commodity prices with lower iron ore fully compensated by higher prices for aluminum and in particular, copper. As I said earlier, the big driver of earnings growth was volumes with higher sales delivering a $2.9 billion uplift. This is mostly from copper and gold with the ramp-up of OT and improved output from Escondida. Higher iron ore sales from the Pilbara were also an important contributor. Volumes were also a major driver of the $800 million improvement in unit costs due to fixed cost efficiencies. Now in copper equivalent unit cost terms, this represented a 5% reduction. There were a few offsets. Kennecott is on track to deliver production increase by 40% to 50% over the next few years, as we outlined at CMD. Its operating performance is much improved, but the financials were impacted by the base effect of refining high intermediate product inventories in 2024. Secondly, our Pilbara business recovered impressively from the four cyclones with record production rates since April. However, there was a $700 million EBITDA impact. Looking forward to 2026, volume growth will be more muted at around 3% across our managed operations, which will be offset by closures at Arvida, Diavik and the midyear curtailment at Yarwun, and an expected grade decline at Escondida. Now nothing has changed from the parameters that we set out at the CMD. We are pushing very hard on productivity improvements and cost reductions building on the initial $650 million already identified and secured. I would, therefore, expect the aggregate volume and cost improvements, net of headwinds, to be a material uplift on that number in 2026. On to the product groups. Iron ore delivered $15.2 billion of EBITDA. The product strategy has been successfully introduced to the market, aligning sales to our system, and we've seen strong cost control reflected in unit costs, in line with guidance at $23.50 per tonne. For 2026, we're guiding to $23.50 to $25 per tonne, reflecting in part the impact of a stronger Australian dollar. Copper was the standout, with EBITDA more than doubling to $7.4 billion, driven by higher prices and rising volumes. Shipments were up 60% at OT, where the underground development project is now complete. Unit costs were down 53% and 2026 guidance is comparable to 2025. Aluminum sustained its impressive record of stability, in particular, for smelting and bauxite where we set a new production record. And we took advantage of stronger markets, leading to a step-change in financial performance with EBITDA up 20%. Now our commercial team continues to proactively optimize our vertically integrated position in the changing tariff environment. It was the first year for our new lithium business, which is clearly not yet a significant contributor, but as set out at the December deep-dive, we'll focus on delivering the in-flight projects, which will bring us to a meaningful capacity of around 200,000 tonnes by 2028. CapEx in 2025 was at the high end of our guidance range of around $11 billion, as we hit peak spend on growth with an outlay of $1.6 billion at Simandou and just over $1 billion on lithium growth projects. Now this is a crucial period of CapEx spend, which will underpin future earnings. Our growth commitments will ease over the next few years with Simandou nearly 2/3 complete. We do continue to strengthen our Pilbara system through replacement mine investments and also Weipa, where later this year, we will consider a final decision on the expansion of the Amrun mine. Given this context, we see no change to our guidance of up to $11 billion for the next 2 years before stepping down to $10 billion thereafter. Turning to the balance sheet. Net debt has risen to $14.4 billion following completion of the Arcadium transaction, a level comfortably in a range consistent with our commitment to a single A credit rating. All our credit metrics are in a solid place. This remains a strong balance sheet. We're committed to our capital framework and shareholder returns policy of paying 40% to 60% of underlying earnings. We know that distributions to shareholders are incredibly important. And once again, we're paying out at 60%, and now have a 10-year track record of paying at the top of the range. So to summarize, we have the right assets and the right commodities. 2025 was a solid year of delivery with sustainable volume uplift. And over the next few years, our focus turns to a powerful combination of self-help and growth as we build on the productivity improvements, and we see the first results from the capital release. The balance sheet remains strong, and we're generating very stable operating cash flow from our diversified portfolio. And with that, I'll turn it back to Simon. Simon Trott: Thanks, Peter. We've talked about what we're achieving and stronger, sharper, simpler is how we're doing it. It's the operating discipline that underpins the way we think about value creation across the group. Over 2026, we will focus on structurally improving the cost base and achieving a meaningful step-up in underlying performance. This work cannot succeed without our leadership team's full engagement and I'll be impressed by the way we've come together. Peter has updated you on our program and three words on this slide: Simplify, deliver and release, reflect our priorities for the year ahead. So to sum up, returns and growth. We grew by 8% in copper equivalent terms. Our strong operating performance, combined with our focus on cost and capital discipline translates into the financial results you see today as we returned $6.5 billion to you, our shareholders. And I'm confident that there's even more to come. Thank you for your time. And with that, we'll open up to questions. Rachel Arellano: Give me 1 minute -- 30 seconds. So we are going to open up to Q&A. We've got a bit over 30 minutes. We will start here in the room, and then we'll go to those on the line. And let's start here at the front. Myles Allsop: Myles Allsop, UBS. Maybe start with the elephant and the Glencore talks. Maybe could you just say what you've.... Simon Trott: I was running a book as [indiscernible] You've made me happy. Peter Cunningham: I think we all [indiscernible] Myles Allsop: So, do you feel comfortable owning coal? That would be your first question. What do you think you've learned from the discussions? What sort of synergies did you see from that sort of combination? Obviously, the value didn't work, but any other issues that kind of stopped the deal from happening? Simon Trott: So you always learn through these processes. The constructive discussions, you learn, I guess, about your own business, you learn about others as well. And as I said in my presentation, we went deep, we went under the hood. We look rigorously and clinically and ultimately didn't get there on value. The discussions were for the full perimeter. And the way that we think about that is really through the lens of the underlying asset quality and whether together, in a combined portfolio, we could incrementally add value compared to the case we laid out at Capital Markets, and it's through that lens that we assess the transaction. Really comfortable with the plans that we put out at capital markets, and as you can see today, that's the full focus of the team. Myles Allsop: And owing coal, was that ever a concern from the management team? Simon Trott: As I said, so it was for the full perimeter of the business, including coal and really through that lens of what's the underlying asset quality and can we add value through the combination. Rachel Arellano: Okay. Alain. Alain Gabriel: This is Alain Gabriel at Morgan Stanley. A couple of questions. One is on streaming, which appears to be quite invoked now. You have a fairly good chunky gold component at OT. Do you see an opportunity there or are the current discussions with the government around taxation, an impediment around going ahead with any streaming agreement? That's the first one. Peter Cunningham: Yes. I mean I suppose all of this comes down to the fact that we've got lots of options across our portfolio to release capital, and that's our focus. I mean, we've talked about the strategic reviews of borates and our RTIT, we're testing the market. We've got options around infrastructure. We do have options around streaming. But we're just going to work through these systematically and say what's the best option that we can undertake. So I mean, those options exist right across the portfolio, but it's all about value and what we can sensibly sort of prioritize to deliver. Alain Gabriel: And the second question is on cost cutting. You've put out a slide there, looking at the cost-cutting opportunities beyond the $650 million program. The Pilbara seems to be at the heart of it. Can you help us frame a little bit the opportunity there to quantify how much can be taken out of the business in terms of costs? Simon Trott: So on the $650 million, so that was a run rate that we announced at Capital Markets that we'd said we'd hit by the end of Q1. So what we're saying today is that our 2026 cash delivery will be materially above the $650 million, which was a run rate. And so that sizes it for 2026. I think the main point here, and Pete talked about it, we've gone systematically asset-by-asset looking at full potential with clear plans then around delivery, and it will be a multiyear program. And so we've sized it for 2026, but clearly, there's more to come in '27 and '28. And I should say it's across all businesses. So yes, iron ore, but it's across each of our businesses in the portfolio. Alain Gabriel: When should we expect that? Peter Cunningham: Just on the unit cost, I mean remember guidance is $23.50 to $25, but it is at a higher exchange rate. So the exchange rate would take you up more to the midpoint of that. So the business is making pretty sizable sort of improvements because as Matt went to its CMD, there's a lot of headwinds in the Pilbara still, but we're offsetting that through productivity. Rachel Arellano: Okay. We'll go to some of the people on the line, if we could. Operator, would you mind to give the first speaker, the microphone. Operator: [Operator Instructions]. Our first phone question comes from Paul Young of Goldman Sachs. Paul Young: Simon, firstly, on Glencore. I mean, well done for sticking to your guidance of being disciplined and being focused on value. Look, I think a simple merger would have changed your strategy from one of simplification to complication. And it does appear that the true operating synergies were pretty limited. So was the main attraction the copper growth? And when Mark and the project team reviewed that pipeline, were there major differences on the CapEx and the timing? Simon Trott: Thanks, Paul. It was obviously -- as I said at the outset, it was for the full perimeter. And so they've got a diversified business. And so we looked across all assets, including, as you say, copper. We did go through forensically. And so I think there was really constructive engagements with the team. We obviously look deeply at their pipeline, their existing assets as they did with us, and it was that combination that we were really asking ourselves the question, can we add incremental value through the combination. And that took into account all aspects of their business and ours. I guess if I step back and setting aside those discussions, as we've outlined in the slides today, the nice thing about the results today is we're growing now, the ramp-up at OT, 8% copper equivalent growth. And then we have the project pipeline to really extend that beyond the 3% CAGR through the 2030 -- options to extend that into the 2030s. And clearly, copper is a particular focus, both in terms of the projects we have, but also through our exploration and other activities. And so that's a singular focus for the team. But we've got to convert what is a really good set of options into value-accretive projects. Paul Young: Okay. And then second question is on the Brazil aluminum deal with CBA and Chinalco. Not much mention of this. I know the deal was only recently announced. But can you just talk to the high-level rationale? Can you expand the refinery in the smelter? What it means for your Atlantic strategy more broadly? And obviously, great for the Chinalco relationship. What does this mean for potential further deals going forward with Chinalco? Simon Trott: Yes. We've learned a tremendous amount through the Simandou project, obviously, working with our partners in the consortium there. And I guess taking that same mindset, we looked at that for the CBA transaction as well, an opportunity to involve ourselves in the Brazilian aluminum sector, an opportunity to add value and growth to our aluminum business and as well as the point you make, which is around securing our supply lines. And so obviously, the potential for bauxite down the track. And so that was the, I guess, the strategic rationale. And as we got into it, we could see a clear value opportunity for our aluminum business and hence, progressing that transaction. Rachel Arellano: We'll take one more from the line, please. Operator: Next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: It's Glyn. Just quickly, just on Glencore, again. You talked about there was a valuation gap. Just how did you measure the value? I mean, what are you actually seeing? What was -- how did you measure the gap? And what metrics do you think the gap was -- the gap emerged? Simon Trott: So ultimately, Glyn, it's a focus on the underlying value. So we worked our way through their full portfolio. We come to a view as to underlying value. Clearly then, there's also the synergies that you can add on to that and then what any transaction would look like. And it's -- so it's those data points that then go into a view about the potential transaction and whether it's going to be accretive to Rio Tinto shareholders. And as you would imagine, there's lots of data points that sit behind that, but that's the core principles that we looked at. Glyn Lawcock: So when you say value, Simon, just to clarify, are you saying -- so when you do like a discounted cash flow, you value each individual asset and you get a sharing of the two entities. That's -- you did that much of a deep-dive bottom up under the hood and basically realized that the equity relationship 60-40, 2/3-1/3, that's -- the gap was just way too large. Simon Trott: Yes. So that's the core tenet of the valuation, as you articulate, Glyn. Obviously, we look at all data points as well, those in the market, what others' views are and fold that into our thinking, but that's what underpins the valuation. Rachel Arellano: Thanks, Glyn. Jason. Jason Fairclough: Jason Fairclough, Bank of America. So Simon, just to take you back to iron ore. Obviously, still a major project -- product for you. And it's kind of a funny year because you've got the change in the benchmark. We've got BHP having a bit of a dispute with the Chinese and we've got Simandou coming online, which has kind of been this thing that everyone's been talking about for a long time. So how do you see the dynamic emerging from here? Are you changing your approach to selling the iron ore to producing it even? Simon Trott: I think we're changing our approach the way we think about portfolio because Simandou having been something that's coming is something that's arrived. And so, as we did the work last year on product strategy, we obviously had a pretty clear view around what the future mix would look like in terms of our own portfolio. Having IOC, the Pilbara asset and Simandou obviously gives us real options across high grade, mid grade and low grade. And so thinking about how we best present those iron units to the market and also working with our customers around what their forward projection looks like. The iron ore industry continues to mature and so working with our customers around it, about what the best mix for that is as well. As you and I have talked about before, Jason, we obviously got a long-term business, and so we've got to look beyond the sort of next few months or into what the future looks like as well for that business and make sure that we're really well positioned regardless of which way the future steel industry goes. Jason Fairclough: So just a bit of a long-term follow-up. India, how do you see the India's place in the market evolving over the next 5, 10 years? Simon Trott: So, I mean growth rates are really high. The central question in India is what portion of their iron ore demand is met domestically. And so we've been doing, our people work on, on looking at that and understanding it. I think inevitably, as we see those sort of growth rates, there will be periods of time when India is a really strong market for us. They do have relatively more domestic suppliers compared to, say, China through their growth phase. And so it will be a different market for us, but there will be some opportunities as well. Ephrem Ravi: Ephrem Ravi from Citigroup. Two questions. Firstly, on Simandou. It seems to have a high rate of fatalities for the time period. And obviously, you haven't changed your guidance for this year. But looking forward, like do you see a risk to kind of hitting that 60 million tonnes in a reasonable period of time unless the safety culture improves quite dramatically? If not, would you consider like portfolio adjustments, i.e., potential disposals of Simandou to your partners? Simon Trott: So the events of the weekend are obviously incredibly sobering and the impact on colleagues, family and friends and looking forward to being on the ground there with the team tomorrow. As I said in my introduction, we've got to be able to safely operate and construct wherever in the world that is. And I think the team at Simandou have made enormous strides and the events of the weekend show we've got further to go. And so that's our real focus at the moment. And I think the work that they have done, we know we can get there. We've just got to put in place the blocks to make sure that we really can. It is a different jurisdiction in a different environment, and we need to adjust our operating practices to that, but we're confident of the 60 million tonnes that we've announced. Ephrem Ravi: And just a question on lithium. Obviously, prices have gone up 100% since the site visit about 2 months ago. And some of the peers like Pilbara is restarting operations, et cetera. So is there any change in thinking in terms of just doing your in-flight projects? Or is something more than in-flight projects going to be approved within a reasonable time frame? Simon Trott: I'll probably borrow the answer I was getting -- giving Jason. I mean, we've got a long-term business. And so we look through at our underlying fundamentals. And the lithium, just given the size of the industry and the rate of growth, we fully expect prices in lithium to be volatile, and we've certainly seen that over the last little while. But we've got to look through that at the long-term pricing because those assets, once we bring them into production, they are going to be in production for decades. And so it's not so much about next week, next month. It's about the years that follow. The nice thing, and I hope you saw that for those that were on the site tour. The nice thing about that business is that it's got options. And it's got really good options in that industry. And so there's a high bar for capital allocation. Our focus is the in-flight, but clearly, there's other options in that portfolio as we look a bit longer term. Peter Cunningham: It was a well-timed side. Simon Trott: Brilliant. Rachel Arellano: Great. Look, we will go back to the line for two more questions. Over to you, operator, please. Operator: Next question comes from Rahul Anand of Morgan Stanley. Rahul Anand: I've got two questions, both on iron ore. The first one is around, I guess, your cost-out targets. Obviously, $650 million outlined at the group level and then you've got a medium-term target in 2023 for the iron ore business around that $20 a tonne mark. My question is around sort of what the targets are for your competitors in the Pilbara? And I kind of think about BHP guiding below $17.50 and they seem to be strongly guiding towards being significantly lower and then Fortescue sub-19. Now I understand, obviously, your mine systems are quite different to theirs. But today, in terms of the next phase examples, you've talked about the Pilbara. So I guess, how can you better that $20 a tonne? And what level of betterment do you think we can expect? And sort of where can you end up in terms of where you sit versus your competitors? I'll come back with the second. Simon Trott: And Pete, I'll get you a comment as well. Probably the first point I'd make is you've got to look at it on apples-to-apples. And people can flip between full unit costs and C1 costs. But the numbers that you're referring to for us anyway is about full unit cost, and so got to compare the same. I think as you've seen today, we finished last year at $23.50; guidance for this year, $23.50 to $25 at a higher exchange rate, probably points to the work that Matt Holcz and the team are doing to really drive efficiencies and effectiveness in the Pilbara. Obviously, different businesses, as you say, in terms of the particular phase of investment they are and the material that we need to move. But I think the numbers today probably point to a fair bit of the work that the team there is doing. Peter Cunningham: And Rahul, I mean, I think the key thing is that we've got all the replacement projects. We've always said they're critical to the performance of the system. So they're now being executed. That is absolutely critical to us. And I think what you saw in the 9 months of 2025 post Q2 to Q4 was just how the business could perform when it had the volume going through it. And that is, I think, critical for the future. And at the same time, I mean, it's the same for all of our businesses. What we have done over the last 6 months is put together really clear actions to drive productivity and costs throughout our whole system. And that is what's going to underpin then real productivity improvement over the next few years. And when we talk about working through the system, and removing bottlenecks and really driving performance, it's going to be really, really driven very, very hard over the next few years to drive productivity at the same time as those new sort of replacement mines come in. That's at the heart of our -- where we will get to that $20 in '23 terms going forward. Rahul Anand: No, absolutely, I mean, I acknowledge the business has already improved significantly in terms of, I guess, reliance and productivity, especially the last quarter. Look, the second question is around the iron ore negotiations. Now, obviously, there's been a lot of press with BHP and the CMRG Group. I just wanted to kind of take the conversation to perhaps a wider industry question. Would I be right to kind of deduce that these types of conversations are perhaps going to happen, not just with BHP, but I guess all iron ore suppliers into China as these contracts come up for renewal? And if you've had any conversations so far, how have those conversations been? And I guess, if you have some sort of time line or something in terms of which contracts are coming due for renegotiations, I guess, in the next year or 2 years? Simon Trott: So we have had conversations, we're having regular conversations with CMRG and all market participants across our business, whether that's in China or in some of our other markets. And so those conversations are what I would describe as continual and ongoing. Look, if I was to characterize them, they're exactly the sort of conversations you'd expect between us and customers. We're obviously focused on their business, securing supply prices as we are. And so it's coming together and really understanding each other's business and trying to create value together, and that's what we do with customers, that's what we're doing with CMRG. And so in that sense, it's a continuation of where we've been. The market continues to evolve. We've obviously been talking for some time about the maturing iron ore market in China. You'll see more than 1 billion tonnes of steel in China this year again. And so it remains a large and really solid market for us as we think about folding in Simandou into the mix. And so all those things are on continual discussions with CMRG. Rachel Arellano: We'll take the second question from the line, please. Operator: Next question comes from Rob Stein of Macquarie. Robert Stein: Just a couple of quick ones for me. The copper unit cost guidance you provided. Can you give us an indication is the byproduct -- magnitude of byproduct credits there? I think The Street was expecting a lower number that you might be providing a conservative estimate of byproduct credits there. And I'll follow-up with the second. Peter Cunningham: I mean, I think the gold volumes are kind of a bit higher in '26 and '25. And Rob, we've used pretty much, I think, just a bit higher than the average price of '25 in those calculations. Robert Stein: Okay. And then just speaking about copper and longer-term growth. I mean, your -- one of your competitors came out the other day and provided quite a comprehensive list of growth projects organically that they're pursuing that takes their growth profile out across next decade, and it's quite transformative in terms