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Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Simone Cole, General Counsel and Secretary. Please go ahead. Simone Cole: Thank you. Good morning, and welcome to Choice Properties Q4 2025 Conference Call. I am joined this morning by Rael Diamond, President and Chief Executive Officer; Erin Johnston, Chief Financial Officer; David Muallim, Senior Vice President, Leasing and Operations; and Niall Collins, Executive Vice President, Development and Construction. Rael and Erin will provide a recap on our fourth quarter operational results and annual highlights before we open the lines for Q&A, where Niall and David will join to answer your questions. Before we begin today's call, I would like to remind you that by discussing our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements regarding Choice Properties' objectives, strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook and similar statements concerning anticipated future events, results, circumstances, performance or exceptions that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward-looking statements. Additional information on the material risks that can impact our financial results and estimates and the assumptions that we have made in applying and making these statements can be found in the recently filed Q4 2025 financial statements and management discussion and analysis, which are available on our website and on SEDAR+. And with that, I turn the call over to Rael. Rael Diamond: Thank you, Simone, and good morning, everyone. Welcome to our Q4 conference call. Before I begin my comments, I want to provide an exciting update on our team. I'm pleased to share that David Muallim has returned to Choice Properties as SVP, Leasing and Operations. David brings exceptional experience back to Choice from his time at Loblaw overseeing their real estate leasing and new store development. Previous to that, David spent a decade with our organization, and we are very excited to welcome him back. With David's return, Niall Collins is transitioning back to his primary role of EVP, Development and Construction, where he will be focused on delivering our robust development pipeline. I want to thank Niall for his leadership and the stability he provided leading both our operational and development teams over the past 2 years. This transition underscores the depth of our leadership team as we continue to execute on our strategy for unitholders. With that, I'll now focus on our results. We are pleased to deliver another strong year of operational and financial results as our team continues to execute on our strategic priorities. Our full year performance in 2025 demonstrated the strength of our necessity-based retail portfolio, our well-located industrial portfolio and our ability to create value through development. Together, these factors enabled us to once again meet our earnings outlook, delivering same-asset cash NOI growth of 2.2% and FFO per unit growth of 3.6%. We completed this while further strengthening our industry-leading balance sheet, ending the year with leverage at 7.0x. During the year, we remained extremely active in our capital recycling, completing $801 million of real estate transactions. This included $460 million of acquisitions and $341 million of dispositions for net acquisition activity of $119 million. We also continue to create value through our development, transferring 17 new commercial projects totaling 836,000 square feet. These projects were completed at an average yield of 7.4% and resulted in $47 million of value creation. Given the strength and stability of our business and our strong performance in 2025, our Board of Trustees has approved our fourth consecutive distribution increase effective March 2026. This increase reflects our ongoing commitment to returning capital to unitholders. Turning now to our fourth quarter results. The momentum in our business continued, and we finished the year in a solid position. Our portfolio occupancy increased 20 basis points to 98.2% in the fourth quarter, primarily due to new leasing in our industrial portfolio, combined with favorable renewal spreads of approximately 22%. This drove healthy same-asset NOI growth of 2.4%. Our leasing spreads in the quarter were completed on 1.6 million square feet, representing very strong retention rate of 92.4%. We also completed 233,000 square feet of new leasing, highlighted by positive absorption in Ontario retail and Alberta industrial portfolios. In retail, we continue to see robust demand for necessity-based centers nationwide. In the quarter, we completed 596,000 square feet of renewals and 89,000 square feet of new leasing. This drove our retail occupancy up 20 basis points, ending the year at 98%. Renewal activity was particularly strong with leasing spreads of 16.8%, led by Atlantic and Quebec regions and tenants in the dollar store, liquor and office supplies categories. Looking ahead, our team views vacancies and potential backfills as opportunities to re-lease space at both higher rents and to higher covenant tenants. Beyond our existing portfolio, we remain active in advancing retail intensifications and new greenfield developments at attractive risk-adjusted yields. Erin will speak more about our development completions shortly. Our industrial portfolio has remained remarkably resilient with occupancy increasing another 50 basis points in the quarter to end the year at 98.8%. The leasing progress is consistent with what we outlined at the beginning of the year. During the quarter, we had a very strong retention rate of 93.8%, completing over 1 million square feet of renewals at a spread of 26%. Included in our leasing activity was 514,000 square feet of renewals in the GTA where the tenant had a fixed rate option, resulting in a spread of 17%. Excluding this renewal, our spreads averaged 40%. Our team also completed 138,000 square feet of new leasing at rents, 31% above our average in-place rents. This leasing activity highlights the significant mark-to-market and embedded growth in our industrial portfolio. We continue to see a stabilizing industrial market broadly for high-quality generic assets in the right markets and remain focused on advancing our industrial development pipeline at Choice Caledon Business Park. Lastly, in our mixed-use and residential portfolio, we delivered stable performance in 2025, reflecting the high quality of our office assets, which are primarily leased to affiliate entities. While select residential properties have experienced some pressures from new supply, they remain supported by strong long-term fundamentals in urban markets, and we remain committed to our pipeline of high-quality transit-orientated residential developments. Finally, touching on transaction activity in the quarter. We remain active on our capital recycling program, completing approximately $261 million of real estate transactions during the quarter. This included $67 million of acquisitions and $195 million of dispositions. Our most significant transaction in the quarter was a new 50-50 joint venture with Wittington across 2 office towers at Yonge and St. Clair in Midtown Toronto. This transaction included the third-party acquisition of 2 St. Clair Avenue East for $43 million at Choice's 50% share, excluding costs, while concurrently selling a 50% interest in the Western Center to Wittington for $76 million. Overall, the transaction represents a net $33 million office disposition for Choice. This was a strategic transaction as the 2 buildings are directly adjacent and operate as an integrated complex with shared common areas, including a shared loading dock. Choice will manage both properties going forward. During the quarter, we also disposed of a nonstrategic industrial asset for $18 million and $101 million of retail assets that we disclosed last quarter. All dispositions were completed above IFRS values. We also acquired a retail center for $23 million in Peterborough and subsequent to the quarter, completed $28 million of additional retail acquisitions. Overall, 2025 marked an active year of capital recycling as our team remained focused on maintaining the quality of our market-leading portfolio while leveraging our balance sheet to grow our business through net acquisitions. With that, I will turn the call over to Erin to discuss our financial results and additional capital allocation activity. Erin? Erin Johnston: Thank you, Rael, and good morning, everyone. We are very pleased with our financial performance this year. As Rael noted earlier, we closed the year from -- with a position of strength, having achieved each of our financial objectives. When we set our 2025 outlook a year ago, the economic environment was highly uncertain. Our ability to each -- to meet each of our core financial targets underscores the quality and resilience of our portfolio and our team's ability to deliver consistent results for unitholders. Turning to our fourth quarter results. Our reported funds from operations was $189.9 million or $0.262 on a per unit diluted basis, representing an increase of 0.8% year-over-year. FFO in the quarter was driven by year-over-year total cash NOI growth of 4.4%, which included higher same-asset NOI and contributions from transactions and completed developments. This was partially offset by the timing of lease surrender revenue, higher interest expense from refinancing activities and lower investment income. AFFO in the quarter was $0.201 per unit, an increase of $0.05 year-over-year. This increase was largely driven by the timing of maintenance capital projects, which commenced earlier in the current year compared to the prior period. On a full year basis, our AFFO payout ratio of 88% was in line with prior year. Turning to our property performance. Same-asset cash NOI increased by $5.9 million or 2.4% compared to the prior year. By asset class, retail same asset cash NOI increased $3.1 million or 1.6%. This was driven by higher base rents and recovery revenue. And excluding bad debt expense, year-over-year growth was 2.1%. Industrial same-asset cash NOI increased by $2.9 million or 6.2%, primarily due to higher rental rates on renewals, new leasing and contractual rent steps. Mixed-use and residential same asset cash NOI decreased by approximately $0.1 million or 1.8%, primarily as a result of lower rent at certain residential properties. Moving to our balance sheet. IFRS net asset value or NAV for the quarter was $14.43 per unit, a decrease of $72 million or approximately 0.7% compared to the third quarter. The decrease was primarily driven by an $87 million fair value loss on our investment in the units of Allied Properties and a net fair value loss on investment properties of $29 million. This was partially offset by a net contribution from operations of $45 million. As a reminder, we're required under IFRS to mark-to-market our investment in Allied to its trading price at each period end. The fair value changes on investment properties in the quarter were primarily driven by adjustments to select mixed-use and residential developments as well as certain existing residential assets to reflect current market conditions. This was partially offset by gains in the retail portfolio, which were supported by favorable leasing and cash flow assumptions related to backfilling certain sites with higher quality tenants and favorable cap rate adjustments, mainly in Ontario, reflecting continued demand for necessity-based retail centers. On a full year basis, we continue to generate stable value across the portfolio, resulting in year-over-year NAV growth of $263 million or 2.6% on a per unit basis. We ended the year in solid financial position with strong debt metrics and ample access to capital, including $1.6 billion of available liquidity through our corporate facility and cash on hand and $13.8 billion of unencumbered properties. Our debt-to-EBITDA ratio was 7x and remained largely stable. We had no material financing or debt maturities in the quarter and with our next material maturity not occurring until our $350 million debenture in November. Turning to our development activity. Our pipeline continues to be a reliable source of long-term cash flow growth and NAV creation for the REIT. In the quarter, development spend totaled approximately $40 million, and our team delivered 3 new commercial projects totaling 601,000 square feet at a blended yield of 7.8%. Our largest delivery in the quarter was the latest phase of Choice Caledon Business Park project totaling 530,000 square feet at our ownership share, which we completed at a yield of 7.9% and expect rents commencement to begin in April. We also completed 2 retail intensifications, including a 54,000 square foot Costco Gas Bar in Edmonton completed through our 50% owned JV at a 6.1% yield and a 17,000 square foot Shoppers Drug Mart in Ontario at a 6.9% yield, leaving 8 additional Shoppers Drug Mart projects in our active pipeline and many more in various stages of planning. On a full year basis, our development spend totaled approximately $237 million, and we successfully transferred $222 million of assets to income-producing, representing 836,000 square feet of new commercial GLA. These transfers resulted in approximately $47 million of value creation for Choice. Looking ahead, we remain confident in our strategy and financial plan. Our focus remains the same. We will continue to prioritize operational excellence supported by strong leasing execution while enhancing portfolio quality through disciplined capital recycling and delivering on our development pipeline to create value for unitholders. For the full year 2026, we expect to maintain stable occupancy and deliver 2% to 3% year-over-year growth in same-asset cash NOI. Our business is expected to deliver annual FFO per unit diluted between $1.08 and $1.10 in 2026, supported by the strength of our core business, including strong same-asset NOI growth and contributions from transactions and development. This strong performance will be partially offset by the impact of Allied's distribution cut. We will continue to leverage our industry-leading balance sheet to support both our transaction and development activity while maintaining our debt-to-EBITDA below our long-term target of 7.5x. Lastly, given the strength of our business and performance in '25, as Rael mentioned, we are increasing our distribution to $0.78 per unit effective March 2026, which represents a 1.3% increase from the prior year. With that, Rael, David, Niall and I will be glad to answer your questions. Operator: [Operator Instructions] And your first question today comes from the line of Mark Rothschild from Canaccord Genuity. Mark Rothschild: It sounds like that industrial is doing pretty well for the types of properties you own. You're advancing on the development projects. Is this an area that you think you can expand on, grow this year? And do you feel confident enough to maybe start additional development projects? Rael Diamond: So look, we said throughout the year that things are starting to stabilize, and we've definitely seen that in -- on the leasing front. We commenced the spec development last quarter, and it's a function of us having confidence in the market. We've seen lots of RFP activity. I think we need to see a little more traction on the RFP activity before we consider commencing another spec development. I think from a growth point of view, we'll continue to capture that mark-to-market that we spoke about. And our team is always looking for new investment opportunities, and we hope we can grow in that avenue, too, but nothing yet that we are underwriting actively. I don't know, Niall, if you want to add anything else? Niall Collins: Yes. Maybe just to add, we're delivering our spec building in early 2027 for really focusing on deliveries for that year or tenant inquiries for that year. We're starting to hear inquiries around 2028. And as we feel that they're getting some traction, we'll be able to pursue those opportunities as well. Mark Rothschild: Okay. Great. And maybe just... Rael Diamond: Mark, sorry, just one thing quickly. Erin's... Erin Johnston: Mark, just wanted to call out the prospect activity at Caledon has increased to Niall and Rael's point. And then just if we think about industrial for 2026, we would think about same asset growth being closer to that 4% range. Mark Rothschild: Okay. Great. And then maybe just one more in regards to office. The transaction you did sounds like more strategic than anything else. There has been some signs of an office recovery. Obviously, Allied has not participated in that yet. Do you have any thoughts on office investment at this time? Is it an asset class that you would ever -- would the REIT get back into in a more material way? Would you do something if you were confident in improvement? Or is that an asset class that Choice is just not looking to be heavily involved in going forward? Rael Diamond: Yes. Look, Mark, if you go back a few years ago, we exited office because we felt we could never get real scale in the asset class. And it's unlikely for us to see that opportunity. So we are very focused on continuing to build out our retail, industrial and then over time, purpose-built rental. And there's enough investment opportunities in those 3 asset classes that we would not be pursuing office as an asset class. Operator: Your next question comes from the line of Lorne Kalmar from Desjardins. Lorne Kalmar: Just on the guidance side, and Erin, I'm sorry if I missed this. You guys are usually really tight and not that $0.03 isn't tight. But just wondering what has to happen to hit the low end versus the high end? Is it more of that lease term income you guys saw throughout 2025? Or is there something else we should be thinking about? Erin Johnston: Lorne, I would think about our plan as right down the middle now. I know we gave an extra bit of range on guidance, but I think last year, we got the feedback that it was very tight. So I just thought we'd give ourselves the room. In order to outperform a couple of things that we need to see is leasing coming in stronger than expected on retail, same in industrial, maybe a little bit less downtime than is in plan. So there's definitely flex there. And then yes, if there was a little more lease termination income, that would help. But I think there's a bit of room for our team to outperform. Lorne Kalmar: Okay. And then I think you talked to the SP-NOI growth range for industrial for retail, would that kind of be in the 2% to 3% range? Erin Johnston: That's right. Lorne Kalmar: Okay. And then just lastly, on Building D at Caledon, I noticed the yield is quite a bit lower. Maybe just some color around that and why you guys decided to move forward with it given the lower yield than what you guys were getting on the previous buildings. Niall Collins: Lorne, it's really a function of it being a spec building, and it needs to address a wide range of kind of tenant requirements. So we feel we've put in appropriate allowances to be able to capture those requirements. So as we continue to see costs moderate and hone in on a potential tenant, we feel we'll be able to improve those yields. Operator: Your next question comes from the line of Brad Sturges from Raymond James. Bradley Sturges: Just to follow up on your commentary around the industrial segment and RFPs. Is it -- I guess I'm trying to understand that the comment around the need to see a little bit more activity on the RFP side. Is it a function of you're not -- have you seen a change in that market relative to last quarter? Or it's just -- it's a little bit too early to be thinking about 2028 yet given you're only starting to see that activity start to pick up now? Niall Collins: Well, it's more about supply coming into the market, which is falling off dramatically. And with Building D, it will be one of potentially 2, 1 million square feet buildings in the GTA, one actually being ready for occupancy now. So we're the only spec building underway. The activity we've seen over the last couple of months is a function of, I think people are getting used to a level of uncertainty and starting to make decisions around that. For 2028 deliveries, that's now going to be a function of how we see the current environment smoothing out, but we're encouraged by it. Bradley Sturges: Okay. And just following up on that, in terms of like just market rents for industrial for the type of assets you own and across your markets, what do you expect there this year in terms of time line to see a bit more stabilization, even maybe a positive inflection point on the market rent growth? Niall Collins: I think we see this year's -- 2026 spreads will be consistent with '25, which I think has been a very good year in itself. Operator: Your next question comes from the line of Himanshu Gupta from Scotiabank. Himanshu Gupta: On the same asset NOI outlook, and I think you mentioned 4% for industrial. Just wondering, are you being conservative here given the occupancy uptick you have seen year-to-date and then the mark-to-market opportunity as well? Erin Johnston: Yes, it will be between 3% and 4%, Himanshu. And I'd say, as I was just answering the last question, there could be upside if our team sees stronger leasing on deals, $0.50 or $1 more or shorter downtime. But I'd say that every year is also dependent on the mix of what's renewing and what province it's renewing in. So to Niall's point, spreads will be relatively consistent with last year. And that 3% to 4% is very in line with how we view industrial long term. Himanshu Gupta: Got it. Okay. Sticking to industrial here. Your industrial occupancy is obviously outperforming the broader Canadian market. What is causing that for that outperformance? Niall Collins: I think it's a combination of our quality of building and the age as well as the generic kind of properties of the building as well. It's not -- we're not -- we don't -- we're not factoring into some of the other issues that our portfolios are seeing. Himanshu Gupta: And I know there's a section of Loblaw portfolio. On the third-party portfolio, are you more small to mid-bay, larger bay? How would you classify in terms of demand for these types of product? Rael Diamond: I think when Niall is speaking about the market, Himanshu, and he'll chime in after this, he'll refer to the third-party portfolio because the Loblaw represents roughly just, call it, 30% of our income, and it's very stable. And I think we're seeing demand across the board in the small bay, mid-bay and then obviously, on RFP activity on the large distribution type buildings. But maybe, Niall, is there anything else you want to add? Niall Collins: No, I think it's large activities where we're seeing the most interest. There's a lot of competition in the smaller bay, and we're not really focused on that. Himanshu Gupta: Got it. Okay. That's very helpful color. Last question is on capital recycling. Obviously, you have been very active on that front over the years. What more noncore disposition targets do you have for the year? And do you become like more active on net acquisitions here given the good balance sheet? Rael Diamond: Look, Himanshu, I would say, for us, we always focus on quality. And every year, we start the year and we say there's not a lot of product to buy, and we have to obviously source the product and depends what comes to market. And if you think of 2025, we did roughly $800 million of total transactions, and we bought more than we sold. And we're entering '26, we've done a few small retail acquisitions. And we're hopeful that we can find more assets to buy and use the strength of the balance sheet. We just don't have great visibility right now. As far as what we can still sell, I would say our portfolio is in phenomenal shape. And it's not that we're selling things that in our mind is bad quality. It's just on the lower end of spectrum maybe from a growth point of view, and we can use that capital and recycle it into new acquisitions. I would say the other area we're very focused on is the greenfield and just on the commercial development. Erin made reference to 8 Shoppers Drug Marts that are currently on construction. There's a significant pipeline behind that. We're also building, I think, 5 neighborhood shopping centers, and our team is underwriting another asset. So I think just that benefit of working with Loblaw to find those growth opportunities, we believe we'll be able to deploy capital in that area as well, which is very encouraging. Operator: Your next question comes from the line of Giuliano Thornhill from National Bank. Giuliano Thornhill: Just one question back on the greenfield that you mentioned there. How big are these kind of retail sites? And where are they kind of working for Loblaws? Niall Collins: At the moment, we've got 4 that total about 350,000 square feet, and they range from about 40,000 to 160,000 square feet. They're largely Loblaw's anchored with either No Frills brand or some Shoppers brand. So they're very -- they're a large part of how we're anchoring our centers and going out and getting additional CRE leasing. Giuliano Thornhill: And kind of with the industrial, I guess, I don't want to say on pause, but now is the increasing focus going to be more of that retail nodes and larger sites going forward out to 2027? Rael Diamond: Yes. We don't see industrial on pause because we're building the large 1 million foot facility. It's just -- from our point of view, it's just managing risk that you don't want to be doing too many of them at once. But as we said earlier, as we get leasing traction on the building, we'll consider other spec industrial buildings to keep the momentum. Niall Collins: Yes. And just to add, like Tullamore has a range of building typologies as well. So if there is a demand for a smaller size, we can also go forward with that, too. Giuliano Thornhill: I see. Okay. And just one last question. Just with the Bank of Canada potentially done cutting, there's rates may be going higher for longer. Are you seeing the narrowing of bid-ask spreads beginning to happen in transactions and potentially for the market to pick up yet? Rael Diamond: Look, for the product that we've been buying and selling, there seems to have been strong demand. And I think the wider bid-ask spread is when a certain seller or a seller needs a certain price to clear or cover their debt. I think as time has gone by, they've become more realistic. But we think the transaction market has generally stabilized for the assets that we are investing in. Operator: Your next question comes from the line of Sam Damiani from TD Cowen. Sam Damiani: Congrats, David, on your return to Choice. Just on the -- so little bit one by one, my questions have been addressed here, but maybe just to drill a little bit deeper on the retail development. The active pipeline is down around 200,000 square feet. Now that doesn't include the Nepean site, which I assume you're going to move forward with. I wonder if you could just confirm that. But just given how tight retail leasing is today, do you see that sort of 200,000 to 300,000 square foot sort of activity annually meaningfully increasing potentially for choice in the coming years? Erin Johnston: Just going to give some color and then I'll hand it over to Niall. What we include in our MD&A is active, our sites where we really are further along with our permits and zoning. But you'll see in our investor presentation as well, if we think about kind of the next 3 or 4 years, we've identified over 1 million square feet plus in our portfolio that we are able to build out and probably over 60 projects plus in the next 3 to 4 years. So very healthy pipeline there, and those will start to funnel into our MD&A as they become more real. But I'll let Niall comment on the detailed color. Niall Collins: Yes. So as I mentioned, Sam earlier, it's about 350,000 square feet, but there is also an additional 4 that we're bringing in as well as we kind of work through it. So what's in our active development is what's zoned and we can move forward with in the next 6 to 12 months. We will see additional projects coming into the pipeline, the active pipeline over the course of the year. So we're encouraged by what's going to happen over the next 3 years in our plan. Sam Damiani: That's great. That's helpful. And maybe just shifting over to the rental residential segment. It's obviously seen a little bit of pressure. The occupancy is down, which you commented on in your opening remarks. But maybe to drill down a little bit more deeper, which sort of, I guess, clusters or markets are performing best for Choice right now? Is it between Toronto, North York, Brampton, Ottawa, Edmonton? Niall Collins: Look, Ontario, generally, we're seeing in Ottawa and Toronto, a similar pattern. However, that pattern, we think has leveled off. And as we saw the majority of the supply that was going to come off for shadow rental occur in '25, we think we're going to see the same type of growth pattern for a little bit longer and potentially see it improve over the next 12, 18 months. Sam Damiani: And do you still feel confident you'll move forward with a new project potentially this year? Niall Collins: We do. We do. That will bridge the cycle in our view. Operator: [Operator Instructions] Your next question comes from the line of Pammi Bir from RBC Capital Markets. Pammi Bir: Just coming back to the, I guess, the new joint venture with Wittington, can you maybe just expand on that? And what was the -- maybe the motivation behind those transactions? And any color you can share just in terms of the longer-term play there? Rael Diamond: Yes, Pammi, I think if you think of Yonge, St. Clair, essentially the block is owned by either Choice or Wittington. So Choice owning the office asset, Wittington owning all the development land. And the last piece of the block that wasn't owned was the corner, which is 2 St. Clair, which is a small office asset, but call it, more than 30% of the income comes from the ground floor retail. If you stand in the buildings, you actually don't know which one is 2 St. Clair and which one is 22 St. Clair. So from our point of view, it just made logical sense to own them, obviously, own the office together. Office is obviously not completely strategic to Choice. We've said we do it when it's primarily through related entities. And what it did is it allowed us to reduce overall exposure, control operations and then from a group point of view, allowed full control of the block. 22 St. Clair is fully occupied and 2 St. Clair has a bit of leasing upside, which we're quite confident we will pick up that just given the pickup in office momentum at the moment. Pammi Bir: Okay. Actually, that was actually one of my next questions just in terms of the occupancy there. So that's good to hear, and it all makes sense. Maybe just as a follow-up, are there other opportunities where a similar situation may arise that you might be looking at for -- in terms of 2026, where there's an opportunity to maybe consolidate some ownership that might be held by third parties or... Rael Diamond: If you think of 2025, we actually consolidated ownership through some of our joint ventures where our partner wanted out. So I can think of an asset in Edmonton that we purchased our -- 2 assets in Edmonton, actually, we purchased one of our partners out. One of them we took back a Chapters box and we split and we leased it to No Frills and a Shoppers Drug Mart. So I think we're always looking for opportunities where one of our partners wants liquidity, where we can consolidate ownership. And then I think back a few years ago, if assets were not core or strategic to us, we always offer to our partner first. So we'll continue to look for those opportunities on high-quality assets. Pammi Bir: Okay. And then just was there any -- like what range of sort of transaction activity was, I guess, incorporated into your guidance, if any? Erin Johnston: So Pammi, in 2025, we bought more than we sold by about $120 million. I'd say in 2026, our plan would be to be kind of around $100 million, buying more than we're selling. Operator: And with no further questions, I will now turn the call back over to Rael Diamond, CEO, for closing remarks. Rael Diamond: Thank you, Rob. Once again, our portfolio and balance sheet remain in excellent position, and our teams are focused on executing on our strategic objectives in the year ahead. Thank you for your interest in Choice and for joining us this morning. We look forward to providing you another update on the business in the spring. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Evergy's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Peter Flynn, Senior Director, Investor Relations and Insurance. Please go ahead. Peter Flynn: Thank you, Liz, and good morning, everyone. Welcome to Evergy's Fourth Quarter 2025 Earnings Conference Call. Our webcast slides and supplemental financial information are available on our Investor Relations website at investors.evergy.com. Today's discussion will include forward-looking information. Slide 2 and the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations. They also include additional information on our non-GAAP financial measures. Joining us on today's call are David Campbell, Chairman and Chief Executive Officer; and Bryan Buckler, Executive Vice President and Chief Financial Officer. David will cover our 2025 highlights and recent economic development activities. Bryan will cover our full year results, electric load growth potential and our financial outlook. Other members of management are with us and will be available during the Q&A portion of the call. I will now turn the call over to David. David Campbell: Thanks, Pete, and good morning, everyone. I'll begin on Slide 5 by first thanking our employees who worked tirelessly throughout the year to advance our strategic objectives of affordability, reliability and sustainability. The team's hard work and execution laid the foundation for the transformative growth opportunity before us. Today, we are raising our long-term adjusted EPS growth target to 6% to 8% plus through 2030 off of our 2026 guidance midpoint of $4.24 per share. We expect EPS growth to exceed 8% annually beginning in 2028 and through 2030. Our updated growth outlook is bolstered by the recent execution of electric service agreements for 4 data center projects that I will discuss shortly. With respect to 2025, we executed on our capital investment plan to improve reliability and resiliency, investing $2.8 billion in infrastructure to modernize our grid and replace aging equipment. Our financial results in 2025 were negatively impacted by weather and weak industrial demand throughout the year. Despite meaningful results and cost and mitigation actions, we were unable to fully offset these impacts. While the negative drivers were outside of our control, we fully understand that consistent financial performance is a hallmark of long-term value creation. We have confidence in our updated financial outlook, which has been tested against a range of outcomes, and we are committed to delivering against our objective of sound financial execution. Bryan will discuss earnings drivers in more detail later in his remarks. In 2025, we made significant progress in advancing economic development opportunities, growing our pipeline to over 15 gigawatts. A major milestone involved approval of new large load power service tariffs, the LLPS, in both Kansas and Missouri last November. These tariffs established a framework under which new large customers will pay a premium demand rate to locate in our service territories while adequately paying their fair share of existing and new system costs. This, in turn, will drive affordability benefits for existing customers and support economic growth in Kansas and Missouri. In Missouri, the passage of Senate Bill 4 in 2025 marked another successful legislative outcome that signaled strong support for infrastructure investment and growth. Among other features, SB 4 includes provisions that enhance our ability to invest in and timely recover costs associated with new natural gas generation while also extending the PISA sunset provision of 2035. SB 4 reflected the support and combined efforts of the Missouri Public Service Commission, legislative leadership, the Governor's office, commission staff and many other key stakeholders, and we appreciate their leadership and collaboration. In Kansas, we are pleased to reach a unanimous settlement agreement in our Kansas Central rate review. The settlement provided a balanced outcome for our customers and communities and reflects broad alignment around our infrastructure investments while ensuring we continue to provide reliable and affordable electric service. We also received approvals from the KCC and MPSC to construct 3 new natural gas facilities and 3 solar farms totaling nearly 2,200 megawatts. These projects further advance our all of the above generation strategy to support rising customer demand. Safety is at the core of everything we do, and I'd like to thank our generation, transmission and distribution teams for their commitment to safety and a significant reduction in the injury rate last year. Reliability performance also improved as we achieved the strongest results in the company's history for SAIDI, with reductions in both average outage duration and frequency. Our infrastructure investments and the hard work of our operations teams continue to drive benefits and enable us to deliver affordable and reliable power to customers no matter the conditions or the weather. In November, we raised our dividend 4% to an annualized $2.78. As our dividend continues to grow, we expect the payout ratio to decline over time to a revised target of 50% to 60%. As Bryan will discuss, this target is part of our financing plan as we enter a period of elevated growth and investment and is similar to the approach of many peer utilities. Moving to Slide 6. I'm very pleased to announce new electric service agreements for 4 major data center projects. This includes 2 new data centers and significant expansions of 2 existing projects. In aggregate, these 4 projects represent 1.9 gigawatts of steady-state peak demand. Taken together, these projects alone amounts to nearly 20% increase in our total peak system demand and an even higher level of usage growth given high expected load factors. As these customers ramp up, we'll be able to deliver affordability benefits for our customers and communities to the strong LLPS tariffs. Of course, these facilities will take time to construct and reach their maximum megawatts. We've included 1,300 megawatts in our retail load growth forecast in 2030, with the remainder ramping up after that year. This outlook reflects our expected case, which is informed by the specific load ramps as outlined as part of each customer ESA. And finally, we're making strong progress with several additional large customers and expect at least 1 more executed ESA in 2026. This upside is not captured in either financial outlook or sales forecast we're sharing with you today. These commitments solidify Missouri and Kansas as premier destinations for data center customers, now the product of strong partnerships with world-class customers in Google, Meta and Beale. We'd like to thank for their investments in Kansas and Missouri. As customers complete construction, they are responsible to pay their fair share of costs incurred to serve them, including the LLPS premium pricing. As an additional protection, if their actual usage falls short of annual expectations, they are subject to minimum bill provisions, which provides strong visibility to our 8% -- 6% to 8% plus EPS growth outlook and the affordability benefits we can expect to provide our current customers. Slide 7 summarizes the progress we've made in converting our Tier 1 large customer pipeline to signed agreements. Starting in the top row, the 2.4 gigawatt includes the 4 ESAs announced today and the large customers that have already commenced operations. This Tier 1 demand enables a transformative growth opportunity for Evergy, supporting our expected retail load growth of 6% annually through 2030, well above the historical 0.5% to 1%. Moving to the section shaded in green. We remain in advanced discussions with multiple customers whose load represents a 2 gigawatt to 3.5 gigawatt opportunity. We expect to execute at least 1 more large customer ESA in 2026 from this group. In aggregate, these potential customers have executed various service agreements, posted financial commitments and otherwise demonstrated their significant interest in locating in our service areas. The remainder of our pipeline totaling over 10 additional gigawatts highlights the robust activity and sustained interest in our region. The opportunity to serve this load will require creative solutions. And the ongoing dialogue also underscores the readiness of customers to step in, should others exit the queue. The announcements we've made today serve as clear proof of concept that Evergy is well positioned to capitalize on this historic opportunity, reflecting the geographic advantages of our region, support of business and energy policies and a shared approach amongst our many stakeholders to capitalize on economic growth. On Slide 8, we summarized key customer and shareholder protections as provided by our LLPS tariffs. Early last year, we set out on a cross-functional effort to address a key opportunity and challenge: how can Evergy serve new large loads while supporting affordability for existing customers and fairly addressing cost allocation related to new infrastructure investment to serve these large loads. The follow-up work culminated in the approval of settlement agreements in both Kansas and Missouri on a tariff that addresses this challenge. It reflects significant collaboration with commission staff, consumer advocates, industrial groups, the data center coalition, Google, Meta and others and ultimately garnered strong support, as reflected by the approvals of both the Missouri and Kansas commissions. As outlined in the tariff, new large customers are committed to minimum term lengths and minimum monthly bills regardless of usage shortfalls that cover no less than 80% of their contracted capacity at a premium demand rate. Additionally, customers must meet creditworthiness standards and collateral requirements. Termination fees are required should the customer decide to cancel a project or leave early, and these fees would cover the remaining minimum monthly bills for the term of the contract. All told, these tariffs established the framework through which new large customers will pay their fair share for capital investment while bringing massive new projects to Kansas and Missouri. Slide 9 is illustrative and expands upon how the provisions of the LLPS tariffs will work in practice and critically, mitigate impacts on existing customers. Customers taking service under the LLPS tariff will pay a premium demand rate 15% to 20% higher than the rate for existing industrial customers, as well as all the direct costs to serve them. This premium in the revenue is driven by the customers' high load factors will generate significant benefits for existing residential, commercial and industrial customers. As laid out in the flow chart, our future rate requests will be reduced by the revenues generated from LLPS customers. As the higher load from these customers is factored into our requests, system costs are then spread over a higher base, which in turn puts downward pressure on future rate requests. This is a critical aspect of our affordability proposition, as over time, we will be investing at higher levels to serve growing demand. Our existing customers will share in all the benefits of a modernized grid and new best-in-class generation technology without encountering the same level of costs they otherwise would have faced without large new customers. In short, we have a unique opportunity to upgrade the grid and replace aging infrastructure much more affordably than we could without this robust level of load growth. Moving to Slide 10, we highlight a few of the expected benefits of data centers. It's important to recognize that these projects deliver substantial long-lasting value to the communities we serve. Beyond the benefits and protections of the LLPS tariffs, these projects generate tax revenues typically far in excess of the local services needed to serve them. These tax revenues in turn support local budgets for education, infrastructure, parks and other community services. Data centers also strengthen the economic ecosystem, given the growing importance of automation and low latency. These attributes will likely feature more and more prominently in sectors such as health care, finance, transportation, logistics and advanced manufacturing. By enabling leading applications in these industries, data centers will help to attract and support high-quality job creation. These data center projects also represent multibillion-dollar capital investments, with construction job growth often sustained by ongoing equipment upgrades. They drive the need for new and updated fiber optic infrastructure, which can then create a virtuous cycle for additional data-focused industries. In summary, data centers are major investments that can also serve as powerful engines for economic development. They support affordability, generate long-term tax revenue, expand industries, support job creation and catalyze infrastructure investment. This is the kind of growth that strengthens communities for decades, and we are proud to do our part. On Slide 11, we highlight the major gains in regional rate competitiveness our company has achieved since 2017. This success directly supports the growth opportunities that we're discussing today. Since 2017, our rate trajectory has remained well below regional peers and far below inflation. The cumulative change in Evergy's all-in rates over that time is approximately 4.9% compared to our regional peer average of 19% and inflation of 29%. Holding rate increases to a 0.5% annual rate reflects the scale benefits and cost savings from the merger that created Evergy, promises we made and promises we kept. As we enter a new era of economic development, we'll maintain our relentless focus on cost discipline, affordability and competitiveness of our states. Slide 12 lays out our updated capital forecast. Our rolling 5-year investment plan totals approximately $21.6 billion from 2026 to 2030, equal to a $4.1 billion increase over the prior plan. The increase includes over $3 billion of new generation investment to support growing customer demand and meet higher generation reserve margin requirements in the Southwest Power Pool. Our 5-year investment program is expected to result in an 11.5% annualized rate base growth through 2030, which compares to our prior forecast of 8.5%. We'll take a flexible approach to financing our capital plan, utilizing a prudent mix of debt and equity with optionality around timing and execution, as Bryan will describe. I'll conclude my remarks on Slide 13, which highlights the core tenets of our strategy. I'll focus specifically on affordability. Keeping rates competitive and affordable has been a strategic priority since our company's formation in 2018. Evergy stands out as one of the best utilities in the country in managing customer rates and keeping rate increases well below inflation. We will continue to prioritize affordability in our long-term plan. While capital investments are higher than historical levels, so too is load growth, which will allow us to spread system costs over significantly higher kilowatt-hour sales. We expect to see customer rate increases over the next several years being in line with or below inflation for the majority -- the significant majority of our residential customers. Missouri West is our smallest utility today with the lowest rates in our system and some of the lowest rates in the nation, partly because the utility is in need of infrastructure investment, in particular, new dispatchable baseload generation. As a result, as new generation plants come online to serve that jurisdiction, customers may see rate increases above inflation over the next 5 years. However, these investments will help to reduce the rate volatility that Missouri West customers have experienced as a result of utilizing more market-provided energy. In addition, as the full benefits from large load customers are realized, we are confident that we can manage residential rates to a level consistent with inflation, and Missouri West customers will benefit for decades to come. By prioritizing affordability, we contribute to the robust economic development pipeline ahead of us and support the substantial economic potential within our states. As outlined in our capital plan, we will continue to invest in grid modernization to ensure reliability as well as grid resiliency, strong customer service and generation availability. Our primary sustainability goal is to execute a cost-effective all of the above generation strategy, as reflected by our planned investments in natural gas, storage and solar to support our Kansas and Missouri customers. We look forward to continuing to advance a balanced mix of resources over the coming years to support growth and prosperity in our states. And with that, I'll turn the call over to Bryan. W. Buckler: Thank you, David. Thank you, Pete, and good morning, everyone. Let's begin on Slide 15 with a look back at our financial results. For the full year 2025, Evergy delivered adjusted earnings of $894 million or $3.83 per share compared to $878 million or $3.81 per share for the same period last year. As shown on the slide from left to right, the year-over-year drivers are as follows: first, 0.3% growth in weather-normalized demand primarily driven by the commercial class resulted in an increase of $0.04 per share margin. These results were weaker than projected for both residential and industrial, including in the fourth quarter, which led to our final 2025 adjusted EPS results falling short of the guidance we provided on our third quarter call. Regarding residential and industrial load, early indications in 2026 are strong in comparison to 2025, and we expect to return to normal residential load growth in 2026. Secondly, recovery of and return on regulated investments, driven by new retail rates and FERC regulated infrastructure investments, contributed $0.56 in EPS in 2025 as compared to 2024. Unfavorable variances for the year included higher operation and maintenance costs and depreciation and interest expense due to increased infrastructure investments, which drove a $0.43 decrease in EPS. Other items had a negative $0.10 impact for the year. And finally, dilution from our convertible notes led to a $0.05 decrease for 2025. Let's move to Slide 16 to lay out how we expect to deliver on our 2026 EPS guidance midpoint of $4.24. Again, starting on the left side and beginning with 2025 adjusted EPS of $3.83, which modeled a reversion to normal weather in 2026, which would add approximately $0.13 per share. Next, we expect a $0.26 increase from demand growth in 2026, which reflects a forecasted 3% to 4% increase in weather-normalized retail sales. This exceptional level of load growth is driven primarily by the continued ramp of the Panasonic advanced manufacturing facility as well as the ramp up of the data center customers with signed ESAs in our Metro and Missouri West jurisdictions. Next, updated recovery of costs and return on our regulated investments are expected to contribute $0.35 of EPS for the year, primarily related to new rates at Kansas Central that went into effect in the fourth quarter of 2025, as well as the recovery of FERC regulated infrastructure investments. Offsetting these positive drivers is an increase in O&M as well as the combined impact of higher depreciation and interest expense net of AFUDC earnings and PISA deferrals, which is expected to drive a $0.20 unfavorable impact. Lastly, we assume $0.08 of drag related to dilution from convertible notes and expected common stock equity issuances, as further described in a moment. We have high confidence in this 2026 guidance, and it is bolstered by the execution of electric service agreements that we've announced today. Moving to Slide 17, we highlight our large load demand growth profile in our financial plan. Over the past 2 years, we've been hard at work to advance competitive frameworks for capital investment in Kansas and Missouri that would enable our ability to invest for growth in a way that promotes economic prosperity for our customers and communities while solidifying our region as a premier destination for advanced manufacturing and data center customers, the passage of the LLPS tariffs, our operational team's execution on transmission and generation capacity planning, as well as strong collaboration with customers and local stakeholders and legislative efforts have all culminated in what we believe is one of the most compelling growth stories in the sector. As indicated on the chart, the large load customer ramps are already underway and will continue building through 2030 and beyond, supporting our retail load growth CAGR of approximately 6% through 2030. This tells a powerful story of growth anchored by long-term contracts and clear parameters on monthly billings, providing significant visibility into our earnings growth and cash flow streams. We are able to share this level of detail with you because our teams are no longer just talking about a pipeline. Now they are also talking about the successful inking of actual electric service agreements with the very high-quality customers David described earlier. To drive home this point further, the execution of these ESAs was the milestone needed to solidify Evergy's growth trajectory as a company, as these were the final binding agreements to be signed between Evergy and these customers. The numbers on Slide 17 that you see reflect our planning assumptions around the capacity demand that will drive revenue during our planning period, growing from 350 to 400 megawatts of served capacity by year-end 2026 through up to approximately 1,700 megawatts of served capacity by 2030. As a reminder, this plan reflects the contributions from customers under signed ESAs for 4 major projects. Furthermore, we are making strong progress with several additional large customers and expect at least 1 more executed ESA in 2026, whose load would represent upside to the back end of this forecast. As David described, we'll continue working in a measured fashion through our 10 gigawatt plus balance of pipeline to build on the success we're sharing with you today. Okay. So Slide 18 converts that megawatt capacity usage you see on Slide 17, along with our broader customer base, which is also expected to grow, into a view of the strong load growth profile we see ahead. In particular, it highlights generally accelerating annual load growth from 3% to 4% in 2026 to an average annual rate of 7% per year from 2027 through 2030. It also highlights the growth we're seeing across our entire system, growth that will ultimately drive affordability benefits for our customers in every jurisdiction. We believe the ranges on this page will assist analysts and investors in the modeling of our 6% load growth CAGR over the next 5 years across jurisdictions and importantly, reflects the positive momentum we expect to build in our financial results throughout the 5-year planning period. On Slide 19, I will briefly highlight our 5-year investment plan. As David referenced earlier, our $21.6 billion capital investment plan represents a $4.1 billion or 24% increase compared to the prior 5-year plan. A key feature is higher generation investment, which captures approximately $3.4 billion of the total increase and largely consists of new natural gas power plant investment needed to serve growing demand and to meet SPP reserve margin requirements. The T&D portion of our plan emphasizes strengthening system reliability through grid modernization efforts, including replacing assets that are at or near the end of their useful lives. Deploying these critical infrastructure investments to the benefit of our grid operations and for our customers and communities is expected to result in a rate base CAGR of 11.5%. Let's now turn to our updated financing plan on Slide 20. As mentioned on Slide 19, our projected capital investments over the 5 years through 2030 now stands at $21.6 billion. We'll utilize a prudent mix of debt, equity and hybrid securities to finance our capital investments, targeting an FFO to debt ratio of approximately 14% through the forecast period, with strong annual growth in FFO that will provide the potential for even stronger metrics towards the end of the 5-year plan. Moving from left to right, we expect $13.5 billion of cash flow from operations. Our $3.6 billion dividend assumption reflects our expectations of growing the dividend throughout the period while targeting a 50% to 60% payout ratio. Recently, our dividend payout ratio has been in the 65% to 70% area, and we plan to grow the dividend annually at a rate below our EPS growth projection of 6% to 8% plus. We expect to achieve the 50% to 60% ratio in the latter half of the plan. And retaining more of our earnings and equity in the business allows us to efficiently fund our capital investments and keep the level of common equity issuances at lower levels than would otherwise be needed. Next, we forecast $8.4 billion of incremental debt and hybrid securities, net of upcoming maturities. Our plan incorporates $1 billion of equity credit from hybrids, which may assist you in your modeling. Finally, our expected common equity need across 2026 to 2030 is forecasted to be a total of approximately $3.3 billion and now incorporates the benefits of operating cash flow that comes from customers taking service center to LLPS tariff, as well as our revised nuclear PTC assumptions. Of note, we currently assume no equity issuances of our plan in 2030 as the cash flow generation of our business improves and improves. This results in an annual need of $700 million to $900 million from 2026 to 2029. Of course, we'll continue to evaluate the appropriate level of equity funding, particularly as upside capital opportunities make their way into our plan. Now let's close on Slide 21. It's a recap of our growth outlook summary for the next 5 years. First, with the successful execution of electric service agreements with large load customers, we expect strong load growth through 2030 and beyond as the initial 1,700 megawatts will support a 6% consolidated retail load growth CAGR through 2030. This provides us with a visible runway of predictable earnings and cash flow growth into the next decade. As a reminder, this forecast includes load from 4 projects under ESAs and other non LLPS large customers already announced. And we're making strong progress with multiple additional large customers and expect at least 1 more executed ESA in 2026 that is not yet captured in our financial plan today. We continue to believe Evergy has one of the most compelling customer growth opportunities in the industry that could drive robust growth not just in our 5-year forecast, but well into the next decade, resulting in sustainable growth and affordability benefits for our customers and communities and a great long-term outlook for all of our employees. Next, I'll reiterate our capital investment and rate base growth outlook. The foundational earnings power of the company will be fortified by our $21.6 billion capital investment program. Our higher levels of infrastructure investment are in large part related to supporting economic development in Kansas and Missouri and will drive grid modernization and the addition of incremental generation capacity to support our growing customer demand and SPP reserve margin requirements. Our capital plan is expected to drive a 11.5% rate base growth through 2030, fortifying our earnings foundation. Our projections of regulatory lag and financing costs convert this 11.5% rate base growth to an earnings growth projection exceeding 8% annually beginning in 2028. We plan to file rate cases on a time frame corresponding to the in-service states of new generation projects to ensure the financial strength of our utilities while incorporating the affordability benefits of large loads. It is critical that we deliver on our forwardability and reliability objectives for the benefit of our customers. And as our capital investment plan grows, we will utilize a prudent mix of debt and equity financing to support our strong investment-grade credit rating and FFO to debt target of 14%. We will take a flexible approach and evaluate all available financing options, including the use of hybrid debt securities that receive equity credit, to meet our financing needs. We anticipate approximately $700 million to $900 million of equity annually from 2026 through 2029 and currently assume no equity needs in 2030 due to improving cash flows from operations. That being said, upside capital opportunities do exist, and we'll continue to evaluate the appropriate level of equity funding. Altogether, this plan lays the foundation for a transformative growth phase ahead as we expect annual adjusted growth of 6% to 8% plus through 2030 off of our 2026 midpoint guidance of $4.24 per share. As an additional note for the analyst community, we currently expect 2027 EPS growth in the lower half of our 6% to 8% range before accelerating to a level in excess of 8% beginning in 2028. I speak for the entire leadership team in saying that we are excited about the future at Evergy, and all of our employees are deeply committed to successfully executing our business plan and delivering results for our customers, communities, employees and shareholders. And with that, we will open up the call for your questions. Operator: [Operator Instructions] Our first question comes from Stephen D'Ambrisi with RBC Capital Markets. Stephen D'Ambrisi: Just had a couple -- I mean it's a great update, and thank you very much for giving all the color on the added ESAs. Just the one thing that stuck out to me was on the equity issuances in 2030, that you have no planned equity issuances beyond '29. So can you just talk a little bit about what that means for steady-state equity needs for the company? Obviously, there's upside capital that we can talk about. But just to the extent we roll forward a year, what do equity needs look like in '31 and '32? W. Buckler: Yes, it's a great question, Steve. It's a plan that we're really excited about. And our metrics really are fortified by the ESAs you mentioned. They have that level of predictability. And your future revenue outlook really, really just strengthens our profile as a company. When we look at $21.6 billion that's currently in our 5-year plan, this is definitely an elevated CapEx, level of CapEx compared to what we've had in the past. But as David mentioned, we also have an elevated level of load growth. So in this big construction phase, these next few years, we certainly have an equity need like many of our peers, and we're excited to be able to issue that kind of growth equity. So just as we see it today, no need for equity in 2030 because our FFO just greatly improves each year, kind of is illustrative -- or illustrated, rather, quite well by that Slide 17, where you can see the megawatts grow each year of capacity served. There's a potential we win more ESAs. I think we have high confidence in that. And what comes with a growing company like that is often more capital. So we'll have to reevaluate 2030 as more capital opportunities come into plan. But Dave and I were just talking yesterday, when you get into the early 2030s and when we finish our full infrastructure build out, you're going to have some tremendous FFO in the plan and really will make an even stronger balance sheet. David Campbell: Yes. To build on that, I think -- we expect at least 1 more ESA to sign this year with -- that's not in our plan currently. That's not in our sales outlook or the earnings outlook we described. There'll be capital to serve those customers. Now we'll be in an environment where we've got strong FFO to debt levels, but we do expect incremental upside capital investment opportunities. And with that, we'll come up with a financing strategy alongside it. So we won't get ahead of what that update will be when we have those additional ESAs, but we're really excited that it will be an upside potential for our customers and communities and for the company. Stephen D'Ambrisi: Okay. That's very helpful. And just not -- again, not to get ahead of the -- front run the update, I guess, but can you just give a little bit of flavor of the 2.0 to 3.5 gigawatt potential for advanced discussions where you expect 1 more ESA? Like how many customers does that represent? Or how many sites? Just so that we can maybe -- any way we can get some type of idea of what an additional ESA could potentially mean for you guys? David Campbell: Sure. And it's -- I would describe it as -- we want to be purposeful in saying we do expect at least 1 more executed ESA in 2026. So each one of those words, at least and 1 more, are purposeful. So we've worked hard to identify potential transmission, distribution solutions, capacity opportunities. So we feel like we're really tracking well for at least 1 more this year. You can have a sense for the potential size of these customers from the first 4 ESAs that we've signed. We're talking about additional sizable opportunities in that category and we haven't yet included in our plan. So we're -- the team is working hard, and we're -- our confidence is based not only on our assessment of the capacity in the transmission and generation side, but also the status of our discussions and where those customers stand with respect to lining up land permits and advancing commitments to us. So we're optimistic we'll be there. I think it's fair to say that the bulk of the impact from additional ESAs will come after 2030, but there's some additional potential before the bulk of the impact after -- in 2030 and beyond. But what we like about that, of course, is the ESAs we've announced today are transformative for our company in our service territory. The additional ESAs will help to sustain and extend and expand that opportunity well into that next decade. So we're really excited about the pipeline, and we're committed to executing on that and really do expect at least 1 more sizable large customer ESA executed this year. Operator: Our next question comes from Paul Zimbardo with Jefferies. Paul Zimbardo: Thanks for all the disclosure. So much to ask, but I'll keep it concise. And thank you for the commentary on what '27 looks like as well. Is it fair to think you're targeting like an 8% plus CAGR as well? I know it accelerates in the back half, but should we think about better than 8% as we look 2026 to 2030 as well? David Campbell: I think, Paul, we've tried to be pretty explicit in how we've described it. So I won't change how we describe it, but kind of reiterate. So let me just walk through it again. The overall formulation, 6% to 8% plus. As Bryan described, '26, '27 in the bottom half of the 6% to 8% range. For that, we expect to accelerate to exceed 8% annually beginning in 2028 then through the 2030 time frame. So I think that gives you a sense for how we see that earnings power and how it evolves over that time period. The overall rate base growth is in the 11.5% range annually. As we think about the gap between rate base growth and earnings growth, the historical guidance we provided was about 8.5% rate base growth, and we were in the top half of the 4% to 6% range. It was about 300 basis points. We expect that to be in the range of a 250 basis point gap over time. There's a lag that comes from issuing equity and regulatory lag as you -- in a heavy investment mode. But that's what we're looking at over time is that sort of that range of a 250 basis point gap between rate base growth and earnings growth. But the formulation, we tried to be explicit in that 6% to 8% plus, what you see in '26, '27, and then we expect that to accelerate to -- in 2028 and beyond. Paul Zimbardo: Okay. I understand that part. And then just on the credit metric discussion, apologies if it was clear to others. But the 14%, is that an average that you're targeting over time? Because I know you emphasize things get stronger in the back end, just -- any kind of color on the shaping or just how to think about the 14%, if that's kind of a trough or an average, that would be helpful. W. Buckler: Yes. Paul, I think of it as an average, it's pretty consistent throughout the 5-year plan. We do see it getting a bit stronger in year 4 and 5 of the plan. There's just such a heavy cat -- construction phase, '26 through '29, and doesn't really abate that much in 2030. But the level of FFO certainly is just building on itself each year and getting stronger and stronger. So what I would just point out is just our cash flow projections we believe are some of the most predictable in the industry. They're fortified with these electric service agreements with top quality counterparties underpinned by that strength of the LLPS tariffs in Kansas and Missouri, including the minimum monthly bill provisions that escalate over time in conjunction with that rising capacity levels, which are actually spelled out in those ESAs that we're mentioning. So you put all that together, it's a really strong, consistent plan throughout the 5-year period with consistently strong EPS growth and very solid metrics throughout. Operator: Our next question comes from Shar Pourreza with Wells Fargo. Unknown Analyst: Actually, it's Andrew [ Canaby ] on for Shar. So on the ESAs, how prescriptive are the -- is the ramp rate? How much clarity do you get on how much load you'll be serving on a year-by-year basis? And then when do the minimum monthly bills begin to kick in? Do they kick in during the ramp period or once the customer is fully ramped? David Campbell: So the ESAs, the great thing about the electric service agreements that we've signed is that they include a schedule, which includes an annual capacity levels that are specified by year starting in the first year. And the -- they'll be charged the levels that they use. But if they don't meet the minimum levels, then they'll be charged at that 80% level based on the schedule of contracted capacity that's laid out in the ESA. So it's a level of specificity and commitment that's laid out contractually with these counterparties. So we're really excited to reach the agreements with Google for 2 of these, 1 new and 1 expansion of a previous project. With Meta, also an expansion, and then with Beale Infrastructure, which is a Blue Owl company. So these ESAs include those ramps. They're specific. They're [indiscernible] megawatts by year. And the LLPS provisions on minimums and on requirements are tracked directly with that schedule. Unknown Analyst: Great. And then just changing gears a little bit. You mentioned that weak industrial demand played a part in the results for this quarter. What gives you confidence that will turn around in 2026? How much of your overall industrial load is represented by the Panasonic project? W. Buckler: Yes. Andrew, this is Bryan. Thanks for the question. Industrial load in 2025 was -- we're kind of fighting it all year long. January and February of 2025, we had massive snowstorms in Kansas City and some of our largest businesses closed their doors for many days. And then we had a large oil refinery to add an outage early in the year. And then industrial demand picked up with Panasonic and -- but ultimately, by the end of the year, fourth quarter, it was a disappointing level of industrial demand again. And with industrial demand, there's a price component to lower price if you hit a lower peak demand. So that had a kind of a double effect on our '25 earnings. Now we've embedded all this recent weakness in industrial load into our 2026 model already. So we -- our forecasting team, we kind of did a gut check and said, how comfortable already with these load numbers in 2026. We did modify them down, and that's fully reflected in the $4.24 of guidance for EPS in 2026. So we feel like we're in good shape there. The January '26 books, we just closed maybe 10 days ago, and those numbers came in really strong. So we're pleased with our start to '26. It's only 1 month, of course. And then lastly, I'll just say with Panasonic, they certainly started out '25 at a slower pace than we had hoped. But in recent months, they're drawing a considerable amount of load, more and more each month. We certainly expect the load in '26 to be within the range of our planning assumptions. In a recent press release, a Panasonic executive mentioned that they plan to start 2 new production lines at their Kansas facility this year, and we'll wrap up the kind of 50% of total capacity early this year. So I don't know that we've given explicit megawatt numbers for Panasonic. And so I can't really give you that kind of detail around its percentage of industrial load. Operator: Our next question comes from Michael Sullivan with Wolfe. Michael Sullivan: Wanted to try just -- I know there's moving pieces and it might be tough, but just in terms of like sensitivities or rule of thumb, can you give us any sense of incremental load growth, what does that do for CapEx and earnings? And then how much of incremental CapEx needs to be financed with equity? Any help you can give us there? David Campbell: Michael, just to clarify, are you talking about additional CapEx and load growth beyond what we're describing today? Michael Sullivan: That's right. Yes. So if you get another customer, that ESA, what does that do to CapEx and earnings? And then how do you finance the associated CapEx? David Campbell: Yes. Well, I'll put the how do we finance question to Bryan in terms of if we had $1 billion of additional capital, what would the general rule of thumb be. I'd say, Michael, it's -- every ESA is going to be dependent on what you ultimately reach with that customer. As I described, we expect at least 1 more ESA in 2026. We think it will be in the general size range that was reflected in the 4 we've announced today, at least at large. I also described, there's some upside in the '29-'30 time frame, but the bulk of the impacts are in '30 and beyond, so we end in the next decade. So I would really describe it as much powering -- it certainly reinforces the plus and it also helps to extend and fortify that growth trajectory into the 2030s. So I won't get ahead of the specific announcements, that will all depend. The great thing about these ESAs and why we were able to provide the level of detail that we did on Pages 17 and 18 is they do include specific schedules. They do include annual ramps in them. So we'll give that specificity when we announce specific customer. Hope that makes sense. And Bryan, how would you describe if we have incremental capital, what the general financing rules of thumb might be? W. Buckler: Yes, absolutely. And so Michael, we've kind of historically cited 