of their own portfolio. How are you guys thinking about those longer-duration copper growth options that you may have in your portfolio, noting resolution currently is still in the ground and not being mined. And I'm sure you would like to have a project there. But can you give us a bit of a flavor as to how the copper JV is going as well with Codelco and how quickly that's progressing? Simon Trott: Sure. So -- and I talked to, Rob, the copper pipeline in my introduction today because we do have some really good options, but we need to translate options into value-accretive projects. I'll visit Nuevo Cobre in Chile in the next month or 2 months and our projects in the U.S. I guess the nice thing about today's results is we're growing today. And then we've got the 3% copper equivalent growth through to 2030. And so that's why we've tended to focus on the here and now because our growth is through this period. And we have the options then to extend that growth out into the 2030s. And so we'll come to market and update as those projects commence -- progress. And in terms of Chile, as I said, I'll be there shortly. Relationship with Codelco is really good. Looking forward to seeing them next week. And so Chile, Argentina, South America, in general, remains a real focus for our copper efforts. I do think, as I talked about capital markets, partnering is a real super power for Rio Tinto and we certainly look forward to progressing those JVs with Codelco and with our other partners in that region. Peter Cunningham: So Rob, it's really nice progress now, which is what we've got in our numbers today. I mean, in the next few years is really good. Robert Stein: And is there anything through DD with Glencore that identified potentially opportunities for JV at a project level there? Simon Trott: Well, I'll probably set aside the -- if I pull it back to an industry level, as I said, partnering has delivered enormous value to this organization over time in almost all -- in all of the commodities in the portfolio. And so that's an area we are really focused on. Certainly, exploration is one way, partnering with others where we bring something to the table, project execution capabilities, operating capabilities, technical know-how, and partners bring something to the table as well. And I would just make that general comment whether that's with Glencore or with others. Rachel Arellano: Great. Thank you. Chris? Christopher LaFemina: It's Chris LaFemina from Jefferies. I just want to ask about geopolitical risk profile and how that's changing at Rio? So your growth is in Mongolia, in Guinea, you consider doing a deal with Glencore who is in the DRC and Kazakhstan and Glencore is marketing businesses in many regions in the world where you guys don't operate. Rio has spent the last 5 years restoring a culture and which -- and the culture historically has been in relatively low-risk regions. How do you think about geopolitical risk in terms of -- so I'm not only thinking about the Glencore deal, but even going forward, would you consider buying into assets in very high-risk regions where historically you might not have gone? Like would you look at a pure play DRC copper miner, for example? And what would give you comfort in going into regions where you've never been before, for example, Kazakhstan? I mean, how do you think about that? So when you're valuing Glencore in that situation, how do you -- is it a much higher discount rate that you're using? How do you get comfort around assets in those types of regions? Simon Trott: Look, it's an excellent question, and it's one that we spend a lot of time grappling with and thinking about it, and I'm not sure there's a perfect answer. You're right in the sense of, ultimately, it's got to come back to value. And so a higher discount rates, the way you think about the opportunity could clearly, in more challenging projects, whether they're more challenging because of the jurisdiction or more challenging because of technical aspects. The size of the prize has to be there to really step in and take on some of those challenges. And so we have a number of different tool sets, discount rates is one, putting a high bar in terms of the returns that we expect, thinking deeply about how you could mitigate and share some of that risk might be another one. But ultimately, it's a bit hard in the hypothetical because it comes back to the opportunity and what we think about that specific opportunity, whether we take some of those risks. But it's certainly one we spend a lot of time thinking about historically and probably for the reasons you articulate more time now given some of the changes in the world. Tell you what, so the other point I would make just to tag on the back of that. I think in the numbers today, you can see the real value of the diversified model, and it goes a little bit to your question as well, whilst iron ore prices were down, EBITDA has gone up because of greater contribution from copper as we ramp up and obviously, a strong contribution from aluminum as well. And so as we think about risk, as we think about some of the geopolitical tensions, clearly, having that diversified model is also helps you mitigate and manage some of that between jurisdictions. Alan Spence: Alan Spence from BNP Paribas. On the dividend, 10 years paying out the top end of the range. Looking forward, costs are coming out of the business, CapEx is starting to come down. There's no big M&A for now. Is it still the appropriate range? Or how do you think about recalibrating it potentially higher? Peter Cunningham: Alan, I think, very comfortable with the policy we've got. We've always said in our capital allocation framework of the priorities we'll have, investing in the existing business, the sort of ordinary shareholder returns policy and then looking at growth, the balance sheet and returns. If we have excess capital, we will look to sort of return more to shareholders. That framework is still absolutely applicable as to how we think about that right now. Alan Spence: If I can push back a little bit. What's the point of having the low end of the range of 40%, if over the last 10 years, not every year has been an easy year, but you've never paid 40%. Peter Cunningham: Well, I mean, I think I'd sort of push back as well and say that the business has kind of performed at a level to have the 60% payout range. I mean, that's what we've had. I think that's sort of just reflective of the cash flows, quality of assets. And the reality is now we're growing the business. That pie will grow. And so the absolute number in line with the growth of the earnings would increase as well. I think that's a pretty good place to be. It's growth and its returns. Alan Spence: So a minimum 60%? Peter Cunningham: All I'd say is our policy. Rachel Arellano: Okay. We've got one more on the line. Please? Operator: Next question comes from Ian Rossouw of Barclays. Ian Rossouw: Just a follow-up on the Glencore sort of discussions. Yesterday at the Glencore presentation, Gary talked about sort of meaningful potential synergies on sort of overhead, procurement cost savings, line optimization on the marketing side. And I guess he was referring to the point that not a lot of the synergies would have come from sort of operational synergies with mining next to each other as we've seen with some of the other mergers in the industry. I mean, that all suggests that the synergies potential between Rio and Glencore could have been much bigger than what the market was estimating. Just wanted to hear your views on that. Simon Trott: So there were synergies -- and I'll probably go back to what I said. I think the discussions with Gary and the team were constructive and the teams work well together, looking at and really thinking about what those synergies could be. But it's one data point that falls into the valuation and there are many others. And so there was synergies, it's only one data point, though, as well. And the other point I would say is you've got to look at it rigorously compared to the base case, which is what we laid out at Capital Markets Day and what you can do and what you can do yourself. And so it's got to be a really robust methodology of truly value that you can only derive from the combination rather than the value you can chase through other means. Ian Rossouw: And then maybe a follow-up in sort of on the back of Myles was asking about sort of learnings from this process. I mean, would you approach the marketing side slightly differently within the Pilbara or other parts of the business? Simon Trott: Again, if I lift it up to a more general industry statement, I think that marketing front end is something that we are spending quite a bit of time thinking about. We, obviously, established commercial a few years ago, a little bit to the question that was made before in terms of geopolitical tensions and volatility in the world. I think, around our physical flows there are ways we can generate greater value around those flows. And certainly, that's top of mind for Bold and the commercial team. Rachel Arellano: Okay. I think we have time for one more. So, Liam? Liam Fitzpatrick: Liam Fitzpatrick from Deutsche Bank. I'll just ask one. On Chinalco. There was talk last year from you and your predecessor about discussions over the stake in Rio plc. Has that gone anywhere? Are discussions live? Any color you can give. Simon Trott: Continue to engage with Chinalco. Nothing to announce today, obviously. But the relationship is in a good place. Obviously, the CBA deal is with Chinalco as well, and so we're continuing to engage. Matthew Greene: It's Matt Greene at Goldman Sachs. Simon, if I could just come back to Glencore, we talk a lot about valuation today and you touched on discount risk profile. What about where you could see value tomorrow and where -- more importantly, where the market will value your company tomorrow? So in terms of a potential re-rate either being a combined entity being a leader in all these commodities or potential future simplification of demerge got, how much weighting was put on in terms of your view on valuation? How much emphasis did you put on that? Simon Trott: So valuation by its very definition is forward-looking. And so it completely flowed into our view of value. But strategic rationales don't pay the grocery bills. It's got to come back to cash accretion for Rio shareholders, and that's the lens we talk. Rachel Arellano: Okay. Any last question? We're good. Ben? Benjamin Davis: Ben Davis, RBC. Just a question on the mineral sands. Obviously, you've got these asset sales that you're looking at and you're not forced sellers. I'm just wondering if there's anything sort of -- clearly, the cycle is not great in mineral sands. So just curious what sort of minimum valuation you'd be looking for these type of assets? And how surely wouldn't be a better time to wait for another 3 years for it to start again? Simon Trott: We're going to do it patiently, yes. As I've said earlier, we are a long-term business. And similarly, I think the people that are interested in that or the borates business is going to look through the market as it stands. But we're going to be patient, as you say, we're not under any pressure. And so if we don't get the sort of value that we see in the business, we won't progress them. But anything to add? Peter Cunningham: No, I think that's exactly right. Benjamin Davis: And then just quickly on Yarwun, how much are we looking at care and maintenance costs? And again, what's the longer-term plan for that asset, which is sitting there? Simon Trott: We're currently moving that as we announced low single digits, I would say, in terms of spend. Rachel Arellano: Okay. Many, many thanks for joining us today. For those online, we will conclude our time now. And for those here in London, I welcome you to join us for a light refreshment before, for the analysts here, we move into an analyst roundtable. So thank you again. And with that, I conclude today's presentation. Thank you.
Operator: Good day, and welcome to the Carvana Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Meg Kehan with Investor Relations. Please go ahead. Margaret Kehan: Thank you, Nick. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.carvana.com. The fourth quarter shareholder letter is also posted on the IR website. Additionally, we posted a set of supplemental financial tables for Q4, which can be found on the Events and Presentations page of our IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer; and Mark Jenkins, Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meanings of federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ materially from forward-looking statements can be found in the Risk Factors section of Carvana's most recent Form 10-K. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial metrics. Unless otherwise specified, all references to GPU and SG&A will be to the non-GAAP metrics, and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our shareholder letter issued today. And with that said, I'd like to turn the call over to Ernie Garcia. Ernie? Ernest Garcia: Thanks, Meg, and thanks, everyone, for joining the call. 2025 is another incredible year for Carvana. There are many useful ways to describe the progress that we've made, but one approach I return to each year starting with the graph at the beginning of our shareholder letter. I find that useful because they provide a simple visual view of the big picture. And the big picture story is clear and meaningful. The first observation from the graph is that both volume and financial performance are moving up and to the right rapidly. This is only possible if you offer customers something that is sufficiently different and desirable that it cause them to break habit and if the business model itself is sufficiently different and efficient that enables qualitatively different results. When we went public, we wrote that our mission was to change the way people buy and sell cars. And the graphs show that we have built a customer value proposition and a business model with the power to do it. Having a great customer offering is the single most important thing. We have it, and we're making it better every year. Looking at the year in our current position, there are 3 key takeaways in our minds. One, we are getting better and more differentiated as we get bigger. In the last 12 months, we increased customer selection by 20,000 cars, 20,000. We are delivering cars to our customers a full day faster. We have put more cars closer to our customers, leading to $60 average savings on shipping fees for our customers. We have reduced the interest rates our customers pay on their loans by about 1% relative to benchmark on average. We have made the transaction simple and straightforward enough that many of our customers can confidently make it all the way to the vehicle handoffs without ever speaking to a person at Carvana. And customers are telling us they love it with NPS at multiyear highs. That's a lot of progress we made in a year where we also improved our EBITDA margin by 100 basis points. Lots of good things have to be true to make all that possible and those things are hard to replicate. Two, we are making rapid progress toward our goals. With every step, our path to our current goal of 3 million retail units a year and 13.5% adjusted EBITDA margin becomes clear, and this year was a big step. We estimate that fixed cost leverage alone will be worth about 2 points of adjusted EBITDA margin over time. We're making rapid progress in fundamental gains that is lowering variable costs and increasing the efficiency of variable monetization, which gives us more fuel to hit our financial goals and to keep providing additional value to our customers over time. On units, we grew by 43% in 2025, meaning that the compounding annual growth rates necessary to hit our 2030 to 2035 retail unit goal are now 38% and 18%, respectively. With the quality of our customer offering and the positive feedback in our business, we believe there is plenty of fuel to get us to our 3 million unit goal and beyond. But we have a lot of work to do and to keep scaling our operational machine to handle all that volume. And that brings us to point number three. We have the infrastructure to scale and we just need to execute. The most operationally intensive part of our business is vehicle reconditioning. Continuing to scale reconditioning quickly, cost efficiently and at high quality has been, currently is, and for the foreseeable future, will be a central focus. We have a better foundation to scale reconditioning effectively than we have ever had in the past. We already own the real estate for 3 million units per year. We have already made the investments in the facilities to produce 1.5 million cars per year. Our systems that manage the entire process flow through our reconditioning centers are more capable and robust than they have ever been. And we have more locations that are capable of reconditioning cars, 34 as of today than we have ever had meaning we can scale hiring and production faster because of access to more people and more geographies. But it's still hard work and we still have significant room to continue to push more of the complexity of managing cars through these locations into systems with the goals of continually improving consistency across locations and of making scaling easier. The team is up to the challenge. The Carvana future is bright. The experience we deliver to our customers are exceptional and getting better all the time. The scale of our opportunity is enormous and the financial opportunity is clear to see. And we have a team that has proven that we can tackle the difficult technology and operational challenges that are in front of us and turn them into most that are behind us. The march continues. Mark? Mark Jenkins: Thank you, Ernie, and thank you all for joining us today. Unless otherwise noted, all comparisons will be on a year-over-year basis. 2025 was an exceptional year for Carvana. We entered the year focused on 3 key objectives: one, delivering significant growth in retail units sold and adjusted EBITDA; two, driving fundamental gains in unit economics and customer experience; and three, developing foundational capabilities. By these measures, 2025 was a resounding success. In full year 2025, we grew retail units sold by 43% to a record 596,641. We integrated 10 additional ADESA locations, we expanded our digital auction capabilities nationwide, we reached multiyear highs on customer Net Promoter Score, and we increased adjusted EBITDA margin to a record 11%, again, making us the fastest-growing and most profitable company in our industry. Moving to the fourth quarter. Retail units sold totaled 163,522 in Q4, an increase of 43% and a new company record. Revenue was $5.603 billion, an increase of 58%. Revenue growth exceeded retail units sold growth primarily due to traditional gross revenue treatment for certain vehicles acquired from a large retail marketplace partner. Consistent with past quarters, our growth in the fourth quarter was driven by our 3 long-term drivers of growth: a continuously improving customer offering, increasing awareness, understanding and trust and increasing inventory selection and other benefits of scale. The fourth quarter marked our eighth consecutive quarter of industry-leading retail unit growth and unit economics. Non-GAAP retail GPU decreased by $255 primarily driven by higher non-vehicle costs, lower shipping distances flowing through to customers in the form of lower shipping fees and higher retail depreciation rates. Non-GAAP wholesale GPU decreased by $148 primarily driven by faster growth in retail units sold than wholesale marketplace units. Non-GAAP other GPU increased by $49 primarily driven by improvements in cost of funds and higher finance and VSC attach rates, partially offset by our decision to give back to customers in the form of lower interest rates. Since our last reporting, we again expanded our loan sale platform by entering into a fourth loan purchase agreement with a long-standing loan partner for up to $4 billion of loan purchases through December 2027. This brings the total of our new partner loan purchase agreements to $12 billion over the next 2 years in addition to $6 billion with Ally through October 2026. Q4 was another strong quarter for levering SG&A expenses. Our 43% growth in retail units sold led to a $340 reduction in non-GAAP SG&A expense for retail units sold, including a $57 reduction in operations expenses and a $344 reduction in overhead expenses. Advertising expense increased by $83 per retail unit sold as we continue to invest in building awareness, understanding and trust of our customer offering. With approximately 1.6% market share of the used vehicle retail market compared to approximately 20% e-commerce adoption in nonautomotive retail verticals, we believe we are in the early days of customer awareness and adoption of our model. We continue to see opportunities for significant SG&A expense leverage over time and as we scale driven by both continued improvements in operational expenses as well as leverage in the fixed components of our cost structure. Net income was $951 million, an increase of $792 million. Net income was positively impacted by a noncash benefit of $618 million, including a net noncash tax benefit of $685 million partially offset by a $67 million reduction in the fair value of warrants. Net income margin was 17.0%, an increase from 4.5%. Adjusted EBITDA was $511 million, an increase of $152 million and a new Q4 record. Adjusted EBITDA margin was 9.1%, a decrease from 10.1% primarily driven by increased retail revenue per unit resulting from the traditional gross revenue treatment mentioned previously. GAAP operating income was $424 million or 83% of adjusted EBITDA, an increase of $164 million and a new Q4 record. 