50-50 on debt equity funding of incremental capital, which over the long term is a rule of thumb used by many in the industry. So I think that is fine for you to use as a rule of thumb still for us. Being mindful, of course, that the addition of more ESA customers, like David mentioned, could still benefit the very back end of the plan, '29, 2030, think of it, a potential benefit there. And the ramp rates of existing customers could also play a factor. In addition, as we move into future years beyond 2030, these ESAs will reach their peak capacity levels in that early 2030s, maybe in the mid-2030s for the next round. But these contracted cash flows will be correspondingly higher levels throughout that period of time really, in the next 10 years. So super powerful to our cash flows as we think ahead. So irrespective, we do expect this CapEx plan to grow, and it would be accretive and we'll be prudent with our mix of debt and equity in hybrids because we want to continue to create incremental value, not only for you, our investors, but also for the economic growth of our communities. Michael Sullivan: Okay. That's very helpful. And then just -- this was kind of asked, but in terms of what you're embedding in terms of the ramp rates here, are you assuming the like 80% minimum bill level or the full ramp? Or is that basically what the range is between those two? David Campbell: Yes, Michael, let me give you a sense of the general approach we've taken to these, and that is that we typically in the first couple of years of the ESA, we look to the 80% minimum level. And again, if the customer uses more, they'll be billed more. There're different constituents listening here. Minimum build does not mean if you use more electricity, you only be billed the minimum. That's what you'll be billed if you use less. But we -- typically in the first 2 years, we'll bill -- we model it in our plan at the 80% level. And then in the third year and beyond, we use more of an expected case, given what we've seen and what we expect from the customer. So it's more of an expected case. There's a range of upsides and downsides as you move out further in time. But the first couple of years across ESAs, we typically are using that 80% level to be a little more on the conservative side. Operator: Our next question comes from Paul Fremont with Ladenburg Thalmann. Paul Fremont: I guess my first question is, can you tell us roughly what your industrial rate is in terms of dollars per megawatt hour? David Campbell: Well, so it varies by jurisdiction, Paul, and it's in a typical range. I don't know if, Chuck, do you want to comment on one of our typical industrial ranges again, with the varies by jurisdiction? W. Buckler: Paul, I'll let these guys jump in. I'll just remind you that our LLPS rate is a premium, 15% to 20% premium on the demand charge on the rate that we're about to give you. Paul Fremont: Okay. David Campbell: Go ahead, Chuck. Charles Caisley: Yes. Our typical range is in the vicinity of $0.06 to $0.07 a kilowatt hour. Yes. So we -- $60 to $70 a megawatt hour if you want to use that metric, typically cited in cents. But yes, $0.06, $0.07. Paul Fremont: Perfect. And then if there's a cancellation, is that rate essentially sufficient to allow you to recoup all of the costs? Or would there be any exposure in the event of an early cancellation? David Campbell: So the provisions of the LLPS are quite specific on what the results are of a cancellation. So it's in effect through the term of the agreement, the counterparty is responsible for the minimum bill. So that will depend on what the total megawatts are of the contract. In general, that's a very strong protection if you think about size of these customers because we're -- the rates from the LLPS under the large load power service tariff, our demand rate is 15% to 20% higher than the standard industrial rate, which you just heard from Chuck Caisley, is the standard rate of $0.06 to $0.07. So you've got very good protections for your customers. Also in that scenario, Paul, which is a great situation, you will have a set of infrastructure, new infrastructure that you built in place for existing customers, and you've effectively had customers alongside who funded a very large portion of it. And again, the exact math will depend on the size of that customer, the specific ramp they have over time. But we -- these LLPS provisions are strong. The customers with whom we've contracted. One of the hyperscaler customers put out a statement last week, their commitments around meeting their incremental costs are high. Their interest in being in our region and in having as much capacity as we're able to serve them is very high. So we're -- we feel great about the benefits that these contracts will offer for our existing customers and the protections that are embedded on the explicit terms of the LLPS. Paul Fremont: And then for the contract that's in late-stage negotiations, is that -- would that be a new customer? Or would that be an expansion of an existing customer? David Campbell: It could be either one. Paul Fremont: Okay. And last question for me. With respect to the ESAs, are the 4 signed contracts roughly equivalent in terms of megawatts? So should we assume like an average of 300 megawatts per ESA? David Campbell: Well, so we won't disclose the size by customers, but the total steady state is 1.9 gigawatts. So obviously, the average of the 4 is -- comes close to 500 megawatts. But we're not -- we haven't broken it out by individual customer, and we want that -- that is confidential. But the total size we have described not only in aggregate, but how we expect that to feather in over each year, and that's laid out in our slide presentation. Operator: Our next question comes from Anthony Crowdell with Mizuho. Anthony Crowdell: I appreciate the detail. I just wanted to jump on Paul Zimbardo's question earlier. Just if you could help me out, where did you end the year on an FFO to debt basis? And then thoughts -- and this maybe was the heart of Zimbardo's question. Just as you're going into very significant CapEx cycle, thoughts of maybe adding a cushion to the downgrades right -- to your downgrade threshold? W. Buckler: Anthony, our FFO to debt 2025 was right around that 14% area as well. And that was despite the weakness we had with weather and the industrial demand weakness. We talked a lot about the 14% FFO to debt target. And this will be a little bit repetitive to what I said to Paul, but we really do expect this growth in cash flows from operations each year throughout the 5-year plan to be quite robust. And with the CapEx plan at the level it is to, we have inserted planned common equity issuances of $3.3 billion. So this is a robust equity issuance plan, and one that we believe will be appreciated by the rating agencies. We're also moderating our level of annual dividend increases, allowing us to retain higher levels of earnings within equity each year. These are 2 very meaningful steps that our Board supports to the benefit of our balance sheet. So keeping a strong balance sheet and our credit ratings is really important to us. And as I pointed out earlier, we believe we absolutely have some of the most predictable cash flow projections in the industry because they are fortified by those ESAs with top quality counterparties with that strong LLPS tariff protection and inclusive of monthly minimum bills that David mentioned. And those escalate over time with the annual -- those -- the ESA agreements are very specific each year, what those minimum bills will be based on. It's an expanding capacity level each year to 5-year ramps and then a 12-year contract at a steady state peak after that. So just we're in a little better position than I think many peers, Anthony, in the sense that our revenue stream is just 4 to 5 of those ESAs are more predictable than they've ever been with just tremendous counterparties. So that went into our thinking too when we targeted the level of 14%. Anthony Crowdell: And just apologies, is that a change in the third quarter, your FFO to debt target? David Campbell: Yes. Moody's lowered our downgrade threshold a year ago from 15% to 14% after our February call. So this is our first update -- comprehensive update that we've given since last February. Operator: Our next question comes from Ryan Levine with Citi. Ryan Levine: Is Evergy seeking DOE energy-dominant financing capital for its transmission plan? Or any color you could share around maybe alternative subsidized forms of capital outside of capital markets? David Campbell: So as of today, the plan that we announced today is through the traditional financing mechanisms that are available to the utility and will be, as Bryan described, we have a prudent mix of debt and equity with some optionality around how we move things forward, but with a real commitment to a strong balance sheet. For that next tier in our pipeline, we're absolutely open to and will be considering different paths. That could be in the form of some of the creative ideas that are coming out of Washington now and presenting that. It could be participating more directly with large customers. The LLPS tariff actually is embedded within it. If customers bring their own capacity solutions, explicitly contemplated, if they are amenable to man response, it could reduce the capacity requirements. That's also embedded feature in the LLPS, that both those factors could positively impact the rate. So I think particularly getting into that next year that beyond the first 2 categories we list on Slide 7, the next 10 gigawatts, creative approaches are going to be important. We're committed to exploring those. And I think a range of different options will be there. I think the size and scale of the opportunity before our country as well as our company is such that it warrants exploring those opportunities. But I would emphasize, though, is just with the announcements we've made today, it's a transformative growth opportunity for our company, backstopped by ESAs with large customers, great customers. We really appreciate their commitment to our region. So Google and Meta and Beale. But we're excited that we think we can assign at least 1 more this year and keep moving beyond that. And as we go further and further, I think those kind of creative options are absolutely things that we'll be open to and we'll continue to explore. Ryan Levine: And then a follow-up on that. Does that imply that you looked at the [ Kayak ] structure for the existing deals but passed on it and maybe would reconsider that on future deals? Am I reading too much into that? W. Buckler: Could you expand on your question a little bit? David Campbell: I really have acronyms that I don't -- that are different from the ones I'm typical used to, but go ahead. I want to make sure I answer your question. Ryan Levine: Yes. Just in terms of having some of the customers prepay for some of the associated capital in advance in terms of the [ Kayak ] structure, but just in terms of just that concept. David Campbell: I got it. So that's -- the LLPS tariff does not go down that route. But it certainly, as I mentioned, that for additional potential opportunities and down the road, either that kind of setup or customers bringing their own -- potentially their own generation solutions that either brought directly or contracted for, those kind of approaches are absolutely things we're open to and the tariff explicitly contemplate. So that could be a direct -- an SPP, and we're part of the process there is looking at different ways for large loads to bring their own generation on different products that they've advanced and we'll be advancing with FERC. And so it could range from customers bringing their own generation to bring their own capacity they've contracted and thereby reducing their LLPS rate. Those are all different mechanisms we could use. What we've announced today is under the structure of the LLPS and supported by generation that we're bringing, but some of our current customers. And if you look in past announcements have are contracting with potential resources. And if they bring those, then those will be things that we'll contract for and will be an offset for the rate. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to David Campbell for closing remarks. David Campbell: Thank you, Liz. I want to thank everyone for participating in the call today. I want to thank our customers for their commitment to our region. With that, have a great day. That concludes our call. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for joining us for Navios Maritime Partners' Fourth Quarter 2025 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer, Mrs. Erifili Tsironi; and Chief Trading Officer, Mr. Vincent Vandewalle. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call will also be found there. Now, I will review the safe harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners' segment data. Next, Mrs. Tsironi will give an overview of Navios Partners' financial results. Then Mr. Vandewalle will provide an industry overview. And lastly, we'll open the call to take questions. Now, I turn the call over to Navios Partners' Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki? Angeliki Frangou: Good morning, and thank you all for joining us on today's call. I am pleased with the results for the quarter and year-end 2025. For the quarter, we reported net income of $117.3 million and EBITDA of $224.8 million. For the full year, we reported net income of $285.3 million and EBITDA of $744.6 million. Earnings per common unit was $3.99 for the quarter and $9.59 for the full year. We are also pleased to announce a 20% increase in our distribution policy to $0.24 per unit annually commencing for first quarter of this year. We are witnessing the evolution of a new world order with new trade agreements arising out of the dust of the game institution. At the same time, it seems trade is now a tool of national policy as governments prioritize exports and strategic control of supply chains. National security interest are now a dominant consideration in the decision-making metrics. In addition, conflicts and geopolitical tensions are rerouting trade, increasing voyage distances, cost and transit times. As political calculations increase, trade routes are no longer based only on efficiency considerations. As you can see on Slide 3, our fleet has an average age of 9.6 years compared to an industry average of 13.5 years for our 3 segments. Our fleet modernization program has created a fleet that is almost 30% younger than the average and more than 50% younger in comparison to the tanker fleet. Please turn to Slide 4. Navios is a leading maritime transportation company, owning, operating, and chartering a modern fleet of 171 vessels across 3 segments and 15 asset classes. Our fleet is split in 2/3 by value, with about 1/3 in each of the tanker, dry bulk, and container segments. The overall value of our fleet, including our newbuilding program, is $8.8 billion. For our fleet in the quarter, we have $4.1 billion in net vessel equity value. We continue to make headway in reducing our net LTV towards our target of 20%, 25%. At year-end, we had a net LTV of 30.9%. Our balance sheet is strong with $580 million available liquidity and credit ratings of Ba3 for Moody's and BB for Standard & Poor's. Please turn to Slide 5. We believe that diversification is strength when embedded in a culture of risk management. We have a business providing significant optionality in decision-making. For example, if we are unable to secure long-term charters that provide a reasonable return, we patiently wait. We allocate capital similarly, waiting for either opportunistic purchases or acquisitions that can be hedged by long-term charters. Our organization promotes a strong risk management culture. We are continuously monitoring and assessing risk. We evaluate and structure transactions with risk management professionals. We also obtained robust insurance coverage, and we have implemented many tools to manage operational risks. Please turn to Slide 6. At the end of 2025, our fleet gross LTV was 37.3% and net LTV was 30.9%. Our contracted revenue continues to grow and is now at $3.75 billion. Overall, we have sufficient features for the year to exceed our cash breakeven. Please turn to Slide 7. Revenue visibility for 2026 demonstrates our strong execution. We secured coverage for 71% of our available days with contracted revenue exceeding cash operating cost by $172.7 million. This provides significant earnings visibility while preserving meaningful market exposure to the remaining 29% of our available days, representing 15,565 days that are either open or indexed to spot market. Our portfolio positioning reflects a thoughtful approach across segments, as shown in the bottom right of the slide. Containers, 99% fixed coverage. We secured healthy rates. Tankers, 84% coverage, high visibility with selective spot exposure. Dry bulk, strategic market exposure through available days positioned to capture upside. Importantly, we continue to actively pursue long-term charter opportunities that enhance our earnings stability. In the fourth quarter of 2025 and year-to-date, we secured $261 million in new charter commitments. Please turn to Slide 8, where we outline our return of capital program. As I mentioned earlier, we increased our annual distribution by 20% to $0.24 per unit annually. This increase was funded primarily through savings generated from our unit repurchase program. As you can see on the right side of the slide, we reduced units outstanding by 5.3%, employing approximately $73 million to repurchase 1.6 million units. This provided value accretion of approximately $5.20 per unit based on analyst estimates of NAV. Also, we currently have approximately $27 million of capacity under our original authorization. Please turn to Slide 9. Navios is a proven platform and has executed its strategy through an exceptionally challenging environment. When I opened this discussion, I highlighted the unprecedented uncertainties facing our industry: geopolitical risks; regional conflicts; a shifting global tariff regime; and evolving trade patterns. Despite this complexity, we remain disciplined and focused. Over the past 4 years, we built a platform of excellency, growing contracted revenue by 11% to $3.8 billion, achieving an EBITDA run rate of around $750 million and expanding our fleet value, including our newbuilding program to $8.8 billion. Importantly, we have not sacrificed financial discipline in achieving these goals. We reduced our net loan-to-value by 31%, to 30.9%. We recognize that there is more work ahead. But in an uncertain world, we believe our proven platform combining a diversified fleet with a disciplined risk management culture position us to continue delivering value through any market condition. I now turn this presentation over to Mr. Efstratios Desypris, Navios Partners' Chief Operating Officer. Efstratios? Efstratios Desypris: Thank you, Angeliki, and good morning, all. Please turn to Slide 10, which details our operating free cash flow potential for 2026. We fixed 71% of available days at a net average rate of $26,865 per day. Contracted revenue exceeds estimated total cash operating costs by about $173 million, and we have $15,565 remaining open or index-linked days that should provide significant additional cash flow. Moving to Slide 11. We continue to maintain a strong backlog of contracted revenue that creates visibility. During the quarter and year-to-date, we added $261 million of contracted revenue, $97 million from 5 containerships chartered-out for a net average daily rate of $29,572 for an average duration of about 2 years. We also contracted 3 dry bulk vessels, providing a minimum revenue of $93 million. These vessels were chartered-out at an average net daily rate of $23,974 for an average duration of 3.6 years. Two of these vessels has also profit sharing above their base rate. Lastly, we chartered-out 3 tanker vessels for 2 years at an average net daily rate of $31,944, generating $71 million in contracted revenue. Total contracted revenue amounts to $3.8 billion, $1.3 billion relates to our tanker fleet, $0.3 billion relates to our dry bulk fleet, and $2.2 billion relates to our containerships. Charters are extended through 2037 with a diverse group of quality counterparties. Slide 12 summarizes the fleet developments for Q4 and year-to-date 2026. We acquired 2 newbuildings, scrubber-fitted Japanese Capesize vessels for $134.3 million. These vessels have been chartered-out for about 5 years. The charters are based on the new BCI index with an average floor rate of about $25,000 per day, an average fixed premium over the index of about $3,000 per day, and a 50-50 profit sharing if the adjusted index and premium exceeds the floor. This traction with floor and profit sharing mechanism provides protection and stable return and participation on the upside. The vessels are expected to be delivered in the second half of 2028 and first quarter of 2029. We also sold 2 VLCCs with an average age of 16 years for a price of $136.5 million. The vessels are expected to be delivered in the second quarter of 2026. Finally, we took delivery of the newbuilding aframax/LR2 vessel, which has been chartered-out for 5 years at a net daily rate of $27,431. Please turn to Slide 13. We are constantly renewing our fleet in order to maintain a young profile. We reduced our carbon footprint by modernizing our fleet, benefiting from new technologies and advanced environmental friendly features. We have 26 newbuilding vessels delivering to our fleet through 2029, representing $1.9 billion of investment. Based on our financing, both agreed and in process, we have about $197 million equity remaining to be paid. In containerships, we have 8 vessels to be delivered with a total acquisition price of about $0.9 billion. We have mitigated the residual value risk with long-term charters with creditworthy counterparties expected to generate about $0.6 billion in aggregate revenue over a 5-year average charter duration. In tankers, we have 16 vessels to be delivered for a total price of approximately $0.9 billion. We chartered-out 10 of these vessels for an average period of 5 years, which are expected to generate aggregate contracted revenue of about $0.5 billion. In dry bulk, we have 2 vessels to be delivered with a total purchase price of about $0.1 billion with a minimum contracted revenue of about $0.1 billion. We also continue to opportunistically sell older vessels. In 2025 and 2026 year-to-date, we sold 14 vessels with an average age of 18 years for about $372 million, 6 were dry bulk vessels, 5 were tankers, and 3 were containerships. I now pass the call to Erifili Tsironi, our CFO, who will take you through the financial highlights. Eri? Erifili Tsironi: Thank you, Efstratios, and good morning, all. I will briefly review our unaudited financial results for the fourth quarter and year ended 31st December, 2025. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Slide 14. Total revenue for the fourth quarter of 2025 increased by 10% to $366 million compared to $333 million for the same period in 2024 due to higher fleet combined time charter equivalent rate despite lower available days. Our fleet TCE rate for the fourth quarter of 2025 increased by 10% to $25,567 per day, while our available days decreased by 2% to 13,390 days, compared to Q4 2024. In terms of sector performance, our TCE rate per day was high in all 3 sectors as follows: 15% increase to $19,588 for our bulkers; 9% increase to $29,158 for our tankers, and 2% increase to $31,315 for our containers. EBITDA, net income and earnings per common unit for the fourth quarter and full year 2025 were adjusted as explained in the slide footnote. Adjusted EBITDA for Q4 '25 increased by $25 million to $207 million compared to Q4 2024. The increase was driven primarily by a $33 million increase in revenue, partially mitigated by $4 million increase in time charter and voyage expenses, and a $3 million increase in [indiscernible] mainly due to a 3% increase in the daily OpEx rate to $7,153 per day and a $1 million increase in general and administrative expenses. Adjusted net income for Q4 '25 increased by $21 million to $100 million. Adjusted earnings and earnings per common unit for the fourth quarter of '25 were $3.4 and $3.99, respectively. Revenue for the full year '25 increased by $10 million to $1.3 billion. Our combined TCE rate for 2025 was $23,509 per day, 3% higher compared to 2024. In terms of sector performance, the average TCE rate for our containers increased by 3% to $31,239 per day compared to 2024. In contrast, our dry bulk average TCE rate was approximately 3% lower to $16,408 per day. The TCE rate for our tanker fleet was marginally below 2024 levels at $27,011 per day. Adjusted EBITDA for the full year '25 decreased by $4 million to $728 million compared to last year. The decrease in adjusted EBITDA despite higher revenue and lower time charter and voyage expenses was mainly driven by a $22 million increase in vessel operating expenses as a result of a 3% increase in both OpEx days and OpEx daily rate to $7,009 per day, a $7 million increase in general and administrative expenses mainly due to higher euro-dollar exchange rate prevailing during the year as well as the expansion of our fleet and a $4 million increase in other expenses net. Adjusted net income for 2025 decreased by $46 million to $296 million compared to 2024. The decrease was mainly driven by a $30 million increase in depreciation and amortization and a $10 million increase in interest expense and finance cost net. Adjusted earnings and earnings per common unit for the full year '25 were $9.94 and $9.59, respectively. Turning to Slide 15. I will briefly discuss some key balance sheet data. As of December 31, 2025, cash and cash equivalents, including restricted cash and time deposits in excess of 3 months were $413 million. In addition, we have another $167 million available under 2 reducing revolver facilities. During the year, we paid $250 million under our newbuilding program, net of debt. We concluded the sale of 11 vessels for $190 million, adding about $145 million of cash after debt repayment. Long-term borrowings, including the current portion and the senior unsecured bond net of deferred fees increased to $2.2 billion following the delivery of 6 newbuildings during the year. Net debt-to-book capitalization improved to [Audio Gap] Slide 16 highlights our debt profile. With our recent $300 million senior unsecured bond, we further diversified our funding resources in addition to bank debt and leasing structures. The bond has a fixed interest rate of 7.75% and following the completion of the bond, 43% of our debt is fixed at an average interest rate of 6.2%. We have also mitigated part of the increased interest rate cost by reducing the average margin for our floating rate debt and bareboat liabilities for in the water fleet to 1.8%. I would like to note that the average margin for the committed floating rate debt for our newbuilding program is 1.6%. In December '25 and January '26, Navios Partners completed 4 financings for a total amount of $325 million. The $90 million sale and leaseback facility at 2% margin relates to an asset swap under an existing facility with no penalty in order to assist our charters with the trading of the vessels in the U.S. and China. Our maturity profile is target with no significant balloons due in any single year until 2030 when the bond matures. I now pass the call to Vincent Vandewalle, Navios Partners' Chief Trading Officer, to take you through the industry section. Vincent? Vincent Vandewalle: Thank you, Eri. Please turn to Slide 18. Geopolitical developments continue to shift worldwide trading routes, whether due to tariffs, trade agreements, the Red Sea or conflicts. The extradition of Maduro to the U.S. is reshaping trading patterns for Venezuelan oil with more imports to the U.S. and the elimination of sanctioned vessels. Civil unrest in Iran has led to a volatile regional situation. U.S. is building a significant maritime force in the region. In return, Iran attempted to board the U.S. tanker and closed parts of the Strait of Hormuz. Any sustained closure of the Strait of Hormuz would have a severe impact on the oil and tanker markets. In the meantime, nuclear and other talks are ongoing between the U.S. and Iran. Sanctions decreased export from Russia. Prohibitions on importing Russian crude and related products are just starting to affect trades as continuous seizures of sanctioned vessels. Despite the truce in Gaza, transit through the Red Sea and the Suez Canal continues to be limited, increasing tonne miles for most vessel types. In addition, the Houthis announced that they would join any retaliations against U.S. and related targets should anyone attack Iran. With this uncertainty, Maersk is allowing one of its services to transit the Red Sea with naval escorts, while CMA CGM has ceased service there entirely. The Ukraine war continues to impact trading patterns with limiting grain exports out of the Black Sea, while benefiting exports out of Brazil and the U.S.A. Russian crude and product exports continue to [indiscernible] Rosneft and Lukoil, elevating rates for non-sanctioned vessels. Please turn to Slide 20 for the review of the dry bulk industry. Demand growth for dry bulk trade has been relatively stable over the last 25 years and at about 4% average annual tonne mile growth. The current order book stands at about 12% of the total fleet and will remain low due to high newbuilding prices, uncertainty about new fuel regulations, yard availability, and general market outlook. The fleet is aging quickly with 39% of the vessels 15 years old. With older vessels far exceeding those on order, supply should be constrained over the medium-term. Please turn to Slide 21. The main driver of dry bulk demand will be strong Atlantic Basin iron ore growth over the next several years with new projects in Guinea, Brazil and Liberia. The largest new project is Simandou in Guinea, which started shipments at the end of last year and is expected to ramp up to 120 million by '27. Vale in Brazil has 3 new projects totaling 50 million tonnes expected to start exporting by the end of '26. Liberia will add 10 million of exports in '26. In total, these 180 million tonnes are all long-haul tonne miles trading, creating demand for an additional 249 capes. With the current order book at only 231 capes, a further tightening of supply and demand is expected over the next few years, benefiting rates. Overall, the dry bulk market looks positive based on steady long-term demand growth and constrained supply of vessels. Please turn to Slide 23 to -- for the review of the tanker industry. As to supply, we see a relatively low tanker order book of 18%. About 50% of the fleet is already over 15 years old, rising quickly over the next few years. With older vessels exceeding the order book and yards offering first deliveries in late '28 or early '29, supply is set to be tight for several years. Please turn to Slide 24. After the U.S. capture and removal of President Maduro in early January, the U.S. is helping Venezuela move from a sanctioned exporter of crude oil to an exporter of crude oil to non-sanctioned buyers. Improvements will take time, but even raising crude exports from near-term lows of 0.8 million barrels per day to 1.8 million barrels per day with increased demand for more crude tankers. Please turn to Slide 25. The U.S. Office of Foreign Assets Control, OFAC, the E.U. and the U.K. continue to sanction Russian, Venezuelan, and Iranian oil revenue and ships delivering their crudes and products. Most recently, countries started to see sanctioned tankers with U.S. seizing 9, France seizing 1, and India seizing 3 small tankers, further reducing the efficiency of the dark fleet. These tight sanctions have 2 main effects. Sanctioned oil volumes from these 3 countries have more difficulty finding willing buyers, raising demand for compliant barrels and non-sanctioned vessels to carry that oil. Since the end of December, Russian crude export to China and India have reduced by 30% and 70%, respectively. With 822 tankers now sanctioned, the fleet has already seen a significant reduction of about 15% of the total capacity. The tanker market also looks positive over the medium-term based on a lower order book, an aging fleet, and a reduced fleet due to sanctions. Please turn to Slide 27 for a review of the container industry. After the COVID pandemic, the ordering of container ships was mainly for biggest units with fleet expansion in large ships set to continue at high level. Currently, 78% of the order book is for ships with 9,000 TEU capacity or greater and only 20% of the order book is for 2,000 to 9,000 TEU capacity where Navios is most active. Smaller segments of the fleet are well positioned to take advantage of shifting trading patterns. As shown on the right-hand graph, growth in non-mainland trades far exceeds the traditional mainland trades to the U.S. and Europe due to tariffs and higher growth in developing countries. Trading involves the Southern Hemisphere, mostly served by smaller-sized vessels, are expected to see continued healthy growth as this trade shift continues. Overall, Navios fleet is well positioned within the container market and continues to benefit from long-term employment with our high-quality charters. This concludes our presentation. I would now like to turn the call over to Angeliki Frangou for her final comments. Angeliki? Angeliki Frangou: Thank you, Vincent, and we'll open the call to our -- to the questions. Operator: [Operator Instructions] We'll take our first question from Kristoffer Skeie with Arctic Securities. Kristoffer Skeie: Just first on the quarter. Have you made any changes to your accounting of depreciation given the relatively large drop versus Q3? Angeliki Frangou: No. Actually, in Q3, if you recall, we had a one-off -- write-off $27 million relating to the termination of certain bareboat charters. So this was a one-off just for Q3. Actually, the economic rationale of those vessels is the ones that we got back, and we re-entered in a very healthy market. [indiscernible] and accounting adjustment. Kristoffer Skeie: And when it comes to the net LTV, it has dropped quite fast the recent quarters. Can you share some color on when do you expect the net LTV target to be reached? And when that happens, what can we expect in terms of buybacks and dividends? Angeliki Frangou: It's a good question. We think we have the right balance to meet all the challenges and opportunities in this market. I mean, you have seen that we have covered our 2026 all our expenses, and we are about $170 million extra above our -- extra contracted revenue above our cash operating cost. And we still have 16,000 days open. So basically, this flexibility allow us to bring down our LTV, increase our liquidity and be opportunistic on the most profitable reinvestment opportunities. We continue on our buyback, and we continue -- and as you see, we increased our dividend, which is primarily driven by savings from repurchase units. Kristoffer Skeie: Sure. Great. And the last question for me. I mean, you have exposure towards dry bulk, tankers, and container now. Are you seeing any other interesting segments that you sort of wish to invest in? How do you see that? Angeliki Frangou: We're always looking for opportunities, but I will say that today we are sitting in a good position on -- with all our container exposure fixed and having -- and we are having dry bulk and VLCC mainly days open, which is, I think in a good -- we are in a very good position. Operator: Thank you. And this concludes our Q&A session. I will now turn the call back to Angeliki for closing remarks. Angeliki Frangou: Thank you. This completes our quarterly results. Thank you. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to OR Royalties Q4 and Year 2025 Results Conference Call. [Operator Instructions] Please note, this call is being recorded today, February 19, 2026 at 10:00 a.m. Eastern Time. I would now like to turn the meeting over to your host for today's call, Mr. Jason Attew. [Foreign Language] Jason Attew: Good morning, everybody, and thank you for your attention today. We know that it's a very busy day of earnings, so we appreciate your time. Procedurally, I'll run through a prepared presentation, and then we'll subsequently open up the line for a question-and-answer session. For those participating online via the webcast, you can submit your questions in advance through the webcast platform. Today's presentation will also be available and downloadable online through our corporate website. We will be making forward-looking statements. And as I always say, the future is bright, but it's not guaranteed. So please read the fine print. All amounts are in U.S. dollars, unless otherwise noted. I'm joined on the call this morning by Frederic Ruel, the company's VP Finance and Chief Financial Officer, amongst others, the others indicated on Slide 3. When looking at OR Royalties full year 2025, the company had a remarkable year. OR Royalties earned 21,735 GEOs in the fourth quarter of 2025, which allowed us to end the year at 80,775 GEOs in aggregate. A figure that fell within our annual guidance range of 80,000 to 88,000 gold equivalent ounces and was effectively around the midpoint of our GEO guidance range when normalizing for commodity prices versus our budgeted ratios for 2025. Propelled largely by elevated precious metals prices in 2025, OR Royalties achieved the enviable triple crown of record annual revenues of $277.4 million, record operating cash flow of $246 million and record earnings of $1.10 per share facilitated by our peer-leading cash margins of nearly 97%. OR Royalties ended the 2025 year with $142.1 million in cash and most importantly, the company was completely debt free. Having previously paid off the entirety of our credit facility in the third quarter. With respect to our ongoing commitment to return capital to shareholders, OR Royalties declared and paid is a quarterly dividend of $0.05, marking its 45th consecutive dividend with over $279 million returned to shareholders to date from these distributions. The consistency and predictability of our dividend allowed the company to once again be included in the S&P/TSX Dividend Aristocrats Index as of late January 2026. Subsequent to quarter end, OR Royalties Board of Directors approved a base quarterly dividend of $0.055 per common share payable on April 15, 2026 to the shareholders of record as of close of business on March 31, 2026. Consistent with the past 2 years that I've been in the CEO seat, Fred and I will be making a recommendation to our Board on our dividend with the company's first quarter 2026 financial results, which if you were paying attention, we increased our dividend by 8% and 20%, respectively, in the last two first quarters of 2024 and 2025, respectively. For us, 2025 prove that boring is good. We generated record cash drastically -- we generated record cash, we drastically improved the balance sheet and stayed disciplined. It was these tenants that allowed us to announce in the past 3 weeks, two exciting and accretive transactions, which will provide further details later on in my presentation. 2025 will be remembered as a year of discipline in our capital allocation. OR Royalties transacted on only just $25 million in royalty and stream acquisitions. To put that number into context, over $9.3 billion in transactions were completed across the sector last year, which would include the large corporate consolidations of Sandstorm and Horizon. While we reviewed these opportunities, the rapid movement in commodity prices often created a disconnect on price and value. Furthermore, even where we identified value, we encountered internal red lines regarding structural security and contract terms that were simply -- we were simply unwilling to cross. Our team remained extremely active in 2025, but we prioritize value over volume. When deploying capital and assets with 15- to 25-year mine lives, we simply do not compromise on structural security or settle for NAV destructive investments. Because our near-term growth is already secured and fully funded, we possess a strategic advantage many peers lack, the luxury of walking away from bad deals to wait for the right ones. We'll now pivot to the company's financial performance for the full year of 2025. For those that are interested, quarterly numbers for Q4 '25 can be found in the appendix of today's presentation. As previously noted, annual revenues were a record for the company and effectively track the higher year-over-year precious metals prices. 2025 net earnings of $1.10 per basic common share for the year were a record and represented a substantial increase over 2024. Most importantly, 2025 saw yet another year-over-year improvement in cash flow per share, the eighth consecutive year of cash flow per share increases and yet another record for the company. And finally, positive annual adjusted earnings of $0.88 per basic common share. At the end of 2025, the company had 22 producing assets with the vast majority of our key contributing royalties and streams coming from what we define as Tier 1 mining jurisdictions and just under 75% in aggregate, and that includes gold equivalent ounces from Canada, the U.S. and Australia. If we were to include Chile as Tier 1, we'd be closer to 90%. Looking at the commodity breakdown, 95% of our 2025 GEOs came from precious metals, gold at 65% and silver at roughly 31% with the remainder coming primarily from copper. This percentage breakdown was based on OR's budgeted commodity price ratios for 2025. When applying peak spot prices for gold, silver and copper achieved earlier in 2026 to our 2025, GEOs earned. Our direct revenue exposure from silver would have been 45%. No matter which price deck you're using today, OR Royalties provides investors with material silver exposure. Agnico Eagle's Canadian Malartic Complex delivered a fantastic year for both themselves and ourselves in 2025, once again outperforming our original expectations thanks to better-than-expected grades at the Barnat pit experienced throughout the last calendar year. At Mantos Blancos, we've seen an extended period of stability as it relates to plant throughput. While we've continued to see some quarterly variability of the process silver grades at the mine, we expect that 2026 should prove largely consistent year-over-year versus vis-a-vis 2025. Touching briefly on CSA. After a strong start to the year in 2025, things slowed down in the back half, which can be largely attributed to Harmony's ongoing ownership transition. Harmony's focus right now continues also on maximizing the asset value over the long term as it has a multi-decade view of the asset. Consequently, we expect our new partners to take their time on setting the mine up to form well over this extended period, instead of pushing too hard for increased production in the short term. We'll all have better understanding soon enough as based on public disclosure, we're expecting an updated 2026 CSA copper and silver production guidance for Harmony next month with an updated long-term mine plan to follow in the third quarter of this year. I mentioned previously that at the end of 2025, we had 22 producing assets. However, as of today, that number stands at 23, thanks to the very recent acquisition of a 1.5% NSR royalty at Buenaventura San Gabriel mine. Of note is that our transaction with Gold Fields will actually close later this quarter. but we've still included San Gabriel on the list for today. Buenaventura's newest mine in Peru just poured its first gold in December of 2025. And as such, we're largely expecting San Gabriel to ramp -- to be in a ramp-up phase for this year and the next based on plans outlined by Buenaventura. At the same time, San Gabriel is expected to grow into being a meaningful GEO contributor to/or from 2028 onwards. We'd like to congratulate our new operating partner in Peru on getting the mine developed and into production on time and on budget. In addition, Ramelius Resources announced last night that first Dalgaranga ores were delivered to their Mt Magnet plant. Once those tonnes start getting processed, the number of our producing assets will jump to 24. Similar to San Gabriel, Dalgaranga will be ramping up this year and the next and growing into a material GEO contributor to OR from 2028 onwards. This provides a perfect segue to our other announcement yesterday, the acquisition of the Gold Fields royalty portfolio. While we're excited about the strategic depth of the entire portfolio we purchased, the crown jewel is undoubtedly the addition of Buenaventura's newly commissioned San Gabriel mine. This asset checks every box. It provides immediate additive GEOs in 2026 and possesses a long reserve life with significant embedded growth, driven by Buenaventura's plan to expand throughput to 4,000 tonnes per day by the end of the decade. We're happy to be adding a producing asset in a well-established mining jurisdiction in Peru, and we couldn't ask for a better local operating partner in Buenaventura. A Peruvian-based miner with over 70 years of experience developing, operating and expanding mines in the country. For more on San Gabriel or any of the other new royalty assets acquired from Gold Fields, I would refer you to last night's press release or you can also reach out to my colleague, Grant Moenting, over the phone or e-mail. Flipping to Slide 9. We view the Namdini transaction as a textbook execution of our strategy to double down on a known high-quality asset. By acquiring the additional 1% NSR, we have secured a 2% royalty in total, on a mine that is already producing and ramping up. This transaction removes development risk and adds immediately high-margin gold ounces to our 2026 profile from an established operator in Shandong Gold. While the ramp-up hasn't followed the 2019 technical report to the letter, seeing is believing. Our team was boots on the ground in January, and that visit was a positive tipping point. We didn't just see a mine coming online. We saw operational excellence and community integration that convinced us Namdini will be a cornerstone asset for Shandong for decades, far outliving its initial 15-year reserve life. Once we saw the tangible upside doubling down to 2% royalty wasn't just a choice, it was the easiest decision we made all year. Flipping to Slide 10. And moving back to Canada and a very familiar asset within our portfolio, the Island Gold District. After a bit of an uncharacteristically bumpy year at Island Gold in 2025, our partner, Alamos Gold, rebounded nicely earlier this month by outlining his concrete plans for yet another Island Gold District expansion. And most notably, a 25% increase to the tonnage to be mined from the high-grade Island Gold underground mine. Alamos now expects to eventually be able to ramp up to 3,000 tonnes per day of OR mine from Island underground versus the previous expectation of 2,400 tonnes per day. This is great news. And the great news is that the shaft infrastructure currently under construction is already being built to handle this capacity. So no additional work on this front is required. As noted by our partner, the shaft construction will be complete later this year, meaning that as the underground development ramps up over the time to support 3,000 tonnes per day, the GEOs from our royalties will follow. As a reminder, the real benefits to OR from Island Gold come from what is effectively a triple multiplier effect, higher grades, higher throughput and a higher royalty rate. As noted on the slide, Alamos' expanded and accelerated mine plan is also anticipated to transition on a greater proportion of production toward OR's 2% and 3% NSR royalty. With the blended life of mine royalty at around 2.34%. Long story short, as our partner continues to execute on its plans to expand production at its flagship mine, Island Gold, Island Gold, while at the same time, become one of OR Royalties most important assets from a GEO contribution perspective by the end of this decade and beyond. Late last week, Agnico Eagle provided a comprehensive update as it relates to our cornerstone asset, the Canadian Malartic Complex. As is customary at this time of year, there were certainly some key items of note as it pertains to OR Royalties. First, the asset's 2026 production guidance increased a little bit versus what we had been projected this time last year, but also was in line with our own internal expectations. As a side note, the first quarter of 2026 will now include first production from East Gouldie, over which we have a 5% NSR royalty coverage via the ramp. And this has been advanced forward several times over the past couple of years. More exciting, however, were material increases to Malartic's production guidance for both 2027 and 2028. With 2028 notably expected to realize an increase of approximately 80,000 ounces to 735,000 ounces per annum when compared to 2027, which is anticipated to be driven by growing contributions from East Gouldie at Odyssey. Overall, when we look -- when looking at 2026 to 2028, production is expected to be sourced from the Barnat pit, increasingly supplemented by OR from Odyssey and low-grade stockpiles. Odyssey is expected to contribute approximately 120,000 ounces of gold in 2026, approximately 240,000 ounces of gold in 2027 and approximately 450,000 ounces of gold in 2028 as mining activities ramp up. Second, our operating partner explicitly stated that it is advancing on a technical evaluation of Shaft #2 at the Odyssey mine. With the preferred shaft location now confirmed near Shaft #1 and close to what they believe to be the center of gravity of the deposit. The evaluation, which incorporates the year-end 2025 mineral resource update will assess the potential for producing an incremental 8,000 to 10,000 tonnes per day. The technical evaluation is expected to be completed at the end of 2026, with permitting studies scheduled to begin in the third quarter of 2026 and potential formal permit submission early 2027. Agnico noting that after getting through all the permitting and development of Shaft #2, the project would be positioned for initial production in 2033. 2033 also marks the first year of expected production from Marban, over which OR Royalties has a blended NSR royalty of around 90 basis points. The technical evaluation envisions a 14,000 to 16,000 tonne per day open pit operation, producing between 120,000 to 150,000 ounces of gold annually over a 12-year life of mine with construction we currently anticipated to start in 2031. Exploration at Canadian Malartic remains a massive value driver for OR royalties. Agnico has budgeted $32.6 million for a comprehensive 190,700-meter campaign in 2026, deploying up to 20 rigs to unlock the full potential of the property. Crucially, the drill bit is focused exactly where we want it, exploring the lateral extensions of the massive East Gouldie Deposit and the emerging Eclipse zone. Both of these high priority targets fall under our 5% NSR royalty, offering the highest leverage to exploration success in our entire portfolio. Now on to Slide 12. Where we've outlined both the company's brand-new 2026 GEO delivery guidance, as well as the updated 5-year growth outlook to 2030. Starting with 2026. OR Royalties expects GEOs earned to range between 80,000 and 90,000 GEOs this year at an average cash margin of approximately 97%. The 2026 guidance assumes ramp-ups at both Dalgaranga and San Gabriel, as well as the increased geos from our now 2% NSR royalty at Namdini. As previously noted on the call, we're expecting relatively consistent year-over-year GEOs earned from Capstone Copper's Mantos Blancos mine, while we've taken a more conservative view on CSA as Harmony works through its ownership transition and prior to us getting more complete updates expected from Harmony. Putting it all together, 2026 represents marginal growth over 2025. With a much more significant step changes expected in 2027, thanks to expectations of increasing GEOs to be earned from many of the assets already discussed today, but I'll point a few out, Canadian Malartic, Island Gold, Dalgaranga, San Gabriel and Namdini. In addition to new mines expected to come online, such as Hermosa Taylor. This trend of increasing year-over-year growth should then continue between 2027 and 2030. Our new 2026 guidance reflects the consensus commodity price ratios at the beginning of February for both gold to silver and gold to copper. The former obviously has more influence on our potential GEOs earned for this has been set to 73:1, while the current spot ratio stands at approximately 64:1. We are applying the exact same methodology as we have in all our previous years of the company's existence, and we'll continue to be transparent with respect to how these ratios influence our GEOs earned throughout the coming year. Switching to the updated 5-year outlook to 2030, we're now happy to say that our expected 50% growth over the next 5 years, best what we had outlined last year looking to 2029. Unsurprisingly, expected additional GEOs from brownfield expansions such as Island Gold, as well as large-scale greenfield underground mines, including Hermosa Taylor and Windfall are still being included in the outlook as they had been for the 2029 outlook. So this begs the question, what's new? What a difference a year makes, especially when that year resulted in an incredible performance from precious metals prices coinciding with the intentions of more streamlined project permitting processes, most notably in jurisdictions like Canada and the United States. As a result of the Osisko Development recent success in advancing its flagship Cariboo project in BC, both on the permitting and financing front and is now being included in our 2030 outlook. The same can be said for Solidus Resources Spring Valley project in Nevada, which received its final federal permits in the summer of 2025 and subsequently secured its full financing to move forward. We're expecting first gold from Spring Valley by mid-2028. And while a portion of the payments under OR royalties there don't kick in until the first 500,000 ounces of gold have been recovered, we're confident enough we will see meaningful GEOs from the project in 2030. We're also cautiously optimistic on United Gold's Amulsar project in Armenia, where construction is expected to be complete later this year, enough so to have included in our 2030 outlook. And finally, though much less impactful than the other three have mentioned. We've included South Railroad given Orla expects to see first gold and silver production prior to the end of calendar year 2027. I will once again reiterate as I often do that all this growth you see here out to 2030 is completely bought and paid for. In other words, there is absolutely zero contingent capital associated with OR Royalties realizing its GEO-delivery profile over the next 5 years. Moving to Slide 13. We you'll see we provided some more details on projects that made the cut for our 5-year 2030 outlook versus those that didn't. Some minor comments on those that you see on the slide in the not included section. First, we have full faith and confidence in Agnico Eagle and its plans at Upper Beaver. Agnico noted last week that they are now expected to be ramping up the eventual mine in 2030. Given typical delays in payments versus production, we've elected to push it back by a year. Second, as it relates to Eagle, the process in terms of finding a new owner has slowed down a bit versus the previous public expectations. While we're still expecting the announcement of a new owner sometime in this calendar year, we have elected to wait for more clarity before including this important asset in our outlook. Finally, on Cascabel, we are very pleased with the recent announcement regarding Jiangxi Copper's intention to acquire SolGold in the project. However, we expect Jiangxi to take a different view on project schedules, specifically how it relates to sequencing the high-grade block cave project versus the lower grade TAM open pit. Finally, we'll end the formal part of our presentation on Slide 14, which outlines the current state of OR Royalties balance sheet. At year-end, we were completely debt-free and held just over $140 million on the balance sheet. The cash position is strong even after we bought back and canceled approximately $38 million worth of shares in the fourth quarter of 2025, all completed subsequent to OR Royalties going debt free. The average cost per share of these buybacks was $48 -- approximately $48, inclusive of the 2% Canadian government tax. Our much improved balance sheet is one of the key achievements we are proud of in 2025. And it's something I've been keen on addressing since I joined the company back 2.5 years ago, at which time for context, we held over CAD 300 million in gross debt. Beyond the cash, our balance sheet is also primed and ready to position to allow us to act on potential new and accretive opportunities. Thanks to a completely untapped credit facility of $650 million with an additional uncommitted $200 million accordion. Following a quiet 2025, defined by capital preservation, we have pivoted to active deployment in the first quarter of 2026. With the consolidation of the Namdini royalty and the addition of the Gold Fields portfolio anchored by the producing San Gabriel mine, we have secured immediate cash flow and strengthened our long-term pipeline. Looking ahead, we remain active in the market, targeting assets that contribute to our industry-leading 50% growth trajectory through to 2030. However, our priority remains on accretive value creation. We will not chase growth for growth's sake or compromise our return criteria. And with that, I'd like to thank everyone for listening today. We'll now open up the line for questions, as well as questions posted on the webcast. If we don't get to all the questions on the line, we'll make sure we respond offline to those that we don't get to cover on this webcast. Operator? Operator: [Operator Instructions] Your first question comes from Tanya Jakusconek from Scotiabank. Tanya Jakusconek: Can you hear me? Jason Attew: We can hear you, Tanya. Tanya Jakusconek: Okay. I have a few questions, if I could. I wanted to start just first one is easy, just on guidance. Just wondering how I should think about your year. I understand that this ratio forecast, but if we were to assume constant gold and silver pricing, how should we be thinking about the quarter-over-quarter performance? Again, just high level, not asset by asset. Jason Attew: Thank you for your question, Tanya. And look, we obviously -- our methodology that we're applying for 2026 is consistent with our methodology we've always used for which we use the consensus pricing for the year that -- for 2026, and that consensus price deck is 7:1. Certainly, as we've seen some volatility with respect to silver, in particular, and as I mentioned in my remarks, the silver price is currently about 64:1. So if you were to use the 64:1, the roughly 30% silver revenues would move to close to 45%. We don't look at quarter-over-quarter guidance in terms of the ratios of gold to silver. Again, we will update yourself and the analysts and the investment community as our quarters are reported, but that's our methodology. We certainly do have very good leverage to silver. And if silver does continue around kind of the 64:1 ratio, as I said, there's a significant uptick in our GEOs that would be earned for which, again, just to give you some specific guidance around 2026 would add an incremental, let's just say, 4,000 to 5,000 GEOs over the course of the year, if again, it stayed at 64:1. Tanya Jakusconek: Okay. Maybe another way of asking the same question is do you have any mine ramp-up in the first or second half? Or any new things that are coming on that I should kind of think about just in my production profile? Jason Attew: Not really, apart from what we've disclosed. I mean, obviously, the biggest contributors from a silver perspective are Mantos Blancos CSA followed by Gibraltar. And as I said in my remarks, Mantos, it doesn't correlate in a meaningful way to the copper grades. And obviously, what we've seen at Mantos Blancos is a very stable throughput, but we're still seeing some variability as it relates to the silver grade and the silver reconciliation. And this is why, as we thought when we put our 2026 guidance, we'd essentially look at historically where they were trending and essentially give that reference or instruction for 2026. There certainly could be some upside if, again, the silver variability is less extreme than what we saw in 2025, but that's what we're essentially suggesting for Marketplace. And Mantos Blancos would be, again, the biggest variation with respect to our silver deliveries in 2026. Tanya Jakusconek: Okay. Maybe I'll move on to just the M&A or the transaction environment. You did your buying the royalty portfolio from Gold Fields. Just wondering because the [ Bristow ] the [ Namdini ] one, which you did, which you doubled down on, just wondering if there's other opportunities to double down on other assets that you already know and own? Jason Attew: Yes, great question. Really good question, Tanya. So I would say the opportunity set at what we're looking at is pretty significant. Our corporate development team and our technical team is flat out looking at opportunities similar to what we had in 2025. I would say it crosses the gamut of assets that we already know and understand to brand-new assets to portfolios in senior companies much the same as what we saw in 2025. So to answer your question, yes, there are some opportunities of assets that we're quite familiar with that we might actually have exposure to, as well as new opportunities. But as I've always said and our team has always gone through, one of the major filters that we do have is with respect to geography. We're very, very proud of the fact that -- and we think we differentiate ourselves versus our peers of having a majority of our assets in Canada, the U.S. and Australia. So that certainly is one of our filters that was what we think about acquiring new assets in 2026. Tanya Jakusconek: And what would be your sweet spot where these transactions land? Is that $100 to $500 or $200 million to $500 million range? Just trying to understand. Jason Attew: Yes. I think it really depends on a case-by-case perspective, whether, again, our focus is on either cash flowing royalties or something that will actually impact our 5-year outlook. Look, we've obviously got -- and Fred has done a fantastic job of having lots of capacity with respect to our revolving credit facility. We are seeing opportunities, as you said, $100 million to $200 million, but we're also seeing opportunities from $750 million all the way up to $1 billion. So we're in the midst, and there's a lot of these transactions that are in flight. But what I would say, if it's going to be a big chunky transaction like the $750 million to -- we absolutely understand the return metrics. We have to have these as accretive transactions. And as I said, for these larger transactions, they have to really be contributing GEOs either now or within our 5-year outlook. Operator: [Operator Instructions] Your next question comes from Derick Ma from TD. Derick Ma: I wanted to ask a question on the 2030 number. Guidance came in below expectations and at least certainly below my estimates. You mentioned Cascabel, Eagle and Upper Beaver. What is the quantum of geos that you would expect from those assets in 2031 and beyond, let's say? And does the 2030 number include minimum payments from Cascabel? Jason Attew: So just will answer the first -- last question first. The 2030 would include the minimum payments from Cascabel. I would direct you to our presentation that we just went through in terms of the aggregate upside slide -- Slide 13 in our presentation deck. If you aggregate all this optionality or all these potential GEOs that could fall within our 2030 guidance, we're looking at another 20,000 to 30,000 gold equivalent ounces in aggregate. Operator: Your next question comes from Brian MacArthur from Raymond James. Brian MacArthur: Or same sort of question. 2030, did you just assume basically flat at Mantos? Or what did you do with Mantos out in 2030, just given the reconciliation that we've been seeing or not seeing. Jason Attew: Yes. So with respect to Mantos, Brian, you're absolutely on point. It's effectively flat to what we have seen in 2025 and what we're expecting for 2026. Operator: And there are no further questions over the phone at this time. I will turn the call back over to Jason. Jason Attew: Great. Thank you very much, Julie. We thank you for your time today. Hopefully, we'll see some of you in person in the coming weeks as we run the gauntlet in the upcoming conference circuit. And if not, and you have questions, observations, insights about our business, we'd be very happy to discuss them. Please reach out to Grant, Heather or myself, and we very much look forward to engaging with you. Thank you again for your time today. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Operator: Good morning, and welcome to the Travelzoo's Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. [Operator Instructions] The company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts, constituted forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are described in the company's Forms 10-K and 10-Q and other SEC filings. Unless required by law, the company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the company's website for important information, including the company's earnings press release issued earlier today. An archived recording of this conference call will be made available on the company's Investor Relations website at travelzoo.com/ir. Now it is my pleasure to turn the floor over to Travelzoo's Global CEO, Holger Bartel; its Chair, Chief Membership Officer and General Counsel and CEO of Jack's Flight Club, Christina Ciocca; and its Financial Controller, North America, Jeff Hoffman. Jeff will start with an overview. Jeff Hoffman: Thank you, operator, and welcome to those of you joining us. Today, I'm stepping in for Lijun, our Chief Accounting Officer. Please refer to the management presentation to follow along with our prepared remarks. The presentation in PDF format is available on our Investor Relations site at travelzoo.com/ir. Let's begin with Slide 4. Travelzoo's consolidated Q4 revenue was $22.5 million, up 9% from the prior year. In constant currencies, revenue was $22.1 million, up 7% from the prior year. Operating income, which we as management call operating profit, decreased as expected as we invested more in the growth of Club Members. Q4 operating profit was $0.6 million or 3% of revenue, down from $4.9 million in the prior year. Let me explain the rationale for a significant increase in marketing expenses, which lowered EPS. Slide 5 shows that investments in the acquisition of Club Members are attractive as they have a quick payback. On the left side, you will see that average acquisition cost for a full paying Club Member was $28 in Q1, $38 in Q2, $40 in Q3 and $34 in Q4. On the right side, you see that we get this money back fast. The member pays, in the U.S. in this case here, their $40 annual membership fee right away at the beginning of the membership period. Additionally, we generated $10 in revenue from transactions in the same quarter. This full payback doesn't even consider an increase in advertising revenue and future membership fees and other revenues. Now Slide 6 shows as a reminder that with subscription businesses, membership fee revenue is recognized ratably over the subscription period, whereas acquisition costs are expensed immediately when incurred. Slide 7 shows the effect. While we have a quick payback, the reported EPS is different. Higher member acquisition expenses, coupled with only a small portion of revenue recognized in the quarter reduces EPS. In the case of Q4, that effect was a reduction of approximately $0.08. As shown on Slide 8, our strategy is fueling membership growth at a rate of 180% year-to-date. New Club Members come roughly half from legacy members and half from those new to Travelzoo. On Slide 9, we break down the main categories of revenues, advertising and commerce and membership fees. Advertising and commerce revenue was $18.3 million for Q4 2025. Revenue from membership fees increased to $4.1 million. Membership fees, which are more stable and predictable, are adding revenue and are becoming a larger share. This year, we expect them to account for about -- for around 25% of revenue. On Slide 10, you can see that revenue growth came from all reporting segments. Investment in member acquisition in Europe led to a loss. G&A expenses increased primarily due to a onetime expense related to a global company meeting. Operating profit on our North America and Europe segments was lower. Operating profit on our Jack's Flight Club segment remained flat. On Slide 11, you can see that our GAAP operating margin was 2% in Q4 2025. Acquiring more Club Members has the effect of lower GAAP operating margin. Still, given the favorable ROI, our goal is to further grow the number of Club Members to accelerate Travelzoo's growth. Slide 12 shows that the investments in Club Members occur in all key markets. Over time, we expect margins to return to previous levels or even exceed them. On Slide 13, we provide information on non-GAAP operating profit as we believe it better explains how we evaluate financial performance. Q4 2025 non-GAAP operating profit was $0.9 million or 4% of revenue compared to non-GAAP operating profit of $5.4 million in the prior year period. Slide 14 provides information about the items that are excluded in the calculation of non-GAAP operating profit. Please turn to Slide 15. As of December 31, 2025, consolidated cash, cash equivalents and restricted cash was $10.8 million. Cash flow from operations was $1.5 million. Our cash balance increased accordingly. Now looking ahead, for Q1 2026, we expect year-over-year growth to continue. We expect continued revenue growth in subsequent quarters as membership fees revenue is recognized ratably over the subscription period of 12 months. As we acquire new members, as more legacy members become Club Members. Over time, we expect profitability to increase as recurring membership fees revenue will be recognized. In the short term, fluctuations in reported net income are possible. We might see attractive opportunities to increase marketing, and we expense marketing costs immediately. Now I turn the discussion over to Holger. Holger Bartel: Thank you, Jeff. We will continue to leverage Travelzoo's global reach, our trusted brand and the strong relationships with top travel suppliers to negotiate more Club Offers for Club Members. Travelzoo members are affluent, active and open to new experiences. We inspire travel enthusiasts to travel to places they never imagined they could. Travelzoo is the must-have membership for those who love to travel as much as we do. Please turn to Slide 17. Membership empowers travelers to live the life of a modern travel enthusiast to the fullest while respecting different cultures. Membership provides access to high-quality and highly-valuable Club Offers. Our global team negotiates and vets them rigorously. These offers cannot be found anywhere else. Membership also provides complimentary access to airport lounges worldwide in case of flight delays. And we just launched in partnership with Allianz, the first Travel Enthusiast Hotline, providing 24/7 complimentary assistance wherever Club Members travel. Culinary Journeys created for the travel enthusiasts are coming soon. Slide 18 shows a few of the many exclusive Club Offers that we created for Club Members during Q4. Our members love luxurious trips. So on the left side, we had a Bali 5-star Jungle Spa Retreat for 2 people at an amazing price of $499. Below, Costa Rica 5-star new resort with an upgrade for Travelzoo members to an Ocean View room. A $499 Portugal trip that includes round-trip flights from the U.S. or in London, a Top West End Show with dinner for GBP 75 per person. Slide 19 shows the worldwide complimentary launch access in case of flight delays. It's perfect for the travel enthusiasts. Slide 20 then provides information about Travelzoo members. As you see Travelzoo is loved by travel enthusiasts who are affluent, active and open to new experiences. On Slide 22, we provide an overview of our management focus. We are working to grow the number of paying members and accelerate revenue growth by converting legacy members and adding new Club Members, retain and grow our profitable advertising business from the popular top 20 product, accelerate revenue growth, which drives future profits in spite of temporary lower EPS, grow Jack's Flight Club's profitable subscription revenue and developed Travelzoo META with discipline. Now Christina will provide an update on Travelzoo META and Jack's Flight Club. Christina Ciocca: We are excited to announce that we now expect the first Travelzoo META experiences to become available in Q2 2026. We are planning to incorporate access to Travelzoo META as a benefit of Travelzoo Club Membership. Through Jack's Flight Club, we focused in Q4 on profitability, while acquiring sufficient premium subscribers to offset attrition. This was due to other investment priorities. I'm now handing over to the operator for questions for Jeff, Holger and me. Operator: [Operator Instructions] We will take our first question from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Just a couple of questions on the revenues, particularly on the advertising and commerce, it decreased sequentially, and I was wondering if you can add some color on the reasons that, that was down. And then on membership fees, that increased only $0.5 million from the previous quarter, and that was a slowing of the cadence as well, which was 20% from the previous quarter. So just on the revenue trend. So if you could just add some color both on the membership fees as well as the advertising and commerce as well. Holger Bartel: Yes, you are right. Revenue from advertising and commerce was a bit soft in Q4. So far, we see that softness to continue a bit more into Q1 as well. Really no specific reason that we can point out. We've been focused very much on membership and adding new members. And it's as I said, no -- really no specific reason I can point out why it was a little bit soft. And then membership fees, I think it's probably mostly a rounding issue the change from Q3 to -- Q2 to Q3, Q3 to Q4 was really not that substantial. We expect that to increase, that quarterly revenue increase. We expect that to increase in 2026 as we are looking to spend more on member acquisition this year than in 2025 as long as we can maintain and achieve the positive return and quick payback that Jeff was talking about. Michael Kupinski: And if I can slip one in. G&A was a little higher than expected. Anything extraordinary in those numbers? Holger Bartel: I think Jeff mentioned it, we had a one-time expense related to a global company meeting that we held in Q4. So it's not a permanent increase. It's just a temporary increase in Q4. Operator: Your next question comes from the line of Patrick Sholl with Barrington Research. Patrick Sholl: Kind of just your comments around profitability and marketing expense. So I think marketing expenses were up like 30% just full year. Do you kind of see that as like the peak level or like that you'd be able to leverage additional growth off of? Or do you kind of see that continuing to move higher? And I guess, can you maybe sort of like reconcile the comments on the payback with like the lower operating cash flow for basically each quarter in 2025 year-over-year? Holger Bartel: As I mentioned, as long as we can maintain a good return and the quick payback that Jeff was talking about, we would increase member acquisition in 2026. So we are planning to increase it over 2025. And as we've now explained for a few quarters, that in the short term always impacts EPS. However, as we move throughout 2026, and we have now recurring revenue coming in for members that are renewing after the first year of membership. And for these members, we don't have to spend anything on member acquisition. They are simply renewing their membership. So that revenue will increase without expenses related to that. So that will, over time, improve EPS. But as we said, cautiously in the last few earnings statements, we do not know in advance what the opportunities for member acquisition are. If we really see good opportunities, we might spend very aggressively, and that will certainly impact EPS in the short term as it has in Q3 and Q4. Patrick Sholl: Okay. And then just could you maybe talk a little bit about churn within that initial member cohort and how you're expecting that to go with the members that you added through 2025. I guess like the thing that kind of kicks that one off is just like the decline in the deferred revenue balance in the quarter. Holger Bartel: It's too early to judge that because as you saw from that slide that showed the growth of Club Members, most Club Members joined in the first quarter of 2025. Their renewal is coming up now. So it's a bit too early to comment on that. As you also see, we are adding new benefits for our club members, and we hear that they are very much appreciated by the members, and that will lock these members in over a longer period of time even if they don't necessarily find a specific offer that they would like to buy in a certain quarter at a certain time. Operator: Your next question comes from the line of Steve Silver with Argus Research. Steven Silver: Holger, the slides early on mentioned the potential for additional advertising revenue from membership fees and -- or the membership revenues affecting potential advertising revenues from advertising, just curious as to where you think the member base -- the paid member base needs to be in order to reach a critical mass in terms of having an impact on that incremental advertising revenue. Holger Bartel: Well, as we are adding new members, we are also -- this also allows us to increase or maintain our advertising rates. So that's -- I don't think there's a specific point where we can say it makes a huge -- it makes a big difference. So as we are growing, it allows us to also maintain and then improve our advertising business. But as I said, we are really looking to drive members' membership and the growth of members in 2026 more aggressively because that revenue, which currently is around $4 million, as you saw, that revenue is recurring, very stable revenue while advertising and commerce revenues are always a bit contingent on the situation of how many offers we can source, what these offers are, if they are good or very good and the appetite of our advertisers. So that's less controllable while membership revenue is recurring, stable, and that's why we decided 2 years ago to move to a model of a subscription, a paid subscription and created Travelzoo Club. Steven Silver: That's helpful. Great. And one more, if I may. Can you just discuss a little bit about the underlying trends that led to the lower cost of new customer acquisition in Q4. I know you've mentioned seeing -- or taking advantage of opportunities as they arise, maybe being a little more aggressive in some periods versus others. But can you just talk a little bit about the underlying trends between Q3 and Q4 that led to the lower cost per acquired member? Holger Bartel: Christina is overseeing this. So she will respond to this question, Steve. Christina Ciocca: Sure. So I think it's a combination of factors. So hard to pinpoint exactly what drove the lower cost per acquisition. But in general, actually Q4, we tend to see more difficult cost per acquisitions with certain channels like META and Google, but we were able to manage that with kind of optimization that we made through the user experience. We had member days in Q4 that helped to drive the lower CPAs and we were kind of cautious with spending as efficiently as possible. So I think that resulted in a lower CPA in Q4 as compared to Q3. Holger Bartel: It's contingent, though, Steve, on how much we invest in member acquisition. If we scale it as we are planning to do now in 2026, that normally makes CPAs go up a little bit. But from that slide, you see that we were still under the threshold of where we could spend because $34 and then we get $40 back from the membership fee and we get additional revenue from these members, we could have spent more in Q4. And so our plan is going forward to get a little bit closer to that threshold. And so having said that, CPA on the one hand, as Christina explained, CPA, we have a positive impact on CPA through learning how to do things better. On the other hand, CPA will go up if we spend more. But as long as we are staying within that quick payback, we feel comfortable that we can maintain that. Someone mentioned earlier a question about cash, maybe it was Pat or Michael. As you see, our operating cash flow in Q4 was positive. In general, member acquisition as long as we can maintain the numbers that we showed on this earlier slide, we are able to finance that member acquisition through the cash we are generating because the member has to pay their 12-month membership fee at the beginning of the membership. So that brings in this $40 and if we can acquire them below $40, the impact on our cash situation is basically neutral. Operator: Your next question comes from the line of Ed Woo with Ascendant Capital. Edward Woo: My question is, what are you seeing out there in terms of the industry travel outlook for this year 2026? Holger Bartel: I think in travel, we see a little bit the same as what people are seeing in the U.S. economy that it's diverging on the one hand, luxury travel is absolutely booming. In fact, you might have also read that hotel rates at 5-star properties around the world have reached the highest ever and the increase from 2024 to 2025 was also quite strong. While on the other hand, lower-end travel, cheaper travel is more challenging. However, you saw from the demographic that our members are generally more on the upper end. They are higher income. They can spend. They have the money to stay at 5-star properties and maybe that's also what was the -- what was explaining a bit the softness in Q4 and now the softness in Q1 in advertising and commerce, it is challenging. It's a bit challenging right now to get really very aggressive offers from luxury properties. But I think that the supplier on these properties is increasing. There's many, many new hotels operating -- sorry, opening all around the globe and they need to fill their beds. We feel that, that will become better going forward. But that trend is similar to what I think we are seeing in the U.S. economy in general. Edward Woo: Great. And this is the same trend you're seeing in Europe and Asia? Holger Bartel: Yes. There's no big difference between the market. More pronounced in the U.S., I would say, just let me add that, yes, but the trend is the same, but it's a bit more pronounced in the U.S. Operator: Your next question comes from the line of Theodore O'Neill with Litchfield Hills Research. Please go ahead. Theodore O'Neill: Holger, the new annual fees for 2026 are $50 per member and it looks like. And so existing members, will they -- who are paying $40, do they now pay $50? Or does that apply -- the $50 applies to new members only? Holger Bartel: Good catch, Theo. Yes, I was talking about $40 because we were speaking about Q4. In the U.S., we increased the membership fee to $50, correct. We did not increase it in other markets. We increased it on January 1, but then we gave existing members an opportunity to renew at the old rate of $40 before the end of January. But anyone who didn't take advantage of the opportunity has to pay the $50 now going forward, whether that's someone new to Travelzoo or whether that is anyone who is renewing their membership that expires after February 1. Theodore O'Neill: Okay. And on the balance sheet, accounts receivable dropped. So it looks like your DSOs went up. Is that a happy coincidence? Or was there an active plan to try to bring receivables down? Holger Bartel: I'm happy -- I was happy to see that our team is doing a better job collecting receivables. Jeff, do you have any more insight on that part of the balance sheet? Jeff Hoffman: No, I would say that more aggressive outreach with our clients to ensure that we're getting paid on a timely basis is consistent with prior quarters. I think it was most likely a happy coincidence. Operator: This concludes the Q&A portion of today's call. I would like to turn the call back over to Mr. Holger Bartel for closing remarks. Holger Bartel: Yes. Dear investors, thank you so much for your time and support. We look forward to speaking with you again next quarter. Have a great day. Operator: This concludes today's Travelzoo's Fourth Quarter 2025 Earnings Call and webcast. You may disconnect your lines at this time, and have a wonderful day.
Operator: Welcome to the NiCE conference call discussing fourth quarter 2025 results, and thank you all for holding. [Operator Instructions] As a reminder, this conference is being recorded February 19, 2026. I would now like to turn this call over to Mr. Ryan Gilligan, VP, Investor Relations at NiCE. Please go ahead. Ryan Gilligan: Thank you, operator. With me on Today's call are Scott Russell, Chief Executive Officer; and Beth Gaspich, Chief Financial Officer. Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, please be advised that the company's actual results could differ materially from these forward-looking statements. Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors in Item 3 of the company's 2024 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 19, 2025. During today's call, we will present a more detailed discussion of fourth quarter and full year 2025 results and the company's guidance for first quarter and full year 2026. You can find our press release as well as PDFs of our financial results on NiCE's Investor Relations website. Following our comments, there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for share-based compensation, amortization of acquired intangible assets, acquisition-related expenses, amortization of discount on debt and loss from extinguishment of debt and the tax effect of the non-GAAP adjustments. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties and assumptions. I will now turn the call over to Scott. Scott Russell: Thank you, Ryan, and good morning, everyone. I am incredibly proud of what our team accomplished in 2025. We achieved our financial guidance each quarter and for the full year, delivered total revenue growth of 8%, cloud revenue growth of 13% and non-GAAP EPS of $12.30, all at the high end of our guidance range. Since I joined, we sharpened our focus on execution and speed. We leaned into the AI-first platform-led strategy and doubled down on international expansion and strategic partnerships. Our 2025 results reflect strong execution against that strategy. In 2025, we extended our CX AI market leadership with AI ARR increasing 66% to $328 million, representing 13% of cloud revenue. We set records for acquiring new AI logos, growing 300% year-over-year and closed a record number of seven-figure ACV deals for CXone with 100% including AI. We further strengthened our competitive position with the acquisition of Cognigy, the enterprise leader in agentic AI, making NiCE the only player in the CX market with a fully AI native CX platform. In our international markets, 2025 was a breakthrough year. We landed our largest international deal ever and ultimately grew international revenue by 16% with growth accelerating to 29% in the fourth quarter. We also expanded our strategic partner ecosystem through deals with ServiceNow, AWS, Snowflake, Salesforce, Deloitte Digital, PwC and RingCentral as well as several other international SI partners. Our partners continue to be an incredibly valuable and exciting part of our growing contribution, and we expect these partnerships to bring even more in the coming years. Coming out of Q4 with a strong booking momentum and retention, we are entering 2026 on track to reaccelerate cloud revenue growth, which Beth will, of course, cover in more detail shortly. None of this would be possible without a healthy core CCaaS business. We have the leading platform in a growing and healthy market. Seats and interactions on CXone continued to grow in 2025. And importantly, only about 40% of contact centers have migrated to CCaaS today, leaving a large and durable on-premise to cloud migration opportunity ahead. We are delivering real transformative value to our customers, and this is translating into strong performance in our core CCaaS business. In Q4, cloud revenue grew 14% year-over-year and excluding NiCE Cognigy, grew 12%. Q4 was a record quarter for new cloud ACV bookings, including and excluding Cognigy, driving cloud backlog growth to 25%, including Cognigy and 22% excluding it. Our win rates continue to improve against key CX competitors as customers increasingly favor holistic end-to-end CX platforms over fragmented point solutions. This is reflected in several key deals during the quarter, including a large enterprise win with a leading North American financial services firm. They selected NiCE in a competitive displacement of a legacy on-prem environment and will adopt NiCE's AI-powered CXone platform, including NiCE Cognigy to increase service automation, reduce low-value interactions and deliver more personalized client experiences. Additionally, we won a seven-figure ACV deal with a leading financial services group in EMEA, which selected NICE CXone to replace a legacy on-premise ACD and consolidate multiple platforms into a unified AI-ready CX foundation. With a strong core, we are positioned to capitalize on the significant CX AI opportunity in front of us. AI is expanding NiCE's CX market opportunity beyond the contact center, creating new use cases that are still early in adoption and driving faster expansion as customers scale AI across their organizations. NiCE Cognigy NICE strengthens that position. NiCE Cognigy is ranked #1 by industry analysts and was recently recognized as the only conversational AI platform to receive the customer choice distinction in the latest Gartner Peer Insights Voice of the Customer Report. That customer validation extends across our core platform as well with CXone also now recognized as the only CCaaS platform to receive the customer choice distinction. Combining the market leaders in CCaaS and agentic AI for CX into the only AI native CX platform that can operate seamlessly across voice, digital and AI at enterprise scale allows NiCE to be uniquely positioned to seize the significant CX AI opportunity ahead. Our platform owns the point of engagement and is built on the industry's largest CX data foundation. With decades of CX experience and a platform that supports 20 billion interactions annually, NiCE understands customer experience better than anyone, and this leadership is showing in the results. 2026 is the year that NiCE Cognigy begins to act as a force multiplier. We recently launched Cognigy Simulator, an AI performance lab that allows for faster, scalable and more reliable testing of AI agents. And soon, we will expand NiCE Copilot capabilities with Task Assist for agents powered by NiCE Cognigy. Later this year, we will complete the integration of NiCE Cognigy into a single fully native CXone platform, delivering a seamless AI native experience at enterprise scale. As we enter 2026, I am very excited about the significant pipeline growth from our NiCE installed base that we -- and we expect that pipeline to grow as we further integrate NiCE Cognigy into CXone. While we're incredibly excited about what the future holds for our seamlessly integrated capabilities, NiCE Cognigy is seeing strong momentum today. More broadly, we continue to see strong AI-driven enterprise software demand with customers prioritizing investments that deliver clear ROI and measurable outcomes. In Q4, seven-digit ACV wins included a leading North American consumer services company that expanded its relationship with NiCE by adding Cognigy for self-service to its existing CXone platform. This expansion will replace an AI solution from a CRM provider, providing -- delivering a compounding benefits of a unified platform with improved orchestration, deeper insights and more seamless experiences across channels. In another large enterprise win, a leading North American energy company and an existing CXone customer expanded its relationship with NiCE to accelerate AI-driven customer engagement. By adopting Cognigy for self-service and Copilot to support agents on more complex interactions, the customer aims to improve containment and call handle times while scaling efficiently during periods of elevated demand. The market is still in the early stages of AI adoption, yet it's already driving our growth. But as you heard me say in the Capital Markets Day, we need to make strategic, targeted and time-bound investments in 2026 to seize this opportunity. These investments will focus on innovation, including integrating NiCE Cognigy and advancing our agentic AI capabilities, while also expanding our go-to-market and delivery capabilities, so we're able to execute on the significant growth catalysts we see in 2026 and beyond. These catalysts, including driving AI-first growth across every customer touch point, automating end-to-end customer journeys with AI -- agentic AI on our platform, capitalizing on the CCaaS cloud migration, accelerating our international expansion and partner ecosystem and expanding beyond the contact center. Before handing it over to Beth, I want to emphasize two points. First, 2026 is all about speed, and we're moving quickly to seize the opportunity in front of us. And secondly, my conviction today is stronger than when I joined that AI is a clear tailwind for NiCE. Let me be really clear here. NiCE is an AI company. Enterprise CX AI requires deep domain expertise, unified data, orchestration and governance at scale, and that is what we do. We have the technology, the data, the domain expertise and the customer base to win, and we will seize this opportunity. With that, I'll now hand the call over to Beth. Beth Gaspich: Thank you, Scott. I'm pleased to close out 2025 by sharing our strong fourth quarter and full year results, which reflect continued disciplined execution across our business. Our fourth quarter performance has further strengthened our confidence in the recent financial targets we shared at our Capital Markets Day in November 2025. Later in my remarks, I will share our first quarter and full year guidance for 2026, which reflects the healthy momentum we experienced exiting 2025. 2025 was a transformative year for NiCE with Scott and our NiCErs across the globe laying the groundwork for accelerating top line growth in the years ahead. Before I dive further into the fourth quarter 2025 results, there are several financial accomplishments from last year that I would like to highlight. First, our full year 2025 results were impressive and came in at the high end of our previously communicated guidance ranges. Full year total revenue was $2.945 billion, representing 8% year-over-year growth. Full year cloud revenue grew 13% year-over-year and 12% excluding Cognigy. 2025 reflected consistent execution in our core cloud business with 12% cloud revenue growth delivered each quarter, excluding Cognigy. Operating margin tracked as expected, while free cash flow margin of 21% exceeded our guidance, reflecting disciplined execution while absorbing Cognigy starting in early September. Second, we completed the acquisition of Cognigy, which was financed entirely with cash on hand, supported by our strong balance sheet and robust organic operating cash flow. Third, we fully repaid $460 million of outstanding debt. Our balance sheet is now debt-free, providing us with significant financial flexibility to invest prudently in our business and return capital to shareholders. And fourth, we continue to return significant capital to our shareholders through our share repurchase program, underscoring our confidence in the durability of our cash flow generation and long-term value creation. In 2025, we repurchased $489 million of our shares, representing 32% growth year-over-year and 79% of free cash flow generation, ending the year with approximately 60.4 million shares outstanding. Shifting to fourth quarter financial results. Total revenue was $786 million, representing 9% year-over-year growth. Cloud revenue totaled $608 million, growing 14% year-over-year and represented 77% of total revenue, continuing the steady mix shift toward our cloud-first model. Excluding Cognigy, cloud revenue increased 12% year-over-year. Cloud growth in the quarter was driven primarily by continued momentum in our CX AI offerings with AI ARR of $328 million, up 66% year-over-year as customers increasingly adopt our AI-powered automation across both self-service and human-assisted workflows. Cloud growth also benefited from ongoing CCaaS migrations and a very strong international performance, including a modest incremental contribution for an earlier-than-expected go-live of a large international enterprise deployment originally planned for 2026 as well as a small foreign exchange tailwind of approximately 50 basis points in the quarter. As we've noticed previously, while AI is already a meaningful contributor to growth, we remain early in fully monetizing its long-term potential. That context is important as we continue to invest in this opportunity today while building operating leverage over time as our AI revenue compounds. Our cloud net revenue retention for the trailing 12 months was 109%, remaining healthy and stable with the prior quarter, reflecting continued customer retention and expansion activity. Turning to our business segments. Customer Engagement revenue was $658 million in Q4, representing 84% of total revenue and growing 10% year-over-year, driven by double-digit cloud revenue expansion across all geographic regions with strong performance internationally, reflecting increased enterprise adoption of CXone and growing demand for our AI-powered CX solutions. Financial Crime and Compliance revenue totaled $128 million, growing 2% year-over-year and represented 16% of total revenue. Actimize is the clear market leader and is benefiting from the positive momentum we are experiencing in shifting this segment to a higher recurring business with healthy cloud revenue growth. From a geographic perspective, the Americas region represented 82% of total revenue, growing 5% year-over-year, and this performance was supported by double-digit cloud revenue growth in the region alongside the continued evolution of our revenue mix from on-premise related revenue towards cloud-based solutions. EMEA revenue, which represented 13% of total revenue, grew 38% year-over-year or 32% on a constant currency basis, and APAC revenue representing 5% of total revenue grew 11% year-over-year, consistent on a constant currency basis. This strong growth is reflective of continued healthy demand in international markets, one of our key growth drivers. International revenue is now majority cloud, while cloud adoption internationally remains underpenetrated, supporting a significant growth runway in 2026 and beyond. Turning to profitability. Our total gross margin for the fourth quarter was 69.3%, consistent with our expectations. Our gross margin reflects our continued investments in scaling our global cloud infrastructure and supporting increased AI workloads, particularly as usage expands across regions and use cases. Operating income for the quarter was $301 million, resulting in an operating margin of 31%. Earnings per share for the quarter were $3.24, a 7% increase compared to last year. Cash flow from operations in Q4 was $180 million, underscoring the strength of our operating model and our ability to fund growth internally. Free cash flow was $156 million in Q4, and we ended the year with $417 million in cash and short-term investments. Our strong free cash flow and balance sheet are key strategic assets that provide us flexibility to invest in innovation, support strategic initiatives and continue returning capital to shareholders over time. We remain committed to disciplined and thoughtful capital allocation. To further enhance our financial flexibility, yesterday, we entered into a new $300 million revolving credit facility, which provides additional liquidity and optionality while maintaining our strong balance sheet. In addition, we are announcing that our Board has authorized a new $600 million share repurchase program, reinforcing our confidence in the durability of our cash flow generation and our disciplined approach to capital allocation. This brings our total remaining share repurchase authorization to approximately $1 billion. Before closing with guidance, I do want to spend a few minutes on how we are thinking about 2026, specifically around the cadence of investments and how that should translate into margins throughout the year. At our Capital Markets Day, we shared a midterm framework for growth, margins and cash generation. Today, we are confirming that framework with additional clarity on timing and cadence. 2026 will be a year of deliberate targeted investment to support our next phase of growth to capitalize on the immense CX AI opportunity. These investments are focused on three primary areas: cost of goods sold, R&D, and sales and marketing. As we've shared, near-term margin performance expectations reflect intentional investment choices. These investments are designed to optimize our AI market-leading position, drive durable growth, expand our competitive differentiation and position the business for long-term operating leverage. While we plan to increase organic investments during 2026, our margins remain industry-leading, outperforming our market peers even with the addition of the focused spend, and we expect to build on this strength with steady margin expansion in 2027. In tandem with investing for growth acceleration, we are investing in AI internally to enhance productivity and execution across the organization. Within our go-to-market operations, we are applying AI to accelerate customer quoting and surface key signals from customer interactions, enabling faster deal execution, improved forecast accuracy and reduced deal risk. Beyond go-to-market, we're using AI to improve internal operations, including applying AI to HR knowledge and deploying Cognigy within our internal help desk to resolve IT queries more quickly and with a more human-like experience. These are just a few examples where we're already leveraging AI internally to deliver long-term operational efficiencies. In 2026, we expect the pace of incremental margin investment to be highest in the first half of the year as we execute against our growth priorities, including integrating Cognigy and scaling its operations with operating margins improving in the second half. This positions us to exit 2026 near the upper end of our 25% to 26% operating margin range and sets the stage for margin expansion in 2027 and beyond, driven by the benefits of our 2026 investments, including stronger cloud revenue growth, continued scaling of our AI business and the increasingly accretive contribution from Cognigy. Cognigy remains on track to be accretive within 18 months of the acquisition close. Now I'll close with our total revenue and non-GAAP EPS guidance for the full year and first quarter of 2026. Full year 2026 total revenue is expected to be in a range of $3.170 billion to $3.190 billion, which represents an increase of 8% at the midpoint. We expect cloud revenue growth in 2026 to be in the range of 14.5% to 15% with Cognigy expected to contribute approximately 200 basis points. Turning to financial income. It's important to note that our cash and short-term investment balance was reduced by approximately $1.2 billion in 2025 as we financed the Cognigy acquisition and fully repaid our outstanding debt, which will naturally impact financial income in 2026. We expect our effective tax rate throughout 2026 to be in the range of 20.5% to 21% due to tax law changes in certain jurisdictions that became effective at the start of this year. Full year 2026 fully diluted earnings per share is expected to be in a range of $10.85 to $11.05. For the first quarter of '26, we expect total revenue to be in the range of $755 million to $765 million, representing an 8.5% year-over-year growth at the midpoint. We expect the first quarter 2026 fully diluted earnings per share to be in a range of $2.45 to $2.55. In summary, we exited 2025 from a position of strength. anchored by a stabilized and growing cloud business, a differentiated customer experience platform with embedded agentic AI and a strong balance sheet that supports investment and continued capital returns to our shareholders. Our large and expanding installed base reflected in healthy cloud net revenue retention, continued growth in cloud backlog from both customer expansion and new large enterprise wins and an increasing number of enterprise go-lives gives us confidence in the durability of our growth as we enter 2026. Our 2026 guidance reflects our excitement about the market opportunity ahead and our confidence in our ability to accelerate top line growth through our market leadership and unmatched assets. Together with Scott, we would like to thank all our dedicated teams across NiCE for their disciplined execution and focus throughout the past year, which drove our strong financial performance. We remain confident in our strategy, our execution and our ability to deliver durable shareholder value over the long term. With that, I'll turn the call back to the operator for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Rishi Jaluria with RBC. Rishi Jaluria: This is Rishi Jaluria. Nice to see solid execution to close out the year. Maybe two questions, if I may. First, look, looking at the market, it's pretty clear that the market is scared of AI disrupting and displacing your business. Clearly, that's spread to all of software and is something that we've all been dealing with really in a big way over the past couple of months. You made it clear over the past couple of years and at Analyst Day and now today that you're viewing AI as a real tailwind for NiCE and something that could pick up accelerating momentum in kind of the coming years. Can you maybe help us understand where is the disconnect? Where do you think that the market is wrong? And kind of where is your opportunity to kind of disprove those bear cases and kind of prove yourselves as an AI beneficiary? And then I've got a quick follow-up. Scott Russell: Sure. Thanks, Rish. So let me try to take that. So there is clearly a disconnect between the fears in the market and the reality of what we're seeing in the business. So let me try to break it down, if I can. First of all, there's a concern about competition from new AI point solution. And the reality is this, the CX AI market is expanding rapidly. And it's large enough actually to support multiple approaches. But our growth -- the growth of our business is not coming at the expense of those competitors. Actually, it's a beneficiary. If you look at NiCE's business, 13% of our cloud revenue is AI. We've already proven that we've embedded it into our core platform. We're able to deliver durable value to our customers. And why is that? Well, CX is complex, and we are domain experts in CX. You look at what is required from our customers, it requires orchestration, really rich and unified data governance. It requires deep domain expertise across the customer journey. And so whilst point solutions and some AI solutions can address use cases and narrow use cases, they don't actually fulfill the full customer journey. They're -- in fact, in some ways, they're actually complicating or creating more complexity. So a unified platform that is able to deliver across voice, digital and AI is what the market needs and expects. And that's where a combined platform that we offer, which is unique in that we've got the best-in-class in both cases helps us. And that -- and I guess, ultimately, we're showing that in the numbers. The growth rates, I indicated at Capital Markets Day, if you remember, Rish, that we expected our cloud growth in 2026 to be between 13% to 15%. We're already indicating at the high end of 14.5% to 15%. That's on the back of customer demand, real backlog that's growing at 25%, real pipeline that we're converting into ultimately revenue for NiCE, but ultimately, it's value for our customers. So I'm confident that our growth indicators reflect the tailwind that AI brings, and I'm sure the market ultimately will see NiCE in a favorable way. Rishi Jaluria: All right. That's super helpful. And maybe just a follow-up on that. In kind of the AI native space, we've obviously seen a lot of funding for voice AI start-ups. And it feels like maybe piggyback on that earlier point of conversation, the market is kind of viewed it as -- at least the stock market is viewed it as kind of an either/or. But it really feels like there might be opportunities for even partnerships and integrations and kind of focusing on customer success. Can you maybe talk about your opportunities? I know, Scott, you talked a lot about increasing partner ecosystem traction, et cetera, but maybe an opportunity to even just have deeper integrations and partnerships with some of these AI natives just to kind of leave the choice up to the customers even if it may sound potentially competitive. Because at the end of the day, they do need the pipes that you have, they do need the call routing piece. Maybe help us understand what could that kind of ISV or AI partnership look like? Scott Russell: Yes. It's a great question, Rish. I'll probably break it into two parts. The first is we're an open platform. We've made a very conscious decision to be a platform that allows the customers to utilize their data because it's their data that all of the billions of interactions that sits on our platform and being able to leverage it across not only the NiCE CXone, but an open stack that supports the use of other tools. And that's why the partnerships with Salesforce, with AWS, with ServiceNow and many others are essential to it. And we're -- at the enterprise, you're dealing with a complex technology landscape, and so we're able to use that to our advantage. But let me just zero in on the AI side. One of the questions that we often get is, hey, these new frontier models and what does it mean? And is that going to be a disruption to us? And actually, it's a benefit. It's actually a significant positive because if you look at it, the labs, these frontier models, they are tremendous advancements in agentic capability. But we leverage those models. We have partnerships with those AI players that we can use those models in our stack, but then we've built a purpose-built AI around customer engagement data. And so we differentiate by our specialization. Those models are really powerful, but then we process it on those billions of interactions, the specific learning loops, the optimization. So the specialization around the customer intent resolution, the compliance-heavy workflows, the guardrails that enterprise have, the real-time voice orchestration. So the reality is it's not replacing, it's enabling a more powerful and differentiated outcome with the combination of what we bring and what they bring to give a better outcome for our customers. So it's not replacement. It's actually expansion and extension from what we've already done, and it gives us more opportunity to deliver ROI. Again, that's why we're seeing the backlog and the bookings growth that we're getting because the customers are voting by their choice of NiCE, and we're benefiting that in our revenue outlook. Operator: Your next question comes from the line of Samad Samana with Jefferies. Samad Samana: Great to see the solid 4Q results. Maybe first, just one on the guidance. I think we're all happy to see the upward revision to the 2026 cloud revenue growth forecast. I was curious, Beth or Scott, if you guys could break down what led to the upward revision? Is it the core organic cloud revenue? Is it Cognigy doing better than expected? Because if we assume Cognigy is at 200 basis points of revenue growth contribution, that kind of implies an acceleration for the organic business. Just help us unpack that. And then I have one follow-up. Beth Gaspich: Yes. Thanks for the question, Samad. And I'll take that, and Scott, feel free to chime here. I think generally, as a starting point, we feel confident that both will contribute to that mix and give us that confidence as we step into 2026. Scott has already highlighted the strength of the backlog. We had a record in terms of new cloud ACV bookings in the fourth quarter that led to that strength of the 25% growth in our cloud backlog looking ahead. So that's a mix of both the strength of that AI force that we see, inclusive of both our own homegrown AI and of course, amplified by the addition of Cognigy. So when we look both at the core, which you've seen was consistent at a 12% growth throughout each and every quarter this year, we feel confident that there is opportunity to accelerate growth both in that core as well as continue to drive that growth through Cognigy, which had very strong fourth quarter showing as well. So it comes from a combination of both those places. Samad Samana: Great. And then, Scott, a follow-up for you. And I know that this topic came up at the Capital Markets Day as well. I think it's appreciated by investors that the company is putting the foot on the gas with AI being this massive opportunity, right? You guys are literally putting your money where your mouth is. I'm curious maybe as you think about deploying new investments and how that's going inside the organization? And are you starting to see a shift inside of the sales organization, whether it's win rates, whether it's productivity as maybe the accelerated investments drive enthusiasm in the organization as well? Scott Russell: Yes. It's good question. So first of all, there is, I guess, a positive energy and momentum that we're seeing in the business. And that's obviously on the back of the bookings and the backlog generated in Q4, the momentum that we've been able to generate, but also the pipeline and what we see. What was interesting is the Cognigy business continues to grow remarkably on a stand-alone basis, just acquisition of new market where NiCE has no footprint at all and our ability to be able to go and compete and win in that new marketplace where they don't have a need for a CCaaS, but they really want an AI CX platform as a leadership, that's given a real positive energy inside of our sales organization, combined with the obvious opportunity that we see with existing installed base, the large customer base that we have and our ability to be able to serve that. So I think first on the positive momentum, fantastic. The other point, and Beth touched on this in her opening comments, we're embracing the use of AI inside of our business as much as we expect our customers to. We're living and breathing that reality. So for our sales teams, being able to use it to be able to get better understanding of customer signals, intent, our ability to automate quoting and being able to do fast turnaround for business for our customers when we're competing, these were deployed and we're up and running. So I think our go-to-market are also seeing higher productivity that allows them to get more at bats to be able to get more customers engaged and ultimately improve our win rates. So you need to do both. You need to have a great capability that you take in a market, but you've got to walk the talk, and we're definitely doing that. Operator: Your next question comes from the line of Arjun Bhatia with William Blair & Company. Arjun Bhatia: Scott, maybe one for you to start out with. Obviously, it's good to see the continued traction in your AI and self-service ARR. I imagine the distribution of customers in that group of those that are advanced versus those that are still starting is quite wide. But when you're looking at your more sort of advanced customers, what are you seeing in terms of seat dynamics there? Has that changed at all over the past couple of quarters? Or is this still like something that's being contemplated for years or quarters in the future in terms of what they do with their seat counts and agent counts? Scott Russell: Yes. It's a great question, Arjun. So I think there's a couple of things to maybe highlight here. As I mentioned in my opening comments, our core CX CCaaS platform is really strong. And to Beth's earlier comment, we see reacceleration in our outlook for '26 and beyond. Why is that? Well, I guess I'll best answer it by discussions that I've been having. This week, I had a number of meetings with customers, CEO, CTO and we were just talking about their CX environment and their existing use of their contact center. And right now, they both had indicated that their contact centers are capacity constrained. They're not overstaffed. And so they plan to use AI to actually free up their agents for higher value engagement, proactive outreach, more revenue generation or more value orientated. So rather than elimination of roles, they're using it as an efficiency driver so their people can be driving more value-added activities. And so they had no plans, no plans to reduce agents in the short to midterm. Now that's not to say that as we continue to build out our platform that we don't see the opportunity to be able to reduce the human capacity as the AI picks up. But we -- that's why in these complex environments because remember, CX is tough. you've got to have accuracy of data at high volume, the guardrails, the domain expertise and ultimately, it's got to fulfill a great consumer experience for the brand. And so what they don't want is a point solution that gives them a bit of automation, but then increases the complexity when it has to interoperate with their AI agents. And I think we've really seized upon this. What we see at the top end is that customers value a unified customer engagement platform. We call it the front door. So whether it's voice, whether it's digital, whether it's AI or what is most likely to be a combination of all three at the same time, real time at enterprises at the top end, they need a platform that can give that in a scalable, reliable way. And obviously, we differentiate on that basis. So it's interesting about the, I guess, the perceived concerns that you're going to see this erosion of the seats. We -- the data does not support that assertion, but we're growing on both levers, and we continue to expect to do so. Arjun Bhatia: All right. Perfect. Yes, that's super helpful color. And then Beth, I had one for you. Just in terms of the investments that you're making, I think I fully appreciate, right, it's the right time to sort of lean in given the precipice of the tech change here. But how are you just monitoring that you're making the sort of the right investments and you're allocating capital appropriately? Like what are the ROI signals you're looking for? Or is it just continued sort of revenue reacceleration here? Beth Gaspich: Yes. Thank you. We're very excited about the opportunity ahead of us, and we absolutely believe this is the appropriate time to lean in. We really have at NiCE a fence investment approach where we are very closely monitoring a very tightly the exact areas that we plan to invest, which we've talked a lot about. It's around the go-to-market. It's bringing in more integration of Cognigy into the platform, agentic capabilities as well as using additional AI technologies internally, accelerating our delivery time line, all of those areas are very intentional, and we are very much closely monitoring that the dollars are being spent in the right places. In parallel, as a general muscle that we have in NiCE, we are constantly also driving initiatives that drive long-term operating leverage. Scott talked about the use of AI. There are other initiatives as well that we're always putting in place. So we're also monitoring the effectiveness and seeing that we get the ROI from those initiatives and investments through key specific metrics. And when you add all of those together, ultimately, the big test is that we see that we are delivering on the growth that we've signed up for on the top line. And so those are a combination of all of the things we monitor very, very closely to ensure we're on track and that we're getting the ROI from those investments. Operator: Your next question comes from the line of Tyler Radke with Citi. Unknown Analyst: This is Kyle on for Tyler. It was great to see the significant acceleration in international revenue. And I'd be curious to hear how you'd expect that trend to continue into FY '26? And what -- maybe any color on what would be embedded in the total revenue guidance on a constant currency basis? Scott Russell: So let me cover the international expansion. So first of all, I need to highlight. I've inherited a beneficiary from a significant investment that had been made in our international expansion. So the footprint of our data centers, the sovereign cloud, the capacity in key markets in U.K., Europe, in parts of Asia. So what we saw in '25 was a real breakthrough in terms of -- obviously, our bookings and the backlog, we saw in Q4 a significant acceleration of our revenue that you saw in those results. And so for '26 and beyond, what we see is expansion opportunity. And if I give you a couple of data points to color. First is the CCaaS shift in the international markets is not as progressed as what it is in North America. So there are more opportunities with our platform to be able to win the on-prem to cloud migration, leveraging those investments, leveraging our momentum. The second is they're doing it with AI from the get-go. They're not doing this in a two-part move or sequential. They're doing it at the same time. So the unified platform where we can embed Cognigy and our AI agentic capabilities in that -- in those deals gives us competitive edge, but it also allows us to be able to accelerate revenue because the AI adoption time frames are faster, whilst often the CCaaS migration is a complex onetime undertaking. And then the last, what I would say is those international markets are benefiting from our investments in the ecosystem. Practically, all of our go-to-market in international is through our partners. And so the strategic ecosystem is part of the reason why our international expansion is performing strongly because we've really made sure our go-to-market motions with both SI partners, resellers, technology partners internationally be the core vehicle that we use. And that gives us reach that goes beyond the 4 walls of the NiCE capability. We really do leverage their breadth and strength in those international markets. So it is -- you can expect to see continued momentum in that area. Beth Gaspich: And then I would just quickly, Kyle, address on the currency side. I think, first of all, I'll start with the overall outlook for NiCE in totality. I think it's important to highlight that in total, NiCE is still predominantly concentrated in terms of mix out of the Americas, which is mostly USD denominated. So 82%, for example, of our revenue in the fourth quarter was coming from the Americas, mostly USD. Any impact that we may see within the international business, which is thriving and growing for us, has been considered and is factored in. We're always looking at the environment generally on a macro for exchange rates and other factors as well that is inclusive in the expectations that we're looking at. Again, you may see that more noticeable as you've seen in the fourth quarter in terms of the impact on the international markets, but not any expectation that is not already baked into our expectation for the full year. Unknown Analyst: Understood. And then regarding the Better Together story with NiCE and Cognigy, the ability to win more deals as a combined CCaaS and AI domain expert. How did the joint go-to-market motion play out in 4Q? I know it's early, but also how to think about the Cognigy opportunities from current CXone customers versus sales to customers on competitor CCaaS platforms as well? Scott Russell: Let me take that one. So I was really pleased. I've got to say that despite it being -- with Cognigy coming into the NiCE family at the -- in September, coming into our busiest and most hectic quarter of the year, it was remarkable to see two things. One, Cognigy and our ability to win and grow as a stand-alone AI market-leading platform, it was fantastic. But then secondly, our -- I've got to give it to our -- the NiCE go-to-market team, we were able to quickly pivot. And so the fourth quarter performance also on a Better Together where we were able to embed it into our big wins and the strong performance we had in fourth quarter, Cognigy was well and truly a part of that, which is why, by the way, 100% of our seven-digit deals included AI and that pretty much nearly all of them was inclusive of Cognigy. So the early collaboration was really strong. What we're really now focused on is how do we then capitalize and expanding on that rapidly in '26. So we're very early days in the AI expansion. We see obviously new competitors with AI point solutions. We've got a differentiated offer. So really, we're doubling down on the Better Together, unified platform, but also winning and competing in the AI-only market where the situation exists and being able to win and win well. So competitive win rates were good. I feel very good about the fast integration, and it's a credit to Phil Heltewig and the Cognigy team and the way they've really embraced and coming to the NiCE team and led the way. Operator: Your next question comes from the line of Siti Panigrahi with Mizuho. Sitikantha Panigrahi: Great. If I look at your cloud backlog that excluding Cognigy, it's organic cloud backlog, now 22% growth, that is quite a step-up from 13% in Q3. So a few things, like what's the composition like for that step-up? And you guys earlier talked about it takes longer to convert to recognized revenue. So how should we think about the lag from the backlog to cloud revenue growth over the next 2, 3 years? -- 2-3 quarters? Beth Gaspich: Yes. Thanks, Siti, for the question. I would start and just say that when you think about the 25% growth we had in the backlog, you highlighted the 22% growth that we had, excluding Cognigy. When you think about how that will play out in the coming years and months, essentially, the substantial majority of that will actually be recognized in the next 24 months. It is not, however, linear. Of course, it is dependent upon various go-lives that happen throughout that period. So the expectation and as we continue to shift that from the backlog over into recognized revenue, you should see that gradual expansion playing out in the cloud revenue growth over that period. Sitikantha Panigrahi: Okay. And then on the Cognigy side, Beth, you talked about before exiting Q4, $85 million ARR. Is that still -- does that still holds good based on what you're guiding for the year? Beth Gaspich: It is. We had a very nice performance of Cognigy since the start of the acquisition and the close. So yes, very much on track and looking forward and excited about our ongoing opportunity during the course of '26. Operator: Your next question comes from the line of Jamie Reynolds with Morgan Stanley. James Reynolds: This is Jamie on for Elizabeth. And congrats on the strong quarter. It's just the first question. It'd be great to just unpack a little bit more about how that displacement with the CRM vendor materialized. What capabilities did NiCE bring where that vendor fell short? Scott Russell: Yes. I'll answer this one, Jamie. So there's a couple of factors here. First of all, customers -- the customer that we're referring to had a need of an integrated customer engagement platform. What they didn't want is one platform to handle the AI piece, another platform to handle digital and another platform to handle voice because what it did was it created friction in their engagement, and it was actually impacting a positive customer experience. What they wanted was the data, the operational flows, the process to be orchestrated end-to-end. So it was more about clear conscious strategy for customers. And we're seeing this more and more where they're distinguishing a customer engagement platform, the front door to the enterprise by their customers in a unified single approach rather than fragmented through differing technologies. Now that's not to say that they don't need and orchestrate with the CRM because you still want your sales data, your commerce data, your other information, your customer data that you've got there. But when it comes to the interaction and understanding the customers' intent and then having a simple way of being able to orchestrate between a human agent, an AI agent, synchronous, asynchronous, inbound and outbound, they wanted it on a single stack. And obviously, we see the benefits of that. Ultimately, they chose it because it will deliver better ROI, better customer experience. And it was one customer example. We've got many others that are doing the same journey. James Reynolds: Got it. That's helpful. And then just as a quick follow-up, it'd be great to get any color on how the performance among the more seasonal customers kind of trended in the fourth quarter relative to your expectations? Beth Gaspich: Yes, thanks. When we looked at the seasonality, we had highlighted that we had a strong bar to climb when compared to the fourth quarter of 2024, but we were quite pleased with the seasonality that we experienced in the fourth quarter this year. I did highlight a couple of things in my formal remarks around we had about a 50 basis point tailwind coming into the cloud revenue in the fourth quarter coming from foreign exchange that was included there. We also ended up having a go-live of a very large international deal earlier than anticipated that came into that. So those also kind of triggered some health in the quarter. But generally, we were pleased with the seasonality that we saw, which was healthy for our fourth quarter across our diversified vertical customer base. Operator: Your next question comes from the line of Michael Funk with Bank of America. Michael Funk: So Scott, earlier you mentioned -- I think you mentioned that only 40% of enterprise have moved from on-prem into the cloud. So I'd love to hear more color around the pace of that migration and then net new versus migration internally and the increase that you see in TCV when customers do migrate internally? Scott Russell: Yes. So as I mentioned, there's a significant market in front of us. Now the international side, Michael, is particularly strong because they've not progressed in the migration compared to the Americas. So just from a geographic standpoint, we see real momentum on the international side and obviously, we're benefiting from it. I think what -- if I take a step back, what's happening in the market is customers were previously forced to choose, do they do the on-prem, the cloud migration? Do they do an AI move? They had to distinguish between their methods. Now we give them the choice to do that as well. But what we've now seen and the results are undeniable around all of our big wins, all of our CCaaS moves are embedding AI in. So what we're seeing now is they're using AI to be able to drive the automation capability, give them fast return, early deployment while they're still doing their CCaaS shift, and that is able to help make sure that they've got early return on investment. It gives us a competitive differentiation because we unify the journey of not just the on-prem to cloud and the AI, but it's combined together. So it actually has given us a really significant differentiation compared to where we were a year ago, where we were obviously able to still capitalize on that. The last comment I would make is the routes that customers are choosing will -- that they will -- migration paths will continue to be a key part of the differentiator. What customers aren't prepared to do on the CCaaS migration is long time to transition. So the other thing that we've really focused on is reducing the time to turn up or the time to value. We improved our delivery time frames by 20% during 2025. I mentioned that, that was a focus area at the beginning of last year. And I think the more we're able to show that we can do a time-bound, efficient migration while capitalizing on the AI capability, we're going to be able to seize an acceleration of those CCaaS moves as the customers evaluate the use of this technology in their landscape. Michael Funk: Maybe one more, if I could, quickly. Financial crime and compliance business, love to hear your thoughts on the operating and strategic benefits of owning that business versus maybe some strategic alternatives? Scott Russell: Yes. It's such a great business. What makes me smile is it continues to be seen and perceived and understood as the market leader. We serve the most sophisticated financial institutions with a level of trust that, honestly, it is a joy. I meet with banking executives and our clients. And the first thing they tell me is, we trust Actimize, we rely upon it. We need your help to continue to support our ability to fight financial crime, fraud and compliance factors. So from a brand point of view and from a trust point of view of that segment, which is also a big segment inside of our CX business, it really does enhance our -- the trust position that we have as a company. So great business, strong performance, really profitable. And yes, we're proud for it to be a part of the NiCE family. Operator: Your next question comes from the line of Thomas Blakey with Cantor Fitzgerald. Thomas Blakey: Maybe just first one, Scott, I just wanted to talk about these increased win rates that you're talking about and obviously evidenced by the increase in backlog. If you could maybe -- in answering another way about the increased win rates on pricing and any levers you might have there with regard to your to Cognigy or other kind of consumption-based AI levers that you have here in the market, that would be helpful? Scott Russell: Yes. I'll try to answer it simply. We're definitely seeing customers being more astute in their expectations of ROI and that leads to more quantifiable outcome. Now they're not buying outcome-based pricing, but they're negotiating an understanding proven ROI that we're able to deliver. One of the advantages we obviously have is that we understand their volumes, their interactions on their existing seats, how efficient their platform is. We use data to inform them about what the automation that AI can do to improve upon that and then how that then delivers measurable return and we put that into our offers. So look, we've seen our pricing continue to be effective in terms of profitable business for NiCE, but also as a differentiator. But we're watching it closely. I think the market in AI will continue to be scrutinized, the promise versus the reality. It's easy to come in with an AI solution and say, we'll build you a bunch of AI agents. But if it doesn't deliver the real value, they go to vendors and partners that have proven to deliver that before. And we leverage that. There is no doubt that we're using our historical strength and benefits to our advantage. And if that means updating our pricing models, we'll do so. Thomas Blakey: Yes. No, that's helpful. And you're definitely balancing that well in terms of the backlog growth. Maybe for Beth, you've broken out in the past the consumption-based AI ARR. I don't know if it's something you'd want to help with here. And just understanding the increase in backlog and the jump in AI ARR in total, I wanted to know if consumption is driving that. And when we can kind of expect as folks are finding value here, looking to expand AI in terms of the CX role internally, NRR to start maybe expanding? Is that more of a '26 or more of a kind of an out-year kind of environment when you kind of look at your contracts and backlog wins, that would be helpful? Beth Gaspich: Yes, sure. So I think I would start with where Scott just led to, which is we have a flexible pricing model that allows that fluidity, and we're driving more and more increasingly towards interaction and consumption-based pricing, which is demonstrated in our overall AI ARR growth, where we're leaning in more and more towards pricing, which is coming from that increasing and ongoing expansion of interactions that we see. With respect to our backlog, we actually -- it demonstrates we have even further upside. When we look at our backlog, we're actually only including there our minimum contractual commitments. So our pricing model and the way we commercialize with our customers generally is on a subscription basis over a multiyear period. So that's what's being reflected in our model. We're still in very early stages of deployment with a lot of those enterprise customers. So as we continue to see those interactions increasing, that's further upside that we have even beyond what's already captured in our backlog. Operator: Your final question comes from the line of Patrick Walravens with Citizens. Patrick Walravens: Great. Let me add my congratulations. I was wondering if you could give us an update on your two $100 million deals. I think you had one that was in APAC and one that was in EMEA. And Beth, maybe you commented on that when you talked about something that went live. So what's the state of those two now? And then are there anything else -- are there any more this big that are in the pipeline? Beth Gaspich: Yes. So I'll take the first part, which is -- thanks for the question. Those -- both of those deals that were internationally driven are actually within our recognized revenue. They've both gone live. We're very excited about them. We're delivering to the customers. I would also add that there are additional opportunities. Those customers are continuing to look to do more with us. So we're off in a great start of those relationships, and we'll have more to come. But yes, they are already live and contributing to our revenue. Scott Russell: Yes. And in terms of the outlook, look, I guess you're getting a sense on this call, both with our backlog, but our optimism. There is some big opportunities that are in front of us. It's highly competitive out there, but I think we're proving that we've got a differentiated ability to win those. And so I look forward to being able to share more significant wins going forward, both internationally, but also in North America. Operator: That concludes our question-and-answer session. I will now turn the call back over to Scott for closing remarks. Scott Russell: Look, I just wanted to, first of all, thank everybody for the engagements, not only today, but throughout '25. It was a year of clear transition, but we're really excited about what we delivered, but also about the future in front of us. And in particular, I just wanted to thank all the NiCE employees, the NiCE is all around the world, our partners and our customers that contributed towards this. We've got exciting times ahead. It is an exciting market, but we've got the momentum to be able to seize upon it, which we will do. So I appreciate the time, everyone, today. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Radian Group Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bob Lally, VP Finance. Please go ahead. Robert Lally: Thank you, and welcome to Radian's Fourth Quarter 2025 Conference Call. Our press release, which contains Radian's financial results for the quarter, was issued yesterday evening and is posted to the Investors section of our website at radian.com. This press release includes certain non-GAAP measures that may be discussed during today's call, including adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity. A complete description of all our non-GAAP measures may be found in press release Exhibit F and reconciliations of these measures to the most comparable GAAP measures may be found in press release Exhibit G. These exhibits are on the Investors section of our website. Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer; and Dan Kobell, Senior Executive Vice President and Interim Chief Financial Officer. Before we begin, I'd like to remind you that comments made during this call will include forward-looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For more information regarding these risks and uncertainties as well as certain additional risks that Radian faces, you should refer to the risk factors included in our 2024 Form 10-K and our third quarter 2025 Form 10-Q as well as the subsequent reports filed with the SEC. Now I would like to turn the call over to Rick. Richard Thornberry: Good morning, and thank you for joining us. I am pleased to report another strong quarter for Radian, rounding out an outstanding year, both in terms of our financial performance and the beginning of an exciting strategic transformation of our company with the acquisition of Inigo. Our performance in 2025 demonstrates the strength of our core business and the disciplined execution of our strategy. We grew our mortgage insurance in force portfolio to an all-time high. We maintained strong credit performance and operational discipline. We continue to generate substantial capital, distributing $795 million from Radian Guaranty to our holding company and returned $576 million to stockholders through dividends and share repurchases. And we used risk distribution strategies to effectively manage our capital and proactively mitigate risk. Most notably, earlier this month, we completed our strategic acquisition of Inigo, a highly respected specialty insurer underwriting through Lloyd's of London. Importantly, we funded this transaction entirely with available liquidity and excess capital with no new equity raised. This marks a defining milestone in Radian's history and the beginning of an exciting new chapter. We believe this is truly transformative for Radian's future. Building on a strong foundation as a leading U.S. mortgage insurer, we are now poised to expand and diversify into a global multiline specialty insurer. We have the unique opportunity to leverage our high-performing Mortgage Insurance business, which is expected to continue generating excess capital alongside a growing and global specialty insurance business. The acquisition significantly expands our expertise, capabilities and geographic reach, greatly increasing our total addressable market and position us to deploy capital strategically for attractive returns. We expect this transaction to double our annual revenues, be accretive to EPS and returns and provide greater strategic flexibility to deploy capital across multiple insurance lines through various business cycles. Inigo has a proven track record in the Lloyd's market, fueled by a high-performing culture and an experienced team with a strong focus on their customers. Their business model and the approach align closely with our Mortgage Insurance business, particularly in their commitment to strong risk management through disciplined underwriting, leveraging data and analytics and disciplined capital allocation. As part of Radian, Inigo will operate as a stand-alone business unit in London, maintaining its management team, brand and culture. We are excited to welcome Inigo's CEO, Richard Watson, and his talented team to Radian and look forward to working together to build long-term and sustainable value for all our stakeholders as a global multiline specialty insurer. I also want to share that our divestiture plan for our Mortgage Conduit, Title and Real Estate Services businesses is well underway and on track for completion by the third quarter of this year. I am very proud of these teams as they have effectively managed their businesses while working through this process. Last week, we announced an important organizational update. These changes are intended to align our leadership team with our strategic focus, continuing to deliver strong operating performance in our Mortgage Insurance business, realizing the strategic value of the Inigo acquisition and maintaining strong financial management, including effective capital allocation. We promoted Steve Keleher and Meghan Bartholomew, both long-tenured Radian leaders who are well known to the market to co-head our Mortgage Insurance business. We also promoted Dan Kobell and Rob Quigley, two highly experienced and accomplished financial executives with extensive financial management expertise. These appointments and the exceptional teams behind them, along with the addition of the highly talented Inigo team, position us well for the future with a strong and deep pool of talent. I am truly excited to see what this team can achieve together. Before I turn the call over to Dan, I would like to take a moment to formally introduce him. Many of you have worked with Dan during his tenure at Radian, most recently as EVP of Finance, heading Corporate Planning, Corporate Development, Treasury, Investments and Investor Relations. During his 11 years at Radian, he has been a leader across our finance team and his deep expertise in financial management and strong understanding of our business have been invaluable. Most recently, he was a key leader in the work done to identify and complete the Inigo acquisition. His experience and knowledge of Radian and now Inigo position him well for this important role. Now I would like to turn the call over to Dan to review our financial results. Dan Kobell: Thank you, Rick, for the warm welcome. I'm honored to step into this role and lead the finance function at Radian in close partnership with Rob Quigley. This is an exciting chapter in Radian's nearly 50-year history, and I look forward to engaging with all of you as we move forward together. I'm pleased to report additional details about our fourth quarter results, which reflect another quarter of strong performance. For the quarter, we generated net income from continuing operations of $159 million or $1.15 per share. For the full year, net income from continuing operations was $618 million or $4.39 per share. We were pleased to grow our net income from continuing operations per share in 2025, driven by a combination of strong earnings as well as an 8% reduction in our share count. Additionally, in our Mortgage Insurance business, we saw growth in both insurance in force and new insurance written with NIW growing 6% year-over-year. We generated a return on equity of 13.5% in the fourth quarter and 13.1% for the full year. We grew book value per share 13% year-over-year to $35.29. We also returned dividends to our stockholders in 2025 that accounted for an additional 3% of book value. Turning now to the key drivers of our results. Our total revenues continued to be strong at $301 million in the fourth quarter and $1.2 billion for the full year. Slides 14 through 16 in our presentation include details on our Mortgage Insurance portfolio as well as other key factors impacting our net premiums earned. We generated $237 million in net premiums earned in the quarter, which represents the highest level in over 3 years. Our large, high-quality primary Mortgage Insurance portfolio grew 3% year-over-year to another all-time high of $283 billion. Contributing to this growth was $55 billion of NIW in 2025, including $15.9 billion in the fourth quarter. These figures compare favorably to $52 billion in 2024 and $13.2 billion in the fourth quarter of the prior year. Our proprietary mortgage data and analytics, which drive our MI pricing strategy, together with our disciplined and informed approach to risk management have contributed to a healthy and profitable portfolio, creating long-term economic value and generating strong returns for our shareholders. As shown on Slide 14, our quarterly persistency rate remained strong at 82% in the fourth quarter, a small decrease from the prior quarter due to higher refinance activity. As of the end of the fourth quarter, approximately half of our insurance in-force portfolio had a mortgage rate of 5.5% or lower. Given current mortgage interest rates, these policies are less likely to cancel due to refinancing in the near term, and we, therefore, continue to expect our persistency rate to remain strong. As shown on Slide 16, the in-force premium yield for our Mortgage Insurance portfolio remained stable as expected at 38 basis points. With strong persistency rates and the current industry pricing environment, we expect the in-force premium yield to remain generally stable in 2026. As shown on Slide 17, our investment portfolio of $6.1 billion consists of well diversified and highly rated securities, generating net investment income of $249 million in 2025. Our provision for losses and related credit trends continue to be positive with strong cure activity. On Slide 20, we provide trends for our primary default inventory. The number of new defaults in the fourth quarter was approximately 14,200 and as expected, the total number of defaults increased in the fourth quarter to approximately 25,000 loans at quarter end, resulting in a portfolio default rate of 2.56%. This increase in total defaults reflects normal seasonal trends and the expected continued seasoning of our large insurance in-force portfolio. As we have noted in the past, our new defaults continue to contain significant embedded equity, which has been a key driver of recent favorable credit trends, including higher cure rates and reduced severity for policies that result in claims submission. As shown on Slide 21, our cure trends have been consistently positive in recent periods, meaningfully exceeding our initial default-to-claim expectations for these loans. Cure rates in the fourth quarter exhibited typical seasonal trends in line with similar periods from prior years. Slide 22 shows the components of our provision for loss. We maintained our initial default-to-claim rate of 7.5% on new defaults, which resulted in $57 million of loss provision for new defaults in the fourth quarter. Throughout 2025, our provision for losses benefited from favorable reserve development on prior period defaults, primarily due to more favorable cure trends than initially estimated. This continued in the fourth quarter with $35 million of positive reserve development. As a result, we recognized a net provision expense of $22 million in the fourth quarter. Now turning to our other expenses. For the fourth quarter, our other operating expenses were $56 million, down from $62 million in the third quarter. For the year, our other operating expenses were $246 million, below our previously communicated annual expense guidance of $250 million for continuing operations. With the Inigo acquisition and following the planned divestiture of our Mortgage Conduit, Title and Real Estate Services businesses, we will continue to look for opportunities to enhance our efficiency as we simplify our business model to focus on mortgage and specialty insurance. Moving to our capital, available liquidity and related strategic actions. Radian Guaranty's financial position remains strong. In 2025, Radian Guaranty distributed $795 million to Radian Group through dividends and returns of capital. We also continue to diversify our sources of capital and use a range of risk distribution strategies to effectively manage capital and proactively mitigate risk. During the fourth quarter, we completed an excess of loss reinsurance agreement covering approximately $373 million on certain policies written from 2016 through 2021. Our PMIERs cushion was $1.6 billion at year-end, significantly above our required PMIERs capital level. This capital buffer, combined with our current reinsurance programs, positions Radian Guaranty well to withstand and remain well capitalized through a severe potential macroeconomic stress. Moving to our discontinued operations. During the fourth quarter, we extracted $62 million of capital from our entities held for sale. These returns of capital provided immediate liquidity to Radian Group and reduced the net carrying value of these businesses to $110 million as of year-end. As we've mentioned in the past, we have engaged Citizens JMP and Piper Sandler to assist us in the divestiture process. We are making steady progress and continue to expect this process to be completed by the end of the third quarter of this year. Moving to our holding company, Radian Group. In 2025, we repurchased approximately 13.5 million shares of our common stock at a total cost of $430 million. In preparation for the Inigo acquisition, which closed earlier this month, we significantly expanded our holding company liquidity to $1.8 billion at year-end, supported by a $195 million dividend in the fourth quarter and a $600 million intercompany note, both from Radian Guaranty. In January, we drew $200 million on our revolving credit facility, further increasing holding company liquidity. With these resources, we funded the Inigo acquisition with a purchase price paid at closing, net of certain adjustments, of $1.67 billion. Inigo's estimated tangible equity at year-end was $1.16 billion, resulting in a net purchase price multiple of approximately 1.4x tangible equity. Following the Inigo purchase, our holding company liquidity was approximately $350 million. In 2026, we expect dividends of at least $600 million from Radian Guaranty to Radian Group, including a $140 million dividend later in the first quarter. We expect these dividends to allow Radian Group to repay the $200 million draw from the credit facility during 2026 while continuing to maintain sufficient liquidity. As the year progresses, we expect to continue to build our liquidity position at Radian Group, and we will apply our disciplined capital allocation methodology to optimize the use of any excess capital, including potentially resuming share repurchases under our available share repurchase authorization. Finally, our leverage ratio declined to 18.3% at year-end, and we expect it to remain below 20% by year-end 2026. I will now turn the call back over to Rick. Richard Thornberry: Thank you, Dan. Our results for the quarter and the year once again reflect the balance and agility of our company as well as the strength and flexibility of our capital and liquidity positions. Our Mortgage Insurance business remains a cornerstone of our success and of our commitment to supporting homeownership. We appreciate the focus of the administration, FHFA and GSEs on making homeownership more affordable and sustainable. Our products enable qualified borrowers to access homeownership and begin building equity years earlier than if they had to save for a large down payment. For nearly 50 years, we have helped millions of families purchase their homes or refinance their mortgages. We are proud to play this important role in the housing finance system and in building strong communities. Finally, I want to express my gratitude to all Radian employees across every part of our company for their dedication and outstanding work throughout this pivotal year. Their commitment to excellence and our values has been the foundation of our success. Operator, we would be happy to take questions. Operator: [Operator Instructions] And our first question comes from Terry Ma of Barclays. Terry Ma: Maybe just to start off with Inigo, a question for Dan. Kind of -- like you guys just recently closed it, but any kind of updated thoughts on financial metrics or anything you kind of laid out initially a few months ago? Dan Kobell: Yes. Thanks, Terry, for the question. So I'd say broadly no changes from what we laid out a few months ago. And I would say just generally, the simplest way to look at the financial accretion from the Inigo acquisition using round numbers, it's a $1.7 billion acquisition. The funds we used for that acquisition were part of our investment portfolio at Radian between Radian Group and Guaranty. And they were earning, call it, a 4% or a 5% yield. So we've now taken that $1.7 billion and deployed it into an operating business that we expect is going to earn a mid-teens return through the cycle. There's going to be some volatility. It's actually been higher of late. But if you say it's mid-teens through the cycle, that's a -- call it, a 10% step-up in yield on $1.7 billion. So you get to $170 million of incremental net income. And that's really the source of the financial accretion that we had in the transaction. We didn't have expense synergies or revenue synergies that we were relying on. So it's really fairly straightforward taking Inigo as it exists and putting it into Radian. So from an execution risk perspective, I'd characterize it as fairly low. We have some light integration to do in terms of financial systems and reporting to be able to report our results on a consolidated basis, and some areas that -- we'll kind of look at that makes sense at an enterprise level to kind of think about on a consolidated basis. But really no change to what we provided in terms of financial guidance and feel very confident that we'll be able to deliver on that. Terry Ma: Got it. That's helpful. And then maybe just turning to credit. You called out the strong cure trends on Slide 21 of your deck, 90% of defaults curing within 1 year. Like as we kind of look forward, how sticky can that 90% be as you have some of the more recent vintages kind of start to season and peak, which I imagine have probably less embedded equity as some of the earlier vintages. Dan Kobell: Yes. So that's a good question, Terry, and that's certainly something we'll continue to monitor. As you noted, the vintages, if you go back, kind of that are seasoning now, had significant home price appreciation and embedded equity. We do continue to see in our new defaults, very significant embedded equity is still what's coming through. So the more recent vintages, we're starting to see that play through now, certainly going to be mindful of that. But the cure activity that we've seen has been very strong. As a reminder, we assume effectively 92.5% cumulative cure rate in terms of our reserving assumptions. So we take a fairly conservative view there relative to what we've seen over the last several years. It remains to be seen in terms of how those more recent vintages play out because we're just not seeing that enter the default inventory in a significant number yet. But we continue to see those cure trends play out very consistently, very favorable to what our original expectations were. And as far as credit trends overall, not really seeing any pockets of concern from a geography perspective across different credit segments or at a vintage level. Everything is playing out in line with or better than our expectations. Operator: And our next question comes from Mihir Bhatia of Bank of America. Mihir Bhatia: On the pricing environment, can you just compare returns on new business today versus a year ago? Dan Kobell: I can start with that one, and then Rick can jump in for some color on pricing. So as far as -- our premium yield is probably the best way to look at it. Our yield on an in-force basis has been very consistent. It's been around 38 basis points now for really 3 years. That's a pretty good indication that what we're bringing into the portfolio and what's exiting, there's a pretty good balance from a pricing perspective. We're not really seeing that in-force yield move. And I noted in my prepared remarks that we expect that to be the case for 2026 as well. So fair amount of stability there in terms of the blended rate of what's coming into the portfolio and what's leaving. I'll leave it to Rick from a pricing competition perspective. Richard Thornberry: Yes. First off, I'd just say we're very happy with the volume and the quality of what we saw in the fourth quarter and throughout 2025 from an economic value point of view. I would say industry pricing has been relatively stable, and it's a normal competitive environment. So nothing really noteworthy there. As we've stated for us, we don't focus on market share. We focus on economic value and being disciplined and consistent in our approach. And we continue to see really attractive opportunities to leverage our data and analytics to source NIW that has attractive economic value and risk-adjusted returns, which we believe gives us the opportunity to construct a really high-value portfolio, as Dan mentioned in his earlier comments. I think we used that -- those analytics this year to grow our insurance in force and find value to grow that portfolio to an all-time high to $283 billion. And I think we would expect fluctuations quarter-to-quarter, but I think we've been relatively consistent over time because we focus on really trying to find the most attractive EV segments of the market. One thing I would just highlight because I think it's important to note that maybe compared to other MI companies that maybe are more heavily weighted to bid-card structures that we deem to be low-value structures and can effectively limit the ability for us to leverage our proprietary data and analytics platforms to select risk where we see economic value. For us, today, over 80% of our current NIW is being sourced through our proprietary RADAR Rates platform, which is our black box pricing. And it really plays to our strength where we're able to leverage our analytics to price and select the loans we believe have the highest economic value based on loan and borrower attributes, based on our long-term view of geographic trends and differences across the industry. So I believe the combination -- as we've looked at this market the past year, we've seen very attractive opportunities from an economic value point of view. The combination of our industry-leading data and analytics and our view of customer from a quality of origination and servicing perspective, combined with our unwavering commitment to underwriting, I think really provides us with an advantage in terms of long-term portfolio construction. So we like this market. I think our team has done a really good job of leveraging our tools to find value in the marketplace, working closely with our customers. Mihir Bhatia: Okay. Awesome. And then maybe just a quick one on Inigo. Is the mid- to high 80% combined ratio a good run rate to think about for that business? Dan Kobell: Yes. So we haven't provided any kind of forward guidance from an Inigo perspective. I think as we report our results starting with the first quarter on a combined basis, we'll have all the key drivers for both Inigo and our MI business and probably a segment reporting structure, we'll be able to provide more detail at that time. So nothing forward. I think the combined ratio range that you referenced, I think, is kind of where they've been certainly over kind of their 5 years of operation. So I understand if you want to kind of think about that as a good trend to use, but we'll provide updated guidance as we move forward. Operator: And our next question comes from Bose George of KBW. Bose George: Actually, I just wanted to first follow up on the question on the accretion. The $170 million is -- I think it's a pretax number, but can you just confirm that? Dan Kobell: Yes. The way that I would explain that, Bose, I think of that as a pretax number. And... Bose George: Okay. Great. And -- sorry, go ahead. Dan Kobell: No, I was going to say, I think if you take that $170 million and you apply that to our equity base using, call it, a 25% statutory tax rate in the U.K. for Inigo, you get to north of 200 basis points of ROE accretion. So I think that's the right math to use. Bose George: Okay. Perfect. And then in terms of the premium to book value, is there going to be intangibles that need to be amortized? So do you know the split yet between goodwill and intangibles? Dan Kobell: Yes. So there will be intangibles and some of them will most likely be amortizing. We are in the process of doing all the purchase accounting related to the transaction. So that we don't have those numbers available and complete yet. But as I mentioned earlier, when we report our results for the first quarter, we will certainly have that and be able to kind of specify what the intangibles are and kind of what the amortization periods are going to look like for those. Bose George: Okay. Great. And then just one on the buybacks. You mentioned that we could see a resumption back half of the year. So if you look out to 2027, could we see buybacks back at the pre-Inigo levels by next year? Richard Thornberry: I think given our -- by the way, Bose, thank you for that question. I think given kind of our strategic path forward with MI -- our MI business, Inigo combination and the divestiture process underway and the attractive financial metrics that we expect from the Inigo acquisition, I would just state that we think our shares are undervalued, probably not the first time you've ever heard a public company CEO say that. But I think that's the position we take today. And given the strength of our financial position heading into 2026, Dan walked through some of that in terms of our current capital position and the transparency of future capital availability, we would expect to resume opportunistic share repurchases. And I think that's all based on the visibility of our MI business' embedded earnings from our insurance in force portfolio and the visibility to capital return we have from Radian Guaranty to group. And truthfully, we believe the combination with Inigo makes the value of our shares even more attractive. So we look forward to demonstrating the value of the strategic transformation as we go forward to all of our stakeholders. But I think we see value in our shares. Operator: I'm showing no further questions at this time. I'd like to turn it back to Rick Thornberry for closing remarks. Richard Thornberry: Thank you for joining us and for your interest in Radian. We look forward to reporting on our first combined results with Inigo next quarter, kind of exciting and demonstrating how our transformation into a global multiline specialty insurer can create additional value for our customers, partners and stockholders. And we're excited to speak with many of you in the coming months and share more of our story as it continues to unfold. And again, look forward to that first quarter reporting cycle. So thank you and appreciate your interest and be well. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Hello, everyone, and welcome to the Jackson Financial, Inc. 4Q '25 Earnings Call. My name is Charlie, and I'll be coordinating the call today. [Operator Instructions] I'll now hand over to our host, Liz Werner, Head of Investor Relations, to begin. Liz, please go ahead. Elizabeth Werner: Good morning, everyone, and welcome to Jackson's 2025 Fourth Quarter and Full Year Earnings Call. Today's remarks may contain forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations. Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks also refer to certain non-GAAP financial measures. The reconciliation of those measures to the most comparable U.S. GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on the Investor Relations page of our website at investors.jackson.com. Presenting on today's call are Jackson's CEO, Laura Prieskorn; and CFO, Don Cummings. Joining us in the room are our President of Jackson National Life Insurance Company, Chris Raub; our Head of Asset Liability Management, Brian Walta; our Chief Actuary, Lin Sun; and our Treasurer and Head of Corporate Development, Dean Scott. At this time, I'll turn the call over to our CEO, Laura Prieskorn. Laura Prieskorn: Thank you, Liz. Good morning, and thank you for joining our 2025 fourth quarter and full year earnings call. I'll begin with a review of our recently announced strategic actions, followed by a discussion of our 2025 accomplishments, our progress since separation and our 2026 financial targets. 2025 was an exceptional year as we surpassed our financial targets and set records for sales and distribution. We delivered another year of over $1 billion in free capital generation and grew free cash flow while providing initial funding for our new captive reinsurer, Hickory Re. Following my remarks, our CFO, Don Cummings, will discuss our financial performance in further detail. Beginning on Slide 3, Jackson's execution focus and core capabilities have been steadfast and are evident in both our success as a leading provider of retirement solutions and our performance as a public company. As an important next step in Jackson's growth, we recently closed on our previously announced strategic partnership agreement with TPG. This long-term partnership will support accelerated growth of our spread-based business and future flexibility. TPG's unique investment capabilities and collaborative culture align well with Jackson, and our teams have already been working closely together. Our partnership with TPG, combined with the capital efficiency from our captive strategy positions us well for fixed and fixed index annuity sales momentum. Turning to Slide 4. Our strong full year operating results drove nearly 12% growth in our adjusted operating earnings, supported by stable fee income and increased investment spread earnings. Our commitment to shareholder capital return and the benefit of share repurchases resulted in over 20% growth in adjusted operating earnings per share for the full year. As a reminder, our net income includes the impact of our annual assumption review and net hedge results, which Don will discuss. Over the course of 2025, our sustained profitability and disciplined capital management resulted in well over $800 million in free cash flow and capital return. Importantly, we expect to maintain our balanced approach to capital management, focusing on financial strength, future growth and capital return to shareholders. We achieved the highest quarterly and annual retail annuity sales since going public in the fourth quarter and full year 2025. Continued growth in RILA, combined with accelerated growth in our recently introduced fixed index annuity have deepened our distribution relationships and diversified our business. For the full year, retail annuity sales of nearly $20 billion are at their highest level since 2019, and net flows improved for the quarter and full year. While the strong equity market continues to impact net flows and our healthy variable annuity book, our RILA and FIA sales are an increasing offset to VA lapses. These strong sales and a favorable market contributed to the 7% increase in total retail annuity account values to $269 billion at 2025 year-end. Turning to Slide 5. We exceeded all our 2025 financial targets, surpassing the high end of our capital return target range with over $860 million returned to common shareholders. We also ended the year with over $650 million in holding company liquidity and an RBC ratio of 567%. Free capital generation was over $1 billion for the second year in a row. As a result, we distributed over $1 billion from our operating company, Jackson National Life to our holding company, a 27% increase from 2024. We expect our strong capital generation to both support growth and continued capital return, and we have established a new financial target for free capital generation, reflecting our view of future profitability. Our accomplishments last year are significant not only on a single year basis, but also as they reflect Jackson's continued progress over more than 4 years. Slide 6 highlights the significant growth in capital return since separation due to our strong cash flows and prudent capital management. Beginning in 2021, when we launched as a public company and each subsequent year, Jackson increased its common shareholder dividend and raised its targets for capital return to common shareholders. During this time, we managed through periods of external market volatility and formed the captive Brooke Re that allows for more economic hedging and has significantly improved capital stability. Furthermore, Jackson's commitment to investing in our business supports our continued track record of capital returns. Turning to Slide 7. Our ongoing product innovation has resulted in sales growth and greater business diversification. This year was no exception, and we saw the benefits from our second quarter launch of Jackson's Market Link Pro III and Market Link Pro Advisory III, which we refer to as RILA 3.0. In the fourth quarter, RILA sales set a record at nearly $2.3 billion and for the 2025 full year, RILA sales rose 22%. RILA account value at 2025 year-end was $20 billion, a 14% increase from third quarter 2025 and a 74% increase from 2024. We expect RILA to remain a valuable offering for our advisers and their clients, and RILA 3.0 offers a broad range of index and crediting options along with valuable protection benefits. In addition to RILA, our recently launched fixed index annuity, Jackson Income Assurance, was a significant contributor to fourth quarter sales. And looking ahead, we expect this offering to provide further diversification in our new business mix. Importantly, RILA and FIA have broadened our distribution reach, resulting in expanded broker/dealer partnerships and deeper relationships with advisers selling multiple Jackson product lines. We also see momentum in the fee-based advisory business, where 2025 sales reached a record $1.5 billion. The growth was broad-based as our investment-only variable annuity, Elite Access and our RILA offering accounted for over 2/3 of advisory sales, while our traditional variable annuity accounted for nearly all of the remainder. Jackson's expanding annuity product portfolio allows advisers to best meet their clients' individual retirement planning goals. In our fifth year as an independent public company, we are well positioned with a more diverse product suite and broader distribution than at separation. Turning to Slide 8. As we look ahead to 2026, we expect our partnership with TPG and our captive strategy will contribute to stronger and more stable capital generation. As a result, we believe free capital generation will reach or exceed $1.2 billion given our healthy book of business and outlook for profitable growth. We are also raising our capital return targets for the fifth time, setting a 2026 target of $900 million to $1.1 billion, a 16% increase from our 2025 actual capital return of $862 million. Jackson's free capital generation provides greater visibility into potential free cash flow and sustainable capital return to shareholders. To that end, our Board approved our fifth increase in our quarterly dividend to $0.90 per share, a nearly 13% increase over our prior quarterly dividend. We believe Jackson's approach to capital management, balancing investment in our business, maintaining financial strength and returning capital to shareholders will continue to serve all stakeholders. At this time, I'll turn the call over to Don. Don Cummings: Thank you, Laura. Let's turn to Slide 9 and walk through our consolidated financial results for the fourth quarter. We delivered adjusted operating earnings of $455 million, driven by continued strength across our spread-based products. Earnings benefited from the ongoing expansion of our RILA, fixed and fixed index annuity lines as well as our institutional products. We also saw a favorable operating earnings impact this quarter from our annual actuarial assumption review, which added to the solid performance. As always, our spread-based products are supported by a high-quality, conservatively managed investment portfolio. Diversification and strong credit quality remain core to how we manage the portfolio, and that discipline continues to serve us well. Our spread-based product sales reflect the enhanced asset sourcing capabilities at PPM America. PPM's work has allowed us to direct new money into select higher-yielding asset classes, such as emerging markets, residential mortgages and investment-grade structured securities. This modest shift in new money allocation, combined with a compelling product lineup has helped Jackson maintain a stable and competitive position in the spread product market throughout the back half of 2025. And looking forward, we're excited about the momentum created by our new strategic partnership with TPG, along with the ongoing benefit of our capital-efficient captive strategy. Together, these initiatives will further strengthen our ability to offer competitive spread products that generate attractive financial returns. Given the recent headlines around asset-based finance and direct lending, it's worth noting that Jackson is currently underweight in these asset classes compared to our peers. We actually see potential market stress as an opportunity to step in and be selective investors. Additionally, TPG's expertise in direct lending, where they emphasize strong covenants and deep credit knowledge in the lower middle market segment positions us well as we gradually build exposure in this space. Now before we get into the notable items for the quarter, I'd like to take a moment to highlight our strong performance in book value per common share. Over the course of the year, we returned $862 million of capital to shareholders. As you would expect, that level of return contributed to a modest decline in total adjusted book value since year-end 2024. But importantly, our share repurchase activity reduced the diluted share count, which helped drive a 4% increase in adjusted book value per share, bringing it to $155.78. We're also very pleased with our profitability metrics. Our adjusted operating return on common equity for the year came in at 14.7%, up from 12.9% in 2024, reflecting the underlying strength and resilience of the business. Turning to Slide 10. Let me walk you through the notable items that affected adjusted operating earnings this quarter. We reported adjusted operating earnings per share of $6.61. After backing out $0.10 of notable items and adjusting for the difference between our actual tax rate and our 15% tax guidance, adjusted operating EPS was $6.43. That's a 33% increase from last year's fourth quarter. The improvement reflects the strong spread income growth I mentioned earlier, along with the benefit from a lower diluted share count because of our repurchase activity. As we typically do, we completed our annual actuarial assumptions review in the fourth quarter. This year's review resulted in a $0.23 per share operating earnings benefit compared to a $0.31 unfavorable impact in the prior year quarter. The 2025 update primarily reflected favorable mortality trends, which supported operating income in both our Retail Annuities segment and our Closed Block. The only other notable item this quarter was a $0.13 unfavorable impact from limited partnership results, which came in below our long-term 10% return assumption. Moving to Slide 11. This chart walks through our notable items for the full year. After adjusting for those items, our 2025 earnings per share were up 22% compared to last year. That growth was driven primarily by the strong improvement in our spread earnings, along with the benefit of a lower diluted share count from our repurchase program. On Slide 12, we take a closer look at the diverse and growing new business profile within our Retail Annuities segment. The segment delivered 27% growth over last year's fourth quarter and 10% growth sequentially. Our RILA product suite continues to be a standout. We achieved record sales of $2.3 billion, up 53% from the prior year quarter and 10% from the third quarter. Since launching the product in 2021, RILA assets under management have grown steadily and reached a record high of more than $20 billion at the end of 2025. As I mentioned earlier, our spread products are also benefiting from strong momentum. The successful launch of our new FIA offering contributed to $812 million in fixed and fixed index annuity sales during the quarter. With our recently announced strategic partnership with TPG, we feel very well positioned to continue this growth and expand the potential of our spread-based business. Turning to net flows. Our strong RILA sales and spread product performance drove $2.8 billion of nonvariable annuity net flows in the fourth quarter. On the variable annuity side, net outflows have remained somewhat elevated. This reflects several expected factors: the current moneyness of the block, an aging policyholder base and the impact of older, larger sales vintages coming off their surrender periods. On a full year basis, our surrender rate was essentially flat, reflecting overall strong equity market returns. We saw some quarterly fluctuations in surrender rates this year. In the first half of 2025, surrenders improved as market volatility kept policyholders on the sidelines. But since April, as equity markets reached new highs, we've seen surrenders pick up in the second half of the year. Looking ahead, we expect surrender activity to remain closely tied to what's happening in the equity markets. Importantly, those same strong market returns generated over $28 billion of separate account investment performance for the year, over $9 billion more than our variable annuity net outflows. This helped drive 2.8% growth in variable annuity account values and supported the strong levels of fee income we delivered throughout the year. Slide 13 gives an overview of pretax adjusted operating earnings across each of our business segments. Starting with Retail Annuities, we continue to see strong momentum in our spread business. That performance helped lift our average retail annuity AUM to $268 billion, up from $254 billion in last year's fourth quarter. This growth more than offset the lower favorable impact from this year's actuarial assumption update, resulting in pretax adjusted operating earnings that were $19 million higher than the prior year quarter. In our Institutional segment, pretax adjusted operating earnings were also up year-over-year. The increase reflects higher spread income driven by our expanding book of business. New business activity was elevated throughout the year, supported by strong demand for spread lending and our ability to act opportunistically in the market. Finally, in the Closed Block segment, pretax adjusted operating earnings improved compared to the fourth quarter of last year. The primary driver was a comparatively favorable impact from the annual actuarial assumptions update. Let me draw your attention to Slide 14, which really highlights how the quality and structure of our variable annuity book set us apart and support our economic hedging strategy. With Brooke Re, we've created a framework that lets us align our variable annuity hedging directly with the economics of our guarantees. Our VA guarantees at Brooke Re are well protected, and we're seeing stable regulatory capital and distributable earnings at Jackson National Life. That's been clear in our strong free capital generation, free cash flow and capital return over the past 8 quarters. This structure also benefits how we manage our RILA business. RILA remains at JNL separate from the variable annuity guarantees and is managed and priced on a stand-alone basis. All capital generation from RILA flows through JNL's results. There's a natural equity offset between RILA and our variable annuity guarantees. RILA is exposed to upside equity risk, while the VA guarantees are exposed to downside risk. Each is reserved and capitalized independently, VA guarantees under our modified GAAP framework at Brooke Re and RILA under the statutory regime at JNL with no diversification benefit between the two. While we don't get a capital or reserving benefit from these offsetting risks, we do gain hedging efficiency by netting them internally, which reduces our need for external equity hedging. And if RILA grows to surpass variable annuities in terms of equity risk, that benefit continues. Our external hedging would just shift from downside to upside protection. We see this structure as a real differentiator, underscoring our consistent economic approach and the strong performance of our book. We're confident in the quality of our annuity business and our ability to manage risk effectively. Slide 15 walks through a waterfall comparing our fourth quarter pretax adjusted operating earnings of $529 million to the GAAP pretax loss attributable to Jackson Financial of $376 million. We've heard your feedback. So this quarter, we're also providing additional disclosure that breaks out our net hedging results for VA and RILA separately. This should give you a clearer view of how the offsetting equity risk between these businesses are playing out in our results and hopefully make it easier to compare JFI's net hedge results with what's happening at Brooke Re. One of the themes I want to highlight here is the continued stability in our nonoperating results. Since shifting to a more economic hedging approach at the beginning of 2024, we've seen a meaningful improvement in consistency, which has also supported stronger and more predictable capital generation. Our total net hedge result for the quarter was a net loss of $405 million, driven largely by the impact of equity index implied volatility. Let me break the components down. Our hedging program is supported by a robust and stable stream of guaranteed benefit fees, which are assessed on the benefit base, not account value. This structure means our guarantee fee revenue remains consistent even during market downturns, helping to smooth earnings across cycles. In the fourth quarter, guarantee fees totaled $800 million, bringing the full year figure to $3.1 billion. This continues to demonstrate the durability and predictability of this revenue source. Turning to hedging instruments. Our hedging program produced a $370 million net loss in the quarter. This was primarily driven by losses on interest rate hedges as long-term rates moved higher and losses on VA equity hedges from modest gains in equity markets. Our new disclosure really brings out how the RILA business naturally offsets our VA equity exposure. When markets move higher, we typically see losses on our VA hedges, but those are often balanced by gains on our RILA hedges. This dynamic helps drive better overall hedge efficiency for the portfolio. We recorded a $405 million MRB loss related primarily to our variable annuity guarantees. The biggest driver here was higher equity index implied volatility during the quarter. It's worth noting that implied volatility does not impact the MRB calculation at Brooke Re because that entity uses a fixed volatility assumption, an approach designed to enhance balance sheet stability. Excluding the impact from volatility, MRB movements were modest this quarter and our VA net hedge results tracked closely with expectations. We also recognized a $393 million reserve and embedded derivative loss, reflecting higher RILA reserves tied to stronger equity markets. Much of this impact was offset by gains on our RILA hedges. Stepping back, after isolating the volatility effects I just mentioned, our overall net hedge result for the quarter was a modest $62 million loss, a very stable outcome, especially given the size and complexity of our liability profile. We believe these results underscore the effectiveness of our hedging program in supporting capital stability, managing economic risk proactively and preserving the durability of our business model. Lastly, our annual actuarial assumptions review resulted in an unfavorable impact of $360 million. This was driven mainly by higher reserves from updated policyholder behavior assumptions, including lapses. These increases were partially offset by favorable mortality updates and some model refinements. Given the scale of our variable annuity block, we view the overall impact of these updates as very manageable. Now let's turn to Slide 16, which walks through how Brooke Re's equity position evolved over the course of 2025. Throughout the year, Brooke Re's capital position proved resilient, and we continue to build on our base of hard assets, reinforcing the overall strength of the balance sheet and Brooke Re's self-sustaining design. We started the year in a strong position, about $2.1 billion of capital, which put us well above both our internal risk framework and our minimum operating capital requirements. For the full year, Brooke Re generated $27 million of capital before the annual actuarial assumptions review. Given the market volatility we saw in the second quarter and the higher lapse rates during the year, that's a solid result. Even with those headwinds, we still grew our capital base, which underscores the strength of our hedging and risk management under the Brooke Re structure. Now the assumptions review had a $349 million after-tax impact. This differs a bit from what we saw at the consolidated JFI level, mainly because JFI includes non-variable annuity business. The changes at Brooke Re were mostly tied to updates in lapse and utilization assumptions and reflect our long-term best estimate expectations of behavior. We expect those updates to lead to better actual to expected results in 2026 compared to the last couple of years if experience is similar. At year-end, Brooke Re's equity stood at $1.7 billion before we formed and capitalized Hickory Re. Even at that level, we were comfortably above both our internal and regulatory capital thresholds. Once we added the initial capitalization for Hickory Re, reported year-end equity increased by another $150 million, bringing total reported equity to just under $1.9 billion. Shifting to how we think about risk and capital management at Brooke Re, our goal is to make sure the entity always holds enough capital to stay well above minimum operating capital, even under stress. When we first launched Brooke Re, we discussed how our capital framework was built to hold up under stress, specifically to give us 95% confidence that we could withstand a wide range of market scenarios. That confidence level comes from running a robust set of stochastic scenarios to illustrate how our capital position would perform over time. At launch, we didn't just meet the 95% confidence level. We actually capitalized Brooke Re well above, closer to the 98th percentile of our projected capital distribution. In other words, we started from a position of real strength. At the end of 2025, we continue to be capitalized well into the tail, consistent with the 98th percentile and beyond. So overall, 2025 was a year that tested the structure and Brooke Re performed exactly as intended, maintaining strength through volatility and positioning us well heading into 2026. We expect Brooke Re to remain self-sustaining under normal market conditions. And over time, we see it becoming an additional source of free cash flow. Slide 17 highlights the continued growth in our capital generation and free cash flow. At Jackson, we follow a straightforward philosophy, earn it, then pay it. This framework rests on 3 pillars. Generating free capital, this is where we earn it, converting that capital into free cash flow, this is where we pay it and returning capital to common shareholders, the outcome of the first 2 steps working together. In the fourth quarter, after-tax statutory capital generation was $266 million. We view this metric as one of the clearest indicators of the underlying strength of our business, and it guides how we balance future growth with returning capital to shareholders. Quarterly capital generation was reduced by a onetime reserve increase of about $150 million or about $173 million, including deferred tax impacts, primarily related to the runoff closed block. This adjustment was not related to variable annuities or RILA. Excluding this nonrecurring item, capital generation was broadly consistent with the run rate we saw over the first 9 months of the year. Free capital generation was $235 million in the quarter, reflecting the estimated change in required capital driven by our strong and diversified new business results. For the full year, free capital generation totaled nearly $1.4 billion, well ahead of our $1 billion-plus expectation. As Laura mentioned, we've now added free capital generation to our financial targets for the year. In 2026, we expect to generate at least $1.2 billion in free capital, assuming equity markets deliver a 5% return and interest rates move in line with the year-end forward curve. While we're maintaining our RBC risk appetite at 425%, the stability we've seen in RBC over the past 2 years gives us confidence to shift our focus toward free capital generation, aligning with our earn it, then pay it approach. Free cash flow was again strong and consistent in the quarter. After funding the $150 million initial capitalization of Hickory Re and covering expenses and other cash flow items, free cash flow at the holding company totaled $119 million. For the full year, we distributed over $1.1 billion to the holding company and generated $838 million of free cash flow. Based on our year-end market capitalization, that represents a free cash flow yield of about 12% for 2025. While valuation reflects many factors, we believe this is a powerful indicator of Jackson's value, and it reinforces our commitment to continue repurchasing shares while also investing in growth. Our strong free capital generation and growing free cash flow enabled us to return $205 million to common shareholders in the fourth quarter, a 51% increase from the prior year quarter on a per diluted share basis. For the full year, we returned $862 million, above the top end of our disclosed range. Since becoming an independent public company, Jackson has now returned more than $2.7 billion to common shareholders, exceeding our initial market capitalization at separation. As Laura highlighted, we're increasing our capital return targets again, our fifth raise since going public, setting a target of $900 million to $1.1 billion, up from the $862 million we returned in 2025. Our strong capital position and a high-quality book of business underpin our ability to generate free capital well beyond 2026. This consistent capital generation supports a sustainable stream of free cash flow and enables continued capital returns to shareholders. Looking ahead, we expect growth in free capital generation to accelerate in line with the ongoing growth of our business. These results reinforce Jackson's robust capital generation profile, the stability and growth of our cash distributions and our continued focus on delivering enhanced long-term value for shareholders. Turning to Slide 18. This slide highlights the continued growth in our capital and liquidity position. Our in-force business continues to be a strong driver of profitability. Fee income from our variable annuity-based contracts, along with growing spread-based earnings supported solid capital generation during the quarter. At Jackson National Life, our capital position and RBC ratio have become much less sensitive to equity market movements, thanks to the Brooke Re structure. Today, changes in the equity markets primarily affect our assets under management and future capital generation, not our immediate capital levels or RBC ratio. In that sense, our earnings profile is looking more and more like an asset management business. Consistent with our approach of taking smaller periodic distributions, we paid $300 million to the holding company during the fourth quarter. After accounting for the impact of that distribution on our deferred tax assets, total adjusted capital ended the quarter just over $5.5 billion. Our RBC ratio came in at 567%, comfortably above our minimum target. Overall, we believe Jackson is operating from a position of real strength as we move into 2026. As I mentioned earlier, Brooke Re's capitalization remains well above both our internal risk management target, which reflects a range of detailed scenarios and our regulatory minimum operating capital level. During the quarter, there were no capital contributions to or distributions from Brooke Re other than the initial capitalization of Hickory Re. Looking ahead, we'll continue to manage Brooke Re on a self-sustaining basis given the long-term nature of its liabilities. As we announced last week, our strategic partnership with TPG has officially closed. The growth capital from that transaction will flow down through the ownership chain to Hickory Re. Just as a quick reminder, we received $650 million in value from the deal and issued $500 million of common stock. That equates to roughly 4.7 million shares at an effective premium of 30% at the time of signing. It's a great outcome that further strengthens our balance sheet and supports future growth. At the holding company level, we ended the quarter with $691 million in cash and investments, still above our minimum buffer and providing strong financial flexibility. That's down from $797 million in the third quarter, mainly reflecting the funding of our new captive and capital return to shareholders, which more than offset the operating company dividends. Overall, our fourth quarter results show strong momentum, supported by a solid balance sheet, healthy capital and liquidity levels and a business that's well positioned for continued success. I'll now turn the call back to Laura. Laura Prieskorn: Thank you, Don. Turning to Slide 19. You can see our track record of executing on our business initiatives, delivering on our financial targets and creating value for all stakeholders. 2025 marked another year of significant progress and an important milestone for Jackson as we look forward to new growth opportunities. We expect our long-term partnership with TPG to leverage our core capabilities and lead to an expansion of our spread-based business. Jackson remains dedicated to serving financial professionals and their clients with the goal of helping Americans grow and protect their retirement savings and income. As we reflect on the year and our opportunities ahead, we recognize the hard work of all our associates whose talent and dedication remain our greatest strength. At this time, I'll turn it over to the operator for questions. Operator: [Operator Instructions] Our first question comes from Suneet Kamath of Jefferies. Suneet Kamath: I had a couple on Slide 16. Just in terms of the capital levels, I mean you've kind of given us a qualitative sort of framework for how you think about the minimum capital. But I'm just wondering, is there any way that you can kind of give us a little bit more of a target so we can track this over time? Don Cummings: Suneet, it's Don. So first of all, just on Brooke Re, I think it's important to kind of zoom out and put our progress since early 2024 in perspective. And when we formed Brooke Re, we had shared quite a bit of detail around how we think about and manage capital there. And when we first set it up, the liability profile was almost entirely tied to our variable annuity guarantees. Now since then, we've taken a couple of important steps, both of which happened in the fourth quarter. And we believe those will give Brooke Re a more diversified liability and capital profile than it had initially. So I want to just spend a minute and cover what those are. First of all, we reinsured about $1.3 billion of payout annuity liabilities on a coinsurance basis with assets transferring over to support that block. And these liabilities are somewhat similar to the GMWB benefits on our VA book. But importantly, they don't have any equity market exposure, which means that, that block is going to be more stable over time. And another thing to keep in mind as we bring on assets through our partnership with TPG, we do see opportunities to enhance the profitability of that payout annuity block. Secondly, we did establish Hickory Re as a subsidiary of Brooke Re, and we ceded roughly $1.2 billion of in-force assets and liabilities into that structure. And there are a few advantages that I want to highlight here. Firstly, the modified GAAP framework we already use at Brooke Re is well understood by our regulator, and it's worked effectively over the past 2 years. So it made sense to kind of build on that foundation rather than setting up an offshore structure, which would just add cost and complexity to us. With respect to the liabilities at Hickory Re, which are the fixed annuity and fixed index annuity liabilities, we also get a diversification benefit in our minimum operating capital calculation. And that benefit should increase as the block grows with new sales. And then over the next couple of years, we do expect Hickory Re will be an additional source of free cash flow for us. And longer term, we believe that Brooke Re on a stand-alone basis will also be generating sufficient capital to support distributions back to the holding company. And then finally, the growth capital from TPG that came in at closing, that gives us more flexibility at JNL because it frees up excess capital that we otherwise would have used to fund our accelerated growth plans for spread products. And so that gives us confidence in stepping up our capital return plans as we've laid out in our financial targets. And as I've mentioned on prior calls, we would expect our RBC ratio to come down over time. So we're very comfortable with the performance and the balance sheet strength that we have at Brooke Re, and we'll continue to update you on progress there as we go throughout the year. Suneet Kamath: Okay. That's helpful. And then I guess the second question on the slide is the $27 million of capital generation. It just seems like a low number, especially in a pretty favorable equity market environment. I know in your prepared remarks, you called out a couple of things, the surrenders and I guess, volatility. But can you kind of dimension how big of an impact that had on capital generation? Or maybe said another way, what would you expect normal course capital generation to be? Don Cummings: Yes. We haven't provided guidance in terms of kind of normal market environment, capital generation. But you're right, the 2 items that I mentioned in my prepared remarks, the first one related to the volatility that we saw in the early part of the second quarter, and that certainly was a headwind for us. And then the second item, and we do provide some disclosure on this in our financial supplement and the MRB roll forward, we did see some pressure from higher-than-expected surrenders. The overall objective for Brooke Re is to keep it -- be self-sustaining over time. And we continue to believe that, that will be the case. It's just so happens that this year, we did see a couple of headwinds that resulted in the numbers you see here. Operator: Our next question comes from Alex Scott of Barclays. Alex Scott: First thing I wanted to ask about was just the initiative with TPG and any way to help us think through what that could mean for growth in the retail annuity platform and how ultimately that will lead to flows. And so maybe not asking for an outlook, you probably don't want to give an outlook for flows per se. But maybe just helping us think directionally like what that will look like and when you could maybe expect to get to growth mode for AUM overall from a flow standpoint. Laura Prieskorn: Slightly hard to hear. I think you were asking about the partnership with TPG and what the growth outlook looks like as a result of that partnership. Alex Scott: Yes. Sorry about that. I switched to the headset. Yes, you heard the question, right? Apologies. Laura Prieskorn: Okay. Thank you. Our overall goal is to have a diversified set of competitive products that continue to meet a variety of consumer needs. Within the industry overall, we continue to see strong demand for a variety of needs, income, protection, growth, legacy benefits. So having that broad range of annuity offerings helps support that goal that we have for diversifying sales. Don, do you have anything to add around the TPG partnership to support that goal? Don Cummings: Yes. So Alex, thanks for that question. I would say that I would just highlight the progress that we made in spread products over the last half of this past year. We introduced a new product in -- late in the third quarter that really came online fully in the fourth quarter. That's our fixed index annuity product. And you can see we did between that and just other spread products, about $800 million in the quarter. I think that's probably a good yardstick to think about how much we can generate on an annual basis with the TPG partnership in place. The other point that I would highlight for you is that we'll be leveraging the TPG assets for other product lines outside of just fixed annuities and FIA products. We also anticipate some of those assets will fit in well with our RILA asset allocation strategy as well as even some on our institutional products. So we feel quite comfortable that as you look at our results going forward, we'll continue to be able to produce strong retail annuity sales results. And in terms of your question on when we would expect to get to kind of flat net flows, I would say it probably is going to take us a couple of years to sort of have the additional levels of sales coming in to offset what we're seeing on the VA book. And of course, with the VA book, that's going to depend on market environments because as we saw this year, even though we did have net outflows, we had investment performance that offset that by about $9 billion. So we're pretty optimistic about the partnership with TPG and how that's getting operationalized. Alex Scott: Great. Another question I had via is on the Hickory Re. Just thinking through your comment that, that could be a medium-term contributor to remittances versus Brooke Re more long term. if you had cash flow coming out of Hickory Re since it sits underneath Brooke Re, would that cash flow -- can we assume that in the medium term, that cash flow could be taken up to the HoldCo and go through Brooke Re even if it's not sort of Brooke Re stand-alone? I just wanted to clarify that point, whether it would be retained or not. And then maybe any other comments you have on just potential uses of excess capital you have at the HoldCo at JNL. Don Cummings: Yes. So you're right about the way the Hickory Re structure works. So any dividend that we would pay would go up to Brooke Re. And then we would anticipate, assuming there's not anything unusual going on with markets at the time that we would then be able to distribute that up through Brooke Re to our holding company, similar to the way we do today with our stacked structure on the J&L side. So you have that right. And just in terms of other uses of excess capital, we continue to be focused on growth. We think we have a very good opportunity with our broad distribution network to really focus in on the spread sales here in the near term. And as other opportunities come up for us to grow inorganically, we would look at those relative to how we can leverage that capital for returning to shareholders. Operator: [Operator Instructions] Our next question comes from Tom Gallagher of Evercore. Thomas Gallagher: A few questions. First is just on the Brooke Re equity. If you have a net MRB asset of $4.2 billion, how is the Brooke Re equity only $1.7 billion? What would the other accounting adjustment be on where the value of the net MRB asset is going to? Don Cummings: Yes. Thanks for that, Tom. So you're looking at 2 sort of components of the balance sheet, and I'm not going to get into all the kind of puts and takes, but we obviously have other assets at Brooke Re as well as liabilities. And so obviously, the net of all those represents the equity that we have left. As I mentioned in the kind of the more overview and putting Brooke Re in perspective, we have done a couple of transactions in the fourth quarter with the blocks of business that we reinsured into Brooke Re as well as into Hickory Re. So if you look at Brooke Re's consolidated balance sheet, we have a pretty strong position in terms of invested assets. Also, if you look at the capital that we put in initially, which was a total of $1.9 billion, $700 million of that was hard assets. We've seen that grow over the last couple of years as we've executed on the reinsurance settlements. Thomas Gallagher: Got you. And Don, can you update us on what the hard assets are in Brooke Re at this point? Don Cummings: Yes, I'm not going to give you the exact number, but I would just say that the $700 million has grown pretty significantly. So that's the kind of the stand-alone VA piece. And as I mentioned earlier, those blocks that we moved over in the fourth quarter, those were supported by invested assets as well. So we believe Brooke Re has got a pretty strong consolidated balance sheet. And even if you look at the VA and the payout annuity lines of business separately, we're quite comfortable there, too. Thomas Gallagher: Got you. And then just my follow-up is if we think about the annual actuarial review charges, if lapses do remain high on the VA side and you have another year of, we'll call it, close to breakeven hedging on VA, the $300 million to $400 million that you've been having every year would be a decent percentage of this $1.7 billion. So I guess when we think about playing that out for the next 2 or 3 years, is there a risk that you would have to contribute capital to Brooke Re? Because I know you said you have a buffer. I think it was 98% plus versus 95% CTE level currently. But if I think about just what's happened over the last three years and the why, like, we're how should we think about playing that out for the next two or three years? Thanks. Don Cummings: So, I'll make a couple of comments and maybe just ask Lin Sun, our new Chief Actuary, to kind of give a little bit of perspective on our actuarial assumption review process. But just in terms of thinking about how that could impact capital at Brooke Re, one of the things that I mentioned in my prepared remarks was that because the assumption updates that we included in the fourth quarter, those were primarily focused on lapses and benefit utilization. So we would expect that A versus E policyholder behavior that we disclosed in the MRB roll forward, we would expect that to close somewhat. And so that would certainly be helpful. And we'll continue to see how markets play out. As you know, from our prior discussions, -- we do tend to see a slowdown in surrender activity when equity markets are volatile or in periods where equity markets decline. We saw that clearly in 2002, if you look back on our results then. But maybe, Lin, if you could just add a little bit of color around what we went through on the actuarial assumption review. Lin Sun: Happy to. So as you mentioned, the majority of the assumption unlocking impact in 2025 was due to updating our long-term assumptions on lapses. Over the last few quarters, similar to other carriers in the industry, we saw an increase in lapses on our annuity book. We also saw fluctuations month-to-month and quarter-to-quarter. Lapses decreased. We saw a trend of that in the first half of 2025 before they increase again in the second half of the year. Our analysis showed that the elevated lapse experience was particularly prevalent for variable annuity policies with GLWPs at the money or slightly in the money relative to their account value. And we've updated our assumptions to reflect that dynamic. Based on my prior experience in the industry, I'm confident that our annual assumption process is robust, and we're well positioned for evaluating experience and bringing in the data when it becomes credible and affects our long-term view of experience. Operator: Thank you very much. We have no further questions registered on today's call, and therefore, this concludes the Q&A session. I'll now hand the call back over to Laura Prieskorn for any concluding or final remarks. Laura Prieskorn: Thank you. As you've heard this morning, 2025 was an exceptional year of progress for Jackson. We look forward to continuing these discussions and sharing our progress toward our 2026 targets after the first quarter. We thank you all for joining us today and your continued interest in Jackson. Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter Tenaris S.A. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna, Investor Relations Officer. Please go ahead. Giovanni Sardagna: Thank you, Gigi, and welcome to Tenaris 2025 Fourth Quarter and Annual Results Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information during the call and that our actual results may vary from those expressed or implied during the call. With me on the call today are Paolo Rocca, our Chairman and CEO; Carlos Gomez Alzaga, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, President of our U.S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. During the fourth quarter of 2025, sales reached $3 billion, up 5% compared with those of the corresponding quarter of the previous year and 1% sequentially as our sales to Rig Direct customers in the United States and Canada continue to show resilience and in Argentina, we resumed our fracking and coiled tubing services. Our EBITDA for the quarter was down 5% sequentially to $717 million or 24% of sales. These results include the full impact of the 50% Section 232 tariffs in the U.S. Average selling prices in our Tube operating segment decreased by 1% compared to the corresponding quarter of last year and were flat sequentially. During the quarter, cash flow from operations was $787 million. Our net cash position at the end of the quarter decreased to $3.3 billion, following the payment of an interim dividend of $300 million in November last year, $ 537 million spent on share buybacks and capital expenditure of $123 million during the quarter. The Board of Directors have decided to propose for the approval of the general -- Annual General Shareholders' Meeting to be held at the beginning of May, the payment of an annual dividend of $0.89 per share or $1.78 per ADR, which includes the interim dividend of $0.29 per share or $0.58 per ADR that we paid at the end of November of last year. If approved, a dividend of $0.60 per share or $1.20 per ADR will be paid on May 20, up 7% compared to the dividend per share of the corresponding period of the previous year. Thanks to the benefit of our buyback program. Now I will ask Paolo to say a few words before we open the call to questions. Paolo Rocca: Thank you, Giovanni, and good morning to all of you. 2025 was a year in which Tenaris demonstrated the resilience of its operation in the face of a disruptive geopolitical environment and lower activity in key markets. Thanks to our extensive geographical presence, the depth of the service we offer to our customers and the commitment of our employees, we were able to respond rapidly to the various situations we faced. Our results remained remarkably stable through the year, which we completed with an EBITDA of $2.9 billion and a net income of $2 billion on net sales of $12 billion. Free cash flow amounted to $2 billion, all of which was distributed to shareholders through dividend and share buybacks. We are proposing a further increase of the annual dividend per share of 7% over that for the previous year. At the same time, we maintained a net cash position of $3.3 billion. In the U.S. and Canada, the U.S. was marked by further oil and gas industry consolidation and productivity improvement, a lower rig count and the extension of Section 232 tariff to the import of all steel products, including the steel bars we require for our seamless pipe operation Bay City, and the subsequent increase to 50%. In this environment, Tenaris raised the performance of its U.S. production and supply chain system with its Koppel, steel shop, main pipe production plants at Bay City, at Hickman and Enbridge and various pipe processing facilities acting in concert to achieve a record level of production and supply, 90% of our U.S.A. In both the U.S. and Canada, we strengthened our market position and extended the differentiation we offer under our Rig Direct service model. As customers targeted operational efficiency, we continue to develop and roll out our run-ready and well-integrated services that support them by increasing safety and reliability at the well site. Major oil and gas companies are seeking new production reserves to meet a more resilient long-term demand outlook and they're looking beyond the shales with their fast-to-decline curves, to deepwater development and exploration in frontier region. Tenaris with its capacity to develop product for complex operation and to support fast track development with service and the supply of advanced coated line pipe solution at scale is working with most of these companies as they develop such projects. As new offshore projects are sanctioned around the world, we see many opportunities to renew our order backlog, while we execute on existing commitments. Currently, we are delivering casing for Shell's Sparta 20K project in the U.S. deepwater extending our services for ExxonMobil's operation in Guyana and preparing a service base for TotalEnergies, GranMorgu development in Suriname while planning the production of seamless and welded line pipe and coating for the third phase of TPAO Sakarya gas development in the Black Sea. In Latin America, the Mexican government is taking steps to address the financial difficulties Pemex, which took a toll on oil and gathering activity in the country last year. While in Argentina, domestic companies have been able to raise more than $4 billion in financing to develop infrastructure and expand production operation in the Vaca Muerta fields. We supplied the Vaca Muerta Sur pipeline and are currently supplying the Duplicar North pipeline. We are also investing to expand our new fracking and coiled tubing service business and expect to put a third set of equipment to work before the end of the year. In Venezuela, following the intervention of the U.S. government, we are resuming our service to Chevron operation and building up our service capability in the country to support an increase in drilling activity. In the Middle East, we continue to consolidate our presence with the award of a long-term agreement for the supply of OCTG to the Northwest field development in Qatar, while in the Emirates, we enhanced our Rig Direct service to ADNOC, delivering a record amount of OCTG. Saudi Arabia, also conventional drilling activity was reduced during the year. We completed an expansion at our local large diameter facility, from which we are supplying line pipe for the development of gas infrastructure. In addition to the OCTG, we supply for Aramco drilling operation. Our global integrated industrial and supply chain operations have been key to our ability to respond effectively to the different events we faced during the year. We continue to invest and enhance the efficiency and digital integration of these operations as well as reducing their environmental impact. We made further progress towards our midterm target of reducing the carbon emission intensity of our operations as we brought our second wind farm in Argentina into operation. The 2 wind farms now supply essentially all of the energy requirement for our electric steel shop and operation in Canada. As an industrial company, our commitment to the safety of our employees and to the environment sustainability in our communities is absolute. Also, our indicator have improved this year. We continue to reinforce our preventive action and monitor our performance in this aspect. Tenaris, with its presence across the world, competitive differentiation in product service, the quality and compliance of its operation and the financial strength to support its strategy remains well placed to confront an unpredictable and volatile future. I would like to thank all our employees and the communities which sustain our operation for their constant commitment and engagement that have made possible our results and achievement this year. I would also like to thank our customers and our suppliers for their ongoing trust and support. Thank you very much, and we are open to any questions you may have. Operator: [Operator Instructions] Our first question comes from the line of Marc Bianchi from TD Cowen. Marc Bianchi: I wanted to start by asking about the outlook here in first quarter and maybe you could talk about, to the extent you're comfortable how things progress beyond first quarter. When you talked about being close to current levels in fourth quarter, is that -- should we interpret that as meaning flat? And are there any nuances with volume and price that we should be thinking about as we build that out? And then any comments sort of beyond first quarter would be great. Paolo Rocca: Well, thank you, Marc. Well, within our visibility today and considering many parts moving in the energy market and also in the general geopolitical environment, I think it will not be easy to have a medium-term forecast. Now what we see is a relative stability of our performance and our position in the market during the first quarter and it is not so easy. We do not see today a point that should disrupt our operation even in the second quarter. But for the time being, as we say, we feel comfortable in forecasting the first quarter in which the level of margin and in general, the results we can get are more or less in line with the 4Q. But it's difficult to have a more long-term forecast considering the volatility of the environment in which we are moving. Marc Bianchi: Yes. That makes sense. And then the other one maybe somewhat related, the margin resilience in the fourth quarter was quite good. And I'm curious how much of that benefited from some of the actions that you're taking? I think you mentioned Koppel in the press release to try to offset some of the tariff headwind that you've experienced. I think previously, we talked about that being something like $140 million a quarter of tariff costs that you're having to deal with. So I'm curious how much progress did you make on that in 4Q? And what is the opportunity going forward? Paolo Rocca: Well, we are, let's say, continuously operating in the efficiency of our operation, including our capacity to produce more steel in the U.S. So we expect for the first quarter of next year, that a lower level of tariff we get into our IFRS because in the end, we are operating on this even in the past few months. And we think that what is getting into our results in the first Q will be relatively slightly lower of what we have in the fourth Q. But on the other side, the indicator of prices in North America, I mean, in spite of the impact on the hot-rolled coils and other products of the steel industry are moving relatively slow in the pipe business and especially in a welded pipe. So considering the impact of slightly lower tariff and where we are in terms of Pipe Logix and so I think what is moving around in the world, I think that this is the component that justify our vision of a relatively stable top line and margin data for the first quarter. Operator: Our next question comes from the line of Matt Smith from Bank of America. Matthew Smith: My first question was around the international business and on pricing. Just whether you have seen any signs at all of pricing pressure given how some of the international benchmarks have traded down, I guess, since summer 2025? Any color you could give on different regions could be useful. Paolo Rocca: Thank you, Matt. I would say that, as you know, our business globally is composed of many different niche, high-demanding product, different region, different level of service. So I would say, to some extent that the price impact is more easy to understand and project in North America than internationally. But by the way, I will ask Gabriel to give you a vision of what we see in front of us on the ground. Gabriel Podskubka: Yes. Thank you, Paolo. Good morning, Matt. On the pricing on the international markets, we see, in general, some stability, a balanced demand and supply, especially on the premium products, where we are mainly focused. So premium is our service, high technical qualified pipelines. This demand is quite strong, driven by offshore, by Middle East, in gas and our service development. So we see the demand on these segments quite stable. We have, in many cases, long-term agreements that have some formulas related to raw materials. So I would say that the majority of our backlog and our business in international market are driven by stability in the pricing. It is true that there are some spot tendering where we're seeing a slight deterioration in the environment, especially when we are talking about lower end applications, but this is not the most important part of our business, and this is something that we monitor. So I would say, given all the moving pieces and the increasing component of our offshore during 2026 in our international mix, I would say that the pricing in the international markets are quite stable for Tenaris. Paolo