2025 was a strong year for our balance sheet. We ended 2025 with $2.3 billion of cash and equivalents, retired $709 million of corporate notes, and reduced our net debt to trailing 12-month adjusted EBITDA ratio to 1.3x, our strongest financial position ever. As discussed in prior quarters, we remain committed to driving toward investment-grade quality credit ratios over time. In 2026, we plan to maintain our 3 key objectives from 2025, while placing additional weight on driving significant profitable growth at scale. Looking forward, assuming the environment remains stable, we expect significant growth in both retail units sold and adjusted EBITDA in full year 2026, including a sequential increase in both retail units sold and adjusted EBITDA in Q1 2026. In conclusion, Q4 represented another strong quarter, closing out our best year in company history. We remain excited about progressing toward our goals of becoming the largest and most profitable auto retailer and buying and selling millions of cars. Thanks for your attention. We'll now take questions. Operator: [Operator Instructions] And the first question will come from Sharon Zackfia with William Blair. Sharon Zackfia: I guess I wanted to kind of double-click on the reconditioning dynamics. So if you could maybe talk about kind of the challenges you're facing as you're growing at this rapid pace, which is certainly hard to keep up with. And I think in the shareholder letter, you mentioned something like if you got all of the locations to the top quartile, you'd get a $220 benefit per car. What is a reasonable time line to kind of move that bell curve to the right? And do you see the opportunity for GPU to be flatter up for the full year? Ernest Garcia: So first, I would say, I think that team has done an incredible job for a long time, and we've been obviously working hard to scale that part of the business. I think as we've said before, as a general matter, I think for any operational business, oftentimes the most difficult parts are the parts where you're moving the most people and things and for us, that's reconditioning centers. And so that tends to be the most difficult area to scale. I think in addition to growing at 43%, supporting unit growth of 43% and also growing our inventory last year, that team also has been hard at work opening these additional integration sites which is great because it lays the foundation for additional growth in the future. And then I think in Q4, I think there's no question that our expenses were a little higher than we would have liked there. And I think that is partially the result of these additional sites kind of having a single line instead of multiple lines and there being some extra costs that flow through there as a result. I think it's also partially a result of as we kind of spread out, we had some newer managers. And I think a trend that we've seen is locations that have managers that have been around for longer tend to perform a bit better. And so I think those are addressable issues. I think you've -- many of you have been to many tours inside of our inspection centers and seen all the work we've done in Carli to make that process as automated as possible. I think we've got some opportunities to also make the management of those processes more automated. And I think that those capabilities are kind of focused more on lifting the floor of performance instead of raising the ceiling. I think a lot of what we've done so far has been about raising the ceiling. So I think we've got opportunities. I think we've got a very clear plan. I think this is one of those things where I think sometimes if you take a little step backwards, it kind of fires you up, and my strong guess is we'll be in a better spot in 3 to 6 months than we would have been otherwise. I think that team is fired up and ready to go and even no one's excited about taking a little backward step there. So we're focused on it. I do not think it will have long-term implications. I think we'll react to it very positively as we have to many other similar things in the past, and I think we'll get right back at it. Sharon Zackfia: I guess as a follow-up, I know you have your AI brand, I think, as well in the shareholder letter, and it seems to me you would be maybe the most uniquely poised to benefit from what's happening in an AI. Can you talk about what the early kind of nascent uses are that you're implementing AI to do? And then if you're seeing anything in the competitive set or if it's just business as usual there? Ernest Garcia: Sure. Well, I think if we start with things that are visible to investors, I think we put some stats in there. We have 30% of our retail customers now go through the entire process without talking to a person until they get the car. We have 60% of our customers that are selling cars to us who go through the process without talking to anyone until they drop off their car. That's only possible because of the systems that we've built and those systems being intuitive and automated and straightforward. And I think a major set of tools that contributes to that is Sebastian and other tools that emerge from that AI brain. So I think that that's a very clear place where we're getting more scalable, where we're reducing costs. And I think very importantly, where we're improving customer experience. Those customers who go through the experience in that way have a higher NPS than customers that call us. And I think that, that also speaks to the power of those systems. So I think that's an area where it's very apparent, I think, even from the outside looking in. And we've been focused on that for several years, and I think you'll continue to get better all the time. I think -- if you look at other parts of the business, including just the speed at which we're developing new products, that continues to get better all the time. I think there's been a couple of material step changes up in the quality of these different tools. And we're seeing internally those step changes start to flow through the business, and we're getting things done faster. I think that is still relatively early. I think the last -- I mean the last year has been a massive step-up in the quality of these tools. And I think the last 3 to 6 months has been another very large step-up in the quality of these tools. But we do believe that we're fundamentally extremely well positioned to benefit from these things because we have a big deterministic system that's vertically integrated that has access to all the information and that brain has every system feeding it so we can give customers very simple answers to any questions they've got in really any software interface that we choose to put on top of it. So we think that's very powerful. And then I think importantly, to try to discuss a relative negative as something that I think is a long-term positive. I think even that -- a discussion today is what does AI mean for different companies in the long term? And I think we're sitting here talking about the realities of our business, including financing and logistics and reconditioning and these difficult operational things. I think that those are other areas of the business that are very important to deliver a great customer experience and those are areas that are not subject to AI disruption in the immediate term. So we think that we're positioned to benefit in a major way. We think that competitively, we're incredibly well positioned compared to the rest of our industry. And we think that our business itself is also positioned to be an AI winner and not something that is disrupted by AI. So our view is that sum of all that is very positive, and we remain excited. Operator: The next question will come from Jeff Lick with Stephens. Jeffrey Lick: Congrats on a nice quarter and a great year. I was just wondering, Ernie and Mark, can you talk about the environment -- at least the depreciation environment has actually kind of reversed a little bit in Q1 so far. So I was wondering if you could just talk about -- you highlighted in the letter that you expect a sequential improvement, but maybe if you can just talk about the puts and takes and the path of travel for GPU, not only in Q1 but for 2026. Mark Jenkins: Sure. Yes. I could take that one. So Ernie hit pretty well on some of the cost dynamics of Q4. We do expect those cost dynamics to play out in Q1 as well and do expect our non-vehicle costs to be up on a year-over-year basis in Q1. Despite that, we expect a sequential increase in retail GPU in Q1. So we expect to overcome those cost headwinds and demonstrate a sequential increase. Beyond that, I don't have too much commentary to give. I think we'll see how the year progresses. Obviously, we've had a lot of success driving strong retail GPUs for a long period of time. And that's just one of the many places where we've demonstrated a lot of success over time, including obviously, the significant growth. But in addition to that, very significant growth throughout the income statement, including adjusted EBITDA, operating income and net income. So our goal in 2026 is to have another great year, to have another year we drive very significant top and bottom line growth, and that's what we're going to be focused on. Operator: The next question will come from Daniela Haigian with Morgan Stanley. Daniela Haigian: First one, you might have addressed a bit with the retail GPU commentary. But overall, on EBITDA, the variable adjusted EBITDA margin decelerated down to 7% this quarter. Is this a one-off decline? How should investors be thinking about this metric longer term? And is the pace of growth needed to reach that longer-term target, the 18% to 38% CAGR like you mentioned, Ernie, is that supportive of incremental margin expansion? Ernest Garcia: Sure. So I think maybe the first thing I would say on the beginning point is I think revenue changes play a very big role in that calculation. I think if you look year-over-year, we moved away from marketplace units, and that meant we moved to more traditional kind of gross revenue accounting on a number of units. If you look at EBITDA dollars per unit instead in Q4, I believe they were down by about $14 year-over-year, which is first order flat. So I think calcs kind of on EBITDA dollars, I think, would look significantly different. I think looking forward, we feel like we gave you a little bit of a walk, I think you can see where our margins are today. We clearly have significant fixed cost to leverage. We clearly have significant fundamental gains throughout the business. You can see those showing up in our expense line items, I think we remain very excited by the progress that we're seeing in operational expense despite the fact that we're passing value back to customers in faster delivery times and other ways that they do have some costs. So I think we still got a lot of room for that. So we feel like the path to 13.5% is very straightforward. And not only is it straightforward, we think that there's clearly significant additional gains that can be made and handed back to customers along the way. I think our goal has been, remains and always will be to try to make progress across all areas of the business rapidly and simultaneously. So we're going to try to always push all those numbers up, our EBITDA margin, our EBITDA dollars, our growth, our customer experience. And I think that that's where our priorities come in. We got to then try to figure out what are our priorities, and we got to pick projects that push us in the right direction. And so we try to communicate that clearly to investors as well in the same way that we communicate it internally. But the opportunity is clearly there. I think in terms of the opportunity, the way we're thinking about the business, nothing has changed. I mean, really, since we started the business. It's just a function of how well we execute at any point in time, the opportunities there. And if we execute well, we'll go get it, and we'll get it all simultaneously. Daniela Haigian: That's helpful color. My follow-up is I guess the question on everyone's minds here. I just want to give you an opportunity to clarify some concerns around the related party transactions, does Carvana loan to related parties? Do the related parties originate loans for cars sold on Carvana? I think if you look at the 10-K you might have some answers there, but just any messages for investors on that topic here. Mark Jenkins: Sure. The answer there is very simple. All of our related party transactions are disclosed in our financial statements. As a specific matter, we do not sell loans to related parties and have not done so for all of the years from 2017 through 2025. Recent short reports that suggest otherwise, are inaccurate. We have checked every single detail of those short reports to ensure that all of our reporting is entirely accurate and definitively say that those reports are 100% inaccurate. So I think that we feel very strongly about that. We don't sell loans to related parties. We disclose our related party transactions, and there's no ambiguity about that. Ernest Garcia: And then maybe friendly request to investors out there. If we have another short report during a quiet period at the end of the year, just maybe think back the last couple of years to recognize the pattern. Operator: The next question will come from Brian Nagel with Oppenheimer. Brian Nagel: So my first question, and I think this goes back to Sharon's question at the beginning of the Q&A session. But if you're looking at the reconditioning costs dynamic here in the fourth quarter, so I guess what I want to ask , that was more of a challenge for Carvana in the fourth quarter. What changed? Why did that become a more challenging year in Q4 than it had been in Q3 or prior quarters? Ernest Garcia: Sure. I mean, what I would say is I think that, that -- the most important answer, honestly, there's no unique dynamic that instantaneously changed. I think the execution of that team has been exceptional for a very long time, and we haven't spoken about this much, but I think we've been continually over time discussing the fact that if you look back over the last 10 years, the areas where we've run into more issues over time tend to be in reconditioning because it is fundamentally a very hard operational problem. And so I think we try to set people up for that possibility because I think it -- wherever there's operational complexity, there's room for variation. And I think that will remain true forever. Like I said, I think that team is going to -- I really do believe that in 6 months, we're going to be in a better spot than we would have been if we didn't have a fourth quarter miss. I think the dynamics are straightforward. I think they're as described. We've opened a lot of facilities. We've grown quickly. We were growing inventory quickly in the fourth quarter. We're hiring new managers and kind of moving around some management layers to put us in a position to continue to grow quickly. And so I think there are moving pieces and sometimes that leads to a little backsliding, but they're fired up. I mean just small anecdote, one of the corporate team members who runs that team, I was on a phone with this morning at 6:00 when he was driving out to [indiscernible] to go work on it. They're very aware that we had a little miss and they don't like it, and my strong guess is we're going to end up in a good spot quickly. Brian Nagel: That's helpful. My second part, second is also on the retail GPU. You called out as you're positioning inventories better you're seeing as you indicated that your shipping fees now are declining. So I mean clearly, that's a positive for the business. It's very much a positive for the consumer dynamic. But as we're looking at the financials, how should we think about that? Because I guess that, to some extent, undermines the one driver of GPU, but there should be benefits either in sales or your SG&A, correct? Ernest Garcia: Sure. Yes. So I think the simplest way to think about that is year-over-year by positioning cars closer to customers, our logistics expenses were reduced by about $60 and our shipping fees were reduced by about $60, basically making it kind of a breakeven from our perspective, but making it $60 better for our customers. I think we talk about fundamental gains, and I think that that's a fundamental gain that emerges from basically scaling, where there's just kind of cost savings in the system. And then I think the question is, if we want to keep the menu of options of equivalent economic quality as the previous year to our customers, then we would basically have the ability to raise shipping costs for any given distance. We would keep shipping costs flat year-over-year on average, and we would see lower cost and the same revenue. If we choose to leave the shipping cost menu the same then we effectively pass through those costs savings straight to our customers, and that's the election that we made. We think over time, there's a lot of value to sharing that value with our customers and just continuing to separate the offering that we have. I think today, you can see in our financial performance and our growth in our NPS, we are dramatically separated from the outside industry offering, but we want to continue to separate. And we think that the more that we separate the louder customer support becomes and the more quickly we can take over more of the market, which is absolutely our aim. So I think we try to be thoughtful about where that money goes. But that's an area where we got better as a business and customers benefited. Operator: The next question will come from Rajat Gupta with JPMorgan. Rajat Gupta: Just one clarification. When you're saying profitable growth for 2026, is it fair to assume that the EBITDA per unit should expand in '26 versus '25? I just want to clarify if that is the message. And then I have a follow-up. Ernest Garcia: Sure. I mean I think what we're trying to communicate there is subtle, and I think we're trying to communicate is kind of similar to the way that we're discussing internally. So in the letter, we talked about doing full build-outs of ADESA locations, for example. I think in market ops, we're making subtle choices to operate at slightly lower utilization, which happened in Q3 and in Q4 of 2025, but results in faster delivery times because we think the math of that is good. And so those are some areas where we're making some subtle changes either in CapEx or in kind of transitioning away from fundamental gains and towards supporting growth at higher scale. Those are not big moves. So I think what we're trying to communicate is we had those 3 priorities from last year. This year, we're leading a touch into growth. The other 2 priorities remain the same. Our goal is always going to be to make as much progress we simultaneously can across all parts of the transaction. We don't think there -- these are necessarily trade-offs. The trade-off is in our focus and where our priority is more than anything else. We think that there's room to get better at everything all the time, and we'll work hard to do it. And of course, it will be hard like everything that matters is. Rajat Gupta: Understood. Maybe a little more of a high-level question. I mean, you've tried to be as vertically integrated as possible on everything that occurs pre-sale. Is it -- when is the right time to start getting more vertically integrated on the post-sale side, maybe around loan servicing? I mean I'm sure at some point, servicing cars with some of the franchise acquisitions you're doing comes on board. Just curious around your thoughts on that and the timing. Ernest Garcia: Sure. I think you can see from the sum of our choices over a long period of time that we're big believers in vertical integration, both because of the economic benefits and because of the customer experience simplification. So I think as a general matter, we are believers in that and I think that, that belief is deep. And so it will probably show up in lots of choice over a long period of time. I think in the immediate moment, we're now at a place where our contribution margins are very, very high. And I think we've also put some data in the shareholder letter that talks about 70% of our customers referenced a recommendation from a friend or family member mattering when they buy a car from us. And the majority of our customers, 3/4 are recommending us to multiple people after buying from us. I think those are the sorts of things that tell us that there's a lot of value not just kind of in the math from scaling. The math is very clear because the contribution margins are very high, so that just shows up immediately, but also in just kind of laying the foundations for long-term secular growth in our market share because we're delivering great experiences to people that they're going to tell their friends and family about for a long time. I think those survey results are very consistent with individual conversations. If you talk to a customer, you obviously you get lots of stories, but the standard story that I feel like I hear is, yes, I kind of knew what Carvana was. I knew about your vending machines. I know you guys were innovative. I didn't really know what that meant. I went to your website, checked it out. Before I knew it, I bought a car and then I was almost nervous that I messed up and it got delivered and the advocate delivered it, it was great. And then I felt so much better, and I was super excited and I told my friends about it. And to me, that's like a very simple story, but that's just the way that actual growth happens. And so we're going to focus on trying to take the machine that we've got right now, growing it, delivering more experiences like that, that cause people to talk and we think that, that's going to pay us back, and we will always be looking at foundational capabilities would kind of be like the broad bucket that we use, that we discuss additional vertical integration. I think the opportunities there are straightforward. I think you can see many of them as you listed. I'm sure you can think of more if you sat here and thought about it for a second. We see them too, but we're trying to be focused on what's most important at any given point in time because we think prioritization matters a lot. And right now, it's the priorities we outlined for you. Operator: The next question will come from Joe Spak with UBS. Joseph Spak: I'm curious if you could comment on your feelings about what your customers are saying about affordability. I know you invested a little bit into rates and financing to sort of help this quarter. Curious to sort of see what the reaction to that was? And if maybe more is needed or is there anything as you could do, whether it's longer terms or whatnot? And somewhat related there's a lot of EVs coming back at some -- I think, going to some attractive rates at auction. And I'm curious whether you think that, that's an opportunity to plug the hole, so to speak, at the lower end of the market? Ernest Garcia: Sure. I think that's a big question. I think -- there's no question affordability is always an issue, and we would always love for cars to be less expensive. And I think it's always helpful when we can find pockets where we can give customers an offering that's better. I think we're in a market that I think in aggregate is -- has relatively low elasticities. And what I mean by that is if you look at kind of aggregate used car sales across a long period of time, you tend to see used car sales that are relatively flat over a very long period of time across different economic environments and affordability environments and everything else. So we think the thing that we can most impact is the quality of our offering relative to the rest of the market. And to do that, that's kind of that term fundamental gain that we throw around a lot. It's how do we lower our cost to give customers the same experience or get more efficient with our revenues. I think you brought up lowering rates by 1 point. That's -- I mean that's a big move. And I think if you look at other GPU year-over-year, you're going to see that approximately flat. That's pretty impressive, right? So how does that happen? How do we lower rates for our customers by about 1 point, have other GPU that's flat, we built better systems and processes that led to higher attach, and we lowered our underlying cost of funds by bringing on additional partners and getting more efficient in the way that we're structuring transactions and then that meant value for our customers. So I think when we can get fundamentally better and when we're in the position that we're in, where we're already performing so well relative to the industry economically, we're in a position to share with customers. And then the benefit of that is that, that creates affordability for them and separates us further from the economic quality of the outside offering and drive long-term growth. So I think that's what we're going to be really focused on is just trying to continually get better ourselves. And as it relates to EVs or any other segment that would allow us to try to plug some affordability gaps. We're always paying very close attention to all those things. But as a general matter, things that are easy, we'll get very quickly competed away. So if EV prices drop to a place where they're sufficiently desirable to many customers they're solving the affordability problem my at least expectation would be that many dealers will realize that and want to buy those EVs at the same time. I think we are probably a little bit better positioned because we've got a customer base that is more likely to desire an EV. But the hard thing that we can do is make the business better and more efficient. And when the business is better and more efficient, we have money to share with our customers that other people don't have to share, and that makes us different. And so that's generally what we're focused on. Joseph Spak: Super helpful. Second question is really a housekeeping one. And I apologize if I missed this in any of the prepared remarks, but can you just briefly touch on what happened with tax? It looks like there was some release and now there's a large deferred tax asset and a related tax receivable liability on the balance sheet. Mark Jenkins: Sure, I can hit that, and then there will be more details available on the IR website as well, that hopefully will be helpful. But the key facts there are -- we have an UP-C corporate structure, the UP-C corporate structure generates significant tax assets when LLC units are exchanged into common shares, and we've had those changes happening over a number of years. So we've generated very significant tax assets as a result of that. Up until the fourth quarter, we've had a full valuation allowance against those tax assets. But with the realization of sustained profitability, we've now released that valuation allowance leading to the significant deferred tax benefit in Q4. The other thing I should note is the tax benefits from the UP-C structure are shared between pre-IPO LLC unitholders and Carvana common shareholders. And so the tax liability release is -- effectively reflects the portion of the tax benefit that are shared with LLC unitholders. The remainder of that benefit then flows through to Carvana common shareholders, that was more than $600 million. So a nice win for shareholders in Q4 with those tax assets now being reflected in net income. Operator: The next question will come from Chris Pierce with Needham. Christopher Pierce: Sorry. Just -- I hate to go back to this again because I know adjusted EBITDA per unit is sort of what really matters. But can you just walk through a non-vehicle cost in an IRC? Because I'm thinking maybe you're less-efficient car takes longer to get on the website, depreciates more, but then you might head, I think that's a vehicle cost. So like is there like an example you can give to sort of kind of talk about what might happen here and how kind of way you're going to move past it? Mark Jenkins: Sure. Yes. Let me hit that. So by non-vehicle costs, we mean not the acquisition cost of the vehicle, which is the largest portion of cost of sales. But then there's a number of other non vehicle costs like reconditioning and inbound transport being primary examples. And so then just to go back, I think Ernie hit this earlier in the call, but recon costs in Q4 were elevated. We expect it to be elevated in Q1. I think a lot of that is driven by the success that we've had, adding new locations, Ernie touched on these points, but I think our reconditioning team had an exceptional year in 2025, growing locations more than 40%, growing total production more than 40%. I think our total production growth in 2025 is one of the biggest years, I think in the history of our industry in terms of increasing overall production. So I think that, that team had an exceptional year this year. In Q4 with all the sites