Rocca: Thank you, Gabriel. Let me just add one point on which maybe -- that is the European. In Europe, maybe it's early to perceive the impact, but the CBAM and the safeguard that is supposed to raise the quota -- to raise the tariff to 50% and reduce the quota by almost 50% may have a favorable impact on relatively important segment of our international business that is all supported by the industrial power gen activity into Europe. To some extent, I think in the view of the overall say, future of our operation, maybe not immediately, but we should be able to maybe improve our situation and pricing in Europe. And also this reflects with the present exchange rate gets into our -- to our top line relatively well. Matthew Smith: I wanted to ask a second question around the buyback, if I could. So I appreciate the current tranche of $600 million is still ongoing, and we'll have to sort of await the next announcement later in the year. So I just wanted to ask, check whether your philosophy around the buyback has changed at all since last year? Or should we very much expect this to continue to be a material component of shareholder returns in the near future? Paolo Rocca: Yes, thank you. As you are saying, the General Assembly and the Board decided for a program of share buyback of $1.2 billion from May 2025 until May in 2026 divided in 2 tranches. The second tranche has been approved again in October. Now the decision obviously is to the assembly and the Board for the decision on this ground. But let's say, the factors that were relevant for the decision on the shareholder didn't change so much. So we will see if in the assembly in May and the Board after this should decide on this, when the second tranche of $600 million will be closed. They will consider the different factor, the level of cash availability in the company, the perspective of this. And on this basis, they will consider a possibility to continue the program of share buyback. Operator: Our next question comes from the line of Arun Jayaram from JPMorgan. Arun Jayaram: I was wondering if we could talk about your expectations around potentially getting to an inflection point in the Pipe Logix pricing indices, just given your thoughts on import trends and where -- when and where could do you expect us to see that pricing inflection point? Because it continues to trend down, call it, in low percentage points at this point, looking at the most recent pricing data? Paolo Rocca: Yes. Thank you, Arun. Well, the factors that are, let's say, having an impact on the Pipe Logix are different. But you should also consider that there is a Pipe Logix for seamless and the Pipe Logix for welded. What we see is that, to some extent, the Pipe Logix for welded is having a drag down on the overall impact, something that maybe we were not estimating -- fully estimating before. Why? When we saw the hot-rolled coil index going up as it is going up today, we were considering that this should have driven an increase in the welded pipe. But the import of welded pipe coming in based on the Chinese or Southeast Asia or other sources flat product is, let's say, containing movement in the Pipe Logix for welded. And this is, to some extent, having also an impact on the Pipe Logix for seamless product. Now the hot-rolled coil went up so much. There is clearing the way for some import in the welded product and putting under stress the producer of welding product based on hot-rolled coils coming from the U.S. In my view, this is kind of temporary because antidumping action against importation or import of welded will contribute to the gradual alignment of the Pipe Logix to the higher level of the hot-rolled. But this is not something that we can anticipate immediately for the first quarter. But over time, should be acting, should be a factor. Arun Jayaram: Great. And my follow-up, Paolo, I was wondering if you could just provide us your thoughts on how Argentina could play out in 2026 versus 2025? I know that you're adding a third frac fleet in Argentina, but give us a sense of how you see things progressing in the ground because we have seen some IOCs adding rigs in that market. Paolo Rocca: Well, let me tell you that as I was saying in the previous conference, after the election in Argentina in November, the confidence on the investment community is increasing in Argentina. And even the oil and gas companies have been able to finance more than $4 billion, collect financing from different tools that will be used to, let's say, promote and carry on investment planned during 2026. This process has been relatively gradual, but I think that over the second part of '26 and also following the biggest investment in the infrastructure, we will see this collection of financial capability will transform into a higher level of drilling in the country. This has been slower than probably we were expecting 1 year ago because opportunity are there, but also the level of country risk stayed a little higher after the election than we maybe were estimating. And this is maybe slowing down or at least is making more gradual -- the pickup has increased. Also some of these resources has been used for consolidation in the industry, especially by local player. And after this consolidation, the investment will go in operation in the development. First, some of the acquisition has been completed and gradually in this field, drilling will increase. I would expect in the second half of 2026, we will see something moving in this sense. I remember, part of the drilling containment has been coming by the reduction of the operation in the south part of the country. Now this is obvious. There has been a closure of operation in the South. So the key and the core of it -- of everything will be Vaca Muerta. Operator: Our next question comes from the line of Sebastian Erskine from Rothschild & Co Redburn. Sebastian Erskine: I'd like to just start on the margin trajectory for Tenaris in 2026. And I think, Paolo, you mentioned earlier about the impact of kind of hot-rolled coil on ERW margins. I mean, looking at that, I think in the U.S., those have compressed about sort of $350 a ton since August. So I guess that would equate to something like a sort of $35 million, $40 million quarterly cost headwind, but that will take a while to show up. So when does that flow through into COGS? Or is it something we shouldn't really be thinking about as a meaningful impact? Any color there would be helpful. And then I guess on top of that and more positively, when we look into the second half of the year, you've obviously got a lot of offshore work to materialize. So you mentioned Sakarya, Suriname and presumably, obviously, that's higher margin. So can we expect you to operate at the top end of your kind of 20% to 25% EBITDA margin guidance? Is that realistic going forward through the rest of the year and a kind of second half weighting? Paolo Rocca: Maybe, Gabriel, you can give an overview on part of the question. And then eventually, we will ask Guillermo on the other pathway. Gabriel Podskubka: Sure, Paolo. Good morning, Sebastian. Going to the part of your question related to offshore and how they will play out during 2026. I would say that the market in the offshore is quite operating at high levels. We have a strong backlog that we need to execute. As Paolo commented in the opening remarks, we are getting ready to deliver this impeccable execution. These are complex projects that require local deployment. You mentioned the Suriname project. We are building the new service base in Suriname. The new -- the first shipments will arrive in June. So we are ready to deploy the OCTG and the Rig Direct services there into the second half of the year. We are also, for example, producing today thermal insulation coating in Nigeria to support the Shell Bonga North deepwater development. So these are important part of our focus and attention is on delivering this high backlog of orders. And we expect revenues in the offshore in the first half of 2026 to be higher than the second half of 2025. When we talk about the second half, it's true we have an important backlog of Sakarya and other projects. Some of these awards -- additional awards require FIDs. We see some of the FIDs being announced towards the end of this year or even in 2027. So this will depend. So we don't have fully confirmed the backlog of second half of 2026. But we are confident that it will be at least as positive as the first half of 2026. So overall, I would say, the offshore contribution will be important for Tenaris. And if you look at the industry projections, the level of FIDs of deepwater that we are seeing for 2027 are pretty strong, higher than the average of '25 and '26. And we are engaging with our customers early on in those projects much earlier than the FID. So we believe that we're in an offshore cycle that is going to be sustained for a multiyear period. Paolo Rocca: Yes. This is very important. When we look at the estimate of the investment in deep offshore for '27 and '28, the number apparently of estimation are showing level of investment in the range of $120 billion in '28 that are almost 3x some of the low-end years in the past 2, 3 years. So long term, look promising for this. Now Guillermo, maybe you can add on the U.S. operation best vision. Guillermo Moreno: Yes. Thank you, Paolo, and good morning, Sebastian. Well, regarding your question about the trajectory of margins in the U.S. and particularly for our ERW pipes, clearly, the recent increase of prices of the hot-rolled coil and still the reduction of prices for the same products is putting a lot of pressure on our margins. And that is going -- that are going to be reflected mainly in the second quarter. For the following quarters, with all the volatility that we are seeing, it's more difficult to forecast, as Paolo explained before, but -- and will depend mainly on the ability of the Pipe Logix to recover that we think that eventually will based on the push of the cost hot-rolled coil and scrap and also because of the expectation that the imports will continue to go down in the future. Operator: Our next question comes from the line of Stephen Gengaro from Stifel. Stephen Gengaro: So 2 things from me really. One is, can you talk a little bit about your expectations in 2026 for any material changes in working capital as we sort of try to think about free cash flow generation? And then maybe aligned with that, what level of cash do you feel like you need on the balance sheet to run the business? Like what level is excess versus what's sort of normal necessary operational cash? Paolo Rocca: Thank you, Stephen. Well, in general, remember, it's not only a question of the capital we need to run the business, but we also need to have always in mind the capital we need to have available for any expansion or opportunity that may come in front of us. This is an important consideration for the Board, for everybody when we consider the financial strategy in the flows to the shareholder. But as far as the working capital is concerned, I would ask Carlos an overall view because there are some areas like the receivable from some of the clients that is improving. And so you can give us a view of how you see this. Carlos Gomez Alzaga: Sure. Thanks, Paolo. For the 2026, we expect to be quite neutral in working capital, but we will have some swings over the year. Especially in the first quarter, we're expecting an increase in working capital, mainly driven by our accounts receivable. As you saw during the fourth quarter, we have a big reduction in receivables, mainly driven by collections in some -- big collections from Pemex. I think with Pemex, we have arrived to a level that from now on will maintain or increase a little bit. So we won't be seeing a working capital reduction coming from there. And then we are seeing also some terms, we negotiate some terms with customers in the U.S. that might impact a little bit our working capital needs. And also, we are seeing some slight increase in sales for the first quarter that will also imply an increase in account receivables. Paolo Rocca: In terms of inventory, maybe for managing our -- in our balance sheet, the service component of the company is very visible. We have the fixed capital that is slightly higher than our working capital because in the end, we have a lot of inventory to support our service strategy and our Rig Direct strategy. You think, Gabriel, we can imagine some reduction of this streamlining inventory or basically you imagine a stable situation here. Gabriel Podskubka: In general, Paolo, we are always looking for opportunities to improve. This is the case in all our Rig Direct programs, we are managing and balancing the ability to supply and have the right stock at the right moment and have efficient working capital. So this is a constant work. We have done an improvement during the year that we will continue this year on the work in process material. So this is something related to our industrial efficiency where we have been improving, and we have more room to improve. And then there is a part of steel as we have this important LSAW pipelines that we need to buy the steel in anticipation. So typically, there is a longer lead time on these large pipelines that are also reflected throughout the year. But this is an area of attention, and we always think there is room for improvement. Paolo Rocca: It is important for projects like Sakarya. Gabriel Podskubka: For example. Paolo Rocca: Long term, long period of time. Gabriel Podskubka: Yes. Paolo Rocca: And also our operation may demand working capital for serving ADNOC with a long operation and stock demand. Gabriel Podskubka: We are serving every month 550 rigs worldwide. So this requires to have the raw material close to this rig. Paolo Rocca: Serving 550 rigs every day imply to keep all the inventory even in a remote region or at least like in the Gulf. But still, we're working every day to understand how we can optimize this by the way. Sebastian Erskine: No, that's very helpful. Operator: Our next question comes from the line of Alessandro Pozzi from Mediobanca. Alessandro Pozzi: The first one is really going back to the Q2 guidance. You mentioned a bit of an impact from higher raw material costs. I was wondering if you could perhaps quantify or give a sense of what that could be in Q2? And also, as we look throughout the year, I was wondering if there is any quarter where we could see an impact from mix, for example, more line pipe versus seamless and having an idea of the cadence of line pipe volumes, I think it could be quite interesting? And also on maintenance, whether you have any big maintenance quarters? And second question on Argentina. Can you comment on the level of competition you've seen there? We've seen an Indian company getting a contract for a pipeline. And I was wondering your thoughts about the competition there as volumes, as you pointed out, are going up possibly from second half? Paolo Rocca: Thank you, Alessandro. Well, on the first point, there is, let's say, the impact of the row. When we look at the medium term in terms of this, we always keep -- follow basically 4 points: the Pipe Logix for seamless, the Pipe Logix for welded, the cost of hot-rolled coil and the cost of scrap. So on these 4 variables that are moving are acting on our, let's say, the indicator in the formula of our contract many times and also the costs that are underlying. Up till now, I mean, what we see is an increase in the hot-rolled coils that is not followed by the Pipe Logix in welded because there is import from companies that could stay below the line of price, even paying 50%. This is hitting our -- to some extent, in our margin, but we think that this will be a reaction by the Pipe Logix some antidumping action to contain import. And I will ask Guillermo, if you see this happening in medium term, I mean, when we can recover the increased cost of the hot-rolled coils in our top line. Guillermo Moreno: Yes. I think that following what I said before, I mean, remember, there is always a lag between the Pipe Logix and how they reflect in our prices. So normally, we have 1 quarter delay. And while the impact of hot-rolled coils, it comes sooner than that. Our expectation would be that we should start to see some reduction in Q3, but particularly in Q4. Paolo Rocca: Thank you, Guillermo. Now on the line pipe seamless after the acquisition of Shawcor, the line pipe for us is very relevant, and we are I think very competitive. But maybe, Gabriel, you see some changes in the balance between 2. Gabriel Podskubka: Yes, Paolo. Alessandro, regarding your question about the cadence of the pipeline projects, I would say that it's quite stable during the 4 quarters of this year. This is the visibility that we have today and pretty much in line in volumes on what we had on 2025, where we had important projects like Sakarya -- I mean, like [indiscernible] in 2025 in Brazil. This year, we are concluding some pipelines in Argentina in the first quarter and second quarter. Then we will have Sakarya in the third and fourth quarter. We have, I would say, a relatively stable plan of pipelines in Saudi Arabia as well. And then the deepwater pipelines that we have in different parts of the world. So I would say, there is not a significant imbalance in our shipments of line pipe. Paolo Rocca: Thank you, Gabriel. On the last point on the tender in Argentina. Well, this was a tender for a large project for producing LNG in Argentina. The project is carried on by a private company that, let's say, include different shareholders, but it's a private company. They made a tender, a very open tender to everybody. And basically, we lose the tender because they were higher than the lowest bidder. The bidder, as you were saying, was an Indian company. Things like this happens, obviously. Now what we are doing, we are analyzing the offer to see if this is an offer that is following the trade practice or is exposed to potentially an antidumping case raised by us. For the time being, we didn't take the decision here. We are just studying the condition, the condition of the local market for the Indian company, the condition of the pricing of this because we think this is important. We also remember that Argentina had signed an agreement with the United States in which both parties are committing themselves to address the unfair trade practices in both countries. It is logical for U.S. to advance or introduce close of this in the relation with different region, different areas. And this is part of the agreement, the reciprocal trader investment agreement between Argentina. So we think there should be a good environment to analyze the specific situation of this offer and this tender. Alessandro Pozzi: All right. I don't know if I can squeeze in a last one on Venezuela. In your opening remarks, you mentioned that Chevron is ramping up drilling activities. Could you quantify the Venezuela opportunities short term, longer term for Tenaris? Paolo Rocca: Yes. On this, Gabriel, you follow closely this. Gabriel Podskubka: Yes, Alessandro on Venezuela, clearly, the situation is evolving. It's a dynamic environment. But clearly, there are signs that things are going to move positively with the hydrocarbons law and the recent of licenses, I think there are clear signs that some resumption of activity will occur. Today, Tenaris is in a unique position. We are fully serving the Chevron, the only major that is operating in Venezuela. They have a plan to accelerate rigs and demand for 2-wheelers, and we are ramping up for that. This is today something limited, but we expect to expand into 2026. So we are also following the licenses of the other majors that might be coming back to Venezuela soon. So this is, I would say, still in the $50 million for 2026, but with a clear perspective of a higher potential into 2027 and when maybe more clear plans about the other majors are materialized. But overall, a big upside potential in the midterm, depending on how things evolve. Paolo Rocca: Remember, Chevron will not be alone. There will be other company moving. I think our position in Venezuela is unique. Remember, in Venezuela, we're operating the only seamless pipe plant until the plant was expropriated in 2008 by the government by [indiscernible] and at that time, we were the company serving the oil industry in Venezuela. So we also have human resources or people that are familiar with the operation in Venezuela, the service, the complexity on this, the product demand and so even if a lot of time passed, but we still, I think we have a very competitive and differentiated position. Alessandro Pozzi: Right. Sorry, did you say $15 million EBITDA, 1-5? Gabriel Podskubka: $50 million of revenue, 5-0. Operator: Our next question comes from the line of Luigi De Bellis from Equita SIM. Luigi De Bellis: Just one for me. On the Middle East and Mexico, could you share your view on the evolution for the coming quarter for both Middle East and Mexico? Paolo Rocca: Thank you, Luigi. Well, starting, let's say, from Mexico. Mexico, there has been a number of positive events in supporting Pemex. The government capitalized Pemex with a program of $20 billion that is important. And now Pemex is also issuing bonds and getting access into the market for important sum like $1.7 billion. I mean, relevant access with government guarantee. Now what we do not see yet is the definition of the plans that the Pemex will execute during 2026. We do not have clear indication of this. And the private company are moving slowly. And some of the group is moving. Obviously, Woodside in the Trion is moving on. But some of, let's say, the contract that may have enabled private company to come and develop the resources. In my view, this is moving relatively slowly today. Maybe by the end -- the middle of 2026, we will have a better understanding of how they will organize, let's say, the development of the clearly huge resources that Mexico has. Now the question on Middle East, medium-term vision, I think, Gabriel, you also may comment on this. Gabriel Podskubka: Yes, sure. Luigi, for the question on Middle East, I would say, there's not much change on what we have been reporting in the last couple of quarters. Activity remains high. All the main key countries are investing. We have a strong position there with our long-term agreements in Saudi, UAE, Qatar and part of the market in Iraq as well. So I would expect our revenues and shipment in the next 2 quarters, first and second quarter of '26 to be pretty much in line with the last 2 quarters of 2025. The only noticeable news is a probable uptick of drilling activity in Saudi. This is still to be confirmed, but probably during the second quarter of '26, maybe later in the year, we will see a comeback of rigs in Saudi, which reduce rigs during 2025. So we'll monitor that, and there could be a potential upside, but for the second half of this year on the [indiscernible] side. Operator: Our next question comes from the line of Marco Cristofori from Intesa. Marco Cristofori: My question which relate on shale oil, shale industry in the U.S. Let's say that since the end of 2023, we have seen declining rig count, but a growing crude output. So -- and also breakeven are going strongly down according to oil [measure]. So do you think that this trend could allow a further increase of your volumes in the U.S.? And secondly, there are several insights that the shale in the U.S. could reach a plateau in the second half of 2027. So how do you see the evolution of the shale industry in the U.S.? Paolo Rocca: Yes. Thank you, Marco. I would ask to Guillermo to give his view on the evolution of this. In the question of plateau, frankly, I wouldn't -- I don't think we are able to predict the plateau. It will depend on the overall price of oil around. And there are many issues that are unpredictable concerning the major production region and so on and so forth. So in U.S. the plateau has been forecasted in the past at a lower level, and it is continuous surprising us with higher. And so I wouldn't bet on where this number will be in '27. Guillermo, on the question of the productivity. Guillermo Moreno: Yes. I mean, as you said, I mean, the operators in the U.S. have been increasing their efficiency and productivity big time in the last 2 years. So with a much less number of rigs, they are not only producing more, but they are drilling almost the same amount of wells, and they are even going longer. So we are seeing much less rigs, but more production and slightly reduction in the consumption of OCTG compared to what we used -- I mean, so there is no such correlation that we used to have with the rig count. Now looking forward, we still see kind of a stable market for 2026 compared to 2025. We may see some reduction of activity, slight reduction in oil offset by an increase of activity in gas. And as Paolo said, difficult to predict about production. Everybody is talking about plateauing, but at the same time, we see them becoming more creative and producing more oil from each well with the new technologies in terms of fracking, but also in terms of the level of chemicals they use. So we need to see as to where the innovation of the industry can go. But clearly, if we are not at the peak, we are not far from it with this level of activity and rig count. The other variable that we need to take into account is that during the last 2 years, there has been a reduction of drilled by uncomplete wells. So some of the increase of the activity was also coming from wells that were previously drilled but not completed. The level of inventories of those wells has gone -- has come to kind of a bottom. So we don't expect much more of this in the coming quarters. Operator: Our next question comes from the line of Kevin Roger from Kepler Cheuvreux. Kevin Roger: I just have one question to follow on the U.S. and all those stories on the tariff implemented by the Trump administration and notably on the recent news flow that the Trump administration could reduce the tariff on steel and aluminum. I was wondering if you comment a bit more on what should be the implication on your side from a potential reduction on the tariff if, for example, we come back to a 50% steel tariff to 25% or something like that. Just to understand the potential impact on the U.S. OCTG market if we move in that direction, please? Paolo Rocca: Thank you, Kelly. Well, we don't know which is -- I mean, we only have an article on the newspaper. We do not have a written definition. If I should say, the issue may come from the impact of the U.S. economy of the extension of the 232 to the derivative of steel. There are in many products, derivative of steel, which means that they contain steel, there are basically affect price level in the states, but are not having a beneficial impact of industry in the states that is not producing this. Now this universe of derivative increased so much that I think the comment of Trump maybe are just indicating a willingness to reshape what is considered derivative and what is not. Remember, there has been stages of expansion of the definition of derivative 1, 2. And before going to the third, he is considering what would it be, let's say, not creating undue distress in the pricing system. So this is what I understood. We will reconsider the derivative more than reconsidering the level of 50 for 25 because this is a key component of the 232. I don't see this to change. Operator: Our next question comes from the line of Jamie Franklin from Jefferies. Jamie Franklin: So firstly, and apologies if I missed the answer to this one, but I just wanted to focus on your other business segment. Obviously, a big revenue and margin recovery in 1Q, driven by your fracking and coiled tubing services in Argentina. Can you just talk about how you expect that to trend through 2026 and whether we can expect a similar contribution in the first and second quarter and beyond that? And then the second question, just if you could give us an update on your CapEx expectations for 2026 and kind of an outline of where you expect to be spending? Paolo Rocca: Thank you, Jamie. On the oil and gas, I was saying, during the second part of 2026, we are considering that the activity of oil and gas fracking should go up. The drilling activity will also pick up later on. There will be more need to frac. We are just bringing in one additional set of fracking because we are anticipating some increase by the end of the year. And this should drive to some increase on our activity in the second half of '23. This is basically the position on this. The other point, CapEx, I mean, the CapEx will be more or less in line with what we have been spending in 2025. Looking at the forecast, we see even something lower. But I imagine that during the year, new need may come out. Usually, there is something that is coming out from specific intervention. So there will be something lower when we look at this from a planning point of view today. But maybe in the end, we will be close to the level of today. Operator: Thank you. At this time, I'm showing no further questions. I would now like to turn the conference back over to Giovanni Sardagna for closing remarks. Giovanni Sardagna: Well, thank you, Gigi, and thank you all for joining us today. Bye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Fourth Quarter and Full Year End 2025 Results Conference Call. [Operator Instructions] At this time, I'd like to turn the conference call over to Siren Fisekci, Vice President, Investor Relations. Please go ahead, ma'am. Siren Fisekci: Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our fourth quarter and full year 2025 results. This call includes forward-looking statements and information and references non-GAAP measures. Please see the cautionary statements in our MD&A, news release and presentation slides for the period ended December 31, 2025, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO. Michael Steinmann: Good morning, everyone. I'm glad you could join us to discuss Pan American's 2025 results and our outlook for 2026. I'll start with the headline. We delivered record financial results across the board in Q4 and for the full year 2025, reflecting strong execution of our business and meaningful margin expansion from higher metal prices. Net earnings were a record $452 million in Q4 or $1.07 per basic share, which included $61 million of income from our investment in Juanicipio. For the full year, net earnings were a record $980 million or $2.56 per basic share. On an adjusted basis, earnings were $470 million in Q4 or $1.11 per share, and for the full year, $959 million or $2.54 per share. The record financial results reflect both the operating strength of our assets and the leverage we have to metal prices. Importantly, that translates into record attributable free cash flow of $553 million in Q4 and $1.2 billion for the full year. Cash and short-term investments increased by $408 million from Q3, totaling $1.3 billion at year-end or $1.4 billion, including our 44% interest in cash at Juanicipio. To allow shareholders to participate directly in rising net cash levels, we declared a dividend of $0.18 per common share, our third dividend increase in a row. Turning to operating performance. Attributable silver production of 22.8 million ounces in 2025 exceeded the top end of the guidance range we have increased in November, while attributable gold production of 742,200 ounces was within guidance. Silver segment all-in sustaining costs, excluding NRV inventory adjustments, were $9.51 per ounce in Q4 and $13.88 per ounce for the full year. Silver all-in sustaining costs in 2025 were below the decreased guidance. The key contributor here is Juanicipio, which has been performing better than expected since we acquired the mine in September 2025 through the MAG Silver transaction. For the gold segment, all-in sustaining costs, excluding NRV inventory adjustments, were $1,699 per ounce in Q4 and $1,621 per ounce for the full year, which was within our guidance for 2025. It's worth noting that both silver and gold segment costs in Q4 were impacted by higher royalties and worker participation expenditures reflecting the increase in metal prices. The silver segment is also affected by additional royalties at La Colorada related to mining and adjacent concession, where we paid the concession owner a share of net profits earned on ores from their concession, which we treat as a royalty expense. Royalties are also impacted at San Vicente to reflect profit sharing with the state-owned mining company, COMIBOL. In 2025, we made good progress on our major projects, investing $94 million, in line with our guidance, to advance several major projects. Most notably, at La Colorada, where the discovery of multiple high-grade silver zones and the segment expansion of mineral resources have led us to reevaluate the development plans for the Skarn project. We now see an opportunity to integrate the mine plans and infrastructure of the La Colorada vein mine with this current project to a phased approach to development. The phased approach would allow us to focus on higher grade, lower tonnage and less capital-intensive initial stage with the option to target lower grade material in a future expansion. We are aiming to release an updated technical report for La Colorada in the second quarter of 2026 to include a preliminary economic assessment of the new development approach for the Skarn project. There are also continuing discussions with our potential partners on this project to include the proposed changes. At Jacobina, our investment in 2025 were directed at strengthening operational reliability and to advance long-term growth initiatives. We have provided more details on these initiatives in our MD&A, so I won't run through them item by item. But at high level, they include plant upgrades, tailings filtration and filter stack and paste backfill plant. At Escobal, the Guatemalan Ministry of Energy and Mines continued meetings in Q4 2025 to advance the ILO 169 consultation process, and in December 2025, posted an update on progress for the October 2024 to November 2025 period. The ministry also conducted an inspection in Q4 and confirmed our activities are compliant with the court order and suspension of operations. As we have said previously, there is no time line for completion of the consultation process and no date for restart. Turning to 2026 guidance. For silver, we are guiding attributable production of 25 million to 27 million ounces and silver segment all-in sustaining costs of $15.75 to $18.25 per ounce. The year-over-year increase in silver production reflects, in part, the full year contribution from Juanicipio, along with mine sequencing into higher silver grade at Cerro Moro. For gold, we are guiding attributable production of 700,000 to 750,000 ounces and gold segment all-in sustaining costs of 1,700 to $1,850 per ounce. We expect higher grades at Timmins, plus the full year of production from Juanicipio, offset by a lower contribution from Dolores as residual leaching declines and at El Penon from the exhaustion of low-grade stockpiles and lower ore tonnes processed. Our all-in sustaining cost guidance for both the silver and gold segments reflects higher metal price assumptions, which flow through to royalties, worker participation payments and increased smelting and refining costs due to price participation. Needless to say, increased metal prices far outweigh these additional royalties and provide superior return to our business, as seen with record earnings and cash flow in Q4. Sustaining capital is expected to be similar to 2025 with the addition of capital for Juanicipio. We also plan increased project capital to advance La Colorada Skarn and Jacobina and at Timmins, with part of the increase directed toward satellite deposits, reflecting positive drill results and continued work on exploration and preliminary engineering. Please refer to our MD&A for further detail on our 2026 outlook, including an operating outlook by quarter. As we look ahead, we see several meaningful catalysts for 2026. First, with metal prices currently well above Q4 and last year's average, we see potential for strong free cash flow and high returns of capital to shareholders while also funding an expanded exploration program, internal growth projects and further strengthening of our balance sheet. Second, we expect to release an updated La Colorada Skarn PEA in Q2 2026, which we believe will demonstrate higher risk-adjusted returns than the original PEA for the project. And third, the Jacobina optimization study is advancing well, and we look forward to sharing findings and opportunities as the engineering work progresses. Before I wrap up my prepared remarks, I would like to provide a few thoughts on the metal price environment. This is an exceptionally fortunate period for Pan American Silver and our investors, as the increase in metal price coincides with increased silver production, driving higher levels of free cash flow. Gold strength has been driven by sustained Central Bank purchases and renewed investor interest and volatile geopolitical backdrop, U.S. policy uncertainty and weakening confidence in fiat currencies, particularly the U.S. dollar. Those underlying drivers are similarly supportive for silver, in addition to supply/demand fundamentals, with the silver market expected to remain in a deficit for the sixth consecutive year in 2026. We are well positioned in this environment, remaining unhedged on both gold and silver, and with a focus on delivering margin expansion. To close, 2025 was a record year for Pan American: record revenue, earnings and free cash flow, paired with strong operating execution and a stronger balance sheet. We are entering 2026 from a position of strength with a clear plan: Execute safely and reliably, generate strong cash flow, advance our high-quality growth pipeline and return capital to shareholders in a disciplined way. And with that, I'd like to open the call for questions. Operator: [Operator Instructions] Our first question today comes from Cosmos Chiu from CIBC. Cosmos Chiu: Maybe my first question is on Juanicipio. Michael, as you mentioned, very strong results so far. So it's been about half a year now. How would you describe your overall experience with the asset so far? And what has exceeded expectations? Is it throughput? Or is it grade? Or is it both? And is that sort of outperformance sustainable? Michael Steinmann: Yes, it's a bit less actually than half a year. I think we took over mid of September, somewhere around that, from MAG. Great experience so far. And as you can see in the results, I'm very, very happy, but I see -- continuously very happy, but I see what Juanicipio is producing. Of course, when you look at long-term production profiles and the geology of this kind of deposits -- and by the way, that's the same for like a deposit of La Colorada -- when you look at that geology, there's a clear zonation with metals. So you go from precious metals to more base metals. Lead, zinc, and deep down, you would go into copper really, really deep down. So that's kind of the geology of this kind of deposits. So over long term, that's change as you see, but exploration, of course, a good example is La Colorada [ again ] for that or the neighboring mines of Juanicipio as well. With exploration, you keep finding new veins as well, which, again, have higher precious metal content on the top and then go deeper down into base metals. So over the long term, you should obviously expect that the silver grades will be reduced and the base metal grades increase, but that's -- you can look that up in the technical report for it. But as you said, last year, this year, it looks like a very strong silver producer for us and very low cost. Cosmos Chiu: Perfect. And then good that you brought up La Colorada. I wanted to ask a question about La Colorada Skarn. As you mentioned, new technical report is coming out sometime in Q2 2026. But ahead of it, I don't know how much you can share with us, Michael. But what kind of -- in terms of that phased approach, what kind of different tonnages are you sort of evaluating? What kind of size are you sort of evaluating at this point in time? What's kind of like the cost/benefit analysis are you considering right now? And what can we expect when that comes out? Michael Steinmann: Sure, Cosmos. And yes, you need to be patient a little bit more. In a few more months here, it's coming soon. And it's a very exciting project. And that phased approach really has changed the project quite a bit. If you recall, the original PEA, that called for up to 50,000 tonnes a day. Very, very large bulk minable ore body. Of course, that's still the case. It's still a very, very large, even bigger now, bulk minable ore body. But over the last 2 years, we have discovered a lot of high-grade material inside the Skarn and also between the Skarn and the surface in additional structures. And that's really what we're going to mine in Phase 1. So it's going to be quite a long time for Phase 1. It's going to be way more than a decade. And when you look at tonnage, I don't have to file the numbers yet, but you should probably expect somewhere in the 10,000 to 15,000 tonne kind of range for Phase 1, but substantially higher grades than what we showed in the very large bulk kind of cave method in the first PEA. So it will be higher grade, less capital, and really, a focus on silver production for quite a long time before it will go to a more bulk minable, much bigger tonnage and more base metal rich production after that. Cosmos Chiu: And then maybe one last question. When I look at your 2026 guidance, I look at the asset level production compared to 2025 guidance. One asset that is expected to increase year-over-year is Cerro Moro. I guess this is your only asset in Argentina, but Argentina looks to be getting better as a country for mining. So I guess my question is, is this a country or an asset where you might be willing to commit more time and resources into it? Or how should we look at it? Michael Steinmann: Well, Cosmos, in general, I'm always happy to commit time on exploration to any of our assets. We have been incredibly successful over the last 20 years in replacing reserves and adding additional value through our brownfield exploration programs, and La Colorada Skarn is the best example in the company's history with a potential huge value creation through the drill bit. So I'm always happy to continue to drill and exploring our assets. And of course, in the current metal price scenarios, that's even more so. So you've probably seen that we assigned quite an increase of capital to our exploration programs for 2026, and that includes, for sure, Cerro Moro as well. So as you say, lots of positive changes in Argentina and a place that we are active and working for many, many years. And yes, looking forward to more positive exploration results from Cerro Moro as the year goes on. Operator: Our next question comes from Francesco Costanzo from Scotiabank. Francesco Costanzo: I just wanted to ask a follow-up on one of Cosmos' questions actually, just on La Colorada Skarn. Have discussions on a potential partner progressed in the last quarter? And is there any update you can provide us on what the economic terms might look like given the new phased approach or timing of when we might see a deal signed? Michael Steinmann: Yes. Look, the discussions have progressed. But as you can imagine, with the change we made here on this phased approach compared to the single approach we had before, there has to be quite some changes, how we look at that partnership and in that discussion on how that would fall out. So discussions are in full swing. So I don't really want to share right now, details yet on it. But we included that change on the approach and are in full discussions. Francesco Costanzo: Okay. Fair enough. And then just switching gears slightly. With record silver prices, there's obviously a lot of value sitting in the ground at Escobal. So I'm just wondering if you're able to provide us any insights on your view of how the consultation process has progressed in recent months? And whether you feel that things are beginning to reaccelerate compared to this time last year? Michael Steinmann: Well, in general, of course. And we see it worldwide, right, that there is much stronger emphasis on mining and mining projects. High metal prices, of course, helping that. A lot of declaration of critical minerals across the globe and countries that try to secure future metal production for their own use. So that will accelerate from now on, and I'm sure about that. And we'll bring additional projects into production across the globe. Let me have Sean giving us some more details on Escobal, especially. Sean McAleer: Yes. We've been meeting with the Ministry of Energy and Mines through Q4 and a few times earlier this year. And we're standing by for the next updates for meetings and schedules for activities. So there's not a change in the activity that we've seen in the past. But certainly, the engagement continues. And I think the report that was published by the Ministry of Energy and Mines at the end of the year is encouraging, that they are providing some information from the government on their commitment to the process and the status of the process and the fact that it's ongoing. So we're looking forward to meetings here in the coming months and progressing with the process. Operator: [Operator Instructions] Our next question comes from Don DeMarco from National Bank. Don DeMarco: Just a couple of financial bookkeeping questions. First off, how often are the Juanicipio dividends paid? I mean, I see that there was a line item in the Q4 financials, full year financials, but none on the Q3 financials. And I remember back in the MAG Silver days, where there were some agreements at the JV level just to pay out those dividends once a year, although there were some discussions to maybe change that more quarterly. But I'm just wondering what the current arrangement is at this point? Ignacio Couturier: Don, it's Ignacio here speaking. The dividend -- the payments from Juanicipio come in the form of dividends, and there was a payment in Q4. Pan American's share of that payment was around $44 million. Right now, the dividends are being paid out of tax paid retained earnings, and we're currently waiting for Juanicipio to pay its taxes and [ back ] and book its tax return, which will happen sometime in Q1. So soon after that, we're expecting another dividend from Juanicipio, which would be higher than the one we received in Q4. So right now, it's just being driven by just the regular cycle, the financial statements and the tax returns in Mexico. Don DeMarco: Okay. Got it. And Ignacio, also -- looking at -- you've got the senior notes maturing, $278 million at a 4.6% coupon. Obviously, with your free cash flow and cash balance increasing, would this be a consideration to potentially repay early? I mean, obviously, the August 31 have a very favorable interest rate. There'd be no motivation there, but wondering about these 2027s? Ignacio Couturier: Yes. So that's something that we look at from time to time. They are -- as you mentioned, they are coming up in 2027. The bonds aren't very liquid, we know that. So if an opportunity came where a bondholder was interested in potentially some, we would consider it for sure. But this comes down to bigger capital allocation questions which are coming up this year. So look, if the opportunity came up to buy some of those bonds back to 2027, we would consider it for sure. But as I said, our bonds have not been trading very -- with a lot of liquidity in the market. Operator: And with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Michael Steinmann for any closing remarks. Michael Steinmann: Thanks, operator. Strong production and cost control in Q4 in combination with high metal prices resulted in record financial results across the board, as you have seen in the press release. And I'm really proud of what we have achieved in 2026, including the very swift and quick integration of the 44% of the low-cost Juanicipio mine. So please keep in mind that the average metal prices in Q4 were only around $58 for silver and I think a bit more than $4,100 for gold. So we have seen substantially higher metal prices in the new year so far. And additionally, we will be increasing our silver production again by about 14%, largely driven again by the low-cost production of Juanicipio. And to top that, we'll release the updated PEA in La Colorada Skarn in Q2 and further information on the Jacobina optimization as the year advances. So you can imagine, I'm really looking forward to 2026, and I'm looking forward to give you an update on Q4 in our May call. Until then, have a good time. Thanks, everyone, for calling in. Operator: This brings to a close, today's conference call. You may now disconnect your lines. Thank you for participating. Have a pleasant day.
Operator: Thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medical Properties Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead. Charles Lambert: Thank you, and good morning. Welcome to the MPT conference call to discuss our fourth quarter and full year 2025 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Williams, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting. Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at mpt.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section. During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only, and except as required by the federal securities laws, the company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at mpt.com for the most directly comparable financial measures and related reconciliations. I will now turn the call over to our Chief Executive Officer, Ed Aldag. Edward Aldag: Thank you, Charles, and thanks to all of you for joining us this morning on our fourth quarter 2025 earnings call. Before you hear from the rest of the team, I'll spend a few minutes discussing what we're seeing across our diverse portfolio of hospitals as well as a few recent strategic updates. Beginning with performance trends. Total portfolio EBITDARM coverage increased year-over-year to 2.6x. General acute operators delivered particularly strong performance with more than $130 million EBITDARM increase versus the same quarter last year. For the second consecutive quarter, post-acute care operators reported a $50 million EBITDARM increase year-over-year, led by a 15% improvement at Ernest Health, a 28% improvement at Vibra and an 8% increase at Median. Finally, our behavioral health portfolio was down slightly year-over-year, driven by certain volume headwinds in the U.K. market and labor cost pressures in the U.S., which Rosa will elaborate on shortly. During the quarter, we continued to take decisive steps to strengthen our portfolio. Given the strong performance of its post-acute facilities over the past few quarters, we are pleased to enter into a new 20-year master lease agreement with Vibra. We capitalized on an opportunity to acquire a high-performing post-acute facility in California for approximately $32 million with a strong cap rate. More recently, we acquired a new post-acute care facility in Europe for EUR 23 million. We also continue to identify opportunities within the portfolio to achieve attractive returns that enhance our capital allocation flexibility moving forward. To that end, we sold 6 smaller properties during the quarter. Before turning it over to Rosa, I also want to acknowledge that 2025 marked our 20th anniversary as a publicly traded company. Throughout the past 2 decades, we have been guided by the same core principles, providing hospital operators with capital solutions that allow them to focus on patient care, acquiring high-value real estate to deliver attractive returns for our shareholders and supporting the communities we serve around the world. These principles have stayed true as we've navigated periods of significant opportunities and challenges, and they continue to shape the strength of our business today. We are entering our third decade as a public company with strong conviction in our business model and a clear focus on strengthening our platform for the long term. We recently unveiled an updated brand identity, and we were able to acquire MPT as our stock ticker. Given the encouraging performance trends across the portfolio, we remain confident in reaching our goal of over $1 billion in annualized cash rent by year-end. Rosa? Rosa Hooper: Thank you, Ed. Entering 2026, I'm encouraged by the strength and steadiness we see across our global portfolio. Echoing Ed's comments, 2025 was a year in which we solidified our foundation for long-term sustainable performance. Our operators' discipline, coupled with our own structured approach to re-tenanting and portfolio positioning gives us confidence as we look ahead to 2026 and beyond. Our international portfolio today comprises 50% of our investments, and these operators continue to be a cornerstone of portfolio stability. In Germany, Median recorded its strongest quarter since entering the portfolio with quarterly EBITDARM increasing more than 20% year-over-year with occupancy at 90%. Improving reimbursement levels, growing orthopedics demand contributed to notable operational momentum that positions Median for continued strong performance in 2026. In the U.K., general acute operators such as Circle Health sustained strong performance in the face of an evolving health care landscape. As a result of NHS budget constraints impacting the behavioral health market, Priory remains focused on adjusting to shifts in referral patterns and strategically modifying service lines to meet market demand at certain of its facilities. Across Continental Europe, Swiss Medical Network reported solid year-over-year growth in hospital EBITDARM. Its new clinical collaboration with the Mayo Clinic enhances its long-term capabilities and international reputation. Additional operators such as HM Hospitales, eMDs and Atos continue to produce steady performance trends. Turning to the U.S. portfolio. Ernest Health delivered double-digit growth in EBITDARM year-over-year, supported by strong performance of their inpatient rehabilitation facilities and expansion of inpatient rehab units within LTAC facilities. Ernest also successfully refinanced their 2026 term loan and revolver in Q4, extending maturities out to 2030 and compressing the rate, a significant credit enhancement. At LifePoint Behavioral, new leadership is implementing forward-looking program enhancements that will modernize the segment, control labor costs and support a strong revenue mix throughout 2026. As Ed mentioned, we recently entered into a new master lease agreement with Vibra, who increased EBITDARM coverage 28% year-over-year in Q3, driven by strong earnings in the rehab division. Our other long-standing tenants such as Surgery Partners and pipeline continue to report healthy performance trends. Finally, our portfolio of recently transitioned tenants rent continues to ramp, and we expect them to be at 100% contractual rent by the end of 2026. During the quarter, we entered into a new 15-year lease agreement with NOR Health Systems in California, which is expected to reach stabilized annual cash rent of $45 million in December, in line with the rent previously paid by Prospect for these facilities. HSA showed measured progress in Q4 with modest improvements in collections across its markets. Upcoming supplemental receipts and the expected implementation of the MEDITECH EMR system in Q2 are anticipated to support operations and facilitate cost savings. While HSA remains focused on improving cash collections, it's important to remember that HSA will finally be fully stand-alone operationally once the EMR system is implemented. We feel comfortable with the steps underway to drive revenue cycle management enhancements. Our team continues to carefully monitor performance across these new operators. In fact, just last week, members of our team visited the NOR and HSA Miami facilities, all of which had high patient activity. It's clear that efforts to bring back doctors and improve EMS turnaround times are already having a positive impact. While the facilities are generally clean and in good condition, each operator is actively undertaking projects to modernize the properties. Taken together, the consistent performance of our international assets, the steady execution of our core U.S. operators and the ongoing ramp of our transition tenants provide us with a clear confident outlook heading into 2026. We expect 2026 to be a year of continued stabilization and increasing cash rents as our tenants capitalize on service line enhancements, reimbursement tailwinds, EMR modernization and operating efficiencies gained throughout 2025. Our global portfolio is stronger, more diversified and more resilient than it has ever been. We are confident in the long-term earnings power of these assets, and we remain steadfast in our commitment to generating stable, growing cash flows for shareholders. Kevin? James Hanna: Thank you, Rosa. Today, we reported normalized FFO of $0.18 per share for the fourth quarter and $0.58 per share for the full year 2025. As mentioned in our press release this morning, we completed a restructuring transaction with Vibra in the fourth quarter, resulting in a new master lease agreement and collection of approximately $18 million in the form of a onetime rent payment for past obligations. In October, we received a $4 million payment of September rent from HSA. As a result of these cash receipts, normalized FFO was approximately $0.03 to $0.04 higher than it otherwise would have been for the quarter. In the fourth quarter, we entered into a new lease with NOR Healthcare Systems for the 6 California properties previously leased to Prospect. NOR is contractually scheduled to begin paying partial rent in June 2026 with a ramp-up to 100% of contractual rents in December of 2026. We plan to account for their revenue on a cash basis as well. G&A expense was lower year-over-year in the quarter, primarily driven by the lower stock compensation expense due to the change in fair market value of certain performance-based equity compensation. Finally, we recorded approximately $34 million of impairment charges in the quarter, the majority of which related to Prospect. From a cash flow perspective, we received approximately $70 million of net proceeds from the Prospect bankruptcy in the quarter, with a remaining investment of $60 million expected to be collected in 2026 as the bankruptcy process nears and end. Steve? R. Hamner: Thank you, Kevin. I just have a few general comments about our financial position and outlook, and then we can take any questions. First, a general reminder of our debt maturities and our options for refinancing and deleveraging. Our nearest maturity is a EUR 500 million unsecured notes issue due in October of this year. We are paying a rate of 0.99% on these notes, and so we'll, of course, maximize the time benefit from that rate. Our bank revolver and $200 million term loan will mature in June of 2027 after our presumed extension of this facility. And then our $1.4 billion unsecured notes issue matures in October 2027. We retain numerous options for refinancing maturing debt over the next 2 years. Without belaboring those options, which we have discussed previously, they include refinancing with secured debt, additional asset sales and other transactions as the capital markets and our cost of capital continue to evolve. We are confident in these options because of our recent successes generating highly profitable sales of hospital real estate, achieving attractive terms on the $2.5 billion of secured notes we issued a year ago, the euro portion of which are now trading at premiums implying a 5-ish percent rate and the successful 10-year secured financing of our German rehab portfolio in June of last year at a similar 5-ish percent coupon. Our carefully crafted covenants have provided plenty of headroom to be able to consider each of these potential options. As Ed mentioned, we announced a $150 million share repurchase plan last quarter that we used to repurchase a little less than 1% of our market cap through the end of the year. We also invested about $60 million in 2 attractively priced and well-performing post-acute rehabilitation facilities, which we intend to add to the respective master leases of 2 important long-term tenants. While these are relatively modest acquisitions, the acute and post-acute hospital real estate market continues to offer attractive growth opportunities, both in the U.S. and Europe that we will take advantage of as our cost of capital continues to improve. And with that, I will turn the call back over to the operator to queue any questions. Regina? Operator: [Operator Instructions] Our first question will come from the line of Michael Diana with Maxim Group. Michael Diana: I'd like to talk a little about your facility recycling during the quarter. I think you mentioned you sold 6 small properties and a surprise to me anyway, bought 2 properties. So maybe you could talk about those 8 properties, but also just more in general, what your view is on the recycling. Edward Aldag: Sure, Michael. But let me first take the opportunity to thank you for picking up coverage on us and the time you spent with us to fully understand the company and our business model, and we certainly look forward to working with you. So the 6 properties that we sold were smaller properties. They were properties that were underperforming for the rest of the portfolio. We will continue to look at opportunities like that going forward. But also, we're in a position now where we can go back into the acquisition mode. We'll do it very selectively. We believe that the 2 properties that we acquired are very good investment and the opportunity for us to continue to support our existing tenants. Operator: Our next question will come from the line of John Kilichowski with Wells Fargo. William John Kilichowski: Maybe if we could just start on the Prospect sales. If you could just kind of help me source of uses. I think you gave some helpful color in the opening remarks, but maybe just to tie it all together. Could you talk about the sales proceeds from the assets that have closed, the expectations of the asset under contract and then maybe what's going to be above and beyond the DIP financing and where those proceeds will go? R. Hamner: So the only remaining transaction that's pending is the binding contract to acquire the Waterbury facility in Connecticut, and we expect that to close in this quarter. That will significantly finalize the major components of the Prospect bankruptcy. We expect proceeds that will come from that sale, along with collecting of the receivables that will probably take over the next 60 to 90 days, will fully pay the DIP financing. And as we announced previously, probably going back as many as 2 quarters, we've committed to a super secured DIP commitment that we may fund going forward that the proceeds from causes of action that is litigation that's being pursued by the litigation trust, we have first claim on those proceeds, and we remain highly confident, frankly, that the super secured DIP financing will be repaid from those proceeds. William John Kilichowski: That's helpful. And then maybe just jumping to your '26 rent target and the ramp from your legacy assets, legacy Steward assets, the $22 million that you got this quarter. I believe last quarter, we got some color on expectations looking forward. Are you able to provide any color on what you expect to receive in the first quarter of this year? R. Hamner: No, we're not yet giving guidance on quarterly or annual amounts for a couple of reasons. One is, as Kevin mentioned, we still have several fairly significant tenants that we are accounting for on the cash received basis. And so we continue to watch that rent ramp. It has ramped in accordance with the contract that we entered into with those tenants going on 18 months ago now. And I think we said in our press release this morning that virtually all of them are fully paid as we sit here today. Now I'll qualify that with the 2 very small tenants that in recent quarters, we've also called out roughly 3% of the total replacement rents are not yet paying rent. But nonetheless, and as Ed pointed out, we continue to expect through 2026, by the end of 2026, we'll be at an annualized run rate of cash collections exceeding $1 billion. Edward Aldag: And John, I think just to further answer that question with Steve is that there was one payment that HSA made for -- that was received last quarter that was for the previous quarter. Kevin went through that. The next big jump will be when NOR starts paying rent in June, I believe it is. Operator: Our next question will come from the line of Austin Wurschmidt with KeyBanc. Vikram Partap Garewal: This is Vikram Garewal on for Austin. Just one for me. Can you provide us with some additional color on the Vibra restructuring? Specifically, what was previous and what is the new cash rent expected from Vibra? R. Hamner: No, we haven't detailed that out. I'll remind you for the last couple of years, we've referred to this tenant kind of vaguely as the 1% tenant that we've been restructuring. That was consummated in the fourth quarter, and therefore, the collection of $18 million of rent that was due, although not paid pending restructuring. And going forward, Vibra is a significantly stronger tenant for us. And I'll just again reiterate based on your question that there's no impact on previous rental revenue because we haven't been recognizing it because Vibra has been on the cash basis. I don't know if that addressed your question. Edward Aldag: As a part of answering that question, Vibra refinanced all of their debt. So as Steve said, they're in a much better position today than they have previously been. A couple of their properties are actually now leased to Select Medical and rather than Vibra from our standpoint. Operator: Our next question will come from the line of Michael Carroll with RBC Capital Markets. Michael Carroll: Sorry. I wanted to stay on the Vibra transaction. I just wanted to confirm, in the press release, it sounded like the $32 million acquisition was leased to Vibra. I mean, did you buy that from Vibra? And if so, why was that included in this transaction? Edward Aldag: We did buy it from Vibra, and it is a great facility that we feel very good about and glad to have had the opportunity to acquire. Michael Carroll: Okay. And then the cash went to Vibra for that specific deal then? R. Hamner: Correct. And also, Mike, Just to clarify a little bit, the $18 million, we've actually had on our books, a significant portion of that since this time last year when Vibra made a deposit of $20 million. And of that, about half of it we held in reserve to apply to rent. So your point is well taken. Yes, we provided proceeds by virtue of acquiring this asset. But Vibra itself has put in probably upwards of $70 million over the course of this restructuring. Edward Aldag: And Vibra actually used the proceeds from this sale to pay off debt that they had. Michael Carroll: Okay. I mean, is there -- and maybe it's just because the transaction is pretty complicated. I know that we've been talking about the 1% tenant/Vibra for it seems like the past few years now. I mean, is there a reason why it took so long to get this done? And is there anything -- and I guess -- and back to your earlier comments, Steve, you said that you weren't recognizing any rent from Vibra. So did Vibra have 0 rent payment in fourth quarter outside of that $18 million payment, so it will be additive as you go into 1Q '26? Edward Aldag: No, they were actually paying rent. This was just additional rent that they owed as well. R. Hamner: That had not previously been recognized. Edward Aldag: The first part of your question, as I said, it was a total refinancing of Vibra's balance sheet. So there were multiple parties involved. Operator: Our next question will come from the line of Mike Mueller with JPMorgan. Michael Mueller: Yes. A couple of questions. I guess on the first one, for this acquisition and the other acquisition, can you talk about pricing, I guess, the cap rates and coverages? And then for the second question, maybe just a little bit bigger picture. I know you bought some stock back in the quarter, but you also went through all the debt maturities coming due over the next couple of years. How are you thinking about today kind of buybacks versus delevering? Edward Aldag: So let me answer the first part of that, Mike. The coverage on both of these were very strong. The cap rates are also very attractive. As you know, it's not our policy -- it is our policy not to go and disclose each individuals on the various properties, but these are very strong both on the coverage and from our standpoint on the cap rate. R. Hamner: Going forward, Mike, on the balance sheet, we invested what, roughly $25 million in our own stock over the quarter, relatively modest amount. We'll continue to evaluate when it's appropriate to be in the market with the stock. We have multiple opportunities that I tried to summarize very briefly in my prepared remarks to address the upcoming maturities and have a high level of confidence that we'll have some attractive options for addressing that, obviously, beginning this year as we have the very, very low rate euro issuance coming due in October. Operator: Our next question will come from the line of Vikram Malhotra with Mizuho. Vikram Malhotra: I guess two ones. One, just bigger picture. You mentioned the acquisitions. I'm just wondering sort of as the portfolio stands today, whether it's just noncore or international, can you just talk about potential sales and give us an update on like how the buyer pool has shaped up? What sort of capital is still interested in owning hospital real estate? Edward Aldag: So Vikram, if I understood your question correctly, there still continues to be a very strong market for people interested in acquiring our properties. We get calls often. But where we are today, we are much more likely to be in an acquisition mode than a disposition mode. We'll do dispositions as we review various items and think it's appropriate for us. But we are more in an acquisition mode. Vikram Malhotra: And then I guess just on that acquisition point, just looking at the different, I guess, sub-asset classes, behavioral, leaving hospital aside, I'm wondering sort of the opportunity set when you look at post-acute and behavior. Are there any specific focus areas, any types of assets? Just -- and I'm wondering just if you look to sort of maybe -- I don't want to call it expand, but maybe shift the focus in terms of types of health care/hospital settings in terms of acquisitions? Edward Aldag: Sure. Our focus will continue to be general acute care, which it has been through the vast majority of the life of medical properties. But we will continue to look at post-acute, but that's primarily almost exclusively in the rehab sector, which we've been very strong on since the inception of the company. We're still big believers in behavioral. In the U.S., behavioral softness has not come from lack of demand, but lack of ability to have nurses and staff at each of the facilities. In the U.K., it's much more of a funding issue with NHS. If you follow the U.K., you'll know that the need is there. The desire is there. It's just more of a political funding standpoint. Still believers in both sectors, but probably the biggest acquisitions we'll make today will be in general acute care, followed by post-acute care being rehab. Operator: Our next question will come from the line of Farrell Granath with Bank of America. Farrell Granath: This is Farrell Granath. I just wanted to also dig in a little bit more on your acquisitions. Just when thinking about Europe versus the U.S., especially now that we've seen some pressures just on public pay with headlines and reimbursement rates. Does that weigh in on how you're evaluating your pipeline? Or can you give a quantifiable qualitative of how you think about your pipeline in both regions? Edward Aldag: That's a good question, Farrell. And as you know, we're roughly 50-50 now, 50% of the United States and 50% outside of the United States. Still believe that the United States has the best health care in the world, and we obviously will continue to focus here, but it is less political outside of the United States. And so we like our investments outside of the United States very strongly. We're in 9 different countries. We'll continue to invest in the countries that we're in, and we'll continue to look for expansion in places in Europe and places where we are not. We still feel very good about where health care in general is in the United States and feel very good that -- we feel very strong that there'll continue to be small ups and downs, but we don't think there'll be any big ups and downs in the reimbursement in the United States. Farrell Granath: And I guess also on that, when thinking about the people who are selling, are these in the properties that you're acquiring, are these marketed deals? Are you having reverse inquiries? Are these also just operators that you have past business with? Just curious how that pipeline is building out. Edward Aldag: Yes, it's probably 50% or slightly more of people that we've already done business with, our existing tenants or tenants that had formally been our tenants. There's still a very strong pipeline of people who know who we are, that are looking to make acquisitions and to use our type of funding for those acquisitions. I would say most of the deals that come to us outside of our existing tenants are marketed transactions. R. Hamner: Farrell, I'll just point out in addition, just a little bit, we did a pretty limited amount, $60 million in total. That's a result of actually many quarters of negotiation and exploration. So it's not just something that generates just in the quarter. We're able to be and we are being very selective. Right now, again, we still want to see our cost of capital improve. And the point I think we want to make is as that happens, there is a pretty vibrant market. The fact that we did only $60 million in 2 transactions is not indicative of the size and vibrancy of the market. We could have -- I'll put it this way, there were available many more transactions that we could have done that we evaluate. But again, we're being very selective. Operator: Our next question is a follow-up from the line of Michael Carroll with RBC Capital Markets. Michael Carroll: I guess, Ed or Rosa, I wanted to follow up and circle back on the comments related to HSA. Can you remind us, is that operator cash flow positive today with the rent fully ramped? I know that you indicated that last quarter that their coverage was above 1 on the fully rent ramps, but obviously, it takes time for cash collections to pick up to equal that. Edward Aldag: Yes. The cash collections, as Rosa pointed out, are not where any of us would like to see them. However, if you look at this from where they came from, not just as a typical start-up, they actually started out in the whole picking up the Steward properties. We're very pleased with where they are. We obviously want them to be much better. We talked about there being able to -- in the second quarter that we believe that they'll be totally independent acquiring the MEDITECH license and all that goes along with that, taking great steps in the cash collections and we hope and feel good about their ability to do better than that. Where they are right now is still continuing to be at 1x full rent coverage. Michael Carroll: Okay. And then just last one for me. I mean, does HSA or NOR need to be -- does MPW needing to provide them working capital loans still? Or have they weaned off of those specific loans and are able to work with what they have on their own balance sheets? Edward Aldag: Yes. We have not provided any additional working capital loans for either one of those entities. We have provided HSA with funding to help them acquire the MEDITECH license and with NOR, the last fundings that we were participating in those were left over Prospect bills. Operator: And I will now turn the call back over to Ed Aldag for closing comments. Edward Aldag: Regina, thank you very much. And again, thank all of you for listening today. And as always, if you have any additional questions, please don't hesitate to reach out to us. Thank you very much. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Texas Pacific Land Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shawn Amini, Vice President of Finance and Investor Relations. Thank you, sir. You may begin. Shawn Amini: Thank you for joining us today for Texas Pacific Land Corporation's Fourth Quarter 2025 Earnings Conference Call. Yesterday afternoon, the company released its financial results and filed its Form 10-K with the Securities and Exchange Commission, which is available on the Investors section of the company's website at www.texaspacific.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times refer to our company by its stock ticker, TPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover; TPL's Chief Financial Officer, Chris Steddum; and Executive Vice President of Texas Pacific Water Resources, Robert Crain. Management will make some prepared comments, after which, we will open the call for questions. Now I will turn the call over to Ty. Tyler Glover: Good morning, everyone, and thank you for joining us today. Fourth quarter was an excellent finish to 2025 with quarterly records set for oil and gas royalty production, water sales volumes and produced water royalties. Excluding the contribution from our previously announced royalties acquisition from last November, our fourth quarter oil and gas royalty production grew 23% year-over-year. Water sales volumes this quarter exceeded 1 million barrels per day for the first time in our history, growing 36% year-over-year and produced water royalty volumes grew 22% year-over-year. For the full fiscal year 2025, we set annual records across our major operating milestones of oil and gas royalty production, water sales, produced water royalties and SLEM revenue. We also delivered fiscal year records for consolidated metrics, including revenue, net income and free cash flow. Despite oil prices declining from $95 per barrel in 2022 to $65 per barrel in 2025. During the same span, TPL delivered a 3-year compounded annual growth rate for oil and gas royalty production of 17%, water sales volumes of 18%, and produced water royalty volumes of 30%. We achieved this growth while maintaining a debt-free balance sheet and without any financing from new equity. We owe this countercyclical growth to our continued market capture, talented employees, commercial development focus, differentiated scale across royalties, land and water and self-funded acquisitions and investments. Beyond this excellent performance from our core business, we also made tangible progress with next-generation opportunities in data centers and produced water desalination. Starting with data centers. This past December, we announced a strategic investment into Bolt Data & Energy, a new AI infrastructure platform chaired by former Google CEO, Eric Schmidt. Bolt seeks to develop large-scale solutions across data centers and power generation. We're excited to team up with Bolt. For TPL, we can provide unrivaled access to land, conventional and renewable energy and water. We can offer this in a state that maintains arguably the most pro-growth and pro-infrastructure regulatory environment. Bolt is currently expanding its team and having productive conversations with potential customers, and our personnel have been evaluating future site selections across TPL land. As part of our agreement, TPL retains a right of first refusal to provide water to Bolt affiliated projects. We believe Bolt can become a large-scale, fully integrated data center and power generation platform, and we look forward to working closely together as we seek to make West Texas one of the premier technology infrastructure hubs. In addition to Bolt, TPL continues to engage in productive conversations with potential developers and customers for various projects. The data center landscape in the region is rapidly evolving and highly dynamic. We're working on projects across the full extent of our acreage, both in-basin and out-of-basin. Project time lines run the gamut as well with developers viewing West Texas as a near-term priority for new developments, but also as a longer-term hub that can support large-scale expansions. Given the size of these developments, which can potentially represent tens of billions of dollars of total investment across GPUs and power generation, these projects require extensive due diligence and negotiations across numerous counterparties. Projects of this scale are always difficult, especially with West Texas as a relative data center newcomer. That said, versus even a few quarters ago, urgency from developers and customers has clearly increased. Some of these conversations have progressed beyond just conceptual ideas and are in advanced stages of planning. We are encouraged by the progress we've made thus far, and we are hopeful to have multiple new updates to share before the end of the year. Turning to our desalination project. Our 10,000 barrel per day R&D desalination facility in Orla, Texas, which we refer to as Phase 2b is nearing completion. We had originally expected this facility to commence operations by the end of 2025, and we now expect the facility to begin taking produced water in the coming months. During equipment testing and flowing through synthetic produced water, the engineering team experimented with an additional process beyond the original design. After successful testing of new equipment to assess efficacy, we implemented the new process into our freeze desalination design, and we'll be installing the associated equipment into our Orla Phase 2 facility. We believe this will substantially reduce the amount of time and cycles produced water need to pass through the system, thereby providing substantial capital cost and operating expense savings for a commercial scale facility. For TPL, desalination would provide another solution we can offer the industry in addition to our extensive in-basin and out-of-basin pore space. Permian already generates nearly 25 million barrels of produced water a day with volumes expected to grow through the end of the decade, even if oil production were to plateau. To accommodate longer-term produced water growth, the industry will likely need incremental solutions beyond traditional subsurface disposal and desalination potentially provides a sustainable pathway to reduce the amount of water injected subsurface. For 2026, we look forward to commencing operations and ramping volumes on our Orla desalination facility, evaluating the potential to bring large-scale freeze desalination to the Permian. In addition, we plan to invest approximately $20 million on installing co-location equipment at the Orla facility to evaluate the feasibility of waste heat capture and data center cooling. Waste heat capture could provide significant energy savings for our freeze process, while our outlet freshwater stream after having gone through a freezing process could provide direct cooling benefits for data centers and power generation. In conclusion, as we look ahead to 2026, we're excited with the growth pipeline in front of us. We are focused on exploiting our strengths and leveraging our expertise as we look to benefit from the long-term structural tailwinds unfolding across our business. We believe we can continue to drive growth and extract incremental value even as this relatively weak oil price environment persists. With our industry-leading margins, our fortress balance sheet and a $500 million undrawn credit facility, not only can we tolerate periods of low commodity prices, we have considerable capability to invest opportunistically as we look to consolidate high-quality assets and expand market capture. We remain steadfastly focused on maximizing long-term intrinsic value per share and the opportunity set in front of us today across our legacy and next-gen businesses is as robust as ever. One additional housekeeping item I wanted to mention, yesterday, we announced an event for TPL shareholders for an office and water field visit in Midland, Texas. That event will be held on Monday, May 18. We welcome all shareholders to attend, and we ask that shareholders submit an RSVP by filling out a form on our website or e-mailing Investor Relations. Please visit the Events section of our website for more information. And with that, I'll hand the call over to Chris. Chris Steddum: Thanks, Ty. Consolidated revenues during the fourth quarter of 2025 were approximately $212 million. Consolidated adjusted EBITDA was $178 million. Adjusted EBITDA margin was 84% and free cash flow was $119 million. For full year 2025, we generated record free cash flow of approximately $498 million, which represents an 8% year-over-year increase. Full year performance benefited from higher daily oil and gas royalty production, which increased 29% year-over-year, higher water sales daily volumes, which increased 4% and higher produced water royalty daily volumes, which increased 25%. Of the approximately 34,600 barrels of oil equivalent per day for full year 2025 royalty production, the acquisition that closed last November contributed approximately 500 barrels of oil equivalent per day. Consolidated results were partially offset by lower realized oil prices, which declined year-over-year by 15%. Given the strong performance, yesterday, we announced a regular dividend of $0.60 per share, which represents a 12.5% increase versus the prior quarter dividend. Capital expenditures last year were $66 million, which is inclusive of $6 million of payables. This was at the low end of our original guidance. Moving to our well inventory. As of quarter end, TPL had 5.6 net permitted wells, 9.8 net drilled but uncompleted wells, are commonly referred to as DUCs, and 4.0 net completed but not producing wells. That amounts to 19.5 net line-of-sight wells, which also includes approximately 2 net wells from our recent royalty acquisition. Across the Permian Basin, sustained low oil and Waha natural gas prices during 2025 has generally led to a decline in rig activity, which according to Baker Hughes, Permian horizontal rig count is down approximately 26%. However, despite less rigs, the basin has been able to sustain production growth through a sizable drawdown in DUCs. The decline in our line of sight wells, and this is true basin-wide, is primarily due to this DUC drawdown. From our vantage point, we believe the industry will remain in DUC drawdown mode this year. During 2025, we estimate that the industry drew down approximately 600 DUCs with roughly 3,500 to 4,000 DUCs still remaining in the Permian today. With the current pacing of new completions, the industry will generally require around 2,000 DUCs to maintain a buffer in front of active frac fleets, leaving roughly 1,500 to 2,000 discretionary DUCs. Thus, we believe the Permian still has ample DUC inventory to drive a completion pacing to support production via continued discretionary DUC draws with at least a year or more of runway before the industry would need to begin adding rigs to bring new spuds and new completions into balance while maintaining current completion pacing. Another mitigating factor to lower rig counts is that operator efficiencies continue to improve and well laterals continue to get longer. Wells completed on TPL royalty acreage were on average 8% longer than the prior year. We are seeing substantial increases in lateral lengths across the board. This was the first quarter in which new permits, spuds, completions and new PDP wells all had average lateral lengths in excess of 11,000 feet. For new permitted wells this past quarter, the average lateral length is 35% longer than the average permitted well in 2024. We also had over 100 new permitted wells with lateral lengths over 15,000 feet and 34 wells over 20,000 feet. Industry consolidation over the last few years is allowing operators to block up sections and create much larger DSUs. With this trend of longer laterals, greater operator efficiencies and sizable DUC balance, we do not anticipate basin-wide production declines given the current oil strip. Turning to our capital allocation priorities for 2026. We exited the year with $145 million of cash on the balance sheet and 0 debt. During the quarter, we closed on TPL's inaugural credit facility with $500 million of commitments. That facility remains fully undrawn today. For fiscal year 2026, we anticipate capital expenditures to be approximately $65 million to $75 million. And as Ty mentioned, $20 million will be allocated towards investigating waste heat capture and data center and power generation co-location potential for our freeze desalination facility. The remaining balance will be dedicated to our water sales business for electrification, equipment and supply improvement and maintenance. With modest capital needs, a business that continues to generate strong free cash flow and a balance sheet and a net cash position with a sizable undrawn facility, TPL has the flexibility and liquidity to respond to evolving macro and sector volatility. We retain the ability to simultaneously invest in the business, acquire high-quality assets and expand shareholder return of capital, and we can flex up any or multiple aspects of those options should any opportunities or dislocations occur. We have a resilient business and a pristine balance sheet, and our focus remains on maximizing intrinsic value per share over the long term. And with that, operator, we will now take questions. Operator: [Operator Instructions] Our first question comes from the line of Derrick Whitfield with Texas Capital. Derrick Whitfield: Congrats on a strong financial and operational update. I'd like to start with AI macro. Based on the flurry of both power and AI announcements we've seen across West Texas over the last 6 months, I'd love to hear your thoughts on how the opportunity set for power and data center development has evolved for TPL, and if it extends beyond what you've highlighted with Bolt Energy to date? Tyler Glover: Yes. It definitely has. I think the further we dig into it, the bigger we think the opportunity is. We've got a few projects we're working on, some Bolt related, some not. But I think when you look at that business, just like any other business, at the end of the day, scale is what really matters. And there's not really anyone in Texas that offers scale like TPL does, whether that's land, access to gas or water. And I think long term, we're trying to build a real business here. We're not trying to hodgepodge 200-meg facilities over the acreage footprint. The long-term goal is to build multiple multi-gig energy campuses. And that takes a little time, but efforts have been very promising so far. And like I said, we've got a few deals we're working on, commercial negotiations are ongoing. So very excited about the opportunity set. Derrick Whitfield: Perfect. And Ty, for my follow-up, I really wanted to focus more firmly on Bolt Energy and the potential of your strategic agreement as laid out by one of your prominent investors. And maybe just for the benefit of level setting the discussion, the investor believes Bolt's ambition is to build a 10-gigawatt data center campus in West Texas and that each gigawatt could be worth over $125 million in water revenue for TPL, with power generating requiring over 120,000 barrels a day of less conditioned water and data center cooling requiring over 200,000 barrels per day of more conditioned water. With the understanding that we're still kind of in the early stages of charting this out, I know Robert and team have made a great deal of advances in understanding waste heat capture and cooling to improve fuel efficiencies for data centers. All that being said, are these reasonable numbers when kind of thinking about the scale and the potential value that we have in front of us? Tyler Glover: Well, what we've seen is it varies pretty greatly with the design of the facility, both on the power side and the data center side. But with certain designs, yes, those numbers are very reasonable. And we've talked to some power generators that the water usage numbers seem substantially higher than that. So for us, I mean, we're used to moving a lot of water. Fourth quarter, we moved over 1 million barrels of water a day. And we think that this could be pretty material to the water business over the long term. So again, I think the opportunity is pretty substantial. But the usage actually depends -- varies pretty widely depending on design of the facility. Robert, I don't know if you have anything to add to that. Robert Crain: Derrick, it's -- you know our stance on it, it's variation in design. Our goal is to obviously work with the customer on how do we implement the right volume and quality of water in that design. But as things start to evolve, I know it's specific for Bolt, but I think you have to look at just how that power plant is designed. Is it a single cycle? Is it a combined cycle? Is it using evaporative direct air cooling to offset those efficiency losses due to higher ambient air. Our goal is to work with the customer, facilitate their design from a water perspective. Again, we focus on the quality and the volume that's needed. I think when we look at the amount of compute that's coming, I mean, you mentioned the 10 gigawatt goal from Bolt, we're confident in the amount of compute and associated gen that's going to be coming to the Permian, the effect on our water business is going to be significant. Derrick Whitfield: Perfect. And maybe just one quick follow-up, if I could, and shifting really more to your traditional water business. You guys saw record volumes for both disposal and source water and really, for that matter, really strong implied source water realization per barrel for this quarter. Given the broader contraction in activity that we're seeing across the basin, could you speak to some of the things that TPL is actively doing to drive the strength in the business? And just your current outlook for each of these businesses. And the thing that we're kind of seeing occur right now with both is higher highs and higher lows. So any color you could provide would be helpful. Robert Crain: Sure. I'll start on the produced water side. I mean if you look at our success and the growth of produced water volumes, I think it's twofold. One, you go back to our legacy contracts, what we were able to really set up in the early days of ensuring the volumes and how we direct those volumes and work with operators and midstream companies to do it. But the second is the strategy that we implemented 4 or 5 years ago, looking at the constraints we knew that were going to come from produced water management and associated pore space was two things, out-of-basin pore space for short-term solutions and desal. The results you're seeing in those higher numbers is a result of those legacy contracts and our strategy that we've implemented. We look at the produced water management space of -- we're the solutions provider, again, to the operators and the midstream company, and I think you're seeing the results in the numbers. When you look at our source water business, the scale and scope of our system that we continue to expand on every year as we see water demands go up due to cube development and trimul fracs, we've always said the scale and scope of our business allows us to expand and capture more markets. We are -- we can bolt on and build on to that system to capture more where even if we see a slight contraction in overall activity level, we're able to touch so much more as we continue to expand. Operator: Our next question comes from the line of Tim Rezvan with KeyBanc. Timothy Rezvan: Derrick actually hit on some of my topics here. But I just wanted to kind of follow up again on the commentary on the data centers. Your shareholder put out some pretty impressive comments. So do you anticipate putting something out yourself on that opportunity set? Is there a time when you may feel comfortable doing that? Or do you think that your shareholders' commentary is sufficient as it created quite a stir and people are trying to kind of understand the opportunity set here? Tyler Glover: I think eventually, we'll put more information out. We've got pretty strict confidentiality agreements in place with all of our counterparties. And kind of like when we started the water business, keeping most of the commercial terms private, at least in the near term, we think, is a competitive advantage for us. But yes, we do hope to put a stronger narrative out eventually with some additional information on the opportunity set. Timothy Rezvan: Okay. Okay. I guess we'll stay tuned on that. And then if I could pivot to the desalination update. It sounds like there's sort of a change in process that you think creates more efficiencies. So just to be clear on that, this waste heat capture is the idea that it will sort of just improve the efficiency of the operation. And where I'm going with that is there's a debate in the marketplace about the power intensity to run that process. And in an area that's short electricity today, people are trying to understand kind of how feasible it would be to scale that. So if you could just kind of talk through the efficiencies you're trying to capture and overall power intensity of that business, that would be helpful. Robert Crain: Sure. The overall goal in water desal is to reduce energy consumption to overall reduce your price per barrel. If you look at how desal metrics are measured, it's really in your kilowatt per hour per barrel of water treated. So I'll touch first on our kind of adaptation of design. Again, that is trying to achieve that goal of process the water without having to put more energy consumption into it to bring that kilowatt per hour per barrel down. When you look at the power piece, all thermal technologies, you're right, they do require power. So that's where we go when you look at waste heat capture. Again, anything we can do from a waste heat capture standpoint, waste heat is almost free energy. And so we look at one of the big benefits of desal combined with power generation, be it for compute or microgrids or whatever the use may be, again, it's just furthering, bringing that kilowatt per hour per barrel treated down. Timothy Rezvan: Okay. We will stay tuned for an update on that. I appreciate that. And then if I could sneak one more question in. On the western part of your acreage position, you have a meaningful acreage in Hudspeth County. There have been companies developing and exploring for rare earths out there. Could you discuss your exposure to that activity maybe from any exploration or right away occurring there? Any color there would be helpful. Tyler Glover: Yes. So we do have a couple of exploration projects going on currently out there on some properties that we've actually purchased or traded for in the last 7 or 8 years. Early stages, but finding seem promising so far. So we'll be glad to update you as we have additional information. Operator: Our next question comes from the line of Oliver Huang with Tudor, Pickering, Holt. Hsu-Lei Huang: Just wanted to start out on the water side. As we think about the ROFR, to supply water for the previously announced Bolt partnership, just any sort of color on if this is expected to be done through your source water network, treated desal water or a tiered combination? Just really trying to get a better understanding how the latter measures up to spec requirements of counterparties for CCGT and for data center? Robert Crain: I would say both. Again, we go back to that variation in design of what the water volume and quality is needed. I think when you look at Bolt and some of the other deals we work on, eventually, it's going to be a combination of both of the water sources. We love the produced water component that could be used in power gen and combining desal with power gen and data center usage, there's some synergies there that are pretty amazing when you dig into them from waste heat capture, freeze technology. Obviously, the desal and that water is a little bit more complicated to treat, and that's what we've been working on the last couple of years to do. But when you look at the water use and the produced water, really not being in the hydrologic cycle, and being able to implement a produced water stream into power gen and compute water needs, it's really unique to oil and gas operations. Those conversations are progressing nicely. So again, I think it's going to probably be eventually a combination of both water sources. Hsu-Lei Huang: Okay. Perfect. That's helpful. And maybe as we're just kind of thinking about potential scaling up, whether it's 1 gig or multiple gigawatts, do you all have the capacity to ramp the treated water to the required volumes? Or is there a point where you all would be capped out? And just any sort of color in terms of how much capital it might take to build out to, call it, an incremental 250,000 a day of capacity? Robert Crain: When you look at the -- if we look at it just from a feedstock point, Ty mentioned in the commentary, there's 25 million barrels a day in the Permian Basin in produced water aspect. We're never going to have a feedstock shortage of water usage for power gen or compute. I think when you look at actual facilities to get up to the scale that's going to feed it, again, we're going to have to look at what the eventual water needs are, any capital offset that we can get for power gen and compute to help offset the capital needs of the desal facility are going to help bring it to market. I think it's too early to say, are you going to have a constraint to get there. Again, we're going to have to look at what the gen capacity is, what the water needs are and then design around that and make sure there's an economic return for us to do it. Hsu-Lei Huang: Okay. That makes sense. And if I could squeeze one more in, just on the Bolt agreement that you all have. I know it's still pretty early days, but any sort of updates you can provide with respect to just securing any sort of commercial partnerships and anchor customers to just get a better sense of facility size. And also just how should we expect revenues to start flowing through for the first data center project? Any sort of color on timing? Tyler Glover: Well, I think you can find some public comments that Eric has made. His goal is to get to 1 gig pretty swiftly with kind of a 10-gig campus being the ultimate goal. I would say the conversations that he's having and the pace that he's moving are pretty swift. So hopefully, we're announcing some stuff at least this year, if not first half of the year, but that's the goal. I think for us, there's a land use component. Obviously, we've got the right of first refusal on the water, which we think could be substantial, and then the equity return on Bolt could be very material for our business. And so I would just say Eric continues to build out his team. They're moving swiftly and having a lot of really good conversations. I mean, the guys got an unbelievable network of contacts in that space. Operator: We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments. Shawn Amini: Thanks for joining, everyone. Have a good day. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Zealand Pharma Results Full Year 2025 Conference Call. [Operator Instructions] Please be advised that, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Lange, Vice President, Investor Relations. Please go ahead. Adam Lange: Thank you, operator, and thank you to everyone for joining us today to discuss Zealand Pharma's results for the full year 2025. The related company announcement is available on our website at zealandpharma.com. As outlined on Slide 2, I would like to remind listeners that during today's call, we will be making forward-looking statements that are subject to risks and uncertainties. Turning to Slide 3 and today's agenda. I have with me on the call the following members of Zealand Pharma's management team: Adam Steensberg, President and Chief Executive Officer; Henriette Wennicke, Chief Financial Officer; and David Kendall, Chief Medical Officer. All speakers will be available for the Q&A session. Turning to Slide 4. I will now hand the call over to Adam Steensberg, President and Chief Executive Officer. Adam? Adam Steensberg: Thank you, Adam, and welcome, everyone. 2025 was a breakthrough year for Zealand Pharma, especially considering the landmark partnership petrelintide with Roche. As we enter 2026, we are moving into the most defining and catalyst risk year for Zealand Pharma's history, which includes Phase II petrelintide data and multiple key readouts from the Phase III program in obesity with survodutide. Moving to Slide 5. Obesity represents one of the greatest health care challenges of our time, not only because of its high and growing prevalence, but because of the long-term consequences of living with the disease. The longer people live with obesity, the greater the burden and the higher the risk of serious complications. Real-world data clearly shows that treatment persistence with GLP-1-based therapies remains a major challenge. To date, up to 12% of Americans have been exposed to a GLP-1-based therapy, yet only a small fraction remains in treatment. Approximately half of patients who discontinue GLP-1 therapies cite gastrointestinal adverse events as the primary reason. As a result, the key to unlocking the full value of this market is to develop therapies that deliver weight loss that patients desire, but with a better treatment experience that support long-term use in a real world. This leads me to Slide 6. In many other chronic diseases, physicians typically have access to a broad range of therapeutic options that can be tailored to the needs of the individual patients. In obesity, the treatment landscape remains comparatively narrow where we today rely on a single therapeutic category. While the GLP-1-based therapies clearly have advanced the field, they have not yet delivered what ultimately matters the most long-term treatment persistence, durable weight maintenance and sustained improvements in health outcomes. With petrelintide, we see the potential to expand and strengthen the treatment paradigm for weight management. Moving to Slide 7. The partnership we announced last year with us has delivered on everything we had hoped for. And our teams are currently moving full steam ahead and focused on finalizing the design of the Phase III program that we expect to initiate later this year to position petrelintide as a future foundational and first choice therapy for people living with overweight and obesity. I want to emphasize that, this is a true balanced partnership. This is reflected not only in the financial structure where we share profits in the U.S. and Europe, but also at the strategic level with shared development and commercialization rights for petrelintide and petrelintide-based combinations. This structure allows us to retain significant long-term value of the franchise while preserving the strategic rights needed to support our ambition over the long term. Moving to Slide 8 from one strong partner to another. Boehringer Ingelheim is positioned to lead the next wave of GLP-1-based innovation with survodutide, and we are very excited about the potential of survodutide to emerge as the preferred therapy for a large population of people with obesity and MASH. Liver disease is one of the most prevalent comorbidities associated with obesity. As Boehringer highlighted at Obesity Week last year, when you see obesity, think liver. And as one of our external speakers and the principal investigator in SYNCHRONIZE-1 noted at our Capital Markets Day, see obesity, think liver, treat the heart. This framing highlights the excitement for the upcoming Phase III obesity data with survodutide, including data from the cardiovascular outcome trial. Switching gears to our research efforts on Slide 9. Our ambition extends beyond refining the near-term future of weight management. Over the coming period, we aim to build the most valuable metabolic health pipeline, supported by our competitive advantage with more than 25 years of expertise in peptides and metabolic health, proprietary know-how and high-quality in-house data. Combined with rapid advancements in AI and machine learning, this strong foundation position us to remain at the forefront of innovation. While AI will improve efficiency across the industry, true differentiation comes from the quality and scale of proprietary data used to train these models. This is where we intend to focus our efforts. Our goal over the next 5 years is to advance more than 10 candidates into the clinic and set industry-leading cycle times from idea to the clinic. In a field historically characterized by long and complex development cycles, the pace of innovation is accelerating, and we intend to lead that. With that, I will turn over to David. David Kendall: Thank you, Adam. I will begin with an overview of our pipeline shown on Slide 10. Zealand Pharma is in a unique position today with the potential to achieve 5 product launches over the next 5 years. We are also embarking upon a data-rich period ahead with important results from many of our clinical programs. All told, this represents an incredibly exciting and highly compelling path forward for our company. Let's turn to Slide 11 and the ZUPREME-1 trial with petrelintide. We look forward to reporting top line data from the Phase II ZUPREME-1 trial this quarter. This trial is evaluating the efficacy and safety of petrelintide in participants with overweight or obesity without coexisting type 2 diabetes. ZUPREME-1 is a dose-finding trial assessing 5 dose levels of petrelintide administered weekly versus placebo over 42 weeks of active treatment. The trial includes monthly dose escalation over a period of up to 16 weeks, followed by maintenance doses of up to 9 milligrams. The study's primary endpoint assesses change in body weight at week 28. However, top line readout will also include important efficacy and safety measures at week 42. As previously shared, ZUPREME-1 enrolled a population of 494 participants with a mean baseline BMI of approximately 37 kilograms per meter squared and includes a balanced distribution of females and males. This population differs meaningfully from those studied in our Phase I trials, and also from populations enrolled in recent Phase II and Phase III clinical trials of other amylin analogs. Moving to Slide 12 for a reminder of our ongoing plans for petrelintide. Together with our partner, Roche, we are looking forward to leveraging insights from the ZUPREME-1 trial to inform the final design of a comprehensive and ambitious Phase III development program for petrelintide in weight management. We expect to initiate the Phase IIIa registrational trials for petrelintide monotherapy later this year, which will be followed by a comprehensive Phase IIIb program designed to further expand and unlock the full value of petrelintide. With Phase II data approaching, I would like to briefly revisit our target product profile for petrelintide. Our goal with petrelintide is to deliver the level of weight loss that the vast majority of people living with overweight and obesity are seeking, while also providing an improved patient experience to further enhance the use of petrelintide for long-term treatment. Accordingly, a successful outcome for us would be data that reinforces our confidence in petrelintide's potential to achieve approximately 15% to 20% body weight reduction in longer-term Phase III trials, together with a safety and tolerability profile that represents a significantly better experience relative to incretin-based therapies, firmly establishing petrelintide as a foundational therapy for the management of overweight and obesity. In parallel, we are excited about the opportunity to explore petrelintide as a backbone for future combination therapies. Petrelintide in combination with the dual GLP-1 GIP receptor agonist, CT-388, is the first combination being developed in our alliance with Roche. Zealand Pharma and Roche remain on track to initiate the Phase II trial of the petrelintideCT-388 combination in the first half of this year. Now turning to Slide 13 and survodutide, a glucagon GLP-1 receptor dual agonist that we believe has the potential to play an important role in the next phase of innovation in obesity and metabolic disease. In the first half of 2026, we look forward to the results from the 76-week SYNCHRONIZE-1 trial, which is evaluating the safety and efficacy of survodutide in people with overweight or obesity without type 2 diabetes. In the prior 46-week Phase II obesity trial, survodutide demonstrated very compelling and competitive weight loss of up to 19%. Beyond SYNCHRONIZE-1, we expect additional readouts from the broader Phase III obesity program over the course of 2026. Together, these data are expected to support the first regulatory submissions for survodutide. We are also excited and extremely encouraged by the ongoing Phase III program evaluating survodutide in people with metabolic dysfunction-associated steatohepatitis or MASH. This program includes 2 trials assessing safety and efficacy in patients with moderate to advanced fibrosis as well as in those with cirrhosis. Given the high unmet medical need and limited treatment options for this population, we believe survodutide has the potential to become a key therapeutic option for people living with overweight or obesity and coexisting MASH. Let's now turn to Slide 14 and our novel Kv1.3 inhibitor. Yesterday, we announced positive top line results from the first-in-human randomized double-blind, placebo-controlled Phase I trial evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of ZP9830 following a single administration to healthy male subjects. ZP9830 was very well tolerated with no serious or severe AEs or dose-limiting safety findings at any of the dose levels tested. PK parameters increased in a dose proportional manner across the investigated dose range, in line with predictions based on preclinical data. We are very pleased with the results of this trial that are very well aligned with our expectations, reinforcing our confidence in our Kv1.3 channel blocker as a very promising drug candidate with the potential to target multiple autoimmune and inflammatory diseases. We look forward to reporting top line results from the multiple ascending dose portion of this trial and progress ZP9830 into Phase Ib/IIa development in the second half of 2026. With that, thank you very much for your attention. I would now like to turn the call over to our Chief Financial Officer, Henriette Wennicke, who will review our financial results for 2025. Henriette? Henriette Wennicke: Thanks, David, and hello, everyone. Let's turn to Slide 15 and the income statement. Revenue for the full year of 2025 was DKK 9.2 billion, driven by the initial upfront payment received under the collaboration and license agreement with Roche. The net operating expenses, excluding other operating items, totaled DKK 2.1 billion in 2025 and was within the guidance range of DKK 2 billion to DKK 2.3 billion. 76% of the net operating expenses in 2025 were dedicated to research and development, mainly driven by the clinical advancement of the petrelintide program, including the 2 Phase II trials and the preparation for Phase III. The S&M expenses are driven by the pre-commercial activities associated with mainly petrelintide, while G&A expenses reflect a strengthening of organizational capabilities, investments in IT infrastructure and legal expenses related to the patent portfolio. This resulted in a net positive result of DKK 6.5 billion for the year. Let's move to Slide 16 and the financial position. We ended the year of 2025 with a strong cash position of DKK 15.1 billion. Our cash position was strengthened during the year by the initial upfront payment of DKK 9.2 billion from Roche, partly offset by the operating expenses during the period. Our strong capital preparedness enabled us to meet all obligations under the collaboration with Roche for petrelintide, including the comprehensive Phase III program. It will also allow us to intensify our efforts in building a leading metabolic health pipeline and deliver on our Metabolic Frontier 2030 strategy. Let's turn to Slide 17 and the outlook for the year. For 2026, we guide for net operating expenses to be in the range of DKK 2.7 billion to DKK 3.3 billion, mainly driven by research and development activities. On the development side, key cost drivers include the expected initiation of a Phase IIIa program with petrelintide monotherapy and the initiation of a Phase II trial, the petrelintide CT-388 combination. In addition, strengthening our research engine is critical to realizing our vision of building a leading metabolic pipeline and the guidance, therefore, also reflects a step-up in research costs. Overall, the anticipated OpEx spend reflects the momentum we have built into 2026 and position Zealand Pharma to leverage the future growth opportunities. And even though, we only provide guidance on operating expenses, I would like to take the opportunity to remind you that Zealand Pharma is eligible for potential milestone payments for Roche of USD 700 million in 2026. This includes an anniversary payment of USD 125 million and a potential development milestone payment of USD 575 million, which is subject to initiation of a Phase IIIa program with petrelintide monotherapy. Finally, let's move to Slide 18 and our sustainability efforts. As a biotech company, we place the health and well-being of patients at the center of everything we do. And our ability to ensure advance our pipeline and ultimately serve patients rest on our people. We are extremely proud that while we increased our headcount by 41% in 2025, we maintained a very high engagement -- employee engagement score of 8.9 on a 10-point scale. And at the same time, we maintained our employee turnover rate at just 7.8%. We believe this is a testament to our unique company culture and our continued dedication to fostering an engaging and enriching workplace. This makes us confident that we have built a sustainable organization setup capable of supporting our long-term aspirations. We are also committed to taking responsibility for the environmental impact of our operations. In 2025, we committed to the science-based targets initiative and joined the UN Global Compact. In 2026, we will continue our work to transition our company and collaborate closely with our business partner to mitigate climate change. And with that, I will move to Slide 19 and turn the call back to Adam for closing remarks. Adam Steensberg: Thank you, Henriette. Building on the momentum we created in 2025, we have entered the most catalyst-rich year in Zealand Pharma's history with defining data readouts expected for both of our leading obesity programs, petrelintide and survodutide. As we execute on our Metabolic Frontier 2030 strategy, we are also highly energized to open our new research site in Boston this year and to pursue additional partnerships that further strengthen and expand our pipeline. I will now turn over the call to the operator, and we will be happy to address your questions. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Hakon Hemme from Danske Bank. Hakon Hemme Jørgensen: In regards to the upcoming Phase II readout on petrelintide Phase II, the ZUPREME-1, what level of details are you able to share with us on the day of the announcement? Apart from the weight loss, will you include data on petrelintide's tolerability profile in the announcement? Adam Steensberg: Thank you, Hakon, for that question. So we can confirm that the data are anticipated this quarter, which, of course, means also in the coming weeks, and we are highly anticipating being able to share the data broadly. We will, as we always do when we share top line results, provide a balanced presentation of the data while also reserving data that can be presented at scientific conferences later in the year. So you should expect a balanced view, which will discuss both top line efficacy and safety tolerability. Operator: We will take our next question. Your next question comes from the line of Rajan Sharma from Goldman Sachs. Rajan Sharma: I just wanted to get your latest perspectives on competitive dynamics in the obesity market following the first oral launch. I know, you've always been clear in the view that injectables will be the largest segment of the market. Has anything changed given the launch trajectory of or Wegovy? And then maybe just to add on that, where do you expect net price to be in obesity by the time petrelintide launches? Adam Steensberg: Thank you for your question, Rajan. And I think it's -- we have not -- our minds around the oral versus injectables have not changed due to the recent launches. It's very important, and we remain you can say, focused on the fact that all GLP-1s that are launching right now do not address the biggest -- what we consider the biggest issues with the GLP-1s, which is tolerability. As we discussed in the prepared remarks, we have 50% of the patients who stop taking these medicines is due to adverse events related to the gastrointestinal tract. So while we do expect the all options to expand the GLP-1 market, we do not think it will -- it's actually addressing the main issue around the current therapies that are around. And that's why we are so excited about being able to lead in a novel category, which we think have the potential to provide patients, as David discussed, the weight loss they are looking for, but a more pleasant weight loss experience. And it's really back to the thing which we have also advocated for, for a long time. Instead of having such a keen focus on prices as an industry, we need to move the focus into how we help patients stay on therapy. The key to unlock the value of the obesity market is to make sure that obesity medications are used as chronic therapies rather than event-based weight loss agents. And that's where we think petrelintide and the amylin category has the potential to unlock the market value for obesity. When it comes to prices and which, of course, has a lot of focus right now in the current competitive environment also with having had compounders around, it's again some dynamics that we have talked about for a long time. And the uniqueness about the obesity market is we have the more classical market where we have payers and insurance companies and then we have the self-paid market. And you need to address both. Of course, when you launch with a new category, which may provide a much more pleasant weight loss experience, there will be novel dynamics also with regard to pricing. So while the GLP-1 dynamics will affect entrant into that market, we do anticipate that novel themes will play out when you launch novel categories, just as we have seen in other therapeutic areas. So -- but it's too early to provide any specifics on the net pricing when we launch petrelintide. Operator: We will take our next question. The next question comes from the line of Kirsty Rosergewart from BNP Paribas. Kirsty Ross-Stewart from BNP Paribas. Kirsty Ross-Stewart: Kirsty Ross-Stewart from BNP Paribas. So regarding the Phase IIIb development for petrelintide, can you just expand a little bit on the types of opportunities you're hoping to unlock with the broader clinical trial program? And how much of the total opportunity do you believe is represented by the monotherapy? Is that kind of the majority part? Is that what we should be thinking as the main part? Or just are you seeing this as a small portion and just the tip of the iceberg? And just related to that, can you remind us on the financial obligations from you and Roche regarding the future Phase IIIb development? Adam Steensberg: Thank you for your question. I'll just start with a few remarks and then hand over to David. So as -- as you know, our -- the focus for the team right now is to accelerate time lines to a potential launch of petrelintide and in parallel, invest deeply in making sure that petrelintide will become a foundational and first choice therapy and thus also having the data foundation to support that positioning. And we will have -- we'll share all costs with our partner us in those efforts. It's clearly the monotherapy that have our key focus right now. But as David also discussed, the combinations now starting with CT-388 is also carrying investments as we progress these programs. And we will hope to see more combinations really utilizing petrelintide's potentially as a foundational therapy. But perhaps, David, you can comment a little bit more on the Phase III considerations and why we have strong believe that it can become a foundational therapy. David Kendall: Yes. Thanks, Adam, and thanks, Kirsty. As noted, the Phase IIIb program beyond a rapid acceleration of the Phase IIIa program to ensure the earliest possible submission and potential approval. You can imagine that it is obviously the outcomes that matter most to patients and their providers that will be the focus, not only of the weight loss studies in Phase IIIa, but focusing on those complications, which we know are readily tied to weight reduction, such as obstructive sleep apnea, osteoarthritis and osteoarthritis pain, noting that amylin agonists may have the unique potential to favorably alter bone metabolism and impact pain markers as has already been shown with the GLP-1 agonist reduced weight has its benefits and going beyond that. But beyond those, I think attention to preserving muscle mass, maintaining functional status, focusing on the population that seeks weight-reducing therapies the most, specifically women and women's health implications. And finally, a very important impact of those coexistent comorbid conditions, cardiovascular outcomes being primary, looking at the impact on liver disease and other metabolic dysfunction associated comorbidities. As Adam noted, the focus initially is on monotherapy, establishing amylin-based therapies and petrelintide in particular, as a foundational therapy, but understanding that in complex metabolic diseases such as lipid disorders, hypertension, type 2 diabetes, we have learned that the complexity of these diseases often requires multifaceted approaches to therapy. So combinations with incretin-based therapies and other modalities as being investigated by us and others, we believe will become the cornerstone of the optimal treatment for obesity and its related conditions. To reemphasize what Adam stated, petrelintide as monotherapy, which we firmly believe can be foundational, but also substantially improve the patient experience will be the focus of Phase IIIa with the extension in Phase IIIb to unlock the full potential of this asset. Henriette Wennicke: And just maybe a comment from me, Kirsty, as well on the financial obligation. So yes, we will share costs both on Phase IIIa but also Phase III 50-50 with Roche. As I mentioned in my remarks, we will receive USD 575 million in connection with the Phase III initiation, and we will also receive USD 575 million in connection with Phase IIIb initiation from us. Operator: We will take our next question. Your next question comes from the line of Andy Hsieh from William Blair. Tsan-Yu Hsieh: Congratulations on a stellar 2025. Adam, I appreciate that you're moving the field away from the weight loss Olympics, as you coined the phrase. Just to gauge expectations ZUPREME-1, semaglutide and tirzepatide showed an additional 2% and 3% weight loss from 42 weeks to study end. So objectively, should we subtract that 2% to 3% from your TPP goal just to account for the timing difference and gender mix for the imminent readout? And also, if you don't mind, maybe a macro question on what Lilly has done recently. We wanted to recategorize as a biologic. So if they're successful, do you think that, that might set a precedent for all the peptides out there, including petrelintide? Adam Steensberg: Thank you for your question, Andy. And I would say when you -- and of course, everybody compares across studies. When we have designed our ZUPREME-1 study, we have had one key focus, and that is to generate the most robust data set to allow us for the most robust decision-making to move into Phase III. So we have not enhanced the study with a disproportional high amount of women or high BMI. And we've also decided to look at the data point of week 42 instead of week 48 as others would do in order to have the most robust data set for Phase III decisions. So when we then -- as David also shared in his prepared remarks, think about what are the weight loss that we anticipate to see -- we would expect in that study under these study conditions that translate into a 15% to 20% weight loss in a Phase III study setup. That's how we will look at the data. And I would say, historically, when you look into male-to-female ratio, if you take a study that is enriched with only females versus males, you could probably expect what, 5% more weight loss in the female-only cohort. If you then also enhance the BMI and the study duration, then you would see even higher differences. So we are looking for a data set that when we do our internal modeling will allow us to get this 15% to 20% weight loss. And the reason that we have called to end the weight loss Olympic is just the plain fact that patients are not interested -- most patients are not interested in a weight loss above 20%. So why is it that we, as an industry and a community keeps talking about those numbers as if they were so important. You can do these surveys among patients, and you will get the same answer across any survey that we have seen thus far. And that's why I call for the end. As I also said, and as we discussed also in one of the prior questions, the key to unlock the value in this market is to develop therapies that provides patients with the weight loss they're looking for and as importantly, therapies that they can stay on instead of therapies where they only take them for 3 to 6 months and then stop taking them. The big dilemma we have with people don't stay on therapy is that most will likely regain the weight and thus never get to the health benefits. So both from a patient, a society perspective, but also from a company value perspective, the focus has to be on treatments that deliver the weight loss that the most patients are looking for, 15% to 20% and then importantly, medicines they can stay on. And that's why I'm calling to the weight loss Olympic, focus on medicines that deliver what the patients want, and you will unlock the value in this market. On your other question, with regard to efforts to move from a small molecule designation to a biologic. I'm sure that industry is looking into different ways to enhance, you can say, the positioning of their drugs. And I will not share our specific efforts to protect the value of our programs. But rest assured that we also have that -- those efforts as key focus. Operator: We will take our next question. Your next question comes from the line of Yihan Li from Barclays. Yihan Li: Yihan from Barclays. So I guess I wanted to switch gear a little bit to survodutide and also MASH. So for MASH, based on our recent KOL checks, I believe the off-label use of including MASH appears increasingly common. So for example, our physicians would still use tirzepatide in MASH, if possible, even though we know it is not formally approved by regulators. So I'm just curious from your market research, are you observing something similar in terms of this physician behavior? And also more broadly, like assuming survodutide will be launched in 2027, and we understood you might be more offense on this partnership, but also wondering anything you could share regarding its commercial strategy across obesity and MASH? Adam Steensberg: Thank you for your question. And it's important to note that it is Boehringer Ingelheim, who is solely responsible for the development and the commercialization of survodutide. We will just get milestones and then high single to low double-digit royalties. The profile that we have seen thus far from the clinical data released by Boehringer for survodutide gives us a lot of confidence in the molecule, both with regards to weight loss, but also in MASH. On the weight loss parameters, as we have discussed before, we think the weight loss levels and the weight loss experience is going to be quite comparable to what we have seen with some of the market-leading GLP-1s on the market today. We look forward to seeing the Phase III data. When it comes to the MASH data, the Phase II MASH data that we have seen and is also expressed by Boehringer at the time when the data was released, we see them as breakthrough data. These are unprecedented levels of improvements. And I think that's also reflected in the fact that Boehringer have decided to invest in the largest ever Phase III program for MASH, not only addressing F2 and F3, but also F4 patients, which gives unique opportunities to broaden the potential label if approved beyond into the most severe cases of MASH, but also with the scope of the program could provide very early indications of clinical and not just biomarker improvements. With regard to what you mentioned as off-label use, if I heard you right, of the GLP-1s, I would say please remember that the majority of MASH patients are obese in the first place. And thus, of course, it's a logical choice to use the existing medicines to help patients achieve some weight loss as many MASH patients suffer from both obesity and other complications than MASH. So that is only a natural consequence. What we believe is that once you have a product that can make a significant larger effect on the disease status, we should expect to see a very attractive take-up also exemplified by the enrollment into the Phase III program and Phase II program for survodutide. So we have a high confidence in the program. We have a high confidence in Boehringer's ability to execute. They are one of the strongest large pharma players in the cardiovascular metabolic space, and we look forward to see the data coming out this year, including the cardiovascular outcome data in obesity. Operator: We will take our next question. The question comes from Xian Deng from UBS. Xian Deng: Xian from UBS. So 2, please. The first one is on ZUPREME-1. So really appreciate you emphasized -- reiterated the importance of tolerability. So just wondering, looking into ZUPREME-1, just wondering what sort of profile do you -- would you actually consider as really your target profile in terms of tolerability? Would you say -- let's say, do you think it's actually possible to achieve, let's say, placebo level similar to placebo level of vomiting and constipation. So any color on that, that would be great. So the second one is sort of a general question. So a few days ago, so Eli Lilly showed some quite interesting data combining tirzepatide and Taltz in psoriasis, which actually showed better skin clearance than Taltz alone. Of course, that's in psoriasis patients that are also obese. But just wondering if you have any thoughts on that? And would you consider, for example, in the future, collaborating with some other autoimmune players on something similar as well? Adam Steensberg: Thank you for your question. I'll just start by putting some thoughts on your second question and then hand over to David to follow up and also address your first question. I think maybe you also saw that yesterday, we also announced a Phase I data readout with our Kv1.3 ion channel drug, which is a broad autoimmune anti-inflammatory target, which has potential across a number of inflammatory conditions. And thus, we see that as a potential pipeline in a product. And -- there's another notion out there that in relation to the obesity pandemic, you actually see quite significant increases in the prevalence of some chronic autoimmune and inflammatory conditions, which had otherwise been seen as being rather stable. So we see a strong link between the obesity pandemic and the rising prevalence of some of these conditions. And it's clear that if you name things like psoriasis or even IBD, there are some strong links with the obesity pandemic. So we are highly energized by our own Kv1.3 data and the opportunity to perhaps link metabolism and inflammation in the future. But David, maybe you want to elaborate. David Kendall: Yes. And again, thanks for your questions. On the issue of tolerability, noting that tolerability is really a collection of factors. We focus, obviously, a great deal on the GI adverse events that have been made so central, particularly to incretin-based therapies. And while our Phase I data to date have suggested the potential for significantly lower rates of nausea, vomiting and certainly lower rates of the more chronic GI adverse events associated with GLP-1-based therapies, namely diarrhea and constipation in ZUPREME-1 and subsequent trials, tolerability and acceptability of the entire experience will be the focus of our evaluation. So looking obviously at GI adverse events, but in combination with the injection experience, the experience around dosing and dose escalation. And back to the question that was posed to Adam on orals versus injectables, if one thinks about the currently available therapies and the target product profile for petrelintide, we anticipate that the weekly injection will consume about 10 to 20 seconds of an individual patient's time, which clearly can be associated with the acceptability of a treatment, assuming that injection experience is without reactions, pain, discomfort, which we have seen in our Phase I trials to date. So I encourage you and others as we will be doing to look at tolerability and acceptability as a collection of these factors, GI adverse events and more. And to Adam's ultimate point, if that experience is highly acceptable to patients, that will further encourage long-term persistence on therapies and particularly therapies that give patients the weight loss they desire. Operator: We will take our next question. The question comes from the line of Jen Jia from Cantor Fitzgerald. Jennifer Jia: This is Jennifer Jia on behalf of Prakhar Agrawal from Cantor Fitzgerald. So I was wondering for the upcoming Phase IIb obesity readout for petrelintide, in what way can it differentiate on safety, tolerability versus Lilly's amylin eloralintide, and also for the combo with petrelintide with CT-388. Could you give more context on dosing across the 2 products, titration schedule as well as how you want to mitigate the GI tox previously seen with CT-388? Adam Steensberg: Thank you for that question. It's as we have tried to convey on this call, the most important aspect for us when we review these data is to confirm that we have a product that lives up to the target product profile, which we have discussed a number of times, which is delivering a 15% to 20% weight loss and a more pleasant weight loss experience. If we have that, we will have a leading category -- leading molecule within a new category. And I think it's really, really important to also look back at the data that have been generated thus far with petrelintide, which gives us the confidence when we look across the different amylin assets, we have what looks to be the best-in-class amylin analog in development. And that's why we move towards the Phase II data with a high level of confidence, both with regard to weight loss and tolerability data. But the most important part for us is to get confirmation in this Phase II data with what we have seen in the Phase I and thus, that we are fully on the path to deliver on our target product profile. And thereby, as we have also communicated several times, we think petrelintide and amylin in general has the potential to be a larger category for weight management than the GLP-1s because if you allow patients to stay on therapy and you don't have to go out and capture new patients all the time, you would rapidly see the volumes of such a category outgrow the volumes of a category where people stop taking medicines early on. So this is the key focus for us when we look at the data, and we move forward based on the prior data experience, which I think we have released to the market. So we all have the opportunity to look at those data that petrelintide has the potential to be the best-in-class amylin of those that are in the clinic today. The combination product, of course, is also a unique opportunity. And with CT-388, when we did the diligence and the partnership with us, our conclusion was that CT-388 look to be potentially also a best-in-class GLP-1/GIP molecule. And we look very much forward to seeing further data from that program. But the combination -- when we think about the combination with that molecule, our gut feeling, if you will, would be to max out on the potential of petrelintide and then add a teaspoon of the GLP-1 component to enhance the weight loss experience for those patients who need the highest weight loss. And so we look forward to share more on the study designs and of course, ultimately, the data that comes out of the Phase IIb study for the combination that we will start later this year. Operator: We will take our next question. The next question comes from the line of Kerry Holford from Berenberg. Kerry Holford: A question from me is just on the planned Phase IIIa study design. I wonder if you can share any more detail on that. It's clear the message here is to expect you to accelerate launch and deal with the CVOT data later. But can you discuss the endpoint, the study time period that you're looking at for the Phase IIIa study? I mean, for example, could we see a scenario where 6 months weight loss is sufficient to get a first approval for petrelintide? Adam Steensberg: Thank you for your question. I think what we can reassure you is that we, together with us, we are doing everything possible to accelerate, and we have some -- identified some very good levers and have a lot of confidence that we can accelerate and push this program as fast as possible forward. We cannot share the details also the exact details on submission time lines due to the fact that this is a partnership, so we need to agree on when to discuss these things. But we are all on in both organizations to make sure that things are being accelerated towards submission and ultimately a launch. What is also important here to note and one of the main reasons that we decided to partner this program at the time we did was, of course, investments into manufacturing capacity -- and we have been extremely pleased to see the announcements that have come out with, with regard to investments into high-volume, high-throughput manufacturing capacity, which, of course, is needed if you want to secure a successful launch when these products hit the market. And I think that's again coming back to the uniqueness of the partnership we have here and the uniqueness of Zealand today is that we are -- as I conveyed at our Capital Markets Day, and we continue to operate as a biotech company, but we -- and that's the -- we will bring in the best from that world. But in the collaboration with us, we will also leverage the strength of a pharma company as we approach the market with petrelintide. And I don't think you have seen many of these partnerships, but that is why we keep coming back to the strategic value and of course, the profit share we have in this partnership is unique and it's one which we are extremely pleased with to see also how it progresses. We will hopefully soon be able to share more on the exact time lines as we move the program into Phase III, but it's just perhaps one quarterly call too early. Operator: We will take our next question. The question comes from the line of Suzanne van Voorthuizen from VLK. Suzanne van Voorthuizen: This is Suzanne from Kempen. Looking beyond the Phase IIb readout that we're all eagerly awaiting and I believe how petrelintide could provide an alternative to incretins and the product profile you're targeting is very clear. But I wonder if you could elaborate for the longer run based on the knowledge today and the data sets that have been reported for the various amylin assets out there, how do you expect petrelintide to be positioned within the amylin class? What would you expect in terms of differentiation versus the other amylin later down the line? And maybe one clarification about the research site in Boston. What will this hub focus on? And how would that complement the capabilities in Copenhagen? Adam Steensberg: Thank you, Suzanne. It is too early for us to share our thoughts about the ultimate differentiation between the different amylin analogs. We have been extremely pleased with the data that we have seen thus far when it comes to the balance between weight loss and tolerability and safety findings also when we compare across the different modalities, different amylin analogs in the clinic today. So -- and we see a clear opportunity to continue to develop that differentiation that we have already observed in until today. Another key aspect, which I think is important to note as well is as we enter this market, this will be the #1, 2 and 3 focus for Zealand and to build petrelintide into a leading molecule within the amylin class. Others will have to spend more time thinking about existing franchises and how to protect current molecules that are already on the market. And that's a strength and a force which I don't think people should underestimate. On the research side, in Boston, as Utpal shared a little bit on our Capital Markets Day, but it's really going to be a site that will complement what we do in Denmark. In Denmark, we are one of the strongest, if not the strongest research group within peptide chemistry and also having worked in metabolic diseases and health for more than 25 years, have very unique expertise in those areas. In Boston, we will build complementary skills, including focus on high throughput research labs machines that are built -- labs that are built specifically to tap into the automatization that we are seeing in research these days. And on top of that, we are also going to broaden out to modalities beyond peptides. And part of that broadening out will be through partnerships. We just announced one in December with OTR, which has to do with small molecules, but we expect to announce more partnerships, but we will also build some in-house capabilities, so we can become best partners to these opportunities. So it's broadening beyond peptide modalities, and it's also with a high focus on automatization and high throughput, really leading to our firm conviction that we can deliver industry-leading times from idea to the clinic as we build our infrastructure in the coming few years. Operator: [Operator Instructions] We will take our next question. The question comes from Rajan Sharma from Goldman Sachs. Rajan Sharma: Could you just discuss the rationale for restarting development of a GIP analog? Firstly, just to clarify, is this the same asset which you previously deprioritized? And then just in terms of strategy here, do you expect to see monotherapy activity? Or is this really a combination asset for the future? And how should we think about that in the context of CT-388, which is a GLP-1/GIP co-agonist? Adam Steensberg: Thank you, Rajan. I'll hand it over to David. David Kendall: Yes. Thanks, Rajan. Yes, this is the asset that has been part of our pipeline all along. And as you have likely noted, I mean, the interest in leveraging GIP pharmacology, while it is still in its infancy, both with the development of tirzepatide and other GLP-1/GIP molecules, the recent announcement of Novo looking at combinations with an amylin analog. But our understanding, as we've stated all along, that combination therapies can ultimately be leveraged to target this complex metabolic set of disorders, obesity and beyond. And while GIP monotherapy, as has been reported by others, may not in and of itself have potent weight-reducing effects, the potential to further improve insulin action or insulin sensitivity, the ability to unlock even greater effect of other molecules, including amylin analogs, other incretin hormones and other peptide signals is becoming clearer. And for us, this is yet another venture into the potential for combination approaches to targeting these complex metabolic diseases. And again, our commitment to improving metabolic health overall goes beyond, as Adam said, simply reducing body weight, simply targeting MASH to improving things like insulin action, targeting aspects of fat cell or adipocyte behavior and using this pharmacology to really target multiple tissues, multiple organs and further enhance the effect of other peptide and non-peptide signals. So starting with the first in-human to ensure understanding of the PK and safety and tolerability, and then we hope to rapidly advance into assessment of unique combinations with amylin assets and other signals. Operator: We will take our next question. The question comes from the line of [ Susan Shaw ] from Wells Fargo. Unknown Analyst: This is Susan on for Mohit. Just a quick question on ZUPREME-1 dose titration cohorts. Can you speak a little bit more on the rationale behind the timing and the step-up doses that were chosen for the trial? And as a follow-up, where do you expect to see the most improvement on the side effects? Adam Steensberg: Thank you for your question. The rationale was for the dose titration or you could even say that it is even a titration because you can expect, of course, to see weight loss even at the lower doses, but it's is the ability to get to the higher doses is a dosing escalation every 4 weeks is a practical way to do it. Our Phase Ib data suggests that we could do more frequent dose escalation and not compromise the tolerability from a GI side effect profile. It was clean, as you remember, except for one dosing arm where they started at a higher dose than what we do here. So it's also about the practical timing for dose escalation. I don't think we have the same issues as you have with the GLP-1s, where you need to titrate carefully. And remember also a lot of patients, you will have to down titrate when you have decided to titrate up, then you have to back off for some weeks and then back off. That is what becomes -- that's why it becomes so complicated to get patients to the higher doses of the GLP-1, but we have not seen that with the amylin. In all our titration step, we have seen patients being able to tolerate the next dose with any significant new adverse events. So for us, it's more a practical decision rather than something that has to decide with how you have to do it actually from a side effect profile. Operator: We will take our final question. The final question comes from the line of Jen Jia from Cantor Fitzgerald. Jennifer Jia: On 9830, the channel blocker, what indication would you consider pursuing? And what would be the rationale for that? Adam Steensberg: Yes. So we have some very good ideas about where we want to take the molecule in next, and also -- but -- and what you should expect is that we will be pursuing several indications also in parallel, because if you look into the biology rationale, we are looking at what could become a pipeline in a product. It's too early for us to share which indications we are going for, but you should expect us to pursue several indications in parallel. It is a target that industry has been pursuing for a very long time without success because of the difficult nature of addressing this target. And that's also why, as David shared before, we are extremely excited about the fact that we have not only seen PK, but also clear effects of target engagement from a PD perspective in the Phase I study. So we think we have something that could be a future jewel in our pipeline. So -- but the specific indications, we'll have to come back with later. All right. Okay. And with that, I would like to thank you all for attending and for your questions. We look forward to future announcements and updates and to connecting in the coming weeks and months. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to Oceaneering's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Sarah, and I will be your conference operator. [Operator Instructions] With that, I will now turn the call over to Hilary Frisbie, Oceaneering's Senior Director of Investor Relations. Hilary Frisbie: Thanks, Sarah. Good morning, and welcome to Oceaneering's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being webcast, and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer, who will provide our prepared comments; and Mike Sumruld, Senior Vice President and Chief Financial Officer. After Rod's remarks, we will open the call for questions. Before we begin, please note that statements made during this call regarding our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter press release, which is posted on our website. I'll now turn the call over to Rod. Roderick Larson: Good morning, and thanks for joining the call today. We closed out 2025 with strong execution across the business, making continued progress against our strategic priorities. Our performance reflected continued pricing progression in key businesses, strong operational delivery and growing contributions from Aerospace and Defense Technologies or ADTech. Importantly, this translated into meaningful cash generation with our cash balance increasing to $689 million at year-end, further strengthening our financial flexibility. During 2025, we generated order intake of $3.7 billion, which represented a book-to-bill ratio of 1.33, up from 1.1 in 2024, expanded adjusted EBITDA margins by 140 basis points with each operating segment realizing year-over-year improvements, achieved 99% ROV uptime for the second consecutive year and for the seventh time in the past 10 years, improved ROV -- improved pricing in our ROV business by 7% over the course of the year. Won the highest ever initial contract award in Oceaneering's history through our ADTech business, integrated GDi into our Integrity Management and Digital Solutions, or IMDS segment, repurchased approximately 1.8 million shares for $40 million and grew our cash balance by $191 million. As safety remains foundational to everything we do, I'm especially proud of our record low total recordable incident rate, or TRIR, of 0.22 achieved in 2025. Today, I'll cover our fourth quarter and full year 2025 results, our market outlook for 2026, our consolidated guidance for 2026 and our segment outlook for the full year and first quarter of 2026. I'll start by reviewing our fourth quarter 2025 results. We delivered a solid fourth quarter in line with typical seasonality, driven by strong operational execution in several of our business segments. Compared to the fourth quarter of 2024, consolidated revenue of $669 million was driven by substantial growth in ADTech, which partially offset lower revenue in our energy-focused businesses, resulting in a 6% decline from the same period last year. The revenue decrease in energy was primarily due to the unusually high number of international intervention and installation projects that our Offshore Projects Group or OPG, performed in the fourth quarter of 2024 that did not repeat in the fourth quarter of 2025. Consolidated operating income of $65.4 million also declined year-over-year with increases in ADTech, Manufactured Products and Subsea Robotics or SSR, partially offsetting significantly lower results in OPG, stemming from the intervention and installation projects in the fourth quarter of 2024 that I mentioned previously. IMDS was also lower compared to last year. We reported net income of $178 million or $1.76 per share, a 217% increase year-over-year. This improvement was largely due to a $156 million discrete tax benefit related to the release of U.S. valuation allowances. Our consolidated adjusted EBITDA of $90.5 million was at the high end of our guidance range, but as expected, declined year-over-year for the same reasons that revenue and operating income declined. Additionally, during the fourth quarter, we generated $221 million of cash from operating activities and invested approximately $30 million in organic capital expenditures with approximately 55% allocated to growth and 45% to maintenance. Free cash flow for the quarter was $191 million, benefiting from the timing of customer payments, including early receipt of payments originally due in the first quarter of 2026. As of December 31, 2025, our cash balance was $689 million, a 38% increase compared to the end of 2024. Now let's look at our segment results for the fourth quarter of 2025 as compared to the fourth quarter of 2024. SSR operating income of $67.8 million was 7% higher on relatively flat revenue. EBITDA margins improved to 38% from 36%, largely due to improved ROV pricing and increased tooling volumes. Survey results decreased on lower activity levels in the Americas as certain projects originally planned for the fourth quarter of 2025 shifted to the first quarter of 2026. The revenue split between our ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was relatively flat at 78% and 22%, respectively. Average ROV revenue per day utilized increased 7% from $10,481 in 2024 to $11,210 in 2025, with a fourth quarter exit rate of $11,550. These pricing improvements offset the impacts of lower ROV fleet utilization during the quarter, which declined to 62%. Most of the decline came from vessel support of our OPG vessels as drill support utilization was slightly higher compared to the fourth quarter of 2024. During the quarter, 67% of ROV days utilized were for drill support and 33% were for vessel services. As of December 31, 2025, we had 60% of the contracted floating rig market with ROV contracts on 81 of the 136 floating rigs under contract. We ended the quarter with the year -- we ended the quarter and the year with a fleet of 250 ROV systems, including 16 upgraded work class ROV systems that replaced 16 systems that were retired in 2025. Turning to Manufactured Products. Our fourth quarter revenue of $132 million decreased 7% year-over-year. Operating income of $20.4 million and operating income margin of 15% increased considerably due to conversion of high-margin backlog in our umbilicals business and improved results in our non-energy projects. Year-end 2025 backlog was $511 million, a decrease of 15% compared to December 31, 2024. The book-to-bill ratio of 0.84 for the full year of 2025 declined compared to 0.97 in the full year of 2024, largely based on the timing of orders. It is worth noting that Manufactured Products full year 2025 revenue of $569 million and operating income of $72 million represented their highest level since 2020, when we combined our energy and nonenergy products into the same segment. OPG revenue of $131 million decreased 29% compared to the same quarter last year, while operating income decreased to $15 million and operating income margin declined to 11%. This was expected and as noted earlier, primarily due to large international intervention and installation projects that OPG performed in the fourth quarter of 2024 that did not repeat in the fourth quarter of 2025. For IMDS, fourth quarter revenue declined due to lower activity levels in Europe and West Africa. Operating income declined by $2 million due to a combination of lower revenue and a loss associated with the resolution of a commercial dispute. Our ADTech fourth quarter 2025 operating income increased 43% and operating income margin improved to 11% on a 29% increase in revenue as compared to the same period last year. These improvements are the result of new contracts awarded during the year and reflect our strategic initiative to increasingly leverage our offshore knowledge and capabilities to grow this segment. In addition to previously announced contract awards, ADTech completed 2025 with 2 fourth quarter awards on unexercised options that are expected to generate meaningful revenue in 2026. ADTech's current backlog establishes a strong multiyear foundation for revenue growth, extending beyond the traditional 5-year planning horizon. Fourth quarter 2025 unallocated expenses of $52 million increased 26% compared to the same period last year, primarily for increased accruals for performance-based compensation. Now I'll turn my focus to our consolidated full year 2025 results compared to 2024. For 2025, consolidated revenue increased 5% to $2.8 billion, marking our fifth consecutive year of revenue growth. With the exception of IMDS, each of our operating segments achieved revenue increases. Consolidated 2025 operating income of $305 million improved by $58 million or 24% and adjusted EBITDA of $401 million improved by $54 million or 16% compared to 2024. EBITDA growth was realized for all of our operating segments. Cash flow from operations increased $116 million to $319 million, primarily due to timing of customer collections in the fourth quarter. We invested 101 -- excuse me, we invested $111 million in organic capital expenditures, representing a 4% increase over 2024 levels. For the full year of 2025, free cash flow was $208 million compared to $96.1 million in 2024. At year-end, we had total liquidity of $904 million, comprised of $689 million in cash and cash equivalents and $250 million -- $215 million, to be clear, million from our undrawn revolving credit facility. Now turning to our 2026 market outlook. We expect ADTech to be our primary growth driver in 2026 based on our current backlog and expectations for increased spending across defense and government markets. In the U.S., we anticipate a well-funded defense environment with steady activity in subsea critical infrastructure protection, unmanned subsea systems and submarine sustainment. Internationally, geopolitical tensions and increased allied spending create additional opportunities for our AUVs, resident systems and subsea monitoring solutions. For our energy-focused businesses, we expect 2026 results to reflect a global oil market that remains oversupplied early in the year and gradually tightens as the year progresses. Consistent with that backdrop, offshore activity levels are expected to be relatively flat in the first half of 2026 with increased activity in the second half of the year and into 2027. According to the U.S. Energy Information Administration, Brent crude oil prices are expected to average in the mid-$50 to low $60 range in 2026, a level we believe supportive of deepwater activity broadly consistent with 2025. Spinergie forecasts that deepwater rig demand, which is indicative of ROV activity, will remain relatively flat in 2026. Independent research indicates that final investment decisions or FIDs for deepwater projects are expected to increase in 2026. FIDs and subsea tree awards are key leading indicators for offshore activity over a 2- to 5-year horizon, including installations, equipment orders and overall offshore spending. These indicators help inform the expected timing of demand for umbilicals, subsea hardware and other subsea products, such as our rotator valves, all of which are typically ordered 3 to 6 months following tree awards. According to Rystad Energy, 42 deepwater FIDs are expected in 2026 compared to 37 in 2025 and increasing to approximately 75 in 2027. Subsea tree awards are forecasted to increase to approximately 300 awards in 2026 compared to 190 in 2025. Tree installations are expected to increase modestly to approximately 370 installations in 2026 compared to 343 in 2025. Now I'll turn to our consolidated 2026 outlook. Based on our current backlog, anticipated order intake and market fundamentals, we project consolidated revenue in 2026 to grow in the low to mid-single-digit percentage range. Year-over-year, ADTech revenue will improve significantly. SSR and IMDS revenue improvement will largely offset anticipated declines in OPG and Manufactured Products. Our current energy-related backlog includes a mix of multiyear contracts, including awards announced across multiple geographies and business segments, such as multiyear SSR contracts for ROV services in Angola and ROV and survey services in Brazil, and multiyear OPG contracts for Inspection, Maintenance and Repair, or IMR, contract in Mauritania and for riserless light well intervention in the Caspian Sea. For the year, we anticipate generating $390 million to $440 million of EBITDA with year-over-year improvements in all of our segments, except for OPG. At the midpoint of this range, our 2026 EBITDA would represent a modest increase over our 2025 adjusted EBITDA. EBITDA margins are expected to improve in Manufactured Products and IMDS, remain stable in SSR and ADTech and decrease in OPG. We anticipate generating positive free cash flow of $100 million to $120 million. The year-over-year reduction in free cash flow primarily reflects the early receipt of approximately $37 million in customer payments in the fourth quarter of 2025 that were originally scheduled for the first quarter of 2026. At the midpoint of our EBITDA and free cash flow ranges, our cash conversion rate for '25 and '26 combined will be almost 40%, as has been the case over the last several years, we anticipate a substantial cash draw during the first quarter related to working capital changes associated with lower customer receipts, associated with early collections in 2025 that were scheduled for 2026, and the payment of performance-based incentive compensation. For 2026, we forecast our organic capital expenditures to total between $105 million and $115 million, with approximately 40% allocated to growth and 60% to maintenance. Compared to 2025, our energy-focused capital expenditures are projected to be down 12%, while ADTech spending is up to support recent contract awards. We forecast our 2026 interest expense net of interest income to be in the range of $21 million to $26 million. We expect our cash 2026 tax payments to be in the range of $95 million to $105. Directionally, in 2026 for our operations by segment, we expect continued improvements in SSR based on increased tooling volume, improved results from our survey business and the full year benefit of pricing improvements achieved throughout 2025. Revenue growth is expected to be in the low to mid-single-digit percentage range and EBITDA margins are expected to average in the mid-30% range for the full year. For ROVs, we project a service mix of approximately 65% drill support and 35% vessel services consistent with 2025. Our overall ROV fleet utilization is forecasted to be in the mid-60% range with higher activity levels during the second and third quarters. We expect to sustain our ROV market share in the 55% to 60% range for drill support services. Average ROV revenue per day utilized in 2026 is expected to be relatively flat compared to our 2025 exit rate. Survey results are expected to improve in 2026, supported by increased utilization of our Ocean Intervention II vessel, which we upgraded in 2025 to enable simultaneous autonomous survey operations. We have also deployed our Freedom Autonomous Underwater Vehicle or AUV, on commercial operations in West Africa. We expect to deliver a second commercial second Freedom vehicle to the defense innovation unit in the first half of 2026. Finally, as part of our fleet transition plan, we are pleased to announce that our newest electric work class ROV momentum is expected to be deployed on vessel support operations in the U.S. Gulf later this year. For Manufactured Products, we expect meaningful improvements in operating income on slightly lower revenue, driven by continued conversion of our existing umbilicals backlog, high absorption levels across our 3 umbilical plants, increased order activity in rotator and cost reductions in our nonenergy product lines. Operating income margin is expected to average in the mid-teens for the year. For OPG, revenue is expected to decrease and operating income is expected to decrease significantly as projects shift toward traditional IMR work from installation and intervention work. We also project lower activity levels in the U.S. Gulf and West Africa, partially offset by higher activity levels in Brazil, the Caspian and the Middle East. Overall, for 2026, OPG operating income margins are expected to average in the mid-teens range for the year. IMDS operating income is forecasted to improve significantly on increased revenue with growth opportunities in digital and engineering services. Operating income margin is expected to improve to be in the mid-single-digit range for the year. ADTech operating income is expected to improve on significantly higher revenue with revenue and operating income growth in all 3 of our government-focused businesses. Operating income margins are expected to average in the low teens for the year. Our growth expectations are underpinned by 2025 contract awards that span product development, maintenance, inspection, specialized technical services and ongoing operations in complex maritime, space and security environments, supporting mission-critical defense and space operations. For 2026, we anticipate unallocated expenses to average approximately $50 million per quarter with increases associated with wage inflation, IT costs and foreign exchange impacts. Now I'll discuss our outlook for the first quarter of 2026 as compared to the first quarter of 2025. On a consolidated basis, we expect our consolidated revenue to decrease and EBITDA to be in the range of $80 million to $90 million. This guidance range is driven by our expectation for lower activity levels in energy markets at the start of 2026, which we expect to improve as the year progresses. For SSR, we project revenue to increase slightly and operating income to decrease given the geographic mix of ROV activity. We anticipate the mix to be more favorable as we progress through the year. In Manufactured Products, we forecast operating income to increase significantly on slightly lower revenue due to continued backlog conversion and the absence of the inventory release that impacted our theme park ride business in the first quarter of 2025. We expect OPG revenue and operating income to decrease significantly on lower vessel utilization and changes in project mix in the U.S. Gulf and lower international activity. We project IMDS revenue and operating income to be relatively flat. For ADTech, we expect significantly higher revenue and increased operating income on changes in project mix. We forecast unallocated expenses to be in the range of $50 million. In closing, I want to thank our employees for their dedication throughout 2025. Through their efforts, we saw momentum in each of our segments that gives us increased visibility into the future, including strengthening contributions from ADTech, growing opportunities in digital and software services and expanding opportunities in international projects. As we move into 2026, we remain focused on working safely and reliably, supporting our customers and creating value for our shareholders. We appreciate everyone's continued interest in Oceaneering, and we'll now be happy to take any questions you may have. Operator: [Operator Instructions] Your first question comes from Keith Beckmann with Pickering Energy Partners. Keith Beckmann: I wanted to ask kind of around -- I noticed you guys have talked about increased defense and government spending. ADTech looks to be stronger throughout the year with some awards. What is the -- what's kind of the typical lead time and process of government services type of projects from the time that they're awarded to kind of whenever they would show up for you typically. Is there a rough time line on that or lead time? Roderick Larson: It's really hard. It varies quite a bit. I mean some things depending on like if there are services for existing products, they ramp up quickly. Some of the things where we're working on new things, that starts with -- like every other project starts with engineering studies and then you go to prototyping and all those kinds of things. So it really is -- it's hard to call. And I would just -- just to give you an idea, it's a mix right now. So the things we've been talking about are a mix of the two. Keith Beckmann: No, that's very helpful. Makes sense. And then the other question that I had was around ADTech as well again. Whenever you think about kind of the other segments in your business, how those really helped supplement what ADTech does and kind of the growth we've seen in that segment? I think it's kind of like your knowledge around ROVs and maybe how that helps, but any color on that? Roderick Larson: No, I think you're right on. And so we work in different places, right? So one of them is more about just sort of that offshore operations, ROVs, vehicles, that kind of stuff. That's one of the groups that we talk about. The other one is just our experience in maritime and working on things. It started with a lot of our welder expertise and the things we were doing offshore. So in that case, we do SUBSAFE work. So we're doing what we call -- you'll hear us talk about submarine sustainment. And that's because we're doing a lot of the mechanical haul repair, sail repair, things like that when a submarine comes into dry dock for nuclear refueling. So we do a lot of that pressure vessel maintenance, if you will. And we're actually one of the only ones that's actively doing that other than the submarine builders. So that's a SUBSAFE certification they call it, which is pretty unique. And then the third part is, of course, Oceaneering space systems and the space systems stuff, we do everything from the things that astronauts need to do in space. So creating tools, habitats, human interface and not surprisingly, that's about working in low gravity environments, right, like a diver does. So our expertise with divers and tooling kind of translate into that business. And then the other part that came with that is suits and then finally, thermal protection systems, which is sort of a -- if you think about this, this is the shrouding that goes around the rockets, a fabric shrouding that's sacrificial, it burns up basically when the rocket launches. And of course, that business is pretty hot right now with both the return to space, but also with the Golden Dome. Operator: Your next question comes from Josh Jayne with Daniel Energy Partners. Joshua Jayne: First one, I was just curious, could you talk about the future of IMDS and then also your digital software offerings and how you could potentially expand them sort of outside what you're doing within energy? Roderick Larson: Yes. And those are kind of linked at the hip. It -- for us, it's exciting because it's one of the first times we see sort of machine vision, machine learning and AI coming to play. So we're going out to a rig. And instead of just having people crawl all over and do spot checks with hammers and cameras and chip and paint and things looking at pressure vessels and primary containment on the surface side of the offshore platform. We actually are doing laser scanning. We'll be able to take that laser scanning and build a 3D model of the rig and detect corrosion at a very precise level. So you detect that corrosion, so you can be able to do a much more comprehensive scan of the facility but you can also quantify the corrosion and then start to predict how long till failure, what are the parts we need to check more regularly. So it's a huge advantage to catching things early to being a lot more, I would say, precise with how you want to go out and do your inspections thereafter. The cool part and the thing we're really excited about is while that really improves the topside inspection for our customers, we have had some really successful tests about taking that underwater. And so if we can inspect subsea infrastructure the same way with the laser scanning and the 3D model, we can be deploying that off an OPG vessel with an ROV. And so we expect that we will solve the customer's problem, but it will also create demand for ROVs and vessels. Joshua Jayne: That's helpful. And then just one more that I wanted to ask. I want to dig into M&A a little bit. I know it obviously hasn't been as much of a focus for you in the last couple of years. But just given that we've seen some on the rig side recently announced some larger deals. And I would say the current administration is pretty favorable towards moving deals. Has any of this changed your thoughts moving forward on M&A? Or should we expect Oceaneering just to sort of operate how they've been over the last couple of years and sort of sticking to your knitting and with the focus on free cash flow generation and returning it to shareholders with your capital allocation? Roderick Larson: I don't think it's going to change my mind on big industry consolidation, right, to try to go and put things together that if you squint really hard, look like they might go together just to create a bigger company. But it does -- I mean, it does give us a little bit of confidence as we go forward. The GDi acquisition was something we love, a bolt-on of technology that gave us this laser scanning thing I just talked about. I think the more we can look at how do we move to what the oilfield needs next or what the defense side needs next, and picking up new technologies that are great bolt-ons that either give us broader participation in the market or up our technology game, I think those are really attractive. And hey, if they -- if it's easier to do, it will also -- along with the financial wherewithal we're building with a strong balance sheet, it may encourage us to move into slightly bigger things. Michael Sumruld: Yes, I was going to add the same thing. I think for sure, the balance sheet strength and the growth in cash over the last several years, given the excellent work that's happened here, just gives us the opportunity, more flexibility and opportunity to do more when the time is right. Operator: [Operator Instructions] Your next question comes from Brandon Carnovale with Half Moon Capital. Brandon Carnovale: Congrats on a great print. So curious if you're seeing any traction on the autonomous forklift side after kind of like the big delivery, I think you had kind of exiting last year. Roderick Larson: There's -- I would say there's a lot of interest and different people are looking at whether they want to use it for truck loading and unloading, which is a huge opportunity for us. And we've been working on improving the capabilities for doing that. But also wherever it's just operating in places where it's not as conducive to have a driver on the forklift. So it's a lot of interest. I would say it's spread out over a lot of what was a get to know you kind of activities, somebody who wants to pick up 2 or 3 and do a test. I think one of the things we learned is the adoption, we're going to be really keen on, are you ready to adopt. If it's a brownfield application, are the people ready for it? Is the location ready for it? To make sure that those adoptions are smooth. But yes, the interest is high. I think we just got to see how fast these things pick up. So we're still encouraged and the list is long. So we'll keep knocking on the doors and keep answering those calls. Operator: This concludes the question-and-answer session. I'll turn the call to Rod Larson for closing remarks. Roderick Larson: Well, since there's no more questions, I'll just wrap up by thanking everybody for joining the call. This concludes our fourth quarter and full year 2025 conference call. Have a great day. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good day. and welcome to the UL Solutions 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 Yijing Brentano. Please go ahead. Yijing Brentano: Thank you. Welcome, everyone, to our fourth quarter and full year 2025 earnings call. Joining me today are Jennifer Scanlon, our Chief Executive Officer; and Ryan Robinson, our Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website at ul.com. Our earnings release is also available on the website. I would like to remind everyone that on today's call, we may discuss forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, among other things, statements about UL Solutions results of operations and estimates and prospects that involve substantial risks, uncertainties and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward-looking statements. Please see the disclosure statement on Slide 2 of the earnings presentation, as well as the disclaimers in our earnings release concerning forward-looking statements and the risk factors that are described in our filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2025. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as required by law. Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measures can be found in the appendix to the earnings presentation. With that, I would now like to turn the call over to Jenny. Jennifer Scanlon: Thank you, and good morning, everyone, and thanks for joining us. I'm delighted to report that UL Solutions concluded a record year with outstanding performance that exceeded our guidance. What makes our results particularly impressive is that we achieved them while navigating trade policy shifts and geopolitical uncertainties throughout 2025. Our resilience is evident. We've once again delivered robust organic growth, enhanced profitability and strong cash flow generation while maintaining our investment-grade balance sheet. Our performance is a testament to the durability of our business model, the essential nature of our services and the strength of our team. I'm particularly pleased that our global product TI strategy continues to deliver balanced performance across segments, service offerings and regions. Our strategic alignment with major industry megatrends is resonating with customers. This demonstrates the critical role we play in their success, helping them innovate with confidence while accelerating their path to global market entry. The sustained demand for our services underscores the fundamental value proposition we deliver to our customers worldwide. On the call today, I will cover 3 areas: First, highlights of our strong full year performance; second, some notable achievements and activities throughout 2025; and third, our financial position and capital allocation strategy for 2026. With respect to our full year performance, our delivery of superior results reflects our team's consistent ability to execute. I want to express my deep appreciation to our employees whose dedication to our mission of working for a safer world, scientific excellence and customer centricity defines our culture and is fundamental to our long-term success. Ryan will dive into the fourth quarter numbers, but first, let me hit the high notes of our full year 2025 results. We continue to fuel the momentum that began when we became a public company almost 2 years ago, delivering revenues of nearly $3.1 billion, up 6.4% versus 2024 and up 6.2% on an organic basis. Our Industrial segment led the way with 6.9% full year growth, including 7.1% on an organic basis, while our Consumer segment grew 6.5%, including 6.1% on an organic basis. Our Software & Advisory segment completed the year with 4% top line growth, including 3.7% on an organic basis. Our full year results once again reflected growth across all major geographic regions. Adjusted EBITDA for the full year grew 20.7% and adjusted EBITDA margin expanded by 300 basis points to 25.9%. We significantly exceeded our original long-term goal of 24% in our second year as a public company, and we expect this progression to continue. Next, let me highlight significant investments in our global testing infrastructure that we completed or announced in 2025. We opened new advanced facilities in Aachen, Germany for battery testing; Carugate, Italy for HVAC and heat pump testing, Ise Japan for electric motor efficiency testing, and we expanded laboratories in Dongguan and Ningbo, China for IoT, wireless and retail product testing. Additionally, we broke ground on our Global Fire Science Center of Excellence in Northbrook, Illinois, one of our largest laboratory investments to date. We also broke ground on 2 advanced automotive EMC testing facilities, one in Toyota City, Japan, expected to open during the second half of 2026 and another one in Neu-Isenburg, Germany projected to be operational by mid-2027. In addition to our organic investments, we invest in the evolution of safety standards. That role enables us to proactively build the certification services necessary to advance emerging technologies. For example, in Q4, we announced the launch of new certification services for battery-powered vehicles and industrial equipment, supporting the UL 2850 and UL 2701 standards for battery management, thermal runaway risks and functional safety. This work helps manufacturers navigate the complexities of the global energy transition. We are excited to extend our ECOLOGO certification program to industrial products, helping manufacturers demonstrate sustainability commitments and meet growing market and regulatory demands. We issued Schneider Electric, the first ECOLOGO certification for an industrial product, certifying their PowerPact circuit breakers portfolio. Our new ECOLOGO certification for energy and industrial automation equipment sets a new benchmark for sustainable product design, advancing transparency and sustainability. On the software side, we expanded our ULTRUS software platform with new AI-powered releases that support compliance and sustainability goals. These releases help customers manage regulatory requirements and operationalize sustainable practices while complementing our testing, inspection and certification services. Our ongoing strategic investments significantly expand our capabilities across critical growth sectors, including data centers, energy storage, connected devices, fire safety and digital services. Our new offerings address demand in markets projected to experience substantial growth for years to come. Finally, let me comment on our disciplined approach to capital allocation activities during the year. Our strong revenue growth and rigorous expense management allowed us to generate robust cash flow. Key actions in 2025 included investing $197 million in capital expenditures to drive growth, paying down $253 million in borrowing and paying $104 million in dividends. We are excited to enter 2026 building on this momentum. First, we are introducing our 2026 growth outlook, reflecting continued strength in our underlying business model. Second, we are increasing our regular quarterly dividend by 11.5%. And third, we have made some enhancements to the composition of our segments. At the beginning of this year, to better position the company for growth and enhance customer value and innovation, we realigned our Software and Advisory segment as a means to focus and grow our software business. This change creates a focused software segment, which we have renamed Risk and Compliance Software. The segment will be positioned to deliver great value with ULTRUS, our digital platform that helps customers simplify product compliance, gain supply chain visibility and access data to enable smarter decision-making. As part of that focus on high-quality growth and strengthening our value proposition, today, we are announcing the divestiture of our employee health and safety software business. This divestiture is expected to close in the second quarter. We consider these EHS software offerings to be noncore, and we believe this divestiture will allow us to concentrate resources on the core software offerings most relevant to our TIC customer audience and redeploy capital toward attractive opportunities. Over 55% of our global and strategic accounts customers currently purchase at least one of our ULTRUS risk and compliance software offerings. Those offerings will remain a core part of our value proposition. To further focus our Risk and Compliance Software segment, effective in Q1 this year, we moved advisory services, which accounted for approximately 5% of our consolidated 2025 revenue into the Industrial segment from the Software & Advisory segment. We believe this move is a better strategic and operational fit with our core testing, inspection and certification work. We expect this change will strengthen customer value by more tightly pairing technical advisory with standards-driven TIC services and will better align advisory with the industrial demand drivers where we see attractive growth opportunities, such as broadening services into the wider energy ecosystem, expanding our focus on the built environment and better tailoring our offerings to the medical device industry. We believe we are well positioned in 2026 for continued high-quality growth and remain focused on maintaining our investment-grade balance sheet to help execute our strategic priorities. Now let me turn the call over to Ryan for a detailed review of our fourth quarter results and our initial 2026 outlook. Ryan Robinson: Thank you, Jenny, and hello, everyone. I also want to thank all of our team members for delivering another strong quarter and full year 2025. Jenny did an excellent job summarizing our outstanding financial results for the year, and I will focus my comments on our fourth quarter and segment results before closing with some comments on our initial 2026 full year outlook. We are proud to report a continuation of strong growth, adjusted EBITDA margin expansion and solid cash generation in the fourth quarter. Now let me dive into the details of the quarter. Consolidated revenue of $789 million was up 6.8% year over prior year quarter, including organic growth of 5.7%. The increase was particularly impressive given the difficult comps we had from the prior year period and reflected strength in both the Consumer segment, which delivered 7.1% organic growth and the Industrial segment, which delivered 6.1% organic growth. Cost of revenue as a percentage of revenue improved 260 basis points, primarily by holding organic cost of revenue unchanged from last year's level while delivering strong revenue growth. SG&A as a percentage of revenue improved by 150 basis points compared to the prior year period. We recorded pretax restructuring charges of $37 million associated with the previously announced restructuring plan. Adjusted EBITDA for the quarter was $217 million, an improvement of 28.4% year-over-year. Adjusted EBITDA margin was 27.5%, up 460 basis points from the same period a year ago on particular strength in the Consumer and Industrial segments. The primary drivers of the margin expansion include operating leverage from revenue growth and supporting our team members with better technology and work environments. This allowed higher employee productivity and laboratory utilization. And as a result, we reduced our employee compensation expenses as a percentage of revenue -- our service and materials costs also improved as we decreased our use of third parties to fulfill portions of our work. Approximately 120 basis points of the adjusted EBITDA margin improvement was due to certain nonrestructuring severance expenses recorded in the fourth quarter of 2024 that were absent in the fourth quarter of 2025 due to the implementation of the restructuring plan. Adjusted net income for the fourth quarter was $114 million, up 11.8% from $102 million in the fourth quarter of 2024. Adjusted diluted earnings per share was $0.53, up from $0.49 in the fourth quarter of 2024. adjusted net income and adjusted diluted EPS improved alongside stronger core profitability, partially offset by a higher effective tax rate. For the full year, our effective tax rate was 26.6% in 2025. This compares to 16.9% in 2024. Our effective tax rate in 2025 was impacted by the additional implementation of the OECD's Pillar 2 provisions for multinational corporations. We also experienced a benefit in 2024 from a significant release of tax reserves that did not recur in 2025. Now let me turn to our performance by segment, starting with Industrial. Revenues in Industrial rose 7.3% to $352 million or 6.1% on an organic basis as compared to the fourth quarter of 2024, with growth in all service lines. This was achieved despite outsized ongoing certification services growth in the year ago period, which we believe were a result of increased activity ahead of potential tariffs. Certification testing growth was led by energy and automation as well as fire safety testing. Adjusted EBITDA in the Industrial segment increased 21.9% to $128 million in the quarter, while adjusted EBITDA margin improved 440 basis points to 36.4%. As I mentioned earlier, we delivered revenue growth with expense efficiency across the business. Now turning to the Consumer segment. Revenues in Consumer were $335 million, up 8.4% from the 2024 quarter or 7.1% on an organic basis. The improvement was driven by demand across all service categories, led by non-certification testing and other services. In terms of end markets, we saw a surge in demand across consumer technology, including EMC testing as well as HVAC. Adjusted EBITDA for the quarter in Consumer was $66 million, an increase of 46.7% versus the fourth quarter of last year. Adjusted EBITDA margin for the quarter was 19.7% an increase of 510 basis points year-over-year. Margin growth was driven by higher revenue, along with disciplined operational execution and employee utilization. In our Software & Advisory segment, revenues were $102 million in the quarter, essentially flat year-over-year in both total and on an organic basis. The results reflect strong demand in software, including retail product compliance, offset by lower advisory-related activities. Adjusted EBITDA for the quarter in Software & Advisory was $23 million, a 21.1% increase as compared to the fourth quarter of last year. Adjusted EBITDA margin for the quarter was 22.5%, an increase of 390 basis points, primarily due to lower services and materials costs. Turning to cash flow. For the full year 2025, we generated $600 million from operating activities, an increase from $524 million in the prior year. Capital expenditures for the year amounted to $197 million or 6.5% of revenue, reflecting our continued commitment to investing strategically, both for future growth opportunities and for current infrastructure needs. CapEx as a percentage of revenue moderated in 2025 as we finished a couple of key lab additions in 2024 and early 2025 and are ramping up the Global Fire Science Center of Excellence in Northbrook and the EMC labs that Jenny mentioned earlier. Free cash flow totaled $403 million in 2025, up strongly as compared to $287 million in 2024 and grew as a percentage of revenue from 10% to 13.2%. We finished the year with $295 million of cash and cash equivalents. The strength of our balance sheet is reflected in our investment-grade ratings. Our robust balance sheet and strong cash flow generation give us great flexibility to invest in organic initiatives, accretive acquisitions and to pursue a number of value-enhancing activities as we strive to produce best-in-class shareholder returns. In addition, we repaid $253 million of borrowings and returned $104 million to our shareholders through quarterly dividends. Now let me expand a bit on the divestiture of our employee health and safety software business we announced today. This business accounted for approximately $56 million of 2025 revenue, and the transaction is expected to close in Q2. The sale price is approximately $210 million and is subject to customary post-closing adjustments. This strategic exit allows us to focus resources on higher-growth software offerings that are more closely aligned with our core testing, inspection and certification services. The cash proceeds provide flexibility for value-accretive investments and capital allocation priorities. Now turning to our initial 2026 full year outlook. As a reminder, organic growth is constant currency and excludes acquisitions and divestitures. We expect 2026 consolidated organic revenue growth to be in the mid-single-digit range as compared to our full year 2025 results. we expect industrial to grow at a faster pace than consumer. At this time, the forward FX forecasts imply an additional approximately 50 basis points tailwind on revenue growth year-over-year and market forecasts have a large majority of that FX benefit in the first half of the year. We expect to improve adjusted EBITDA margin to a range of 26.5% to 27% in 2026, assuming current forward FX rates that I just mentioned. As a reminder, as part of our restructuring actions announced in the fourth quarter of last year, we expected to exit nonstrategic service lines totaling approximately 1% of 2025 revenue, which will reduce organic revenue growth. and it is factored into the organic revenue guidance. The revenue impact of the expected EHS divestiture, which is pretty similar each quarter will be reflected in the acquisition and divestiture portion of the revenue change and will not affect our organic revenue growth rate. We will be sharing recast historical results for our new segment orientation when we report Q1 2026 results, which will include the movement of $139 million of Advisory revenue in 2025 from the Software and Advisory segment to the Industrial segment. We continue to expect the restructuring plan to be substantially completed by the end of the first quarter of 2027 with remaining changes expected to largely be incurred in the first half of 2026 in the Consumer segment. Once completed, we expect to improve annual operating income by between $25 million and $30 million compared to the trailing 12 months ended Q3 2025 as a result of both the revenue and expense impacts of these actions. Our adjusted EBITDA margin guidance for 2026 contemplates the expected EHS divestiture, some benefit from the restructuring program and our current estimates of the FX impact. We expect capital expenditures to be approximately 7% to 8% of revenue in 2026 with investments in new labs continuing as we seek to match continued strong customer demand. We estimate our effective tax rate in 2026 to be approximately 26%. While our guidance is for the full year of 2026, let me provide you with some color with regard to seasonality. As a reminder, Q1 is typically our lowest revenue quarter in terms of dollars given the Lunar New Year holiday impact on customer operations in Asia and fewer workdays as compared to other quarters. This results in slightly less operating leverage and therefore, profitability in Q1 compared to the other quarters. Our Consumer segment benefited from a surge in customer demand in Q4 and is facing particularly strong comparable results versus the first quarter of prior year. Therefore, we expect more modest growth in Q1. Also, we expect more of our adjusted EBITDA margin improvement to occur in the second half of 2026. We are incredibly proud and thankful for the achievement of our global team, and we believe they have positioned us well for 2026. We enter the year with strong momentum and expect to continue to steadily grow while improving profitability and delivering robust cash flow. We are working hard to deliver sustainable long-term value for our stakeholders. Now let me turn the call back to Jenny for her closing remarks. Jennifer Scanlon: Thanks, Ryan. I mentioned earlier all of the various openings of facilities and investments we made throughout 2025. I would like to add that as part of the trips I often make to celebrate these achievements, I regularly meet with customers, employees and local government leaders. The genuine enthusiasm I always encounter never ceases to energize me. It's inspiring to work for an organization like ours. Our mission of working for a safer world serves essential basic needs of humanity for safer, more secure and more sustainable products. 2025 was another validating year. We exceeded guidance for both Q4 and the full year, demonstrating the strength of our business model and the value we deliver to customers worldwide. As we enter our third year as a public company, our trajectory is clear. From our initial IPO targets through our 2025 results to our 2026 outlook, we expect to continue delivering consistent top line growth and improving profitability. Looking ahead, we see tremendous opportunity. There are some fundamental shifts reshaping global commerce and many are very positive forces such as the energy transition, the push for sustainability and the evolution of connected technologies, all of which are creating unprecedented demand for the safety science expertise that we believe differentiates us. We continue to strategically invest to meet this moment, strengthening our capabilities and expanding our presence in high-growth markets. With our strong financial foundation, global reach and unwavering commitment to our mission of working for a safer world, we believe UL Solutions is exceptionally well positioned to deliver sustained value for our customers, our people and our shareholders in the years ahead. With that, we'll open the line for questions. Operator: [Operator Instructions] The first question comes from Curtis Nagle with Bank of America. Curtis Nagle: Maybe just starting with the '26 margin guide that definitely stands out, looks pretty good. Just some of the biggest drivers, how much of that restructuring leverage, stuff like that? And then I don't think I saw it, but any updates in terms of a long-term margin framework previously '24, you guys are well above that? Or maybe asked another way, sort of past '26, what's a kind of reasonable cadence of margin performance if you're still hitting that or on mid-single or growth? And then I have a follow-up. Jennifer Scanlon: All right. Thanks, Curtis, and welcome. And really, what I want to start by saying is our '26 margin guide is a continuation of our continuous improvement philosophy. And so if you look at what led to our restructuring plan that we announced last year, it really was a confluence of a number of ongoing activities that we packaged into one event. We will continue to pursue continuous improvement activities on an ongoing basis, and that's really what underpins our guidance. But I'll let Ryan go into more of the details. Ryan Robinson: Yes. Thank you for the question, Curtis. And we're pleased with the 300 basis points adjusted EBITDA margin improvement in 2025 on top of the 190 basis points we delivered in 2024. And as Jenny said, we're focused on continuous improvement and increasing that. The themes of improvement in '26 are -- we anticipate to be similar to the year we just completed, driving operational leverage through both price and volume. We intend to continue to increase the utilization of our lab capacity and our staff. The restructuring initiative will help on the cost side, but we also do have revenue reductions that we noted as well as a divested business. And so our expense and efficiency initiatives need to overcome those revenue changes. And as I mentioned on the call, approximately 120 basis points of the adjusted EBITDA margin shift in the fourth quarter was related to that restructuring initiative. All those things and FX go together to giving us comfort to guide to 26.5% to 27% for adjusted EBITDA margin in 2026. Curtis Nagle: Okay. Appreciate it. And then maybe just a quick one on cash. Just how to think about the pacing of debt paydown and potential use of proceeds. I think you said $200 million from the asset sale. Ryan Robinson: Yes. The initial use of proceeds, general corporate purposes initially, we will repay debt. Our priority is to continue to reinvest back into the business, organic CapEx to grow and drive additional shareholder returns. It is a large distributed and consolidated industry. So we continue to evaluate acquisition opportunities. So in the short term, we'll pay down debt, but we will evaluate investment opportunities over time. Operator: Your next question comes from the line of Stephanie Moore with Jefferies. Stephanie Benjamin Moore: I guess as I think about the underlying performance of the business, could you talk a bit about maybe where you're seeing some of your strong outperformance. For example, you called out introducing your first EGOLOGO for -- ECOLOGO for industrial products and the like. Could you talk and see if the organic growth that you've seen in at least the fourth quarter, are these higher-margin verticals or end markets? I guess just trying to think about the substantial operating leverage that we're seeing and if this is just a function of, quite frankly, your initiatives around productivity and your investments? Or are you seeing any kind of maybe mix or end market benefit that would be different from just a steady course? And I have a follow-up. Jennifer Scanlon: Thanks, Stephanie. I appreciate the question. And I would say it's all of the above. First of all, our focus on the megatrends is so important. As we're out there looking at things like the energy transition or digitalization that is really pushing AI data centers and even the needs in the sustainability space, those are 3 of our biggest megatrends. All of those are yielding, as we look at it, double-digit growth. And while we transcend 35 industries and have a number of different services, that push for megatrends is important to our largest customers. and then it becomes important to their supply chains. So we do believe that the megatrends lead to that high-quality growth. At the same time, a number of initiatives that you've mentioned are giving us operating leverage between pricing as well as utilization of our teams as well as introduction of new technologies and new tools to our business. All of those pieces fit together. And then finally, on mix, Ryan mentioned that we expect that industrial will continue to have higher growth than consumer. Stephanie Benjamin Moore: That's very clear. And then I wanted to circle back on maybe the first question on capital allocation, but ask it in potentially a different way. If I'm looking at this correctly, a net cash position is probably on the table here sooner than later. So as you continue to obviously generate significant cash, I fully understand your commitment to continuing to invest back in the business. But as we think about the runway for the stepped-up CapEx, obviously, 2025, you announced a lot of major investment projects. So how should we think about the magnitude of investments from a capacity or physical standpoint in 2026 compared to 2025? What's the runway on that magnitude of investments? And then given the debt position here coming 12 months, what is the overall appetite for buybacks? Jennifer Scanlon: Yes. Let me start. On the CapEx, we always -- in addition to many of the large labs that we've publicly announced, we have ongoing critical facility upgrades that give more capacity, lease renewals to extend our positions in markets as well as just individual services for many of our COUs. So our commitment to CapEx to deliver market-leading growth is an essential part of our strategy and an essential use of our capital allocation. Given high-quality growth as a strategy, of course, we're also focused on M&A. We continue to see plenty of opportunities out there in the market, but we are very disciplined in our approach to that. We are renewing our focus for the year on finding the right opportunities and successfully achieving that discipline and those results. So it's a balance. And then I'll let Brian talk about other distributions of capital. Ryan Robinson: Yes. And in addition to that, we have mentioned that over time, we would consider share repurchases, particularly to offset dilution. We feel that we have been prudent stewards of our shareholders' capital, reinvesting back in the business and creating value. Our focus is organic growth and complementing that with accretive acquisitions. But we appreciate over time, we need to evaluate all uses of cash. Operator: Your next question comes from Andy Wittmann with Baird. Andrew J. Wittmann: All your comments so far have been very helpful and very clear. I just thought maybe I would ask specifically on pricing. Ryan, in the past, you've talked about like kind of half of your growth-ish has been attributable to price. And I think historically, that's been a comment that you've been able to say kind of more confidently around your ongoing certification. Just wondering kind of how it evolved in the quarter? And I know it's harder to pin down on the non- the cert testing portion. But do you feel like -- can you comment on the order of magnitude that you think you're seeing in pricing in those businesses as well? Ryan Robinson: Yes. Thanks for the question. We typically focus on our certification testing business and non-certification testing business, which have clear deliverables and it's easier to measure the impact on price and volume. And I would say in the fourth quarter and the full year, there were similar contributions in the revenue growth of both. We were pleased with the overall growth, particularly in certification testing in the fourth quarter. And our plan for 2026 would be to generally continue to grow with that mix. Andrew J. Wittmann: Okay. That's helpful. And then, Jenny, I just thought I would ask for kind of an update on what you're seeing from new product releases from your customers. Anything around the data center ecosystem. If you could maybe talk about some of the specific categories of testing or product types that you're seeing from that kind of area. Obviously, it feels like it should be a driver. I just feel like a little bit more on the specifics of what you're actually seeing kind of where you think you are in these product rollouts and the testing that you can do to help with this, I think it would just be helpful for us to all understand as it contributes to your revenue growth. And if it is a material contributor to revenue growth, any quantification for how much it's adding to your revenue growth, I think, would also be helpful for people to understand as well. Jennifer Scanlon: Yes. I think on the last point, I just want to highlight, again, we've got 35 industries and a number of different segments that we target. So data center is extremely important, and we are seeing that digitalization trend really lead to double-digit growth rates in those types of services. And here's why we're seeing that. Today, we tested 70 standards. But what we're hearing from our customers is that the existing set of standards for the new complexities in data centers, it's just not enough. And so they're coming to us for leadership and expertise in how they handle just the new realities of the changing of the thermal dynamics of the shift to DC current 800 volts on the ways in which cooling, rack cooling, immersion cooling, all sorts of cooling needs are happening. So the data center work that we're doing, it's across all of our industrial product categories. So power and automation, renewables has a play as these data centers are trying to get enough power to power them. Wire and cable, the shifts to that DC is a different type of wire and cable. -- the built environment around the fire suppression. And then on the consumer side, again, those chillers, those HVAC systems as well as then just the underlying consumer technology, server technology, everything else that's going into those actual racks and pieces of equipment. So it is across the board, and it's an exciting area. Our customers, I mentioned in the fall, we were having a Data Center Power Summit. It was so important and so well received. We're having a second one coming soon. And it's the attendees of that, it's the hyperscalers, it's the equipment and component and wire and cable manufacturers. And there's also the focus on the owners of the colos. So it's complex. It's growing, and we feel like we're right in the center of it all. Andrew J. Wittmann: All right. That's super helpful. Just one kind of, I guess, technical question here. The restructuring plan that you guys announced last quarter, I think at the time, you were saying it was going to be a cost of 42 to 47 . Just want to make sure that there was no change there because I guess you're 37 versus kind of that target range that I set out. It seems like most of the actions have really been taken here. Is that right, Ryan? Or is there -- have there been any changes in planned scope reduction increases, whatever? Ryan Robinson: Yes. The range has not changed. We recorded the majority of that in the fourth quarter. We anticipate completing the rest of that substantially in the first half of this year. But the total range of both the cost to achieve as well as the benefits and timing have not changed materially since we communicated it last quarter. Operator: The next question comes from Arthur Truslove with Citi. Arthur Truslove: Congratulations on excellent results. So first question for me, just within the divisional growth. So if you look at the consumer business, you talked about consumer technology, including electromagnetic compatibility testing. So I just wondered what end market that relates to? And similarly, in terms of the energy and automation within Industrial. And then second question, just to confirm, you're obviously talking about mid-single-digit organic growth on a full year basis. obviously, net of the 1% from the businesses that you abandoned. Just to be clear, does mid-single digit mean sort of anywhere between 4% and say, 7%? Or do you have a different definition? And I suppose within that, where does software fit in? I don't think you mentioned that when you talked about industrial and consumer. Jennifer Scanlon: All right. Well, I'll start with some of the diversified growth. So EMC testing is electromagnetic compatibility. And what this is the FCC in the U.S. and similar regulatory agencies all over the world set tolerance levels for essentially how much RF radio frequency devices admit. So anything with a transmitter or receiver has to go through EMC. So for example, one of our capital announcements is EMC lab in Toyota City, Japan, targeting the auto industry because automobiles, as I like to say, have become driving data centers and driving nodes on the grid. So that's why we -- as the world continues to connect, we continue to see demand for EMC growing. You also asked about energy and industrial automation end markets. That's really everything around power and controls, electrical distribution, circuit protection, wiring devices, anything that really powers large industrial equipment. And again, a lot of that then becomes the types of products that get replicated into innovation into consumer products. Ryan Robinson: And then on the revenue guidance, Arthur, I would describe it in 4 parts, some of which are organic and some clarify the total growth. So first, in each of the past 2 years, we focused on high-quality growth, and we delivered on the mid-single-digit organic revenue guidance that we set at the beginning of the year. Second, if we start with the growth rate that we delivered in 2025 and back out what we announced in 2023, the exit of some businesses that accounted for approximately 1% of 2025 revenue, that puts us squarely in the middle of a mid-single-digit guidance for organic revenue growth year-over-year. And then third, in addition to the organic change, we announced the planned divestiture of the EHS software business, which accounted for $56 million of software and Advisory revenue in 2025, and that was 1.8% of 2025 consolidated revenue. So we believe the sale will close in Q2, and therefore, the total reduction will be for a portion of the year. And then finally, a fourth consideration is FX. And this is based on market forecast. But based on the current market forward rates, that would indicate about 0.5% tailwind to revenue. So if you account for 100 basis points headwind from the divestiture of the EHS business on a total basis and 50 basis points FX tailwind, we have a net 50 basis points headwind for year-over-year total growth rate. So that's squarely in the mid-single-digit range. This is a year of a lot of small puts and takes. So I appreciate the question, and I hope that's helpful, Arthur. Jennifer Scanlon: And then, Arthur, let me add you -- I don't want to forget your question about software. And if you look at our revenue by major service categories in Q4, you'll see that software revenue in the fourth quarter grew at a faster rate than it did for the full year. And I would say that bodes well for what we're looking at in 2026. Additionally, the announced divestiture will allow us to focus on the higher growth categories of our ULTRUS platform, categories like our supply chain insights or our benchmarks, which all really fulfill risk and compliance needs that our core TIC customers have. Operator: Your next question comes from Jason Haas with Wells Fargo. Jason Haas: You mentioned that you saw a surge of demand in consumer in 4Q, and it sounds like that may have potentially pulled forward some business from 1Q. So do I have that right? Can you just explain what that -- what caused that dynamic? Jennifer Scanlon: Yes. The biggest cause of that dynamic is consumer, our customers really move quickly. And when they have innovation opportunities that they're trying to get to market quickly, we need to respond. And our emphasis on customer centricity as well as just our ability to have the right capacity allows us to do that. So we saw some particular strength in some of the most innovative customers in the world in both the consumer technology space as well as some of the really great small appliances that are going to market globally. Jason Haas: Got it. That makes sense. Very helpful. And then I wanted to follow up on -- I know it's been a trend for a while, but the advisory business has been softer and weighed on your overall growth rates. Can you just talk about what's driving that? And then recognize it's shifting segments, but how integrated and synergistic is it to have that advisory business? Jennifer Scanlon: It's a great question, and it's something that we spent a lot of time evaluating in 2025. And what we realized was that our original hypothesis was that those advisory businesses were contributing to our software businesses. But as we really decomposed it, what we realized is that those advisory businesses are much more tightly tied to our TIC business. And so areas like the energy ecosystem, we saw some good strength in renewables advisory last year, a little softening in the fourth quarter in that. But with the shift, particularly with data centers and needing new sources of energy, we see a greater tie to our industrial businesses. Similarly, the softness in commercial real estate has affected our healthy buildings advisory. And again, we believe that opportunities to couple that with some of our built environments services will help contribute to strengthening that. And then certainly areas where we do advisory services into getting medical devices to market, and we also see that tying more closely to the TIC services that we offer. And so that was really the fundamental premise of changing our focus so that we're letting our newly named Risk and Compliance Software segment focus solely on software, the purchasers of that software and those product road maps and tying our advisory teams more closely to the TIC services that are really compatible with those advisory offerings. Operator: Your next question comes from Andrew Steinerman with JPMorgan. Andrew Steinerman: I'd like to focus a little bit more on lab utilization. How much of your '26 margin expansion is coming from higher lab utilization? And then also, you mentioned technology investments expanding productivity. With that additional productivity, how do I think of the calculation of lab capacity and lab utilization? And how much higher could lab utilization go from here? Jennifer Scanlon: Yes. Thanks, Andrew. And it's a great question, something we spend a lot of time evaluating because -- what I want to emphasize is it's not just lab utilization, it's expert utilization. So we've got our engineering or team or technicians who also are part of the overall process. You've got the physical labs and then within those labs, you've got specific pieces of equipment. So anything that we can do to help improve the capacity of any of those 3 functions, our people, our equipment and then our overall facilities is where we're focused. And so certainly, the technology initiatives that we're rolling out is expanding the capacity of our people. Better use of AI in our processes frees up our people to have more capacity. At the actual equipment level, better really monitoring what's the right lab for specific services to be delivered and ensuring that we're directing those customer projects to the labs with the greatest capacity. It's one of the reasons why we believe in running global P&Ls is essential. And then as I mentioned, as part of our capital planning, we're always looking at what are ways that we should be extending the actual capacity of an overall facility, and we'll continue to do that on an ongoing basis. So that productivity comes from all 3 areas. Andrew Steinerman: And are you able to -- my first question was, could you tell us how much of the '26 margin expansion is coming from higher utilization of labs? Ryan Robinson: Yes. I would say we have -- Andrew, we have such a diversity of labs and we even measure utilization in different ways for different types of services, it's hard to directly correlate those. We do see the improvement in trend, and it is driving our results, but it's difficult to precisely correlate it. Operator: The next question comes from George Tong with Goldman Sachs. Keen Fai Tong: In the in the Industrial segment, we've seen organic revenue growth normalize from double digits in 2024 to mid-single digits exiting 2025. To what extent do you think industrial organic growth will reaccelerate? And what are the key drivers? Or conversely, do you view current mid-single-digit growth as the new steady state for industrial growth? Jennifer Scanlon: Industrial, we want to just remind everybody that we believe that there was pull forward in Q4 of 2024 due to anticipation of tariffs. So I would say that normalized level is more along the lines of our annual levels, which is on the higher end of single digits. But that said, as we look forward, the demand that we're seeing for industrial, both in certification testing and non-certification testing, it's strong. These areas of the built environment, the energy and industrial automation, wire and cable, power and controls, these are all pieces that are being fueled by the megatrends. And we're seeing particular strength. The U.S. is strong across the board, by the way, both industrial and consumer and particular strength also coming out of China and more broadly across Asia for that energy and industrial automation within industrial. Keen Fai Tong: Got it. That's helpful. You noted that the industrial business should grow faster than consumer this year. Can you talk about how much of a spread you expect in growth between these 2 segments? Ryan Robinson: We have not provided specific guidance for the growth for each of the segments. We added that comment because of the particularly strong performance of consumer in Q4, and we just wanted to clarify that, that was in part due to a surge of activity in Q4 and not a fundamental change in the relative growth rates of the quarter. Operator: The next question comes from Shlomo Rosenbaum with Stifel. Adam Parrington: This is Adam on for Shlomo. Can you talk about the shift of manufacturing activity from China and other parts of the world and how that trend looked in 2025 as it relates to you 4Q '25. Jennifer Scanlon: Yes. We're not seeing a significant shift out of China. We are seeing significant, I would call it, China Plus One continuation. So our China sites and our China -- the China sites of our customers that we inspect in our ongoing certification services continue to grow, albeit at a pretty low slope. But those sites that we visit, India is growing significantly, Malaysia, Thailand. So absolutely, we continue to see, I would say, dispersion and derisking of supply chains and our customers adding locations. Our China business continues to be strong, and we're continue to be very pleased with our customer relationships. I'm going over there next month, looking forward to being there. Adam Parrington: Okay. And the demand -- what is the demand like for the artificial intelligence safety certification services that the company announced last quarter? Jennifer Scanlon: Yes. It's still in early days, but it's an important topic. What we're hearing is just how important trust is in AI. And we're working with different customers to understand how we adapt that standard for them to provide evidence that their customers can trust their use of AI. So it's still early days. Operator: The next question comes from Andrew Nicholas with William Blair. Andrew Nicholas: First one I wanted to ask was just on kind of the advisory restructuring and the employee health and safety software sale. I mean, could you give us a little bit more color on the growth rates of those businesses over the last couple of years? I know you've called out advisory softness a couple of times over the past several quarters. Just trying to figure out what kind of the restructuring there will do to the reported growth rates? And then any color on the margin profiles of those businesses would be helpful, too. Jennifer Scanlon: Yes. It's a great question. And let me just start. Advisory in general is -- tends to be somewhat cyclical and can be directly affected by very specific market conditions such as slowdown in commercial real estate affecting our healthy buildings portfolio. I always say it's like a sine wave on an upward trajectory, but any given quarter, it can be lumpy. And so our rationale as we were assessing that for moving it under industrial with TIC is that there are just better opportunities for synergies, both in the opportunity identification with our TIC services as well as just the way in which we utilize our teams for some of those services. So we expect that to continue to be on an upward trajectory, but they will continue to be like a wave. The EHS piece of software, our rationale for divesting that is when we look at our TIC customers and the ultimate end personas of the users of our ULTRUS platform. EHS, it's an important service for many manufacturers, but that target audience isn't consistent with our target audience for our other ULTRUS offerings. So we felt it would be better off in stronger hands, and we're excited that it found a good home. It was lower growth in our software portfolio. So for us, we expect our software growth rate to improve as a result of that divestiture. Andrew Nicholas: Great. And anything you could say on the margin profile there just to check that off the list. Ryan Robinson: Yes. I would say, Andrew, with the first quarter, we will provide pretty fulsome information on the realignment of the segments, including the newly named Risk and Compliance Software segment. And so you'll be able to infer how that affects the change in revenue, how that affects the change in profitability. We were -- we wanted to be clear that our consolidated adjusted EBITDA. Our guidance for the year includes that divestiture. So more detail to come, but the guidance includes the change. Jennifer Scanlon: Yes. And last thing on that, our software and advisory team has worked really hard to improve their EBITDA, and we expect that improvement to be durable with these changes, and we'll report more in Q1 when we break them all out. Andrew Nicholas: And then if I could just ask a follow-up question on 2025 results. So obviously, adjusted EBITDA margin was, I think, almost 200 basis points better than what you had originally guided. I'm curious, taking a step back where you felt like you kind of got the most surprise relative to your initial expectations? How much of it was just taking a conservative approach a year ago versus demand or pricing or some other factor beating your expectations? Jennifer Scanlon: I'm just going to give a general philosophy in continuous improvement that when you express to a team specific metrics or specific areas of process that you're focusing on, you typically get results. And so within our processes, there were certain areas that we asked our team to focus on that really would lead to greater customer satisfaction and centricity. And those were areas that also dropped right down to our bottom line. So things like turnaround time or billable utilization or time to quote or use of the new pricing tool, those are all examples of when you put -- when you shine a light on them and apply metrics, people respond really favorably. And we've got a great team who did a great job in all of these areas. Operator: The next question comes from Josh Chan with UBS. Joshua Chan: One question on laboratory productivity as it relates to people. I guess, have you been able to keep your lab headcount relatively flat in this -- despite growing the top line? And if so, kind of do you expect that to continue into the future? Ryan Robinson: Yes. We have been able to keep lab headcount flat. So our revenue per employee and our metrics of productivity per employee have been increasing. It's from a number of different initiatives. As Jenny mentioned, where we're focused on continuous improvement. It's also an outcome of our laboratory optimization, increasingly using centers of excellence that have higher capabilities, higher throughput, higher opportunities for our employees that work in those areas. So that has been a key contributor. As we file the 10-K, you'll get some additional information on our employee compensation as a percentage of revenue by segment and consolidated. And I think you'll be able to see that even more precisely. Joshua Chan: Great. And then just a quick question on the margin guidance. So how much of the restructuring benefit is included in the '26 guide? And also, why does the margin expansion become stronger in the second half than the first half? Ryan Robinson: Some of the improvements in the restructuring initiative are wind downs of existing services that are not instantaneous. They take a couple of quarters to achieve. Also, some of it is a transition of activities to different locations that take a while to consummate. So for 2025, there is a portion of the benefits. But from the time that we announced it, we thought it prudent to focus on by the end of the first quarter 2027, we will have all of these steps behind us. Jennifer Scanlon: Thank you, everyone, for joining us today. We appreciate your support, and we look forward to updating you on our progress again next quarter. Operator: This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Zealand Pharma Results Full Year 2025 Conference Call. [Operator Instructions] Please be advised that, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Lange, Vice President, Investor Relations. Please go ahead. Adam Lange: Thank you, operator, and thank you to everyone for joining us today to discuss Zealand Pharma's results for the full year 2025. The related company announcement is available on our website at zealandpharma.com. As outlined on Slide 2, I would like to remind listeners that during today's call, we will be making forward-looking statements that are subject to risks and uncertainties. Turning to Slide 3 and today's agenda. I have with me on the call the following members of Zealand Pharma's management team: Adam Steensberg, President and Chief Executive Officer; Henriette Wennicke, Chief Financial Officer; and David Kendall, Chief Medical Officer. All speakers will be available for the Q&A session. Turning to Slide 4. I will now hand the call over to Adam Steensberg, President and Chief Executive Officer. Adam? Adam Steensberg: Thank you, Adam, and welcome, everyone. 