that we rolled out over the course of the year, costs were elevated, but we have a number of initiatives in place and are placing an increased focus on ensuring that as we continue to scale production capacity at very high rates that we're doing so efficiently and using software and technology as effectively as possible to make that process of scaling as efficient as we possibly can. Christopher Pierce: Okay. Perfect. And then I hate to call it topical because it's something haven't heard about for years but it came up this morning. Can you just walk through title issues, different titling registrations across 48 states? Maybe touch on the restart program sort of -- I know that this affects a lot of deals, not just you guys, but maybe we hear about it more with you guys. I just kind of like to hear about just broadly what you can do there? And sort of what your restraints are because you've got 48 states with 48 different systems. Ernest Garcia: Sure. I'll try to hit on that briefly. And if you were listening out there yesterday, I passed the gentleman on the elevator that asked me to say Ratatouille. So this is, I think, my shot. But I think we've made tremendous progress in title registration. I think the reality is, as a bigger automotive retailer with more attention, I think that in the post-COVID period, we probably got more negative attention for that than was warranted by the performance. I think our performance at that time was very similar to the performance of many other automotive retailers. But regardless, I think that was one of those moments where you kind of get slapped around with a concept a little bit, and I think it made us much better. And I think today, we're in a place where approximately 99% of our packets are completed by deadline, which means that we're in a spot to get customers their title and registration work done quickly and on time. And from all accounts, unfortunately, there's not like super simple to find benchmarking data out there, but from all accounts that makes us very likely best-in-class despite the fact that we have a fundamentally harder problem because we're moving cars across state lines from many locations to give customers the selection that they benefit from our website. So I think this has turned from an area that I think was complex and was maybe a relative area of weakness because we are taking on a more complex problem to an area that I think is now another area where we shine and outperform in the market. So I think that's something that we're proud of. I think the teams that have worked on that, they just heard your project called out, I think you have a lot to be proud of, and we have a lot to be grateful for. So I think that's another kind of great bright spot in the Carvana story over the last couple of years. Operator: The next question will come from Ron Josey with Citi. Ronald Josey: Two-parter here. Maybe, Ernie, we'll start bigger picture on conversion rates. And we're seeing inventory grow, and you heard about passing on fundamental gains to customers with lower ATRs and faster shipping or delivery time down by a day. Talk to us about just how conversion rates are trending here, the progress as you're working as you -- I know you entered earlier on affordability, but just as you balance affordability with units sold and margins. So first is on conversion rates. And then maybe, Mark, on guidance overall. Wondering when you think about 4Q, I think we talked about at least 150,000 units, we came in high single digits, maybe 9% better. Wondering what drove the upside in 4Q here as we think about 1Q and the demand with tax refunds and seasonality? Ernest Garcia: Sure. I'll hit briefly on conversion. I think conversion rates are something that we definitely kind of define what's the top and the bottom of the funnel. But I think regardless of what we're talking about, I think that we've tended to see over a multiyear period, just continual improvement there. I think we're at a place now where we have a lot of website traffic if we use that at the very top of the funnel, if we want to go even higher than that if we say like aided awareness, I think we're in a place where there's quite a bit of aided awareness. I think our opportunity remains in kind of understanding and trust. And that's why I think we spoke about some of those anecdotes earlier. I think as we pass value back to customers, I think we have very clear understandings because we run very clear tests to make sure that we do understand those things. We know what speed means in terms of conversion. We know what price means or what rate means in terms of the conversion and so that's math that we feel pretty good that we understand and that does flow through instantly. I think -- a lot of the bigger opportunity, though, I think, is more about creating an offering that is different by more that causes customers to tell one another about it more dramatically. And I think that, that's a payoff that's much, much harder to calculate. But I think part of the kind of math that sits underneath the idea that giving value back to customers makes sense is that you have a long tail that pays you off over a very long period of time by just having an offering that is superior to the outside market offering. And so I think we do all the math and try to make very smart decisions as it relates to elasticities and conversion. But I think we also sort of from a principle and from a brand perspective, try to make sure that we're giving customers an offering that's clearly different. Mark Jenkins: Sure. Yes. And then on the guidance front, our most important goal is significant growth in retail units sold and adjusted EBITDA in 2026. That's where we're going to be focused. We talked a little bit in the letter about, 2025 was a year where we had 3 key objectives. Significant growth in units and adjusted EBITDA, driving fundamental gains and also developing foundational capabilities. We plan to maintain those 3 key objectives in 2026 but to increase our weighting on really focusing on the things we need to do to continue to drive very strong growth in units and EBITDA I think we feel great about where the business is positioned today. Our year end 2025 we think was exceptional. We think we're -- our growth in 2025 is in the top couple of percentage points of companies within the S&P 500, which is a stat we feel great about. I think we're starting to see now very strong returns on investments. For example, our operating ROA, operating income divided by operating assets for the year-end 2025 exceeded 20%, which we think puts us in line with very strong long-term compounders. And by the way, those financial metrics are paired with the fact that we only have a 1.6% market share in our core market. And so I think we see a really big opportunity in front of us to build a very meaningful and significant company. And so we just want to make sure that we're doing the things to continue to grow retail units sold and top line significantly and then also continuing to grow on the bottom line as well. So that's where we're going to be focused in 2026. Operator: The next question will come from Marvin Fong with BTIG. Marvin Fong: Two, if I may. I think you referenced it slightly in the last answer, Ernie, but the passing along the lower APR about a percentage point you referenced. In retrospect, did that have the desired impact that you anticipated in terms of driving unit growth? And longer term, what sort of the end state there. Do you have a goal of actually being sort of best in class and offering the lowest APRs to supplying customers? And then my second question, just on advertising, I noted on a per unit basis, it was down. And I was just wondering, you're obviously investing also in the business to drive great word of mouth, which is arguably your best form of advertising. So just are we at sort of a peak on a per unit basis with your formal advertising expense on a per unit basis? Or how would you kind of describe how we should think about that? Ernest Garcia: Sure. I mean, I think as it relates to kind of like the immediate term elasticity as we are passing some of that rate back to customers over the last couple of quarters. I think, yes, generally, we believe that we saw the impacts that we would have expected. And I think that's generally been true, like I said, across time, and we've shared value with customers, and we feel like we understand those elasticities pretty well. I think longer term, maybe I'll answer that slightly differently. I would say in the period between now and hitting our 3 million, 13.5% adjusted EBITDA margin goal, the goal is to make as much fundamental gain as we possibly can, of which we think there is lots of room. We think there's big opportunity in every GPU line item and every expense line item and all the teams are focused on those things and trying to prioritize and figure out where they can get the biggest yield the fastest, and we want to go get that. And then we want to give value back to customers. The more fundamental gains we get, the more value we can give back to customers. And we think the path to 13.5% is very straightforward, and it comes from scaling and kind of new markets acting more like old markets and just the benefits of levering fixed costs. So it's a straightforward path. So I think that's kind of the 2030 to 2035 plan. And I think from there, we'll kind of reevaluate and I'm sure along the way, we'll be giving you updates as well. But I think that's what we're focused on. And so it's just about getting a little better all the time. On AdX, I think we brought up over the last couple of quarters that given the large contribution margins and given the desire to lean into growth and all of the obvious benefits that you get from growth because of the contribution margin and then because of the feedback in the system and because it creates more customers that can tell your story that AdX is a good place for us to invest. We continue to believe that, that is the case. And we've also made some other investments in other parts of the transaction as we discussed. I think we will try to be efficient with those investments and thoughtful about where those investments go there's obviously many different places where we can spend money with a similar goal there. So we try to be thoughtful and optimize as best we can, but I would say no major changes in any of our kind of general thoughts there. Operator: The next question will come from Lee Horowitz with Deutsche Bank. Lee Horowitz: I guess as we look out to '26, the production growth algorithm looks quite strong as capacity comes online and throughput continues to improve. I guess how are you thinking about how that supply growth may be met via demand? And do you see any reason why the relationship you have seen in terms of selection growth and unit growth changing in any way relative to what you've seen historically? Ernest Garcia: I think we started the prepared remarks with something that we think is really useful is looking at the multiyear graphs and just trying to take away those big themes. I think we did have a similar kind of conversation here. I think if we look over the last 13 years of Carvana's life, I think as a general matter, the story has been that as long as we build the operational chain to support volume, there's demand for that volume. And I think generally speaking, that's been a pretty predictive, simple reduction of what's going on. So I think we've got to keep building out that operational chain. It's a lot of work. Our foundation is good. We've got the real estate. We've got the people. We've got the team. We've got the systems. We're making the investments now as we speak, and we're building a system that scales better, but that's constant hard work. And I think that we would expect the future to look like the past on that because we still think we're a tiny portion of this market. Yes, as discussed earlier, we're 1.6% of the used car market and 1% of the car market overall. So effectively, we still have first order of the entire market to grow into. So we think it remains very early in the game, and we think that making sure that we execute well and build out the supply chain is central to predicting where our growth is going to go. Lee Horowitz: Makes sense. And then I guess your competition has clearly talked about pushing on some price in the 4Q. Did reaction to that in any way impact retail GPU? I know you give us the walk, but any color there? And maybe how are some of the actions taken by your competitors changing, if at all, the way you think about price competitiveness in 2026? Ernest Garcia: I think we gave you the walk. I think the story in retail GPU, I think, really is about a transfer to customers of shipping costs and then a little variation in depreciation that I think is going to happen quarter-to-quarter and is natural. And then I think most importantly and most controllably, it's about reconditioning costs. So I think that's the story there. I think we'll always pay attention to what's going on in the market, but as we've said before, I think one of the properties of this market that we think is very beneficial is that it's a market that is massively fragmented that has literally tens of thousands of players in it that share a cost structure and share a way of doing business. And as a result, the way that, that market reacts in aggregate is pretty predictable because they're highly constrained by what their costs are, and it makes kind of the market very consistent and very predictable, and that's been true for our entire life and we'd expect to be true in the future. So with that being the case, we think that our focal point has to just be on us and delivering great customers and making our system more efficient. And if we do that, we think we'll keep getting better. Operator: The final question today will come from John Babcock with Barclays. John Babcock: I guess my question is really revolving around volumes. I mean you're guiding to sequential growth in 1Q, which seems to imply at least 22% growth, maybe a little above that. And generally, I think that's at least below where the Street was. Just kind of curious, I mean are you seeing anything in the market that's giving you caution at this point in time? And this also couples a little bit with your prior comment about shifting more to growth. So I just want a little more clarity there in terms of how you're thinking about that. Ernest Garcia: No, I guess would be the simplest answer. I think things look the same to us, and we're going to continue to run as fast as we can and just try to get a little better every day. I don't think there's any changes to what we're seeing or feeling. John Babcock: Okay. That's clear. And then as far as -- I mean, you're expanding free at-home delivery, free pickup should we think about that over time as potentially impacting GPUs, I mean we've clearly seen the impact this quarter at least of the shipping cost as more people are buying vehicles closer to where they're located. So just kind of curious if you might be able to go through that a little bit. Ernest Garcia: I think ideally, we're making fundamental gains at the same speed that we're passing them back. So that's -- or faster, frankly. So I think that's the general goal. I think in things like shipping fees, I think as we get cars closer to customers, what we're doing today is we're passing that benefit to customers. And I think as we scale that kind of naturally occurs, we have many of these inventory pools that are relatively new that have relatively small pools of cars in them. As those pools grow, that will bring our average car closer to our average customer, and we'll naturally cause a little bit more of that same impact, which we think is net positive. I think that we've made some choices like we discussed earlier, in market ops, for example, to run at slightly lower utilization rates and the benefit of that is that means the delivery times are faster for customers, and we think the math of that is very good. That would mean all else constant, that would take a little pressure on Carvana ops expense. But we generally are making gains in other places that are offsetting that or more than offsetting that. And so that remains the goal. So I think we hope to continue passing value back to customers and to make gains that are of similar size, so -- or better. So we're not moving backwards. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ernie Garcia for any closing remarks. Ernest Garcia: Great. Well, thanks everyone for joining the call. Really appreciate it. Team Carvana, great job again. I think the year 2025 is a tremendous, tremendous year, and I think it's something that was very hard to foresee ahead of time and something that we should all be very proud of. I think Q4 is also an exceptional quarter. I think there were a couple of little line items where we all know that we could have done a little bit better. And I think in many ways, that's great. That's a good reminder for us. Let's use that and let's go do better tomorrow. But great job. We have a ton to be proud of, and we're going to keep rolling down this hill. So let's keep it up. Thanks, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and thank you for standing by. Welcome to Integer Holdings Corporation’s fourth quarter 2025 earnings call. My name is Adra, and I will be your conference operator today. After the prepared remarks, there will be a question and answer session. Please note this call is being recorded. I would now like to turn the conference over to Kristen Stewart, Director of Investor Relations. Please go ahead. Good morning, everyone. Thank you for joining us, and welcome to Integer Holdings Corporation’s fourth quarter 2025 earnings conference call. With me today are Peyman Khales, President and Chief Executive Officer, and Diron Smith, Executive Vice President and Chief Financial Officer. This morning, we issued a press release announcing our fourth quarter and full-year 2025 results. We have posted a presentation to accompany today’s call on the Investor Relations page on our website at integer.net. On today’s call, we will provide an update on our strategy, review our adjusted financial results for the fourth quarter and full year 2025, and discuss our financial outlook. After our prepared remarks, we will open the line for your questions. As a reminder, the results and data we discuss today reflect the consolidated results of Integer Holdings Corporation for the periods indicated. During our call, we will discuss some non-GAAP financial measures. For reconciliations of non-GAAP financial measures, please refer to the appendix of today’s presentation, today’s earnings press release, and the trending schedules, which are available on our website at integer.net. Please note that today’s presentation includes forward-looking statements. Please refer to the company’s SEC filings for a discussion of the risk factors that could cause our results to differ materially. With that, I will turn the call over to Peyman. Peyman Khales: Thank you, Kristen. Thank you to everyone for joining the call today. This morning, we announced our fourth quarter and full-year 2025 financial results. Through diligent execution, the Integer team delivered sales and adjusted EPS towards the high end of the outlook range we provided in October. For the full year, sales increased 8% on a reported basis and over 6% organically, and adjusted operating income increased 13%. Adjusted EPS increased 21%, reflecting the higher sales, improved profitability, and effective capital management. In the fourth quarter, we repurchased $50,000,000 of our common stock. In addition, this morning, we announced our intention to initiate an accelerated share repurchase program to repurchase approximately $50,000,000 under our existing share repurchase authorization. Our share repurchase program reflects the confidence of the board and management in our strategy, financial position, and ability to generate strong free cash flows. We also issued our 2026 financial outlook. We are maintaining the midpoint of the reported sales range that we shared in October and narrowing the range. We expect reported sales to be down 1% to up 1%, and organic sales to be flat to up 3%. This outlook continues to include a 3% to 4% headwind from three new products due to lower than expected market adoption. Excluding the three new products, our underlying business is expected to grow 4% to 6%, in line with the market, underscoring the durability and the strength of our core portfolio. We continue to invest in our key growth initiatives and capabilities that support our long-term strategy, while being disciplined with our near-term expense management. For 2026, we expect adjusted operating income to be down 5% to up 1%, and adjusted EPS to be down 2% to up 6%. The fundamentals of our business are strong, and we remain focused on executing our disciplined growth strategy. We have a robust and diversified pipeline, and when combined with the strength and durability of our underlying business, we remain confident in our ability to return to 200 basis points above market organic growth in 2027. Before Diron reviews our financial results, I would like to provide an overview of our business and an update on our strategy as we typically do on our fourth quarter call, and discuss why I remain confident in our ability to deliver value creation for our customers and shareholders. Integer Holdings Corporation is a leading medical device contract design and manufacturing organization serving the largest global medical device original equipment manufacturers and emerging innovators. Our vision is to improve patients’ lives around the globe one device at a time. We accomplish this by advancing the goals of our medical device customers through industry-leading engineering and manufacturing with a relentless commitment to quality, service, and innovation. Our global scale manufacturing and R&D footprint allows us to serve our customers effectively and efficiently around the world. We offer one of the industry’s broadest and deepest portfolios of capabilities and product offerings across the cardiovascular, neuromodulation, and cardiac rhythm management markets. With this, we can meet a wide range of our customer needs throughout the product life cycle, help them bring products to market faster, and simplify their supply chain. Integer Holdings Corporation is well positioned to create long-term value for shareholders. We have a proven track record of financial performance, delivering strong results through the execution of our disciplined growth strategy. The medical device industry is an attractive end market supported by durable growth drivers, and we continue to focus on several high-growth markets where we have a strong competitive advantage. We are highly differentiated in the industry with deep expertise, broad capabilities, innovative technologies, and scalable global manufacturing. We have a robust and diversified product development pipeline oriented to high-growth markets with the world’s top global medical device companies and many emerging innovators. Our high-performance culture is a competitive advantage, centered on customer centricity, innovation, and operational excellence. In addition, we are disciplined with our capital management. We are investing to support our growth while maintaining a strong balance sheet and prioritizing long-term shareholder value creation. While select new product headwinds are expected to impact our 2026 outlook, we remain confident in our ability to return to above market organic sales growth and margin expansion in 2027. Now let us take a closer look at each of these areas. The medical device market remains highly attractive, underpinned by long-term growth drivers. Within this landscape, we are focused on the cardiovascular, neuromodulation, and cardiac rhythm management markets, which are expected to grow in the mid-single digits. Our strategy centers on investing to continuously expand our differentiated capabilities and partnering with our customers early in the design and development stage of new products. We are focused on new products in targeted high-growth markets, including electrophysiology, neurovascular, structural heart, and neuromodulation. By engaging early in the development process, we help our customers accelerate innovation and drive successful product launches. We have dedicated growth teams responsible for leading product line strategies in highest priority markets. These cross-functional teams bring deep expertise in our key markets, including customer needs, therapies, products, global trends, and competitive landscape. They continuously refine our strategies to address evolving market dynamics and ensure our success. In addition, the growth teams guide and prioritize investments in capabilities and capacity to support long-term sustainable growth. In recent years, we have invested both organically and inorganically to expand our capabilities in our targeted high-growth markets. These investments are designed to enhance the value we deliver to our customers to support their long-term success, which includes speed to market, a reliable and global supply chain, and the highest quality products. We have made many capability investments in recent years, and some examples include advanced automation, laser processing, extrusion, complex assemblies, miniaturization, and catheter process platforming. We have also invested to expand our rapid prototyping capabilities, which allows us to help our customers bring their products to market faster. As we have shared in the past, we have expanded a number of our manufacturing and R&D facilities to support our growth. For example, we have expanded our Salem, Virginia facility where we perform laser processing and micromachining, and plan to further expand our Alden, New York facility which supports the CRM and neuromodulation implantable device. In addition to physical capacity expansions, we have ongoing continuous improvement initiatives to optimize our existing footprint. In parallel, we have executed several strategic tuck-in acquisitions that have strengthened Integer Holdings Corporation’s position in high-growth markets and added specialized high-value capability. For example, InNeuroQo significantly enhanced our capabilities in neurovascular. Pulse Technologies deepened our capabilities in micromachining and strengthened our pipeline across several high-growth markets such as electrophysiology, leadless pacing, neuromodulation, and structural heart. And our 2025 acquisitions greatly enhanced coating capabilities and furthered our vertical integration strategy. Integer Holdings Corporation is a partner of choice because we are differentiated by our technical expertise, broad capabilities, innovative technologies, scalable manufacturing, and exceptional customer service. We support our customer success throughout the product life cycle, from concept to commercialization, enabling innovation, accelerating speed to market, and simplifying our customer supply chain. We have unparalleled subject matter expertise across a broad range of technical disciplines. We are leaders in design for manufacturability, and we have deep product design and regulatory expertise. We are known for our capability breadth and end-to-end solutions. We have a comprehensive portfolio of engineered components, complex subassemblies, and finished devices. Our innovative technologies include an extensive set of proprietary materials and processing capabilities as well as in-house advanced manufacturing and automation. We also offer innovative market-ready access and delivery products. We have robust manufacturing and quality systems across our global footprint. Our customers recognize our ability to seamlessly transition their critical products from the development stage to scale production to support their growth. Product development sales are the compensation we receive from customers as we partner with them to design and develop new or next-generation products. Generally, an increase in product development sales means we are working on more programs, larger programs, more complex programs, or a combination of the three. We believe product development sales are a good indicator for the size of our development pipeline, and they are a leading indicator of the contribution from new products to future growth. Since 2017, product development sales have increased more than 300%, and approximately 80% of our development sales are for products in higher growth markets. This momentum highlights both the strength of our customer relationships and the strategic focus of our portfolio. Our deep and broad pipeline includes many exciting programs that are focused on targeted high-growth markets. To highlight a few, our pipeline includes participation in devices used in electrophysiology procedures, including pulsed field ablation, structural heart delivery systems and components for structural heart implants, neurovascular therapies to treat both hemorrhagic and ischemic stroke, renal denervation, and neuromodulation devices designed to address a wide range of conditions. A robust and diverse pipeline supports our expected return to above market growth in 2027. Within CRM and neuromodulation, our pipeline of emerging customers with PMA products, primarily within the neuromodulation market, continues to be robust. We are engaged with 40 customers across development phases. As these life-saving and life-enhancing products move through regulatory approval and into the manufacturing ramp phase, Integer Holdings Corporation benefits from accelerated sales growth. Sales from customers in the product introduction and launch phases have grown from $10,000,000 in 2018 to approximately $125,000,000 in 2024. Looking ahead, we expect this category to grow at a 15% to 20% compound annual growth rate over the next three to five years, contributing to our ability to grow above market. Our people and our culture are central to our success. Integer Holdings Corporation has a high-performance culture that focuses on delivering value to our customers and shareholders. We recently refined our operational focus areas to customer success, operational excellence, and leadership impact. Customer success recognizes that Integer Holdings Corporation’s success depends upon our ability to enable our customers to achieve their goals and objectives. Operational excellence reflects our focus on continuous improvement at all levels of our organization, to ensure we meet our customer needs effectively and efficiently while creating value for our shareholders. Leadership impact reflects our ongoing investments in developing strong leaders to continuously raise the bar on performance. As part of our operational excellence focus, we continue to advance the Integer Production System, our lean-driven operational framework that integrates advanced engineering and manufacturing and continuous improvement practices to deliver consistent high-quality medical device manufacturing that drives customer success. To further enhance effectiveness and efficiency, as part of our Integer Operating System, we are launching a multiyear program to modernize our ERP platform. This investment is expected to strengthen our operational capabilities, improve productivity, enhance working capital management, accelerate commercial time to market, and position Integer Holdings Corporation for long-term scalable growth. We have dedicated a cross-functional team of top talent to execute a measured and phased implementation over the next several years. We continue to be disciplined with our capital management to drive sustainable long-term value creation for our shareholders. Our capital allocation framework includes organic investments, including capital expenditures to enhance our technology capabilities, automation, and capacity; tuck-in acquisitions to expand our capabilities and presence in high-growth markets; and opportunistic share repurchases. We have maintained a disciplined approach to capital management for many years now. Since 2021, we have invested 5.8% of sales in capital investments and over $700,000,000 in tuck-in acquisitions. In November, our board authorized a share repurchase program of up to $200,000,000. In the fourth quarter, we repurchased $50,000,000 of our common stock. And today, we announced our intention to commence a $50,000,000 accelerated share repurchase program. Looking ahead, we expect to continue investing both organically and inorganically to support our growth objectives and reinforce our competitive position. Our strategy of being positioned in the right markets, investing in differentiated capabilities, getting designed in early in new products and high-growth markets, creating a high-performance culture, and remaining disciplined in our capital management has delivered strong financial results. Since 2022, we have grown sales at a 12% CAGR, well above our market, while expanding our margins by nearly 400 basis points and maintaining our leverage ratio within the 2.5x to 3.5x range. While 2026 is expected to be impacted by temporary headwinds, we are laser focused on executing our strategy to achieve our long-term strategic financial objectives. These objectives are growing sales 200 basis points above market, growing adjusted operating income twice as fast as sales, and maintaining a net debt leverage ratio of 2.5x to 3.5x. I will now turn the call over to Diron to review our financial results and our outlook. Thank you, Peyman. Good morning, everyone, and thank you again for joining today’s call. Our fourth quarter sales and adjusted EPS were at the high end of our outlook ranges that we communicated in October, reflecting strong execution by our global team. Fourth quarter sales totaled $472,000,000, reflecting 5% growth on a reported basis and 2% growth on an organic basis. Organic sales growth removes the impact of acquisitions, the strategic exit of the portable medical market, and foreign currency fluctuations. We delivered $106,000,000 of adjusted EBITDA, up $11,000,000 compared to the prior year, or an increase of 11%. Adjusted operating income grew 10% versus last year, as we continue to make progress on our margin expansion initiatives. Our adjusted operating margin expanded by 74 basis points to 17.6% driven primarily by improvement in gross margin. Adjusted net income for the fourth quarter 2025 was $2,000,000, up 22% year over year, while adjusted earnings per share totaled $1.76, up 23% from the same period last year. Diron Smith: Both reflecting interest expense savings from the convertible note offering in March 2025. For the full year 2025, we delivered strong financial results. Sales totaled $1,854,000,000, reflecting 8% growth on a reported basis and 6% growth on an organic basis. We delivered $402,000,000 of adjusted EBITDA, an increase of 12% versus the prior year. Adjusted operating income grew 13% versus 2024, and our adjusted operating margin was 17.3%. Adjusted operating margin expanded 76 basis points, reflecting gross margin improvement and disciplined expense management. Adjusted net income for the full year was $226,000,000, up 23% year over year, while adjusted earnings per share totaled $6.40, up 21% from the same period last year. Turning to our sales performance by product line, Cardio & Vascular sales increased 11% to $284,000,000 in the fourth quarter 2025, driven by the Precision Coatings and VSI Parylene acquisitions and strong demand in neurovascular. On a trailing four-quarter basis, C&V sales increased 17% to $1,107,000,000 with strong growth from new product ramps in electrophysiology, contribution from acquisitions, and strong demand in neurovascular. Cardiac Rhythm Management and Neuromodulation decreased 2% to $167,000,000 in the fourth quarter 2025, as cardiac rhythm management growth was offset by a decline in neuromodulation, primarily driven by lower demand from select emerging customers with PMA products. On a trailing four-quarter basis, CRM&N sales increased 1% to $669,000,000 with CRM and neuromodulation growing at market, offset by the planned decline of an early SCS neuromodulation finished implantable pulse generator customer which was announced in 2020. Product line detail for other markets is included in the appendix of the presentation, which can be found on our website at integer.net. For the full year 2025, we delivered strong adjusted net income and adjusted earnings per share performance. Adjusted net income increased by $42,000,000, or 23%, and adjusted earnings per share increased by $1.10, or 21%, both growing much faster than our 8% sales growth. Operational improvements accounted for $30,000,000, or $0.86 per share, and reflected the benefits of higher sales volume, manufacturing efficiencies, operating expense management, and acquisition performance. Interest expense was $14,000,000 lower than the prior year, which contributed $11,000,000 after tax, or $0.33 per share, reflecting the savings from the convertible debt offering completed in March 2025. Our adjusted effective tax rate for the full year was 17.2%, down from 18.3% in the prior year, primarily reflecting tax benefits from R&D investment, lower interest expense, and stock-based compensation. These improvements were slightly offset by higher foreign exchange pressure, which reduced adjusted net income by $2,000,000, or $0.07 per share, and an increase in adjusted weighted average shares outstanding, which reduced our adjusted EPS by $0.11. In the fourth quarter 2025, we generated $55,000,000 of cash flow from operations. Our CapEx spend was $27,000,000. Free cash flow was $28,000,000 in the fourth quarter. For the full year 2025, our cash flow from operations totaled $196,000,000, a $9,000,000 decrease from the prior year. Our CapEx spend was $91,000,000, or approximately 5% of sales. This resulted in free cash flows of $105,000,000, an increase of $5,000,000 versus the prior year. At the end of the fourth quarter 2025, net total debt was $1,190,000,000. Our net total debt leverage at the end of the fourth quarter was 3.0x trailing four-quarter adjusted EBITDA, which is at the midpoint of our strategic target range of 2.5x to 3.5x. Turning to our financial outlook. The 2026 outlook we are sharing today is tightened from our preliminary outlook shared in October. We are holding the midpoint of our sales growth and the high end of adjusted EPS growth from our October preliminary outlook. For the full year 2026, we expect reported sales to be in the range of $1,826,000,000 to $1,876,000,000, down 1% to up 1% on a reported basis. On an organic basis, we expect sales to be flat to up 3%. Peyman Khales: We have proactively aligned our cost structure with Diron Smith: expected manufacturing volumes. As we expect the three new product headwinds to be short term and we continue to support our growth initiatives, we are not making structural changes in our organization. We expect our adjusted EBITDA to be in the range of $391,000,000 to $415,000,000, down 3% to up 3% versus the prior year. We expect adjusted operating income to be in the range of $304,000,000 to $324,000,000, down 5% to up 1%. We expect adjusted net income to be in the range between $216,000,000 and $232,000,000, down 4% to up 3%. This range incorporates an expected adjusted effective tax rate of 16% to 18% for the full year, with the first quarter slightly above the full-year rate. Lastly, we expect adjusted earnings per share of between $6.29 and $6.78, down 2% to up 6% versus the prior year. Our outlook reflects the reduction in outstanding shares from our fourth quarter share repurchase and an estimated impact from the $50,000,000 accelerated share repurchase that we announced today. Taking a closer look at our sales performance, as I mentioned, we expect sales to be down 1% to up 1% on a reported basis and flat to up 3% on an organic basis. We expect continued growth across the vast majority of our portfolio. However, as we communicated in October, our organic outlook is being impacted by lower sales of three new products: two in electrophysiology and one in neuromodulation. We continue to be our customers’ supplier of these products, but market adoption has been lower than anticipated. These products represented nearly 6% of total sales in 2025, resulting in an approximate 3% to 4% headwind, and we expect the sales of these three products to be significantly lower in 2026. Excluding these three new products, we expect our underlying sales to grow approximately 4% to 6%, which is in line with the market. We also expect an inorganic decline of approximately 1.3%, which reflects the now completed portable medical exit, slightly offset by contribution from acquisitions and foreign exchange. Our product line outlooks remain consistent with our October preliminary outlook. We expect C&V sales to be flat to up low single digits, reflecting the impact of new products in electrophysiology. We expect CRM&N sales to be flat to up low single digits, reflecting the impact of the new product in neuromodulation. In other markets, we continue to expect a decline of approximately $30,000,000 to $35,000,000, primarily due to the portable medical exit. Peyman Khales: We expect organic Diron Smith: sales to be down low single digits in the first half and return to market growth during the second half, consistent with the October preliminary outlook. The first half performance primarily reflects the significant reduction in sales related to three new products, which were ramping during 2025 and are expected to be at a lower run rate in 2026. For the first quarter, we expect reported sales to be flat to down low single digits. We expect nominal sales to then ramp sequentially throughout the remaining quarters. The quarterly sales cadence reflects a 5% tailwind in first quarter and a 5% headwind in fourth quarter due to year-over-year differences in production days. For the first quarter, we expect our adjusted operating income margin to decline 200 to 250 basis points versus the prior year. We expect our adjusted operating income margin rate to improve throughout 2026 and expect to return to margin expansion during the second half of the year. We expect cash flow from operations to be between $200,000,000 to $220,000,000, an increase of 7% at the midpoint of the outlook. We expect capital expenditures of between $95,000,000 and $105,000,000, or approximately 5% to 6% of sales. As a result, we expect to generate free cash flow between $100,000,000 and $120,000,000, which represents a 5% increase at the midpoint. We expect our 2026 year-end net total debt to be between $1,170,000,000 and $1,190,000,000. This reflects the estimated impact of the accelerated share repurchase program announced this morning. We expect our leverage ratio to be within the targeted range of 2.5x to 3.5x times trailing four-quarter adjusted EBITDA in 2026. I will now turn it back to Peyman. Thank you, Diron. Peyman Khales: In summary, the Integer team delivered a strong performance in 2025 with sales up 8% and adjusted earnings per share up 21%. While 2026 is expected to be impacted by temporary headwinds from three new products, the fundamentals of our business remain strong. Our pipeline is robust and diversified, and when combined with the strength of our underlying business, we are well positioned to return to growth. We remain confident in our ability to deliver 200 basis points above market organic sales growth in 2027. We will now open for questions. Thank you. Operator: We will now begin the question and answer session. As a reminder, if you would like to ask a question, in order to take as many questions as possible, please limit yourself to one question and a related follow-up if necessary. Our first question comes from Brett Adam Fishbin at KeyBanc Capital Markets. Brett Adam Fishbin: Hey, guys. Good morning. Thanks very much for taking the questions. Peyman Khales: Just wanted to start with the guidance top line. Think, you know, most people will be encouraged to see a pretty stable outlook relative to last quarter. But we just wanted to touch on the decision to lower the high end of the preliminary range. I think last quarter, you were at 0% to 4% organic. Now 0% to 3%, so just a slight change. But just curious what the incremental reason for that was and if it has something to do specifically with what you saw in January or more about just the pace of the improvement the second half of the year? Brett Adam Fishbin: Alright. Super helpful. And then, just thinking about margins, and really more of a 2027 question. So the 2026 outlook still implies some pressure, I think, you know, given that sales are expected to be subdued. But, you know, you kind of noted the expected recovery to above-market sales growth in 2027 and then a return to operating margin expansion. So maybe just a little bit more on what drives the return to operating income growth above sales growth in 2027. Peyman Khales: Yeah. Sure. I think for 2026, as Diron mentioned in the prepared remarks, we are not making any structural changes to our business because we have expectations to get to above-market growth in 2027. So as we progress throughout 2026, we expect to get to margin expansion in 2027. When we get back to 200 basis points over market performance, we will continue to deliver margin expansion as we have as part of our strategy and as part of our Integer Production System. Our long-term strategy has not changed: deliver 200 basis points over market and 2x margin expansion. Brett Adam Fishbin: Alright. Great. And then last one for me. You know, I always enjoy this strategic update and some of the updates around the portfolio and PMA products. I think, compared to last year, the total number of PMA products is up by one. Just wanted to maybe ask about overall contribution from the new products that have been coming through and how you kind of expect those to perform this year. A little bit, like, just more long term. It kind of seems like more of the future activity is in the development and clinical phase rather than regulatory. So whether you would kind of expect any of those to progress this year and reach the market by 2027 or if there is kind of a little bit gap in some of the development product actually reaching commercialization. Thank you very much for taking the questions. Peyman Khales: Yeah. No problem. The model that we have, what we have talked about, that we expect this portfolio of products to grow 15% to 20% in a three- to five-year period, takes into account all the dynamics that you talked about. We have a good pipeline that we will be working on. We have about 40 customers in this grouping, if you will. And we have really good visibility to the products that we are working on. Number one, the products that are already in the market: we have expectations of what the growth of those products will be. And then we have good visibility to the launch dates and the expected revenues that, on a risk-adjusted basis, give us confidence that we can grow at 15% to 20% in a three- to five-year period. So what you are seeing here in terms of adding one more customer in the launch phase is in full alignment with our expectations. It has already been modeled in our projections. Operator: We will move next to Matthew Oliver O’Brien at Piper Sandler. Diron Smith: Good morning. Thanks for taking the— Brett Adam Fishbin: Maybe just to follow up on the first question there on the reduction to the high end of the guide. I do not want to over— Diron Smith: focus on this too much. But— Peyman Khales: the organic number is down 100 basis points from flat to up 4% to flat to up— Diron Smith: three. And if I just look at the math on that, you know, it is like $9,000,000 you are taking out— Brett Adam Fishbin: like, at the midpoint by taking it down by 100 bps. So what I am really trying to get at is there is nothing— Diron Smith: from a new customer perspective or existing customer perspective that is making you think, okay, you know what, we are going to get a little less revenue from somebody than we initially expected. And that is why we are taking the high end of the guidance range down. Peyman Khales: Good morning, Matt. No. There are no specific changes, as you were pointing out, to customer forecasts and whatnot. And the guidance that we have is in full alignment with our expectations and in alignment with what we had communicated back in October. We have tightened the range around the midpoint that we had communicated. And again, the individual pieces and the top end are probably more rounding than anything else. Okay. Brett Adam Fishbin: Alright. Fair enough. And then as a follow-up,— Diron Smith: I just noticed that DSOs— Peyman Khales: are kind of meaningfully at the end of Q4. Diron Smith: Any real reason for that? And how do we think about that metric progressing over the course of this year? Thank you. Brett Adam Fishbin: Yeah, Matt. Certainly. Yeah. On the DSO,— Diron Smith: we made a decision to limit the amount of accounts receivable factoring that we did in the fourth quarter. And that is really looking at maintaining our financial flexibility. As you can tell, our revolver is paid down, and any incremental cash that we would have generated through the factoring would have gone to further prepay on our Term Loan A. So we thought there was a better use of cash to limit our factoring in the fourth quarter, which— Brett Adam Fishbin: effectively raised the DSO from what you had typically seen. Diron Smith: Okay. Makes sense. Peyman Khales: Thank you. Yep. Operator: We will take our next question from Richard Samuel Newitter at Truist Securities. Peyman Khales: Hi. Thanks a lot. Two from me. Maybe the first, it looks like— Brett Adam Fishbin: in addition to the organic guide getting narrowed— Diron Smith: towards, you know, a little bit at the— Brett Adam Fishbin: top end, operating margin, or the implied operating profit margin, is also a little bit— Diron Smith: below where the implied level was before, and there is a really, really steep— Peyman Khales: year-over-year 1Q decline, or bigger than what we were projecting. So if you could just maybe talk a little bit about the 1Q, kind of the steep 1Q falloff— Richard Samuel Newitter: there, especially if you have extra selling days helping the 1Q. And then within the context of margin, if you could also— I think you had mentioned on the third quarter call that you expected gross margin to improve year over year. Can you maybe just break down the operating margin comments within the context of OpEx and gross margin? Thank you. Diron Smith: Richard, this is Diron. I will jump in here. Yeah. As you look at our operating margin, we have talked before, and Peyman just mentioned a moment ago, about not making structural changes in the business because we want to make sure we are well positioned to deliver on the return to market growth in the second half and the 200 basis points above market in 2027. So as you look at that structurally, there is a level of fixed cost to absorb. And on the lower sales numbers, particularly in first quarter, there is a little bit more of a challenge in terms of absorbing those fixed costs in the business in the quarter. So as we look at the model and we look at what our structure is on the sales guidance for first quarter, that is where we see the 200 to 250 basis points of margin pressure— Richard Samuel Newitter: there. And then as our sales kind of nominally grow— Diron Smith: throughout the remaining quarters of the year, we expect to see that operating margin rate grow as well. So I think those are a couple of other critical pieces driving that— Richard Samuel Newitter: overall kind of margin outlook for the year. Diron Smith: You know, as you know, we do not necessarily give guidance on our gross margins. But I think what we had said in the past was that with the Integer Production System, we expect to fully continue driving variable margin expansion—so, managing our direct material and direct labor and seeing margin expansion there— Richard Samuel Newitter: while we still will see pressure, depending on where we are able— Diron Smith: to land in the sales outlook on the fixed cost that sits in gross margin and overhead. So it is going to be a little bit of a mixed story within gross margins. Richard Samuel Newitter: Okay. That is helpful. And then just on the discrete products that you are calling out, I appreciate the full-year 300 to 400 basis point impact, and it continues to be. I guess we are a quarter in since you last provided your preliminary outlook. We have seen results for the fourth quarter, especially in the all-important electrophysiology segment. Any characterization you can provide on your discussions with your customers on their views of the end markets that kind of took you by surprise in their specific products? And what can you tell us about your visibility today versus three and four months ago, with respect to how they are approaching their forecasting so that we can get confidence that 300 and 400 basis point impact is the right one even beyond the quarter ahead? Thank you. Peyman Khales: Yeah. No problem. So we finished the fourth quarter in full alignment with our expectations, how we had modeled things. And the discussions that we have had since October with our customers and continue to have are in full alignment with how we modeled things. Just to step back a little bit, Rich, when we provided our guidance in October, we had done a lot of homework, if you will, working with our customers and using our own intelligence to try to come up with a different view of the forecast. And at that time, we talked about that we provided a wider range in our preliminary guidance that took into account different possibilities. And as we have worked with our customers, what is transpiring and what we expect for 2026 is in full alignment with what we had modeled and what our customers are telling us. So the forecasting patterns, the ordering patterns, are in alignment with the projections and what we are guiding. Okay. Thank you. Operator: We will go to our next question from Travis Steed at Bank of America. Richard Samuel Newitter: I wanted to ask on the Q1 revenue kind of flat to down low single digits reported. There are 5% selling days, kind of five to seven extra days, but I know there is an inorganic impact. So make sure I understand the actual organic Q1 to Q2 kind of bridge and anything you would call out on how you would think about what is the kind of the one-time impacts and some of the recovery in your different business in Q1 versus later in the year? Peyman Khales: So we had, in October, guided to a first half of the year being down in the low single digits and that we would grow to market growth throughout the second half of the year in 2026. That view has not changed. Let me just start with that. And we still expect the same growth profile. Now, talking about the first quarter, as you mentioned, the impact of inorganic, yes, there is a little bit of an impact there. But the impact of acquisitions is minimal, really. But as you look at the first quarter and the fourth quarter, we just wanted to highlight that there is a 5% tailwind in the 1Q numbers and there is a 5% headwind in the fourth quarter. So when you look at that, when you adjust for that, the quarterly profiling is exactly as we had expected—that we would start the year a little bit lower and then grow to market growth throughout the course of 2026. Okay. Thank you. And then maybe— Richard Samuel Newitter: another kind of bigger picture question. You know, as a new CEO, just thinking about how you are thinking about shareholder value creation and the pros and cons of balancing more shorter-term value creation, maybe a partnership route versus more longer term, independent shareholder value creation? Brett Adam Fishbin: Yeah. Peyman Khales: It is a good question. And I think, really, the only way we can create value for our shareholders in a sustainable fashion is to have a long-term view of our strategy and how we execute. I think we—let me start with—I am a strong believer in our strategy. I was there in 2018 when we started looking at creating our new strategy and refining and executing it. As we have done over the past many years, we will continue to refine our strategy and execute on it. We believe that we can be successful if we can position ourselves to deliver value to our customers and make them successful. That is the only way that we can be successful in a sustainable fashion. So if your question is both in terms of short term and long term, we believe—I believe—that the only way we can create value is by continuing to execute our strategy, have a long-term view of what we need to do to deliver value for our customers, which is the only way that we can deliver value for our shareholders. Great. Richard Samuel Newitter: Thank you. Operator: We will take our next question from Andrew Harris Cooper at Raymond James. Hey, everybody. Thanks for the questions. Richard Samuel Newitter: Maybe just first, kind of diving into a little bit of the trajectory— Brett Adam Fishbin: heading into 2027. You guided to the sort of ex those challenging products— Richard Samuel Newitter: being with the end market for the year. What happens through the course of 2026 to get you from we are going to be kind of aligned with the market to stepping back up— Brett Adam Fishbin: above in 2027? What has to happen, and maybe what changes throughout the year to get you— Peyman Khales: So I think the first thing to consider is that our core business is very strong. We are saying that our core business is expected to grow in alignment with the market. And by core business, I mean our business excluding the impact of the three products that we have talked about. So the rest of the business is strong; we expect that it will continue to be strong as we enter 2027. In addition to that, we have new products that are expected to launch in the second half of this year and during the course of 2027. So when we look at the combination of these things—and by the way, we no longer will have the headwinds associated with these three products. So when we consider all these elements together, and considering the strength of the pipeline that we have, this is what gives us confidence to get back to 200 basis points over— Richard Samuel Newitter: Okay. Helpful. And then— Peyman Khales: following up on one from earlier as well. Brett Adam Fishbin: On the PMA products and the 15% to 20% goal, historically, you have normally given an update to that number on kind of a biannual basis. But— Peyman Khales: can you share— Brett Adam Fishbin: what those new products generated in 2025? And I ask that just with, in the back of my head, the thought of this one PMA product likely being a headwind there. So how do we think about making up for that in that three- to five-year relative to maybe a little bit of a challenge here with at least one product? Peyman Khales: Yeah. These products, as we had mentioned, had strong growth in 2025. And then we had a slowdown, particularly in the fourth quarter, as we expected. Let me just also remind you that we had exceptionally strong growth from these products in 2024. So we also had some challenging comps. So net-net, I would say that these products grew in alignment—with the fourth quarter headwinds—these products grew within alignment of the market in 2025. Okay. Brett Adam Fishbin: I will stop there and chat more in follow-up. Thank you. Peyman Khales: Great. Thank you. Operator: Next, we will go to Nathan Treybeck at Wells Fargo. Peyman Khales: Hey, guys. Thanks for taking the question. You know, I just wanted to touch on 2027 again. You know, just assuming the product revisions are really just contained in the three products,— Diron Smith: and you lap those headwinds in the second half of this year,— Brett Adam Fishbin: and you obviously said you are not making structural changes to the company,— Diron Smith: I am trying to understand, like, why would the comps— Richard Samuel Newitter: not result in 2027 growth kind of above your, you know, formula of 200 basis points above market. Peyman Khales: Well, our long-term strategic objective is to grow 200 basis points above market. That is the reason why we are providing earlier than usual guidance for 2027, because we want to convey the confidence that we have in our future growth prospects. So we are conveying that we have visibility and we expect to get back to 200 basis points over market. As we get to this time next year, we will be able to provide a more specific guidance on 2027 growth. Diron Smith: Okay. Thanks. And, you know, I noticed— Peyman Khales: the end market, the table in your presentation. So to— Diron Smith: clarify, is that the entire end market or just the areas that you are exposed to? Because, you know, I see electrophysiology; you have mid-teens. I think some market estimates still have the market growing high teens for that time period of 2025 to 2029. So I am just trying to understand if there is anything kind of, you know, anything specific— Peyman Khales: to Integer Holdings Corporation in that— Diron Smith: table. Thanks. Peyman Khales: Yeah. The end market—we expect the end market to grow in the high teens, as you pointed out. In 2025, we expect the end market for EP to be in the high-teens to 20% range. And we expect that in 2026 to be kind of in the mid-teens. Okay. Brett Adam Fishbin: But, you know, as far as— Peyman Khales: the broad end markets, are you referring to just the broad end markets or the areas that we play in? The broad end market. Diron Smith: Okay. Operator: We will go next to Joanne Karen Wuensch at Citigroup. Good morning, and thank you so much for taking the question. Our questions—I will put them upfront. Since the third quarter, what has changed internally in how you think about running your business and communicating goals, etc., with the Street? And it is sort of in the public domain of activist involvement, and I am curious if that has had impact on how you think about goals and running the business. Thank you so much for taking the question. Peyman Khales: Yes. Good morning, Joanne. Thank you for the question. So let me answer your question holistically. Because we believe in our strategy, we believe in how we run the business, our execution, the processes that we have, how we look after our customers, and how we have been able to deliver value for our shareholders—our confidence to be able to deliver value in a sustainable fashion for shareholders—we are not changing anything in our business because we believe in our strategy, and we believe in what we are doing. I think part of your question was about how we establish goals and expectations. How we issue guidance and come up with those forecasts, as we have mentioned before, has a very balanced view of what we believe we can deliver. And then, of course, we look at the downside and the upside of that, and then collectively, we come up with what we think the expectations are. You are pointing out—I think what is implied in your question, Joanne—is the impact of the three new products that gives us some short-term headwinds. As we have mentioned before, that is unusual and that has to do with market adoption that really our customers were not expecting either. So that is an unusual event that we do not expect to continue. I think, just to go back to your second part of the question, we listen and talk to all of our shareholders. And we take their view into account, of course. But we are—and I am—a strong believer of our strategy and how we can deliver value for our shareholders. Operator: Thank you very much. We will move next to Suraj Kalia at Oppenheimer. Diron Smith: Damon—Diron. Can you hear me alright? Peyman Khales: Yes. Good morning, Suraj. Gentlemen, thank you for all the comments on navigating these temporary headwinds— Diron Smith: Darren, one question for you and Peyman one for you. I will pose them both upfront. So, Darren, I want to go back to your comments about— Peyman Khales: not being able to— Diron Smith: absorb fixed costs in Q1. Maybe you could give us some additional clarity on that, Darren. I presume you will have visibility six to nine months in advance. So the specific attribute about fixed cost not being absorbed— Peyman Khales: kind of confused me. Any additional color would be great there. Diron Smith: Peyman, for you, if I could pose this question—and I know this is a hypothetical, but I am just trying to connect some dots here. So let us say you have an ENT customer, Suraj Incorporated, that pulls their demand on a certain product.— Andrew Harris Cooper: Right? You have to lower your manufacture—stop your— Peyman Khales: manufacturing. Your sales go down. So on and so forth. Right? Diron Smith: But for whatever reason, the end customer comes back and says, oops,— Peyman Khales: I need to ramp back production of this new product. Does it require a new contract? Do you all have to switch manufacturing? Do you all keep spare inventory? I am just trying to connect some dots vis-à-vis, specifically, an ENT customer. Any color there would be great. Gentlemen, thank you for taking my questions. Well, thank you, Suraj, for the questions. Why do we not start with the question that you had for me, and then I will ask Diron to get back to your first question. So in terms of how it works, let me start with, just philosophically, Suraj. We work very closely with our customers. In recognition that, you know, we have talked about that the majority of our business is sole source and ultimately we see what the end market demand is. So our customers work with us to give us a forecast based on their production plans. So whatever they have planned for their manufacturing facilities, we get some of those forecasts and orders months in advance because that is what they are planning. If something were to change, we, of course, work with them. So, you know, if they ask us to bring their forecast down, we work with them to do this in an orderly fashion. And what I mean by that is our customers recognize—because they also manufacture themselves—that you cannot stop a production. You cannot have a cliff. So they usually give us a ramp down, and we work with them collaboratively to see what makes sense so that, in the event—the hypothetical event—that you mentioned, that there would need to be a ramp down, we do this in an orderly fashion so that we do not cause a lot of inefficiencies. And conversely, if you have to ramp back up, we do the same thing. Obviously, if you have to ramp back up quickly, there could be costs associated with that, and then we work with our customers. Again, we have a great partnership and relationship with our customers. We work with them. To your specific question about whether there is a new contract—no. We have general contracts with the majority, all of our large customers. We have mentioned before that approximately 70% of our business is under a long-term contract. And all the provisions are spelled out in that. We move with the speed of business. Every time something changes, we do not go and renegotiate a contract. Those things are already done. It is just a question of how we work with each other on a daily basis to make sure that both we, Integer Holdings Corporation, can meet the needs of our customers and our customers work with us so that we can make sure we run our businesses efficiently. Diron Smith: Yeah. And, Suraj, just to maybe cover off on your question related to the fixed cost leverage. I think what you have to understand is that, as a manufacturing company, we have a certain level of capacity and case built out to deliver on our sales performance. So as you look at our sales level in fourth quarter and the sequential movement from 2025 to 2026, you will see a lower sales number, and that still has to absorb the full fixed cost used to deliver on the higher sales number. So this is one of the reasons that we always talk about Integer Holdings Corporation as a company that needs to be looked at on more of a rolling four-quarter basis because you do have that inter-quarter variability that you may have with sales, with a little bit more fixed cost leverage at times, a little bit less in other quarters. And so when you think about our guidance for the year, that is where you will see that the operating margin is not as impacted on the full-year basis in our guidance as, let us say, one quarter is, where we have the lowest sales for the quarter. Thank you. Andrew Harris Cooper: Mhmm. Operator: Thank you again for joining us today. You can access the replay of this call as well as the presentation on Integer Holdings Corporation’s investor website at integer.net. This concludes today’s conference call. 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: Welcome to the Mondi Full Year Results 2025. [Operator Instructions] I'm now going to hand you over to Andrew King. Andrew, please go ahead. Andrew King: Good morning, everyone, and welcome to Mondi's 2025 Full Year Results Presentation. I'm Andrew King, your Group CEO, and I'm joined this morning by our CFO, Mike Powell. As usual, I'll begin with some highlights for the year. Mike will then take you through the financial performance in more detail. I will then return to provide an update on our business units, discussing at the same time the current trading environment and then take you through why we believe Mondi is strongly positioned to capture the upside as markets improve. After that, Mike and I look forward to taking your questions. So as you'll see on the first slide, in terms of our full year performance, I believe we did deliver a resilient outcome, EUR 1 billion of underlying EBITDA, marginally down on the prior year. Pleasingly, cash generated from operations of EUR 1.07 billion was up on the prior year. As Mike will explain in more detail, we were also able to reduce CapEx below previously guided levels, which further supported our cash flow and balance sheet. As I mentioned, this is a resilient performance in the context of what remain challenging market conditions and reflects both the strength of our integrated asset base, the value of our unique product offering, and the impact of the self-help measures we have taken. While we remain confident in the structural drivers underpinning through-cycle growth in our sustainable packaging solutions, we're equally cognizant of the impact of the current downturn and the impact it's having on our near-term performance. In response, we have taken deliberate and decisive actions across the group, intensifying our focus on cost discipline, on operational excellence, on proactively optimizing our production footprint and on cash generation, while at the same time, continuing to focus on delivering a great value proposition to our customers. These actions together with the significant competitive advantages we continue to enjoy as a business, ensure that Mondi is strongly positioned to capture the upside as market conditions improve. With that, I'll hand you over to Mike for more color on the 2025 financial performance. Michael Powell: Thanks, Andrew. Good morning, everybody. Thank you for joining. On to our 2025 results, which demonstrate a resilient performance against a backdrop of the prolonged cyclical downturn that our industry continues to face. Underlying EBITDA of EUR 1 billion saw continued margin pressure associated with the challenging trading conditions, the makeup of which I'll come on to on the next slide. During the year, we successfully completed the build and start-up phase of a number of major capacity expansion projects into our core markets. These investments, together with the Schumacher acquisition, position us strongly to capture the upside as market conditions improve. They have, however, led to a higher capital base. And as a result, you see an increase in depreciation and finance costs, which reduces the group's basic underlying EPS and return on capital in the year. And on the right-hand side, I'm pleased with the stronger cash generation from operations increasing to EUR 1.072 billion through strong working capital management. So let me take you through the main movements in underlying EBITDA when compared to the prior year of EUR 1,049 million that you can see on the left-hand side of the chart. As you can see, the performance was resilient in an environment of macroeconomic uncertainty and geopolitical tensions with only small movements year-on-year, which is a testament to the strength of the cost advantaged and integrated assets, the quality product offering and the targeted actions taken. Sales volumes were up on the prior year, which included additional volumes from ramping up the new capacity. With respect to selling prices, this is mostly comprised of higher containerboard selling prices, which were more than offset by significantly lower uncoated fine paper and pulp selling prices, and Andrew will provide a little more color on that in a couple of minutes. The cost increase is mainly in relation to labor inflation with other costs well controlled. Input costs were overall flat year-on-year against a muted economic backdrop. In the first quarter of 2026, we are seeing overall input costs remaining flat on 2025 despite some sizable headwinds related to lower energy-related income and emission credits. And lastly, the forestry fair value gain, EUR 32 million higher in the year when compared to prior year, all that adding up to the results of an underlying EBITDA of over EUR 1 million for the year. As Andrew said, we're cognizant of the impact from the current downturn and its effect on our near-term performance. So I wanted to spend some time outlining the actions we're taking to proactively manage the fixed cost base. Andrew will touch on operational excellence and productivity later. We execute targeted cost-out initiatives to drive efficiency, eliminate nonessential activities and strengthen the core revenue-generating areas of the business. It is what we continuously do to improve. Whilst we do have targeted incremental costs in growth areas, whether that's due to new capacity or customer demand, we have reduced headcount over the last 12 months elsewhere by approximately 1,000 heads, driven from greater efficiency in our operations, plant closures and about a 13% reduction in our group services offices. We've also recently announced 3 further plant closures, which will reduce headcount by approximately another 200 in the coming year. We combined our Corrugated Packaging and Uncoated Fine Paper businesses into a single business unit, and that facilitates a more streamlined organization, supporting faster decision-making, cost takeout and delivery of operational synergies across our pulp and paper mills whilst retaining our customer-focused value chain orientation. And therefore, for the 2026 year, I expect these actions to offset labor and other cost inflation. Let me now take you through the movement in net debt. We started the year with EUR 1.7 billion. You can see the EBITDA contribution I've taken you through of the EUR 1 billion. In terms of working capital, I'm really pleased with our delivery since the half year. As you'll remember, at the half, we outflowed about EUR 100 million in the first 6 months, which tells you we drove around a EUR 200 million inflow in the second half of the year to leave the total inflow that you see on the chart of EUR 83 million. Including interest, tax and other items, the net result of these 3 items was cash delivered of EUR 767 million, and you see that highlighted in the box on the slide. The next 3 columns shows how we've allocated capital in the year. We invested EUR 673 million in property, plant and equipment, lower than the previously guided EUR 750 million to EUR 850 million, driven by our ongoing focus on cash management. Dividends paid totaled EUR 352 million. And lastly, we completed the acquisition of Schumacher, which expands our geographic reach, drives greater optimization across our plant footprint and unlocks efficiencies that support long-term growth. Integration remains on track. We're confident in the delivery of the EUR 32 million cost synergies over the 3 years from completion, and that's an increase from the EUR 22 million that we initially envisaged. So to conclude, all of that leaves the group with a net debt balance at the end of the year, EUR 2.6 billion, which is 2.6x levered. I also want to set out our robust financial position. We have investment-grade credit ratings. Our available liquidity totals around EUR 1.3 billion and places us strongly to protect value in the short term and capture opportunities in the long term as they arise. We've refinanced short-term debt maturities in the year and have no further debt maturities until 2028. And as a reminder, we have no financial covenants. Let me now take you through some capital allocation points, starting on Slide 9. So the group has a well-invested and cost-advantaged asset base in structurally growing packaging markets. Over the past few years, we've invested in a number of major capacity expansion projects, and we're very proud of the teams for completing the build and start-up phase of these projects on time and on budget. Our focus is now on delivering full productivity ramp-up, executing our commercial strategy, driving cash generation and delivering strong returns. In addition to these growth projects, we invest through the cycle in our asset base to maintain competitive advantage. And you can see here in the gray bars that exclude those growth projects that this has averaged 107% of depreciation over the past 5 years. Our cash capital expenditure for 2026 is expected to be approximately EUR 550 million, lower than the EUR 650 million previously guided. Within the EUR 550 million is approximately EUR 50 million of cash still to flow for the growth projects, leaving a base of around EUR 500 million. This spend will focus on maintenance and targeted cost optimization opportunities, including enhancing energy efficiency, improving productivity and strengthening the resilience of our asset base. On to dividend, the Board does recognize the importance of dividends to our shareholders. Over the last 2 years, we have consciously recommended dividends in excess of our policy on each occasion carefully reviewing expectations for the coming period. Notwithstanding our continued confidence in the resilience and competitiveness of our business, consistent with our objective of retaining financial flexibility, the Board has recommended a total ordinary dividend of EUR 0.2825 per share for 2025, reflecting a return to the group's stated dividend cover policy of 2 to 3x underlying earnings on average through cycle. And lastly, the technical guidance slide for 2026, hopefully, all relatively self-intuitive. With that, let me hand back to Andrew. Thank you. Andrew King: Many thanks, Mike. I'll now take you through the review of the business unit performance and some thoughts on the current market dynamics before coming back to our competitive positioning. Before we get into the segmental review, I remind you that in Q4 2025, we combined the Corrugated Packaging and Uncoated Fine Paper businesses to form an enlarged Corrugated Packaging business unit. So the segmental numbers are all based on the new reporting structure. But to help comparability in the appendix to these slides, we have provided unaudited numbers on the old basis of segmental reporting. So coming first to Corrugated Packaging. A highlight was very much the good volume development achieved across all segments. Containerboard volumes were up around 15% year-on-year against the backdrop of a flat European market demand, supported by increased export sales and the ramp-up of completed expansion projects in our Swiecie, Kuopio and Duino mills. In Corrugated Solutions, we achieved like-for-like volume growth, excluding the Schumacher acquisition of around 2%, in line with overall European market growth. In UFP, we were able to hold volumes stable despite market demand declines of around 5% in each of our key regional markets of Europe and Southern Africa, testament to our cost competitiveness and the quality and reliability of our products and services. The margin squeeze you see came through price. In containerboard, average prices were moderately higher than the prior year, although this does mask a tale of 2 halves, where prices were moving up through the first half, followed by declines through the second half. In Corrugated Solutions, margins were squeezed as higher input costs were not fully passed on to customers due to intense competition in all key markets. In Uncoated Fine Paper markets, prices came under significant pressure through the year as industry moves to reduce capacity were not sufficient to mitigate the impact of significant demand side weakness. This was exacerbated by lower pulp prices, which gave some breathing room to the higher cost unintegrated producers. Our South African business, which I remind you is a net seller of pulp was further impacted by the unusually strong rand, which negatively impacted the rand price achieved for export pulp sales. It is nevertheless encouraging to see some modest pickup in pulp prices over recent months, and we are currently implementing price increases in certain uncoated fine paper grades in Europe on stronger order books and ongoing cost support. If I look back at where we are today in the corrugated packaging markets, margins remain under pressure due to the lingering supply-demand imbalance. Demand has clearly been impacted by the prolonged economic downturn seen in our core markets, lasting now the better part of 3.5 years. That said, it is encouraging to see that even against a soft macroeconomic backdrop, box demand in Europe was still up around 2% last year. And in fact, if you look at the size of the European box market, it has still grown by around 7% since 2019, the year before COVID for a compound annual growth -- average growth rate slightly above 1%. While clearly below historic growth rates of nearer 2% per annum, it is nonetheless still growing and I believe reflects the structural support we see from demand drivers such as e-commerce and sustainability. With a healthier macroeconomic backdrop, one would certainly expect these markets to return to trend growth rates of around 2% per annum. What has clearly been a major contributor to the overhang is the supply side response. Containerboard capacity over the same period since 2019 has expanded by around 15%. In the short term, this overhang will continue to hold back margins in the industry in the absence of meaningful capacity rationalization and/or stronger demand side recovery. In this regard, there's clearly ample incentive for capacity closures with a significant portion of the industry cost curve currently loss-making. As for ourselves, we'll continue to focus on the controllables that we know will serve to strengthen and reinforce our advantaged competitive positioning in these markets, leveraging our market leadership positions, cost advantaged asset base and integration strengths, and I'll come on to more of that a bit later. If we move then to the Flexible Packaging business, I'm very encouraged by the strong volume growth we achieved in our global paper bags business with good contributions from all key markets that we serve. Pleasingly, in addition to the steady performance from traditional industrial end users, we are seeing an acceleration in demand growth for e-commerce solutions in both Europe and the U.S. We continue to invest behind these important growth markets that we are very well positioned to serve. Similarly, our Consumer Flexibles and Functional Paper and Film segments continue to display their defensive qualities as we drive product mix improvements, supported by recent investments and ongoing innovation centered around sustainable packaging solutions. As noted on the slide, volumes in kraft paper were moderately down year-on-year as we responded to a generally softer demand environment with production downtime, particularly in the second half. While there is seemingly something of a disconnect between the strong volume growth in our bags business and the relatively softer kraft paper markets, our analysis suggests this is due to a combination of industry stocking and destocking effects and product mix impacts. On the back of the softer demand, kraft paper prices came under pressure over the second half of the year and into early 2026, following modest increases through the first half of 2025. With the ongoing good demand picture in bags now seemingly translating into better order intake for our key sack kraft grades, we are currently implementing price increases across our range of sack kraft grades, reversing the declines we saw in late 2025 and early '26. Again, if I step back briefly to understand how our industry dynamics are playing out in the context of the current challenging macroeconomic environment. Unlike in the corrugated markets, we see the current margin pressure in this segment as being very much a cyclical demand side story. I remind you that sales in flexibles are split roughly 50-50 between more cyclically impacted industrial end users and the more defensive consumer end markets. On the industrial side, if I take, for example, European industrial bag demand from 2019 until today, it is off around 7%, heavily impacted by the slowdown in cyclically sensitive markets like cement and building materials. Over the same period, European sack kraft capacity has actually remained relatively flat. This is clearly a cyclical demand side challenge. As already mentioned, encouragingly, industry demand is improving, albeit modestly from the lows seen in 2023. European industrial bag demand was up around 2% in 2024 and a further 2.5% in 2025. This also excludes new applications for our bags in nonindustrial applications like retail and e-commerce and consumer markets, which are also adding to demand sources and contributed to the 5% growth we achieved in our bags business. With this backdrop, we will continue to support the growth of our global leading paper bags franchise, supported by our strong backward integration into kraft paper and our complementary offering in functional papers. We are not waiting for the cyclical recovery, but rather continuing to develop new markets for our products while also driving our operational excellence and cost optimization programs to enhance our competitiveness. Coming then to our competitive advantages, I just want to discuss briefly how we see Mondi positioned in these markets and reminding you of the significant advantage we have to deliver resilience in the most challenging of market conditions and similarly capture the upside as market conditions improve. I'll talk to each of these points over the next few slides. Our scale and market positions are a major strategic advantage. In corrugated, we enjoy market leadership positions in the niche virgin grades where we also enjoy significant cost advantage. In emerging Europe, which typically enjoys higher growth rates, we are the leading integrated box producer. As you know, through the Schumacher acquisition last year, we have now extended our geographic reach across Northern Europe, so that we can be a genuine option for regional key account customers, while at the same time, leveraging our paper integration strengths. In Fine Paper, we are the #2 player across Europe with real strength in our core regional market of Central Europe, while we are the clear market leader in our other core market of Southern Africa. In flexibles, we are the clear global market leader in both upstream kraft paper and downstream paper bags with an unmatched global reach and integration strength. Similarly, we enjoy real strength in niche consumer flexibles markets in Europe with, for example, the leading position in the high-growth and highly demanding pet food market. These positions matter. They underpin our customer relationships, supply chain relevance and cost competitiveness. As I've already mentioned, packaging demand is heavily influenced by macroeconomic growth in the short term. While there are many defensive end markets such as food and beverage and other consumer nondurables, there's always an element of cyclicality in demand, even in the most defensive of markets. This is accentuated in our industrial exposures, as already noted, most notably in construction and related markets like cement and building materials. This has clearly been the dominant theme over the past 3 years as the fallout from COVID, wars in Ukraine and the Middle East and the more recent trade wars have all served to undermine consumer confidence, particularly in our core European markets. However, as I've already mentioned, it is pleasing to see that despite this very difficult macroeconomic backdrop, we are starting to see some growth coming back into these markets, albeit off a low base. Most importantly, we remain confident that the structural growth drivers in packaging are very much intact. Key among these are the increasing importance of e-commerce and the drive for sustainable packaging solutions. We are extremely well positioned to leverage these trends. As I'll show you shortly, we offer a one-stop shop for all paper-based e-commerce solutions, while I firmly believe our expertise across different flexible packaging substrates and our vertical integration strengths gives real advantage when developing sustainable packaging solutions for our customers. You'll see on the right-hand side of the slide, we show an example of how new applications, largely driven by sustainability requirements are driving demand for our specialty kraft paper products with a significant increase in applications across e-commerce, nonfood and industrial. A trend we expect to see continue and likely accelerate driven by both regulation and consumer preferences. We continue to seek ways to bring this differentiated product offering to our customers in a way that delivers the best value proposition for them. Last year, we combined our e-commerce sales team from across corrugated and flexible packaging to provide a single point of entry for customers. Similarly, we continue to drive innovation across our broad portfolio of packaging solutions. I was delighted that we recently won Nine WorldStar Packaging awards for innovation, following a long tradition of success in developing innovative packaging solutions in partnership with our customers. This is, of course, all underpinned by our ongoing focus on operational excellence, which focuses on delivering right first-time performance, reducing lead times and providing customers with the agility and flexibility that they expect from us. You'll see on the right-hand side of the slide how our product breadth supports 2 of the most important end-use segments, FMCG and e-commerce, which together make up about half of our packaging portfolio. For each, we offer a full suite of corrugated and flexible solutions that are genuinely complementary and designed around our customer needs. This is what customers value, One Mondi, comprehensive solutions and consistent quality. Our integrated model is a fundamental competitive strength. And here, we need to differentiate between what I refer to as our bulk and niche packaging grades. We firmly believe that in the bulk grades, strength in integration is key. From the paper perspective, it provides security of offtake, allowing us to run our mills as efficiently as possible while also allowing us to optimize logistics into our converting operations. Similarly, from the converters perspective, it offers security of supply, logistics benefits and innovation opportunities using the combined knowledge and expertise of the whole value chain. As you can see from the charts on the left-hand side of the slide, we are highly integrated in these grades. By contrast, in the niche virgin containerboard and specialty kraft grades, we are very comfortable with our strong open market positions. These products are sold on a global basis to a wide number of different customers, many of whom are other integrated producers who do not have these products in their portfolios. Key here is cost competitiveness, quality, reliability and innovation, where we are again very well placed to outperform. Coming to our cost competitiveness, which is particularly important in our upstream paper businesses. This chart illustrates that around 3/4 of our production is in the lower half of the relevant cost curves, a key determinant of long-term outperformance in these markets. We have achieved this by having the right assets in the right places to secure access to cost competitive raw materials. We have then built on this natural cost advantage through judicious investment in the assets on a through-cycle basis. In addition to the scale benefits that come with the capacity expansion, these investments also deliver efficiency and cost optimization through increased energy self sufficiency and raw material efficiencies. A culture of continuous improvement, delivering operational excellence is then key to extracting the full value from these privileged assets. On the topic of operational excellence, as Mike says, this is a continuous program and embedded in our culture. We are very proud of our long track record of continuous improvement, as you can see from the example of what has been achieved at one of our flagship operations, Swiecie in Poland over the past 10 years on the right-hand side of the slide. However, we are always striving for more. And in early 2025, we initiated a multiyear program, aimed at taking us to the next level of operational excellence through a zero loss mindset, embedding standardized processes and ensuring the sharing of best practice, facilitated by empowering our people and strengthening our leadership teams. While I'm being constantly reminded by colleagues that this is a long-term program, and I shouldn't be expecting significant quick wins, I am nevertheless delighted by the initial results from the pilot projects. In Swiecie, for example, this has already led to strong efficiency gains and reduced downtime on the machines. We are very excited by what this program can do for all of our operations as we systematically roll it out across the group. Our converting operations also have a proud track record of driving efficiency gains. Over the past 10 years, we have closed 22 plants while at the same time growing volumes. As our larger plants get increasingly efficient, we are able to successfully transfer volumes from smaller operations, which in turn drives further efficiencies. The chart on the right-hand side of the slide illustrates the track record of productivity gains over the past 10 years in our Corrugated Solutions and paper bags plants, respectively. After a short period of slower rates of improvement, I'm delighted by the significant productivity gains achieved in the last 12 months of 4% to 5%, reflecting a renewed focus on driving this key performance indicator. The Schumacher acquisition has further strengthened our Corrugated Solutions network, enabling further optimization across our footprint and unlocking efficiencies that support our long-term growth. As Mike mentioned, we recently announced 3 further plant closures, again, with the intention of transferring the volumes to other nearby plants in our network. While we fully acknowledge the challenges for those valued colleagues directly impacted by these decisions, we also recognize the critical importance of driving the ongoing optimization of our plant network. We will not hesitate to take the tough decisions on plant or mill closures when required. So let me then finish where I started. In the context of a prolonged cyclical downturn, we have delivered a resilient performance. We have taken and will continue to take decisive actions to drive value. We remain strongly positioned to deliver in the short term and capture the upside as markets improve. Our conviction is driven by our belief in the structural growth drivers underpinning growth in our packaging businesses, our leading market positions, our well-invested and highly cost competitive assets, our compelling customer value proposition and most importantly, our committed and highly capable people who live and drive our culture of excellence and continuous improvement. In this context, I'd like to finish by extending my sincere thanks to all our people for their great commitment and energy in navigating the current challenging market conditions and remaining steadfast in pursuing our goal of delivering sustainable long-term value for all our stakeholders. With that, I thank you very much for your attention, and Mike and I are now delighted to take your questions. Operator: [Operator Instructions] Our first question comes from Reinhardt of Bank of America. Reinhardt van der Walt: I just want to go to one of your comments. You mentioned that you won't hesitate to take tough decisions on plant closures. I think you mentioned that a lot of your assets are in the bottom half of the cost curve, but some of them are obviously not. So if we think about rationalizing supply here on the Mondi side, where do you think that incremental closure could potentially come from? Andrew King: Yes. I think, Reinhardt, -- I mean, as I said, we've got a track record of taking those decisions in order to continue to facilitate the drive for more efficiency. Now typically, historically, a lot of that has been facilitated by our existing plants getting increasingly efficient. And so we are able to continue to serve our customer with a smaller fixed cost base. And that's something we've continued to do, and we won't hesitate to where the opportunity arises. And as I mentioned, we've just recently announced and are in the process of closing a further 3 plants that are plants in Hungary, Germany and Turkey. And if the opportunity arises to drive further efficiencies while making sure we look after our customers, is something we'll continue to do. So the plant network is obviously extensive and it lends itself to those. I think your reference is specifically to the paper mills. Clearly, the most important value driver in the paper mills is your cost position, that's why you see us -- talk so much about the relative cost positioning. Now those cost curves are not precise. It's -- we take the industry cost curves from the various consultants to get a sense of where we are in that space. Quite a lot of -- because people always point to the 25%, as you, I think, have alluded to that is not in this lower half of the cost curve. Some of that one has to acknowledge is pretty much in the sort of specialty camp, which in some ways, it's not appropriate to look at it on the simple cost curve analysis. And certainly the margins that we see in those businesses are not necessarily the case. Clearly, the one asset of ours, which is currently loss-making is the Duino mill in Italy for 2 reasons. One is it hasn't been optimized yet. It only started this year. So we are not yet in a fully optimized position because, of course, as you grow -- as the capacity ramps up, so the unit costs go down and also your input costs get optimized. So we are in the process of doing that. But undoubtedly, there's also the market dynamic that's at play there. And as I mentioned, swaves of industry capacity are currently loss-making. The big challenge in that regard is, of course, you would logically see that the more marginal assets should go first. That's at the moment happening to some degree, but one expects more to happen, frankly, if the current paradigm continues. Duino is a mid-cost producer by the time we are fully optimized on it. And importantly, we also require the security of supply that comes with having some recycled containerboard in our portfolio. As I pointed out in that slide on the integrated system, we actually remain short of recycled containerboard as a business. While it might not feel like it at the moment, given the oversupply in the recycled containerboard market over -- through the cycle, it is important to have some of your own recycled capacity for security of supply reasons into your box business. So there's always that strategic element as well. But suffice to say that all the rest of our paper mills are extremely well placed and extremely cost competitive. Reinhardt van der Walt: That's very clear, Andrew. Maybe if I just flip that question on its head and ask about your capacity at the box level, the box plants. You're driving efficiency, that seems to be a focus right now. But how do you think about maybe some countercyclical consolidation investments? I mean, dividend is down now, CapEx you're pulling back. So there seems to be some balance sheet capacity in the next few years. How are you thinking about countercyclical investments at the box plant level? Andrew King: Yes. I won't even ask Mike to comment on the balance sheet capacity because I know his answer at 2.6x leverage. I think we're very conscious that we're at the top of where we were comfortable in terms of leverage. And so our focus is very much on driving those self-help actions that we spoke about and being as well placed as we can to serve our customers in the current dynamic. And we've invested heavily in the business. We know that. And we have the capacity now. We have all the weapons in our armory to compete very effectively in the markets. That's the job to do right now with the assets that we invested in and the portfolio that we have. That is the focus. Operator: Our next question comes from Detlef of JP Morgan. Detlef Winckelmann: Just a quick one on your CapEx. If I look at 2025 coming in roughly good EUR 130 million below midpoint of guide, putting down '26 by EUR 100 million. Can you run us through kind of what you've paid back, any specific projects? And has anything kind of been kicked to 2027? Or is this kind of EUR 550-ish roughly okay, ex any growth projects? Andrew King: Short answer is, yes, we're very comfortable with that number. Clearly, in the current low growth market environment, one, it's not a difficult trade-off to cut back on anything of a significant expansionary nature. That said, there are some pockets of growth that we are still continuing to support, but they're very small and they're within that overall number. The primary focus at the moment is on in terms of the CapEx program going forward is investing and to make sure the asset integrity is not impeded and, of course, that we do retain the exposure to the upside. But having invested significantly over the last few years, we're very confident that we can pull back on the CapEx spend without prejudicing the asset integrity and similarly, without prejudicing the exposure to the upside. In terms of what we might have prioritized or deprioritized, that is always that constant work being done to prioritize your CapEx programs and the like. But we are very confident that there's nothing we're doing now that, as I say, either prejudices asset integrity or indeed limits our exposure to the upside in the near term. Clearly, if we see markets starting to show real recovery in terms of -- from the demand side, there might be some other opportunities. And we have a great asset base that we continue to leverage if the opportunities are there, but we're very comfortable operating in this sort of envelope for an extended period of time. We've always said maintenance CapEx, and that's not just -- not just sort of holding on to what we got, but adding some opportunity is in the sort of 100% to 110% of depreciation. So that's what we're operating with this year. Michael Powell: Yes, Detlef, just to be explicit on your 2027 question, we're not stoking an issue for 2027. As Andrew said, we can operate at this 110%. We've got capacity that we've put on the ground that isn't yet full. And in this environment, I think we're very comfortable. We've got well-invested assets and now we need to generate the cash and fill those assets. Operator: Our next question comes from Lars of Stifel. Lars Kjellberg: I'll just start with the big question in terms of where your margins are today, they're obviously down quite a bit on the cyclical pressures and of course, you reinvested in your business with headwinds from starting up, et cetera, et cetera. Where do you think considering what seems to be somewhat structurally higher wood costs that your margins could -- where they should be in some sort of normalized environment? And just on the short-term comments, you did say kraft paper order books are starting to improve and you're reversing the sort of couple of quarters on price declines. What are you seeing containerboard when it comes to demand trends? And of course, you have spoken to and many others, of course, and it's reality there's been a distress here for a long time. Are you seeing any real signs of this cracking? Andrew King: I think on the first question, I'm not going to -- I know it's flavor of the month, but I'm not going to give long-term forecasts. But I think Lars, yes, European wood costs are structurally higher than they were pre-Ukraine for obvious reasons because of the restriction or the prohibition of supply out of Russia and Belarus, which, of course, caused prices to go up -- and yes, they've come down to some extent from the peak levels in 2022, but they're still above pre-Ukraine levels. So I think that is a structural change. At the same time, it clearly affects all players in Europe to a greater or lesser degree, but clearly, everyone is impacted. So the whole cost -- industry cost base has gone up. That's particularly relevant for, for example, the sack kraft grades, which are primarily made, as you well know, in Northern and Central Europe. And so the relative positioning hasn't materially changed on that. Clearly, where it has changed on a global basis is in, for example, pulp, where as a globally traded commodity, you are competing with other continents where maybe you haven't seen that same level of input cost pressure. From our perspective, we are -- we are not a pulp player. I mean the only place we make open market pulp of any significance is in South Africa. And of course, there, the wood cost situation is actually relatively improved versus the European cost base. Clearly, that was the other reason that attracted us to Canada, where, again, in our Hinton mill, the wood costs are extremely favorable compared to Europe. So I think it's in that sort of market where you might have seen a relatively less competitive dynamic. In the kraft liner market, which is the other big grade of virgin product that we make, again all the European competitors have seen similar input cost inflation. I guess, on a relative basis, people like the LatAm producers have enjoyed a relative advantage. But as you know, they produce their kraftliner out of virgin hardwood grades. You can't add things like recycled content into those grades, which the Europeans and ourselves, in particular, are able to benefit from. So we can offset some of those cost disadvantages on the wood front with the PFR content and the like. So I think to your point, Lars, it is a relevant consideration on a global basis, but then you have to look grade by grade where you are -- have to compete on a global basis versus what are more regional markets. The question on containerboard, I think you mentioned it was basically twin question on pricing and sort of where is the supply-demand picture, which, of course, are linked. Yes, I mean, right now, margins across the industry are heavily squeezed. Clearly, the big capacity problem is in recycled containerboard. It's not on the virgin grades. But at the same time, we're the first to acknowledge that the overhang in the recycled grades is putting a cap on the ability to push pricing on the virgin grades because on the margin, there is substitution. So the question is how fast -- how quickly this overcapacity can be -- can be absorbed into the market. I firmly believe it has to come through a combination of factors. Clearly, the demand side, albeit we're starting to see some okay demand last year, bag, I think the box -- Europe -- box volumes were up around 2 percentage points. If you look at the industry statistics, that's okay in a normal environment. Of course, it's off a low base because we saw a sharp decline in sort of 2023 into '24, and now it's only rebuilding now. So you have seen on a trend basis, a low trend growth for the last 5 years. At the same time, the capacity has been coming in on historic trend rates, if you look at it. So that has caused this oversupply. I do believe it will require further capacity closures to balance. I don't think we can assume that demand in itself is going to do all the heavy lifting here. But as I said in my opening remarks, there's every incentive for that. Now we are starting to see some movement on that front. It's not these big ticket sort of headline grabbing moves, but you are starting to see closures take place. I firmly believe, as I say, there's every incentive for more closures. There must be huge pain at the high end of the cost curve. And simply put, the current margins are not sustainable. So if you believe in a structurally growing market, which we do, the current incentive price is not there certainly for new capacity and the incentive is for closures and you've got to believe something is going to -- something is going to change on that front. I hope that answers your questions, Lars. Lars Kjellberg: It does. Operator: Our next question comes from Cole of Jefferies. Cole Hathorn: I appreciate the actions taken on the cost front, and Mondi has never, like many of your peers, announced separate kind of cost initiatives, but 1,000 headcount, group services pulled back, that's all ultimately helpful for 2026. I'd just like a little bit more color on the message on costs. You're talking about stable costs '26 versus '25. I'd just like some moving parts there. And then after the input costs, can you give any color on what would be the potential contribution from the Schumacher acquisition and the EUR 32 million synergies that you're trying to achieve in 2026? And also a difficult one is the contributions from the CapEx projects. I know prices are low and the market is still challenging, but the contribution from the major CapEx projects would be helpful. Michael Powell: Sure. Let me start, Cole, and with the first couple, and then the last one sort of relates to wider market issues, which Andrew can comment on. Just in terms of costs, just so we're clear, if I take what some would call overheads, we call them fixed costs, we have taken those actions. We continue to take actions on overheads. Large part for us is people costs, some maintenance of equipment, but clearly, that's around assets. Those people actions that we have taken, plus those other efficiencies that will drive through our overhead base will offset, as I said in my words, will offset any inflationary pressures. So we still have -- we like to pay our workforce that are precious to us, inflation increases, the work we have done will offset that. So I'd expect our fixed cost overhead base to be flat given the actions that we've taken. I think you also touched on input costs, so above the line direct materials, others might call it. Again, within that, it's early in the year. I would guide to flat if I was sat here today. Clearly, that will change as the year goes on. But as of today, we're seeing it flat on 2025. Why is that? We're seeing some headwinds. There's less energy emission credits in various forms from governments. I think you've heard the rest of the peer group talk about those. For us, that's about EUR 60 million headwind on energy. We'll work hard to offset that. We've got some other cost categories coming down still, which I think reflects sort of a pretty lackluster economy, things like chemicals are still coming down. And then within wood, we've got some ups and downs. We've got Scandi Wood coming down, Central Eastern European wood going up. I would say the ups and downs are much smaller than they've been. I know we're in a much more volatile world. So I don't want to diminish a sort of 20% up and 30% down, but those movements are much smaller ups and downs than they were 2 years ago or frankly, that they would be if economies recover. So I think what the puts and takes to give me confidence to guide to flat is the puts and takes are probably a bit either way, and we're working hard internally to offset those energy grants from governments in various forms. So best guidance is flat on input costs [ goal ]. I hope that's a bit of color within the categories that you're after. And Andrew, in terms of markets and volumes. Andrew King: Yes. So I think just adding to the cost story, I frankly prefer our procurement guys to be struggling a bit more because it generally means an economic pickup, which puts more pressure also on input costs, but that's a far more favorable environment than sadly the one we continue to struggle with the geopolitical and macroeconomic backdrop that we see. But still -- but coming back to, call it, the self-help [ goal ], which is very much also linked to the CapEx program. I guess it can be divided into 2 parts. The one is what is within our control and the other, which is clearly the market dynamic that we're selling into. And of course, the 2 are somewhat interlinked. But if I look at it in broad terms, on the big upstream capacity expansion, we've probably got another 300,000 tonnes to come this year from ramping up the projects. Now about half of that is Duino, which I think I've already explained to you. Clearly, in the current paradigm with the current recycled containerboard price, you're not seeing a big contribution on those extra tonnes at the moment. But as I said, it's -- the focus there is very much driving the productivity improvement. And of course, that also has benefits on cost optimization and the like. For the rest, it's obviously very valuable tonnes even in the current difficult environment because it's expanding both the virgin capacity out of Swiecie and Kuopio and also the sack kraft production out of the PM10 in Steti. And I remind you, last year, we took down the Stambolijski mill. So this incremental capacity for the market is really absorbable. And again, we're excited by the underlying growth we see in our bags and other applications for our kraft paper. So very confident that, that can be placed into good markets. So that's where a lot of it comes from. In terms of the absolute contribution, the big challenge here is what is your pricing assumption, particularly on the paper grades, which is what we're saying is this is going to support our volume growth in 2026. We think we can for all of those reasons grow above market. The absolute pricing will obviously determine exactly what the contribution is from that. But this is good low-cost tonnage that we are bringing into the market. And similarly in the converting businesses, again, there is always a much closer interplay with the market dynamics and the capacity -- putting up the capacity is the easy, but getting it into the market at the right price is something which obviously is also a function of the overall market conditions. Again, though, I think we've got all the tools to be able to grow above market in the key markets where we've increased capacity, and that includes the Schumacher acquisition, which as we said at the time, also comes with effectively some latent capacity, which it's incumbent on us to grow into the market, and we're very confident we can continue to do that. I think a very exciting area for us is that e-commerce area where, as I said in my opening remarks, we do have a fantastic and unparalleled breadth of portfolio there that is genuinely what our e-commerce customers are buying from us across the platform. I think I've got an example of the protective mailer behind us and the like. These are all products which are combining expertise in our Corrugated and our Flexibles business, which is fantastic. And that's why we brought together the sales team that can talk as one voice for all our offering across our Flexibles and Corrugated business. Cole Hathorn: And then just as a follow-up, bringing the CapEx down to EUR 550 million is -- it's a strong effort considering you had commitments for the major projects as well as the recovery boilers. Could you just break down that EUR 550 million CapEx number because reducing it to that level, I know must have involved a lot of work. Andrew King: Yes. I mean just to be clear, we're not making any -- we're not investing in a new recovery boiler at the moment. Those things are properly expensive. We've got a few -- I think you're referring to just biomass boilers. Firstly, just to be very clear, those are all in the numbers. So there's nothing on top or anything like that. No, I mean, as I said earlier, we feel confident we can do this. Yes, I mean as you rightly say, when you work across the organization, it's always a challenge because everyone's got essential CapEx, et cetera, and great -- growth opportunities and the like. But we are extremely confident that we are managing this CapEx at a level which doesn't impair the integrity of the asset base, it doesn't store up a problem for later because we're not believers in that. We believers in building a long-term sustainable business. But at the same end similarly doesn't prejudice the upside as and when it happens. So yes, in short, we are very confident. It does still allow us to make those important investments in, for example, these biomass boilers, which are very important, both in terms of -- because there is a stand business element, some of these -- the existing capacity is end of life. But as importantly as that, it also gives us upside in terms of cost opportunity and importantly, CO2 reductions and things, which are very important for our customers. Our Scope 1 and 2 emissions is our customer Scope 3. They are very focused on that. It is a genuine selling point and a very important value for them. So these are very important steps and -- but that's all included in the numbers we guide to. Operator: Our next question comes from Andrew of UBS. Andrew Jones: So yes. You have some relatively encouraging comments about the kraft paper market. Can you just point to like which pockets of demand are sort of starting to come up at the moment? Are you seeing more growth in export markets? Is it specific customer segments within Europe? Like what's the moving parts? And how much do you put down to kind of a restocking dynamic after last year's destock versus like a fundamental underlying improvement in trend? And how do you see the rest of the year, given we've obviously got some infrastructure investments coming through on the cement side and things like that? Can you just talk through that dynamic, if that's okay? Andrew King: Yes. As I said in my remarks, it is a bit confusing this seeming disconnect between bag growth because bags use sack kraft and relatively soft picture in the kraft paper markets in 2025. Actually, if you recall, 2024, it was a bit of a reverse. It was the other way around as the kraft paper markets were stronger relative to the underlying bags. But to me, first and foremost, you look at the end users, which is the bag demand, and it is encouraging that last year, as I said, we grew 5%. If you look just at the European market, the industry numbers tell us that it was about a 2.5% growth market in Europe. North America seems to have starting to show some growth as well now, which is encouraging. Again, we were growing strongly in North America or the Americas, but it's mainly North America for us, it's Mexico and the U.S. And then, of course, important markets for us are also Middle East, North Africa, which always some volatility in those markets in individual pockets of that, but if you take it as a whole, again, some good growth. So, when I look at last year's contribution to the bags growth, it was everywhere contributed. On top of that, we obviously, as I mentioned, got these new sources of demand for the likes of -- I mentioned again, the e-commerce mailer bags and things like that, a nice extra area of growth. I mean, the core of that business remains in the industrial space, but these sort of applications are coming through which both support the growth of our converting business, but also, of course, demand for the paper grades. So that is -- that has been a picture of 2025, and it's certainly continued into '26 in terms of a decent looking demand environment for our bags. It seems as though having, as I say, having been a bit softer into the second half of the year with the kraft paper volumes. We did see that in our order books into the Q4. I think we cautioned about that in Q3 numbers. And certainly, that did continue into January, we shouldn't -- we generally not saying it's sort of 1st of January, suddenly, things changed. But certainly now, we are starting to see that good position in bags, translating into a certainly stronger order position in the kraft paper business. Yes. And on the back of that, we're in currently in the market for price increases. I hesitate to say -- remind you that this is very much recovering the pricing erosion we saw Q4 into early Q1 this year. Andrew Jones: Yes. That's clear. And just a second question on the ramp-up of projects. I mean, I remember when you acquired Schumacher, it was running at roughly 50% utilization after a large plant came on. Can you give an update as to sort of broadly where that is and maybe also where Duino is running at just so we can understand how that kind of movement in board versus sort of board demand internally sort of evolves as we go through this year? Andrew King: Yes. Duino is easy because it's much easier to measure capacity in the paper machines. I think I said earlier, we could expect another 150-odd tonnes production -- incremental production this year out of Duino if we run full. In terms of the Schumacher market capacity, I mean, again, it is also a function of the overall market. So clearly, we are confident we can grow above market because I say we've got a very strong base on which to believe that in terms of the asset base that we have, we've obviously invested now in growing the commercial infrastructure to support the growth of that business in that Northern European region. But we have to also acknowledge, when I mentioned that box demand growth across Europe was 2-ish percent. That does mask quite different regional growth rates. Clearly, Southern Europe, Spain was the a star performer, where unfortunately, we don't have direct box exposure. We do obviously sell containerboard into that, so that's helpful, but it's not direct exposure. Our direct exposure in the box business from a European perspective is very much Northern Europe -- and Northern and Central Europe. Clearly, Germany, I think box demand was probably 0.5 percentage points or something growth last year. The overall market remains slow and we are working in that context. So we have to be realistic about what we can do in the short term because what we don't want to do is chase volume at the expense of margin that would be stupid in a very short term -- shortsighted because we're here for the long term, so we must do it in a structured and systematic way, but we're very confident in the capability we have there to continue to grow above market. So that is the primary focus in terms of how we grow out and fully utilize, as you say, the underutilized capacity we acquired as part of that acquisition. I think we've got time for one more, and we're probably over time, but I'm happy to take one more. Operator: Yes, we'll take our final question from Kevin of Deutsche. Unknown Analyst: If I could sneak in 2, if I could. The first was on your guidance for downtime and the impact on EBITDA this year. I just presumably, that's weighted very much towards the Corrugated Packaging segment, but I just wondered if you could sort of help us think about the sort of weighting by segment and cadence we might expect during the year? And just if I could sneak in a second quick one. There's clearly a number of elements in the numbers today addressing capital allocation decisions. And I think you signaled in your piece earlier, Mike, that it's your leverage is sort of the higher end of where you're comfortable with, I guess. I just wondered what you're trying to signal today in terms of the time frame you might get that leverage to a bit more of a comfortable -- a more comfortable position for you guys. So any color on those 2 would be great. Michael Powell: Sure. On maintenance, to keep it simple, it's about the same as last year. We've guided to about EUR 100 million, EUR 20 million first half, EUR 80 million, 2nd half. I think you should assume the same split. Yes, on leverage, listen, I don't think you should use the phrase uncomfortable with where we are. I think it's at the top end of where we'd like to be to have that financial flexibility. And you've seen a number of measures that we continue to take through last year and into this year around working capital, around cash generation of the assets, around spend on CapEx. I think that's just prudent financial management in the current economic environment. How quick we delever. It depends on 2 things. One is the net debt. I don't want to be sort of flippant. That's the one that we can control to an extent in terms of the cash that we consume and the cash that we choose to spend as a business. And then the other one is EBITDA, which actually on a math basis is much more powerful in reducing your leverage that, as Andrew has said, will be a function of both the actions we take, but also how the market operates, over the coming period. Clearly, if price moves, you deleverage very, very quickly. We're not waiting for the markets to move. We're taking control of our own actions there. And I think you've seen that today. I think you'll continue to see it, as I said earlier, it is what Mondi does. Hopefully, that answers your question. Unknown Analyst: Yes. That's really helpful. Apologies for the difference in wording, I guess, but you get that. Michael Powell: No, no, not at all. I just want you to understand. Andrew King: Very good. And with that, we've taken up more than, more than -- a lot of time. So I really appreciate the interest, as always, Fiona and team are available for any follow-up questions. And for those of you we look forward to seeing you in -- on the road shows over the next few weeks. So again, really appreciate the interest. I think in summary, we know the world is difficult out there. We are not standing still in that environment. We are seeing good growth in some of our core businesses. We're supporting that with the right actions to make sure we're extremely competitive in any environment and was really good positioning for the upside when it comes. So I really appreciate your interest, and thank you very much for your attention today, and goodbye from us. Michael Powell: Thank you.