2025 was a breakthrough year for Zealand Pharma, especially considering the landmark partnership petrelintide with Roche. As we enter 2026, we are moving into the most defining and catalyst risk year for Zealand Pharma's history, which includes Phase II petrelintide data and multiple key readouts from the Phase III program in obesity with survodutide. Moving to Slide 5. Obesity represents one of the greatest health care challenges of our time, not only because of its high and growing prevalence, but because of the long-term consequences of living with the disease. The longer people live with obesity, the greater the burden and the higher the risk of serious complications. Real-world data clearly shows that treatment persistence with GLP-1-based therapies remains a major challenge. To date, up to 12% of Americans have been exposed to a GLP-1-based therapy, yet only a small fraction remains in treatment. Approximately half of patients who discontinue GLP-1 therapies cite gastrointestinal adverse events as the primary reason. As a result, the key to unlocking the full value of this market is to develop therapies that deliver weight loss that patients desire, but with a better treatment experience that support long-term use in a real world. This leads me to Slide 6. In many other chronic diseases, physicians typically have access to a broad range of therapeutic options that can be tailored to the needs of the individual patients. In obesity, the treatment landscape remains comparatively narrow where we today rely on a single therapeutic category. While the GLP-1-based therapies clearly have advanced the field, they have not yet delivered what ultimately matters the most long-term treatment persistence, durable weight maintenance and sustained improvements in health outcomes. With petrelintide, we see the potential to expand and strengthen the treatment paradigm for weight management. Moving to Slide 7. The partnership we announced last year with us has delivered on everything we had hoped for. And our teams are currently moving full steam ahead and focused on finalizing the design of the Phase III program that we expect to initiate later this year to position petrelintide as a future foundational and first choice therapy for people living with overweight and obesity. I want to emphasize that, this is a true balanced partnership. This is reflected not only in the financial structure where we share profits in the U.S. and Europe, but also at the strategic level with shared development and commercialization rights for petrelintide and petrelintide-based combinations. This structure allows us to retain significant long-term value of the franchise while preserving the strategic rights needed to support our ambition over the long term. Moving to Slide 8 from one strong partner to another. Boehringer Ingelheim is positioned to lead the next wave of GLP-1-based innovation with survodutide, and we are very excited about the potential of survodutide to emerge as the preferred therapy for a large population of people with obesity and MASH. Liver disease is one of the most prevalent comorbidities associated with obesity. As Boehringer highlighted at Obesity Week last year, when you see obesity, think liver. And as one of our external speakers and the principal investigator in SYNCHRONIZE-1 noted at our Capital Markets Day, see obesity, think liver, treat the heart. This framing highlights the excitement for the upcoming Phase III obesity data with survodutide, including data from the cardiovascular outcome trial. Switching gears to our research efforts on Slide 9. Our ambition extends beyond refining the near-term future of weight management. Over the coming period, we aim to build the most valuable metabolic health pipeline, supported by our competitive advantage with more than 25 years of expertise in peptides and metabolic health, proprietary know-how and high-quality in-house data. Combined with rapid advancements in AI and machine learning, this strong foundation position us to remain at the forefront of innovation. While AI will improve efficiency across the industry, true differentiation comes from the quality and scale of proprietary data used to train these models. This is where we intend to focus our efforts. Our goal over the next 5 years is to advance more than 10 candidates into the clinic and set industry-leading cycle times from idea to the clinic. In a field historically characterized by long and complex development cycles, the pace of innovation is accelerating, and we intend to lead that. With that, I will turn over to David. David Kendall: Thank you, Adam. I will begin with an overview of our pipeline shown on Slide 10. Zealand Pharma is in a unique position today with the potential to achieve 5 product launches over the next 5 years. We are also embarking upon a data-rich period ahead with important results from many of our clinical programs. All told, this represents an incredibly exciting and highly compelling path forward for our company. Let's turn to Slide 11 and the ZUPREME-1 trial with petrelintide. We look forward to reporting top line data from the Phase II ZUPREME-1 trial this quarter. This trial is evaluating the efficacy and safety of petrelintide in participants with overweight or obesity without coexisting type 2 diabetes. ZUPREME-1 is a dose-finding trial assessing 5 dose levels of petrelintide administered weekly versus placebo over 42 weeks of active treatment. The trial includes monthly dose escalation over a period of up to 16 weeks, followed by maintenance doses of up to 9 milligrams. The study's primary endpoint assesses change in body weight at week 28. However, top line readout will also include important efficacy and safety measures at week 42. As previously shared, ZUPREME-1 enrolled a population of 494 participants with a mean baseline BMI of approximately 37 kilograms per meter squared and includes a balanced distribution of females and males. This population differs meaningfully from those studied in our Phase I trials, and also from populations enrolled in recent Phase II and Phase III clinical trials of other amylin analogs. Moving to Slide 12 for a reminder of our ongoing plans for petrelintide. Together with our partner, Roche, we are looking forward to leveraging insights from the ZUPREME-1 trial to inform the final design of a comprehensive and ambitious Phase III development program for petrelintide in weight management. We expect to initiate the Phase IIIa registrational trials for petrelintide monotherapy later this year, which will be followed by a comprehensive Phase IIIb program designed to further expand and unlock the full value of petrelintide. With Phase II data approaching, I would like to briefly revisit our target product profile for petrelintide. Our goal with petrelintide is to deliver the level of weight loss that the vast majority of people living with overweight and obesity are seeking, while also providing an improved patient experience to further enhance the use of petrelintide for long-term treatment. Accordingly, a successful outcome for us would be data that reinforces our confidence in petrelintide's potential to achieve approximately 15% to 20% body weight reduction in longer-term Phase III trials, together with a safety and tolerability profile that represents a significantly better experience relative to incretin-based therapies, firmly establishing petrelintide as a foundational therapy for the management of overweight and obesity. In parallel, we are excited about the opportunity to explore petrelintide as a backbone for future combination therapies. Petrelintide in combination with the dual GLP-1 GIP receptor agonist, CT-388, is the first combination being developed in our alliance with Roche. Zealand Pharma and Roche remain on track to initiate the Phase II trial of the petrelintideCT-388 combination in the first half of this year. Now turning to Slide 13 and survodutide, a glucagon GLP-1 receptor dual agonist that we believe has the potential to play an important role in the next phase of innovation in obesity and metabolic disease. In the first half of 2026, we look forward to the results from the 76-week SYNCHRONIZE-1 trial, which is evaluating the safety and efficacy of survodutide in people with overweight or obesity without type 2 diabetes. In the prior 46-week Phase II obesity trial, survodutide demonstrated very compelling and competitive weight loss of up to 19%. Beyond SYNCHRONIZE-1, we expect additional readouts from the broader Phase III obesity program over the course of 2026. Together, these data are expected to support the first regulatory submissions for survodutide. We are also excited and extremely encouraged by the ongoing Phase III program evaluating survodutide in people with metabolic dysfunction-associated steatohepatitis or MASH. This program includes 2 trials assessing safety and efficacy in patients with moderate to advanced fibrosis as well as in those with cirrhosis. Given the high unmet medical need and limited treatment options for this population, we believe survodutide has the potential to become a key therapeutic option for people living with overweight or obesity and coexisting MASH. Let's now turn to Slide 14 and our novel Kv1.3 inhibitor. Yesterday, we announced positive top line results from the first-in-human randomized double-blind, placebo-controlled Phase I trial evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of ZP9830 following a single administration to healthy male subjects. ZP9830 was very well tolerated with no serious or severe AEs or dose-limiting safety findings at any of the dose levels tested. PK parameters increased in a dose proportional manner across the investigated dose range, in line with predictions based on preclinical data. We are very pleased with the results of this trial that are very well aligned with our expectations, reinforcing our confidence in our Kv1.3 channel blocker as a very promising drug candidate with the potential to target multiple autoimmune and inflammatory diseases. We look forward to reporting top line results from the multiple ascending dose portion of this trial and progress ZP9830 into Phase Ib/IIa development in the second half of 2026. With that, thank you very much for your attention. I would now like to turn the call over to our Chief Financial Officer, Henriette Wennicke, who will review our financial results for 2025. Henriette? Henriette Wennicke: Thanks, David, and hello, everyone. Let's turn to Slide 15 and the income statement. Revenue for the full year of 2025 was DKK 9.2 billion, driven by the initial upfront payment received under the collaboration and license agreement with Roche. The net operating expenses, excluding other operating items, totaled DKK 2.1 billion in 2025 and was within the guidance range of DKK 2 billion to DKK 2.3 billion. 76% of the net operating expenses in 2025 were dedicated to research and development, mainly driven by the clinical advancement of the petrelintide program, including the 2 Phase II trials and the preparation for Phase III. The S&M expenses are driven by the pre-commercial activities associated with mainly petrelintide, while G&A expenses reflect a strengthening of organizational capabilities, investments in IT infrastructure and legal expenses related to the patent portfolio. This resulted in a net positive result of DKK 6.5 billion for the year. Let's move to Slide 16 and the financial position. We ended the year of 2025 with a strong cash position of DKK 15.1 billion. Our cash position was strengthened during the year by the initial upfront payment of DKK 9.2 billion from Roche, partly offset by the operating expenses during the period. Our strong capital preparedness enabled us to meet all obligations under the collaboration with Roche for petrelintide, including the comprehensive Phase III program. It will also allow us to intensify our efforts in building a leading metabolic health pipeline and deliver on our Metabolic Frontier 2030 strategy. Let's turn to Slide 17 and the outlook for the year. For 2026, we guide for net operating expenses to be in the range of DKK 2.7 billion to DKK 3.3 billion, mainly driven by research and development activities. On the development side, key cost drivers include the expected initiation of a Phase IIIa program with petrelintide monotherapy and the initiation of a Phase II trial, the petrelintide CT-388 combination. In addition, strengthening our research engine is critical to realizing our vision of building a leading metabolic pipeline and the guidance, therefore, also reflects a step-up in research costs. Overall, the anticipated OpEx spend reflects the momentum we have built into 2026 and position Zealand Pharma to leverage the future growth opportunities. And even though, we only provide guidance on operating expenses, I would like to take the opportunity to remind you that Zealand Pharma is eligible for potential milestone payments for Roche of USD 700 million in 2026. This includes an anniversary payment of USD 125 million and a potential development milestone payment of USD 575 million, which is subject to initiation of a Phase IIIa program with petrelintide monotherapy. Finally, let's move to Slide 18 and our sustainability efforts. As a biotech company, we place the health and well-being of patients at the center of everything we do. And our ability to ensure advance our pipeline and ultimately serve patients rest on our people. We are extremely proud that while we increased our headcount by 41% in 2025, we maintained a very high engagement -- employee engagement score of 8.9 on a 10-point scale. And at the same time, we maintained our employee turnover rate at just 7.8%. We believe this is a testament to our unique company culture and our continued dedication to fostering an engaging and enriching workplace. This makes us confident that we have built a sustainable organization setup capable of supporting our long-term aspirations. We are also committed to taking responsibility for the environmental impact of our operations. In 2025, we committed to the science-based targets initiative and joined the UN Global Compact. In 2026, we will continue our work to transition our company and collaborate closely with our business partner to mitigate climate change. And with that, I will move to Slide 19 and turn the call back to Adam for closing remarks. Adam Steensberg: Thank you, Henriette. Building on the momentum we created in 2025, we have entered the most catalyst-rich year in Zealand Pharma's history with defining data readouts expected for both of our leading obesity programs, petrelintide and survodutide. As we execute on our Metabolic Frontier 2030 strategy, we are also highly energized to open our new research site in Boston this year and to pursue additional partnerships that further strengthen and expand our pipeline. I will now turn over the call to the operator, and we will be happy to address your questions. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Hakon Hemme from Danske Bank. Hakon Hemme Jørgensen: In regards to the upcoming Phase II readout on petrelintide Phase II, the ZUPREME-1, what level of details are you able to share with us on the day of the announcement? Apart from the weight loss, will you include data on petrelintide's tolerability profile in the announcement? Adam Steensberg: Thank you, Hakon, for that question. So we can confirm that the data are anticipated this quarter, which, of course, means also in the coming weeks, and we are highly anticipating being able to share the data broadly. We will, as we always do when we share top line results, provide a balanced presentation of the data while also reserving data that can be presented at scientific conferences later in the year. So you should expect a balanced view, which will discuss both top line efficacy and safety tolerability. Operator: We will take our next question. Your next question comes from the line of Rajan Sharma from Goldman Sachs. Rajan Sharma: I just wanted to get your latest perspectives on competitive dynamics in the obesity market following the first oral launch. I know, you've always been clear in the view that injectables will be the largest segment of the market. Has anything changed given the launch trajectory of or Wegovy? And then maybe just to add on that, where do you expect net price to be in obesity by the time petrelintide launches? Adam Steensberg: Thank you for your question, Rajan. And I think it's -- we have not -- our minds around the oral versus injectables have not changed due to the recent launches. It's very important, and we remain you can say, focused on the fact that all GLP-1s that are launching right now do not address the biggest -- what we consider the biggest issues with the GLP-1s, which is tolerability. As we discussed in the prepared remarks, we have 50% of the patients who stop taking these medicines is due to adverse events related to the gastrointestinal tract. So while we do expect the all options to expand the GLP-1 market, we do not think it will -- it's actually addressing the main issue around the current therapies that are around. And that's why we are so excited about being able to lead in a novel category, which we think have the potential to provide patients, as David discussed, the weight loss they are looking for, but a more pleasant weight loss experience. And it's really back to the thing which we have also advocated for, for a long time. Instead of having such a keen focus on prices as an industry, we need to move the focus into how we help patients stay on therapy. The key to unlock the value of the obesity market is to make sure that obesity medications are used as chronic therapies rather than event-based weight loss agents. And that's where we think petrelintide and the amylin category has the potential to unlock the market value for obesity. When it comes to prices and which, of course, has a lot of focus right now in the current competitive environment also with having had compounders around, it's again some dynamics that we have talked about for a long time. And the uniqueness about the obesity market is we have the more classical market where we have payers and insurance companies and then we have the self-paid market. And you need to address both. Of course, when you launch with a new category, which may provide a much more pleasant weight loss experience, there will be novel dynamics also with regard to pricing. So while the GLP-1 dynamics will affect entrant into that market, we do anticipate that novel themes will play out when you launch novel categories, just as we have seen in other therapeutic areas. So -- but it's too early to provide any specifics on the net pricing when we launch petrelintide. Operator: We will take our next question. The next question comes from the line of Kirsty Rosergewart from BNP Paribas. Kirsty Ross-Stewart from BNP Paribas. Kirsty Ross-Stewart: Kirsty Ross-Stewart from BNP Paribas. So regarding the Phase IIIb development for petrelintide, can you just expand a little bit on the types of opportunities you're hoping to unlock with the broader clinical trial program? And how much of the total opportunity do you believe is represented by the monotherapy? Is that kind of the majority part? Is that what we should be thinking as the main part? Or just are you seeing this as a small portion and just the tip of the iceberg? And just related to that, can you remind us on the financial obligations from you and Roche regarding the future Phase IIIb development? Adam Steensberg: Thank you for your question. I'll just start with a few remarks and then hand over to David. So as -- as you know, our -- the focus for the team right now is to accelerate time lines to a potential launch of petrelintide and in parallel, invest deeply in making sure that petrelintide will become a foundational and first choice therapy and thus also having the data foundation to support that positioning. And we will have -- we'll share all costs with our partner us in those efforts. It's clearly the monotherapy that have our key focus right now. But as David also discussed, the combinations now starting with CT-388 is also carrying investments as we progress these programs. And we will hope to see more combinations really utilizing petrelintide's potentially as a foundational therapy. But perhaps, David, you can comment a little bit more on the Phase III considerations and why we have strong believe that it can become a foundational therapy. David Kendall: Yes. Thanks, Adam, and thanks, Kirsty. As noted, the Phase IIIb program beyond a rapid acceleration of the Phase IIIa program to ensure the earliest possible submission and potential approval. You can imagine that it is obviously the outcomes that matter most to patients and their providers that will be the focus, not only of the weight loss studies in Phase IIIa, but focusing on those complications, which we know are readily tied to weight reduction, such as obstructive sleep apnea, osteoarthritis and osteoarthritis pain, noting that amylin agonists may have the unique potential to favorably alter bone metabolism and impact pain markers as has already been shown with the GLP-1 agonist reduced weight has its benefits and going beyond that. But beyond those, I think attention to preserving muscle mass, maintaining functional status, focusing on the population that seeks weight-reducing therapies the most, specifically women and women's health implications. And finally, a very important impact of those coexistent comorbid conditions, cardiovascular outcomes being primary, looking at the impact on liver disease and other metabolic dysfunction associated comorbidities. As Adam noted, the focus initially is on monotherapy, establishing amylin-based therapies and petrelintide in particular, as a foundational therapy, but understanding that in complex metabolic diseases such as lipid disorders, hypertension, type 2 diabetes, we have learned that the complexity of these diseases often requires multifaceted approaches to therapy. So combinations with incretin-based therapies and other modalities as being investigated by us and others, we believe will become the cornerstone of the optimal treatment for obesity and its related conditions. To reemphasize what Adam stated, petrelintide as monotherapy, which we firmly believe can be foundational, but also substantially improve the patient experience will be the focus of Phase IIIa with the extension in Phase IIIb to unlock the full potential of this asset. Henriette Wennicke: And just maybe a comment from me, Kirsty, as well on the financial obligation. So yes, we will share costs both on Phase IIIa but also Phase III 50-50 with Roche. As I mentioned in my remarks, we will receive USD 575 million in connection with the Phase III initiation, and we will also receive USD 575 million in connection with Phase IIIb initiation from us. Operator: We will take our next question. Your next question comes from the line of Andy Hsieh from William Blair. Tsan-Yu Hsieh: Congratulations on a stellar 2025. Adam, I appreciate that you're moving the field away from the weight loss Olympics, as you coined the phrase. Just to gauge expectations ZUPREME-1, semaglutide and tirzepatide showed an additional 2% and 3% weight loss from 42 weeks to study end. So objectively, should we subtract that 2% to 3% from your TPP goal just to account for the timing difference and gender mix for the imminent readout? And also, if you don't mind, maybe a macro question on what Lilly has done recently. We wanted to recategorize as a biologic. So if they're successful, do you think that, that might set a precedent for all the peptides out there, including petrelintide? Adam Steensberg: Thank you for your question, Andy. And I would say when you -- and of course, everybody compares across studies. When we have designed our ZUPREME-1 study, we have had one key focus, and that is to generate the most robust data set to allow us for the most robust decision-making to move into Phase III. So we have not enhanced the study with a disproportional high amount of women or high BMI. And we've also decided to look at the data point of week 42 instead of week 48 as others would do in order to have the most robust data set for Phase III decisions. So when we then -- as David also shared in his prepared remarks, think about what are the weight loss that we anticipate to see -- we would expect in that study under these study conditions that translate into a 15% to 20% weight loss in a Phase III study setup. That's how we will look at the data. And I would say, historically, when you look into male-to-female ratio, if you take a study that is enriched with only females versus males, you could probably expect what, 5% more weight loss in the female-only cohort. If you then also enhance the BMI and the study duration, then you would see even higher differences. So we are looking for a data set that when we do our internal modeling will allow us to get this 15% to 20% weight loss. And the reason that we have called to end the weight loss Olympic is just the plain fact that patients are not interested -- most patients are not interested in a weight loss above 20%. So why is it that we, as an industry and a community keeps talking about those numbers as if they were so important. You can do these surveys among patients, and you will get the same answer across any survey that we have seen thus far. And that's why I call for the end. As I also said, and as we discussed also in one of the prior questions, the key to unlock the value in this market is to develop therapies that provides patients with the weight loss they're looking for and as importantly, therapies that they can stay on instead of therapies where they only take them for 3 to 6 months and then stop taking them. The big dilemma we have with people don't stay on therapy is that most will likely regain the weight and thus never get to the health benefits. So both from a patient, a society perspective, but also from a company value perspective, the focus has to be on treatments that deliver the weight loss that the most patients are looking for, 15% to 20% and then importantly, medicines they can stay on. And that's why I'm calling to the weight loss Olympic, focus on medicines that deliver what the patients want, and you will unlock the value in this market. On your other question, with regard to efforts to move from a small molecule designation to a biologic. I'm sure that industry is looking into different ways to enhance, you can say, the positioning of their drugs. And I will not share our specific efforts to protect the value of our programs. But rest assured that we also have that -- those efforts as key focus. Operator: We will take our next question. Your next question comes from the line of Yihan Li from Barclays. Yihan Li: Yihan from Barclays. So I guess I wanted to switch gear a little bit to survodutide and also MASH. So for MASH, based on our recent KOL checks, I believe the off-label use of including MASH appears increasingly common. So for example, our physicians would still use tirzepatide in MASH, if possible, even though we know it is not formally approved by regulators. So I'm just curious from your market research, are you observing something similar in terms of this physician behavior? And also more broadly, like assuming survodutide will be launched in 2027, and we understood you might be more offense on this partnership, but also wondering anything you could share regarding its commercial strategy across obesity and MASH? Adam Steensberg: Thank you for your question. And it's important to note that it is Boehringer Ingelheim, who is solely responsible for the development and the commercialization of survodutide. We will just get milestones and then high single to low double-digit royalties. The profile that we have seen thus far from the clinical data released by Boehringer for survodutide gives us a lot of confidence in the molecule, both with regards to weight loss, but also in MASH. On the weight loss parameters, as we have discussed before, we think the weight loss levels and the weight loss experience is going to be quite comparable to what we have seen with some of the market-leading GLP-1s on the market today. We look forward to seeing the Phase III data. When it comes to the MASH data, the Phase II MASH data that we have seen and is also expressed by Boehringer at the time when the data was released, we see them as breakthrough data. These are unprecedented levels of improvements. And I think that's also reflected in the fact that Boehringer have decided to invest in the largest ever Phase III program for MASH, not only addressing F2 and F3, but also F4 patients, which gives unique opportunities to broaden the potential label if approved beyond into the most severe cases of MASH, but also with the scope of the program could provide very early indications of clinical and not just biomarker improvements. With regard to what you mentioned as off-label use, if I heard you right, of the GLP-1s, I would say please remember that the majority of MASH patients are obese in the first place. And thus, of course, it's a logical choice to use the existing medicines to help patients achieve some weight loss as many MASH patients suffer from both obesity and other complications than MASH. So that is only a natural consequence. What we believe is that once you have a product that can make a significant larger effect on the disease status, we should expect to see a very attractive take-up also exemplified by the enrollment into the Phase III program and Phase II program for survodutide. So we have a high confidence in the program. We have a high confidence in Boehringer's ability to execute. They are one of the strongest large pharma players in the cardiovascular metabolic space, and we look forward to see the data coming out this year, including the cardiovascular outcome data in obesity. Operator: We will take our next question. The question comes from Xian Deng from UBS. Xian Deng: Xian from UBS. So 2, please. The first one is on ZUPREME-1. So really appreciate you emphasized -- reiterated the importance of tolerability. So just wondering, looking into ZUPREME-1, just wondering what sort of profile do you -- would you actually consider as really your target profile in terms of tolerability? Would you say -- let's say, do you think it's actually possible to achieve, let's say, placebo level similar to placebo level of vomiting and constipation. So any color on that, that would be great. So the second one is sort of a general question. So a few days ago, so Eli Lilly showed some quite interesting data combining tirzepatide and Taltz in psoriasis, which actually showed better skin clearance than Taltz alone. Of course, that's in psoriasis patients that are also obese. But just wondering if you have any thoughts on that? And would you consider, for example, in the future, collaborating with some other autoimmune players on something similar as well? Adam Steensberg: Thank you for your question. I'll just start by putting some thoughts on your second question and then hand over to David to follow up and also address your first question. I think maybe you also saw that yesterday, we also announced a Phase I data readout with our Kv1.3 ion channel drug, which is a broad autoimmune anti-inflammatory target, which has potential across a number of inflammatory conditions. And thus, we see that as a potential pipeline in a product. And -- there's another notion out there that in relation to the obesity pandemic, you actually see quite significant increases in the prevalence of some chronic autoimmune and inflammatory conditions, which had otherwise been seen as being rather stable. So we see a strong link between the obesity pandemic and the rising prevalence of some of these conditions. And it's clear that if you name things like psoriasis or even IBD, there are some strong links with the obesity pandemic. So we are highly energized by our own Kv1.3 data and the opportunity to perhaps link metabolism and inflammation in the future. But David, maybe you want to elaborate. David Kendall: Yes. And again, thanks for your questions. On the issue of tolerability, noting that tolerability is really a collection of factors. We focus, obviously, a great deal on the GI adverse events that have been made so central, particularly to incretin-based therapies. And while our Phase I data to date have suggested the potential for significantly lower rates of nausea, vomiting and certainly lower rates of the more chronic GI adverse events associated with GLP-1-based therapies, namely diarrhea and constipation in ZUPREME-1 and subsequent trials, tolerability and acceptability of the entire experience will be the focus of our evaluation. So looking obviously at GI adverse events, but in combination with the injection experience, the experience around dosing and dose escalation. And back to the question that was posed to Adam on orals versus injectables, if one thinks about the currently available therapies and the target product profile for petrelintide, we anticipate that the weekly injection will consume about 10 to 20 seconds of an individual patient's time, which clearly can be associated with the acceptability of a treatment, assuming that injection experience is without reactions, pain, discomfort, which we have seen in our Phase I trials to date. So I encourage you and others as we will be doing to look at tolerability and acceptability as a collection of these factors, GI adverse events and more. And to Adam's ultimate point, if that experience is highly acceptable to patients, that will further encourage long-term persistence on therapies and particularly therapies that give patients the weight loss they desire. Operator: We will take our next question. The question comes from the line of Jen Jia from Cantor Fitzgerald. Jennifer Jia: This is Jennifer Jia on behalf of Prakhar Agrawal from Cantor Fitzgerald. So I was wondering for the upcoming Phase IIb obesity readout for petrelintide, in what way can it differentiate on safety, tolerability versus Lilly's amylin eloralintide, and also for the combo with petrelintide with CT-388. Could you give more context on dosing across the 2 products, titration schedule as well as how you want to mitigate the GI tox previously seen with CT-388? Adam Steensberg: Thank you for that question. It's as we have tried to convey on this call, the most important aspect for us when we review these data is to confirm that we have a product that lives up to the target product profile, which we have discussed a number of times, which is delivering a 15% to 20% weight loss and a more pleasant weight loss experience. If we have that, we will have a leading category -- leading molecule within a new category. And I think it's really, really important to also look back at the data that have been generated thus far with petrelintide, which gives us the confidence when we look across the different amylin assets, we have what looks to be the best-in-class amylin analog in development. And that's why we move towards the Phase II data with a high level of confidence, both with regard to weight loss and tolerability data. But the most important part for us is to get confirmation in this Phase II data with what we have seen in the Phase I and thus, that we are fully on the path to deliver on our target product profile. And thereby, as we have also communicated several times, we think petrelintide and amylin in general has the potential to be a larger category for weight management than the GLP-1s because if you allow patients to stay on therapy and you don't have to go out and capture new patients all the time, you would rapidly see the volumes of such a category outgrow the volumes of a category where people stop taking medicines early on. So this is the key focus for us when we look at the data, and we move forward based on the prior data experience, which I think we have released to the market. So we all have the opportunity to look at those data that petrelintide has the potential to be the best-in-class amylin of those that are in the clinic today. The combination product, of course, is also a unique opportunity. And with CT-388, when we did the diligence and the partnership with us, our conclusion was that CT-388 look to be potentially also a best-in-class GLP-1/GIP molecule. And we look very much forward to seeing further data from that program. But the combination -- when we think about the combination with that molecule, our gut feeling, if you will, would be to max out on the potential of petrelintide and then add a teaspoon of the GLP-1 component to enhance the weight loss experience for those patients who need the highest weight loss. And so we look forward to share more on the study designs and of course, ultimately, the data that comes out of the Phase IIb study for the combination that we will start later this year. Operator: We will take our next question. The next question comes from the line of Kerry Holford from Berenberg. Kerry Holford: A question from me is just on the planned Phase IIIa study design. I wonder if you can share any more detail on that. It's clear the message here is to expect you to accelerate launch and deal with the CVOT data later. But can you discuss the endpoint, the study time period that you're looking at for the Phase IIIa study? I mean, for example, could we see a scenario where 6 months weight loss is sufficient to get a first approval for petrelintide? Adam Steensberg: Thank you for your question. I think what we can reassure you is that we, together with us, we are doing everything possible to accelerate, and we have some -- identified some very good levers and have a lot of confidence that we can accelerate and push this program as fast as possible forward. We cannot share the details also the exact details on submission time lines due to the fact that this is a partnership, so we need to agree on when to discuss these things. But we are all on in both organizations to make sure that things are being accelerated towards submission and ultimately a launch. What is also important here to note and one of the main reasons that we decided to partner this program at the time we did was, of course, investments into manufacturing capacity -- and we have been extremely pleased to see the announcements that have come out with, with regard to investments into high-volume, high-throughput manufacturing capacity, which, of course, is needed if you want to secure a successful launch when these products hit the market. And I think that's again coming back to the uniqueness of the partnership we have here and the uniqueness of Zealand today is that we are -- as I conveyed at our Capital Markets Day, and we continue to operate as a biotech company, but we -- and that's the -- we will bring in the best from that world. But in the collaboration with us, we will also leverage the strength of a pharma company as we approach the market with petrelintide. And I don't think you have seen many of these partnerships, but that is why we keep coming back to the strategic value and of course, the profit share we have in this partnership is unique and it's one which we are extremely pleased with to see also how it progresses. We will hopefully soon be able to share more on the exact time lines as we move the program into Phase III, but it's just perhaps one quarterly call too early. Operator: We will take our next question. The question comes from the line of Suzanne van Voorthuizen from VLK. Suzanne van Voorthuizen: This is Suzanne from Kempen. Looking beyond the Phase IIb readout that we're all eagerly awaiting and I believe how petrelintide could provide an alternative to incretins and the product profile you're targeting is very clear. But I wonder if you could elaborate for the longer run based on the knowledge today and the data sets that have been reported for the various amylin assets out there, how do you expect petrelintide to be positioned within the amylin class? What would you expect in terms of differentiation versus the other amylin later down the line? And maybe one clarification about the research site in Boston. What will this hub focus on? And how would that complement the capabilities in Copenhagen? Adam Steensberg: Thank you, Suzanne. It is too early for us to share our thoughts about the ultimate differentiation between the different amylin analogs. We have been extremely pleased with the data that we have seen thus far when it comes to the balance between weight loss and tolerability and safety findings also when we compare across the different modalities, different amylin analogs in the clinic today. So -- and we see a clear opportunity to continue to develop that differentiation that we have already observed in until today. Another key aspect, which I think is important to note as well is as we enter this market, this will be the #1, 2 and 3 focus for Zealand and to build petrelintide into a leading molecule within the amylin class. Others will have to spend more time thinking about existing franchises and how to protect current molecules that are already on the market. And that's a strength and a force which I don't think people should underestimate. On the research side, in Boston, as Utpal shared a little bit on our Capital Markets Day, but it's really going to be a site that will complement what we do in Denmark. In Denmark, we are one of the strongest, if not the strongest research group within peptide chemistry and also having worked in metabolic diseases and health for more than 25 years, have very unique expertise in those areas. In Boston, we will build complementary skills, including focus on high throughput research labs machines that are built -- labs that are built specifically to tap into the automatization that we are seeing in research these days. And on top of that, we are also going to broaden out to modalities beyond peptides. And part of that broadening out will be through partnerships. We just announced one in December with OTR, which has to do with small molecules, but we expect to announce more partnerships, but we will also build some in-house capabilities, so we can become best partners to these opportunities. So it's broadening beyond peptide modalities, and it's also with a high focus on automatization and high throughput, really leading to our firm conviction that we can deliver industry-leading times from idea to the clinic as we build our infrastructure in the coming few years. Operator: [Operator Instructions] We will take our next question. The question comes from Rajan Sharma from Goldman Sachs. Rajan Sharma: Could you just discuss the rationale for restarting development of a GIP analog? Firstly, just to clarify, is this the same asset which you previously deprioritized? And then just in terms of strategy here, do you expect to see monotherapy activity? Or is this really a combination asset for the future? And how should we think about that in the context of CT-388, which is a GLP-1/GIP co-agonist? Adam Steensberg: Thank you, Rajan. I'll hand it over to David. David Kendall: Yes. Thanks, Rajan. Yes, this is the asset that has been part of our pipeline all along. And as you have likely noted, I mean, the interest in leveraging GIP pharmacology, while it is still in its infancy, both with the development of tirzepatide and other GLP-1/GIP molecules, the recent announcement of Novo looking at combinations with an amylin analog. But our understanding, as we've stated all along, that combination therapies can ultimately be leveraged to target this complex metabolic set of disorders, obesity and beyond. And while GIP monotherapy, as has been reported by others, may not in and of itself have potent weight-reducing effects, the potential to further improve insulin action or insulin sensitivity, the ability to unlock even greater effect of other molecules, including amylin analogs, other incretin hormones and other peptide signals is becoming clearer. And for us, this is yet another venture into the potential for combination approaches to targeting these complex metabolic diseases. And again, our commitment to improving metabolic health overall goes beyond, as Adam said, simply reducing body weight, simply targeting MASH to improving things like insulin action, targeting aspects of fat cell or adipocyte behavior and using this pharmacology to really target multiple tissues, multiple organs and further enhance the effect of other peptide and non-peptide signals. So starting with the first in-human to ensure understanding of the PK and safety and tolerability, and then we hope to rapidly advance into assessment of unique combinations with amylin assets and other signals. Operator: We will take our next question. The question comes from the line of [ Susan Shaw ] from Wells Fargo. Unknown Analyst: This is Susan on for Mohit. Just a quick question on ZUPREME-1 dose titration cohorts. Can you speak a little bit more on the rationale behind the timing and the step-up doses that were chosen for the trial? And as a follow-up, where do you expect to see the most improvement on the side effects? Adam Steensberg: Thank you for your question. The rationale was for the dose titration or you could even say that it is even a titration because you can expect, of course, to see weight loss even at the lower doses, but it's is the ability to get to the higher doses is a dosing escalation every 4 weeks is a practical way to do it. Our Phase Ib data suggests that we could do more frequent dose escalation and not compromise the tolerability from a GI side effect profile. It was clean, as you remember, except for one dosing arm where they started at a higher dose than what we do here. So it's also about the practical timing for dose escalation. I don't think we have the same issues as you have with the GLP-1s, where you need to titrate carefully. And remember also a lot of patients, you will have to down titrate when you have decided to titrate up, then you have to back off for some weeks and then back off. That is what becomes -- that's why it becomes so complicated to get patients to the higher doses of the GLP-1, but we have not seen that with the amylin. In all our titration step, we have seen patients being able to tolerate the next dose with any significant new adverse events. So for us, it's more a practical decision rather than something that has to decide with how you have to do it actually from a side effect profile. Operator: We will take our final question. The final question comes from the line of Jen Jia from Cantor Fitzgerald. Jennifer Jia: On 9830, the channel blocker, what indication would you consider pursuing? And what would be the rationale for that? Adam Steensberg: Yes. So we have some very good ideas about where we want to take the molecule in next, and also -- but -- and what you should expect is that we will be pursuing several indications also in parallel, because if you look into the biology rationale, we are looking at what could become a pipeline in a product. It's too early for us to share which indications we are going for, but you should expect us to pursue several indications in parallel. It is a target that industry has been pursuing for a very long time without success because of the difficult nature of addressing this target. And that's also why, as David shared before, we are extremely excited about the fact that we have not only seen PK, but also clear effects of target engagement from a PD perspective in the Phase I study. So we think we have something that could be a future jewel in our pipeline. So -- but the specific indications, we'll have to come back with later. All right. Okay. And with that, I would like to thank you all for attending and for your questions. We look forward to future announcements and updates and to connecting in the coming weeks and months. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter Tenaris S.A. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna, Investor Relations Officer. Please go ahead. Giovanni Sardagna: Thank you, Gigi, and welcome to Tenaris 2025 Fourth Quarter and Annual Results Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information during the call and that our actual results may vary from those expressed or implied during the call. With me on the call today are Paolo Rocca, our Chairman and CEO; Carlos Gomez Alzaga, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, President of our U.S. Operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. During the fourth quarter of 2025, sales reached $3 billion, up 5% compared with those of the corresponding quarter of the previous year and 1% sequentially as our sales to Rig Direct customers in the United States and Canada continue to show resilience and in Argentina, we resumed our fracking and coiled tubing services. Our EBITDA for the quarter was down 5% sequentially to $717 million or 24% of sales. These results include the full impact of the 50% Section 232 tariffs in the U.S. Average selling prices in our Tube operating segment decreased by 1% compared to the corresponding quarter of last year and were flat sequentially. During the quarter, cash flow from operations was $787 million. Our net cash position at the end of the quarter decreased to $3.3 billion, following the payment of an interim dividend of $300 million in November last year, $ 537 million spent on share buybacks and capital expenditure of $123 million during the quarter. The Board of Directors have decided to propose for the approval of the general -- Annual General Shareholders' Meeting to be held at the beginning of May, the payment of an annual dividend of $0.89 per share or $1.78 per ADR, which includes the interim dividend of $0.29 per share or $0.58 per ADR that we paid at the end of November of last year. If approved, a dividend of $0.60 per share or $1.20 per ADR will be paid on May 20, up 7% compared to the dividend per share of the corresponding period of the previous year. Thanks to the benefit of our buyback program. Now I will ask Paolo to say a few words before we open the call to questions. Paolo Rocca: Thank you, Giovanni, and good morning to all of you. 2025 was a year in which Tenaris demonstrated the resilience of its operation in the face of a disruptive geopolitical environment and lower activity in key markets. Thanks to our extensive geographical presence, the depth of the service we offer to our customers and the commitment of our employees, we were able to respond rapidly to the various situations we faced. Our results remained remarkably stable through the year, which we completed with an EBITDA of $2.9 billion and a net income of $2 billion on net sales of $12 billion. Free cash flow amounted to $2 billion, all of which was distributed to shareholders through dividend and share buybacks. We are proposing a further increase of the annual dividend per share of 7% over that for the previous year. At the same time, we maintained a net cash position of $3.3 billion. In the U.S. and Canada, the U.S. was marked by further oil and gas industry consolidation and productivity improvement, a lower rig count and the extension of Section 232 tariff to the import of all steel products, including the steel bars we require for our seamless pipe operation Bay City, and the subsequent increase to 50%. In this environment, Tenaris raised the performance of its U.S. production and supply chain system with its Koppel, steel shop, main pipe production plants at Bay City, at Hickman and Enbridge and various pipe processing facilities acting in concert to achieve a record level of production and supply, 90% of our U.S.A. In both the U.S. and Canada, we strengthened our market position and extended the differentiation we offer under our Rig Direct service model. As customers targeted operational efficiency, we continue to develop and roll out our run-ready and well-integrated services that support them by increasing safety and reliability at the well site. Major oil and gas companies are seeking new production reserves to meet a more resilient long-term demand outlook and they're looking beyond the shales with their fast-to-decline curves, to deepwater development and exploration in frontier region. Tenaris with its capacity to develop product for complex operation and to support fast track development with service and the supply of advanced coated line pipe solution at scale is working with most of these companies as they develop such projects. As new offshore projects are sanctioned around the world, we see many opportunities to renew our order backlog, while we execute on existing commitments. Currently, we are delivering casing for Shell's Sparta 20K project in the U.S. deepwater extending our services for ExxonMobil's operation in Guyana and preparing a service base for TotalEnergies, GranMorgu development in Suriname while planning the production of seamless and welded line pipe and coating for the third phase of TPAO Sakarya gas development in the Black Sea. In Latin America, the Mexican government is taking steps to address the financial difficulties Pemex, which took a toll on oil and gathering activity in the country last year. While in Argentina, domestic companies have been able to raise more than $4 billion in financing to develop infrastructure and expand production operation in the Vaca Muerta fields. We supplied the Vaca Muerta Sur pipeline and are currently supplying the Duplicar North pipeline. We are also investing to expand our new fracking and coiled tubing service business and expect to put a third set of equipment to work before the end of the year. In Venezuela, following the intervention of the U.S. government, we are resuming our service to Chevron operation and building up our service capability in the country to support an increase in drilling activity. In the Middle East, we continue to consolidate our presence with the award of a long-term agreement for the supply of OCTG to the Northwest field development in Qatar, while in the Emirates, we enhanced our Rig Direct service to ADNOC, delivering a record amount of OCTG. Saudi Arabia, also conventional drilling activity was reduced during the year. We completed an expansion at our local large diameter facility, from which we are supplying line pipe for the development of gas infrastructure. In addition to the OCTG, we supply for Aramco drilling operation. Our global integrated industrial and supply chain operations have been key to our ability to respond effectively to the different events we faced during the year. We continue to invest and enhance the efficiency and digital integration of these operations as well as reducing their environmental impact. We made further progress towards our midterm target of reducing the carbon emission intensity of our operations as we brought our second wind farm in Argentina into operation. The 2 wind farms now supply essentially all of the energy requirement for our electric steel shop and operation in Canada. As an industrial company, our commitment to the safety of our employees and to the environment sustainability in our communities is absolute. Also, our indicator have improved this year. We continue to reinforce our preventive action and monitor our performance in this aspect. Tenaris, with its presence across the world, competitive differentiation in product service, the quality and compliance of its operation and the financial strength to support its strategy remains well placed to confront an unpredictable and volatile future. I would like to thank all our employees and the communities which sustain our operation for their constant commitment and engagement that have made possible our results and achievement this year. I would also like to thank our customers and our suppliers for their ongoing trust and support. Thank you very much, and we are open to any questions you may have. Operator: [Operator Instructions] Our first question comes from the line of Marc Bianchi from TD Cowen. Marc Bianchi: I wanted to start by asking about the outlook here in first quarter and maybe you could talk about, to the extent you're comfortable how things progress beyond first quarter. When you talked about being close to current levels in fourth quarter, is that -- should we interpret that as meaning flat? And are there any nuances with volume and price that we should be thinking about as we build that out? And then any comments sort of beyond first quarter would be great. Paolo Rocca: Well, thank you, Marc. Well, within our visibility today and considering many parts moving in the energy market and also in the general geopolitical environment, I think it will not be easy to have a medium-term forecast. Now what we see is a relative stability of our performance and our position in the market during the first quarter and it is not so easy. We do not see today a point that should disrupt our operation even in the second quarter. But for the time being, as we say, we feel comfortable in forecasting the first quarter in which the level of margin and in general, the results we can get are more or less in line with the 4Q. But it's difficult to have a more long-term forecast considering the volatility of the environment in which we are moving. Marc Bianchi: Yes. That makes sense. And then the other one maybe somewhat related, the margin resilience in the fourth quarter was quite good. And I'm curious how much of that benefited from some of the actions that you're taking? I think you mentioned Koppel in the press release to try to offset some of the tariff headwind that you've experienced. I think previously, we talked about that being something like $140 million a quarter of tariff costs that you're having to deal with. So I'm curious how much progress did you make on that in 4Q? And what is the opportunity going forward? Paolo Rocca: Well, we are, let's say, continuously operating in the efficiency of our operation, including our capacity to produce more steel in the U.S. So we expect for the first quarter of next year, that a lower level of tariff we get into our IFRS because in the end, we are operating on this even in the past few months. And we think that what is getting into our results in the first Q will be relatively slightly lower of what we have in the fourth Q. But on the other side, the indicator of prices in North America, I mean, in spite of the impact on the hot-rolled coils and other products of the steel industry are moving relatively slow in the pipe business and especially in a welded pipe. So considering the impact of slightly lower tariff and where we are in terms of Pipe Logix and so I think what is moving around in the world, I think that this is the component that justify our vision of a relatively stable top line and margin data for the first quarter. Operator: Our next question comes from the line of Matt Smith from Bank of America. Matthew Smith: My first question was around the international business and on pricing. Just whether you have seen any signs at all of pricing pressure given how some of the international benchmarks have traded down, I guess, since summer 2025? Any color you could give on different regions could be useful. Paolo Rocca: Thank you, Matt. I would say that, as you know, our business globally is composed of many different niche, high-demanding product, different region, different level of service. So I would say, to some extent that the price impact is more easy to understand and project in North America than internationally. But by the way, I will ask Gabriel to give you a vision of what we see in front of us on the ground. Gabriel Podskubka: Yes. Thank you, Paolo. Good morning, Matt. On the pricing on the international markets, we see, in general, some stability, a balanced demand and supply, especially on the premium products, where we are mainly focused. So premium is our service, high technical qualified pipelines. This demand is quite strong, driven by offshore, by Middle East, in gas and our service development. So we see the demand on these segments quite stable. We have, in many cases, long-term agreements that have some formulas related to raw materials. So I would say that the majority of our backlog and our business in international market are driven by stability in the pricing. It is true that there are some spot tendering where we're seeing a slight deterioration in the environment, especially when we are talking about lower end applications, but this is not the most important part of our business, and this is something that we monitor. So I would say, given all the moving pieces and the increasing component of our offshore during 2026 in our international mix, I would say that the pricing in the international markets are quite stable for Tenaris. Paolo Rocca: Thank you, Gabriel. Let me just add one point on which maybe -- that is the European. In Europe, maybe it's early to perceive the impact, but the CBAM and the safeguard that is supposed to raise the quota -- to raise the tariff to 50% and reduce the quota by almost 50% may have a favorable impact on relatively important segment of our international business that is all supported by the industrial power gen activity into Europe. To some extent, I think in the view of the overall say, future of our operation, maybe not immediately, but we should be able to maybe improve our situation and pricing in Europe. And also this reflects with the present exchange rate gets into our -- to our top line relatively well. Matthew Smith: I wanted to ask a second question around the buyback, if I could. So I appreciate the current tranche of $600 million is still ongoing, and we'll have to sort of await the next announcement later in the year. So I just wanted to ask, check whether your philosophy around the buyback has changed at all since last year? Or should we very much expect this to continue to be a material component of shareholder returns in the near future? Paolo Rocca: Yes, thank you. As you are saying, the General Assembly and the Board decided for a program of share buyback of $1.2 billion from May 2025 until May in 2026 divided in 2 tranches. The second tranche has been approved again in October. Now the decision obviously is to the assembly and the Board for the decision on this ground. But let's say, the factors that were relevant for the decision on the shareholder didn't change so much. So we will see if in the assembly in May and the Board after this should decide on this, when the second tranche of $600 million will be closed. They will consider the different factor, the level of cash availability in the company, the perspective of this. And on this basis, they will consider a possibility to continue the program of share buyback. Operator: Our next question comes from the line of Arun Jayaram from JPMorgan. Arun Jayaram: I was wondering if we could talk about your expectations around potentially getting to an inflection point in the Pipe Logix pricing indices, just given your thoughts on import trends and where -- when and where could do you expect us to see that pricing inflection point? Because it continues to trend down, call it, in low percentage points at this point, looking at the most recent pricing data? Paolo Rocca: Yes. Thank you, Arun. Well, the factors that are, let's say, having an impact on the Pipe Logix are different. But you should also consider that there is a Pipe Logix for seamless and the Pipe Logix for welded. What we see is that, to some extent, the Pipe Logix for welded is having a drag down on the overall impact, something that maybe we were not estimating -- fully estimating before. Why? When we saw the hot-rolled coil index going up as it is going up today, we were considering that this should have driven an increase in the welded pipe. But the import of welded pipe coming in based on the Chinese or Southeast Asia or other sources flat product is, let's say, containing movement in the Pipe Logix for welded. And this is, to some extent, having also an impact on the Pipe Logix for seamless product. Now the hot-rolled coil went up so much. There is clearing the way for some import in the welded product and putting under stress the producer of welding product based on hot-rolled coils coming from the U.S. In my view, this is kind of temporary because antidumping action against importation or import of welded will contribute to the gradual alignment of the Pipe Logix to the higher level of the hot-rolled. But this is not something that we can anticipate immediately for the first quarter. But over time, should be acting, should be a factor. Arun Jayaram: Great. And my follow-up, Paolo, I was wondering if you could just provide us your thoughts on how Argentina could play out in 2026 versus 2025? I know that you're adding a third frac fleet in Argentina, but give us a sense of how you see things progressing in the ground because we have seen some IOCs adding rigs in that market. Paolo Rocca: Well, let me tell you that as I was saying in the previous conference, after the election in Argentina in November, the confidence on the investment community is increasing in Argentina. And even the oil and gas companies have been able to finance more than $4 billion, collect financing from different tools that will be used to, let's say, promote and carry on investment planned during 2026. This process has been relatively gradual, but I think that over the second part of '26 and also following the biggest investment in the infrastructure, we will see this collection of financial capability will transform into a higher level of drilling in the country. This has been slower than probably we were expecting 1 year ago because opportunity are there, but also the level of country risk stayed a little higher after the election than we maybe were estimating. And this is maybe slowing down or at least is making more gradual -- the pickup has increased. Also some of these resources has been used for consolidation in the industry, especially by local player. And after this consolidation, the investment will go in operation in the development. First, some of the acquisition has been completed and gradually in this field, drilling will increase. I would expect in the second half of 2026, we will see something moving in this sense. I remember, part of the drilling containment has been coming by the reduction of the operation in the south part of the country. Now this is obvious. There has been a closure of operation in the South. So the key and the core of it -- of everything will be Vaca Muerta. Operator: Our next question comes from the line of Sebastian Erskine from Rothschild & Co Redburn. Sebastian Erskine: I'd like to just start on the margin trajectory for Tenaris in 2026. And I think, Paolo, you mentioned earlier about the impact of kind of hot-rolled coil on ERW margins. I mean, looking at that, I think in the U.S., those have compressed about sort of $350 a ton since August. So I guess that would equate to something like a sort of $35 million, $40 million quarterly cost headwind, but that will take a while to show up. So when does that flow through into COGS? Or is it something we shouldn't really be thinking about as a meaningful impact? Any color there would be helpful. And then I guess on top of that and more positively, when we look into the second half of the year, you've obviously got a lot of offshore work to materialize. So you mentioned Sakarya, Suriname and presumably, obviously, that's higher margin. So can we expect you to operate at the top end of your kind of 20% to 25% EBITDA margin guidance? Is that realistic going forward through the rest of the year and a kind of second half weighting? Paolo Rocca: Maybe, Gabriel, you can give an overview on part of the question. And then eventually, we will ask Guillermo on the other pathway. Gabriel Podskubka: Sure, Paolo. Good morning, Sebastian. Going to the part of your question related to offshore and how they will play out during 2026. I would say that the market in the offshore is quite operating at high levels. We have a strong backlog that we need to execute. As Paolo commented in the opening remarks, we are getting ready to deliver this impeccable execution. These are complex projects that require local deployment. You mentioned the Suriname project. We are building the new service base in Suriname. The new -- the first shipments will arrive in June. So we are ready to deploy the OCTG and the Rig Direct services there into the second half of the year. We are also, for example, producing today thermal insulation coating in Nigeria to support the Shell Bonga North deepwater development. So these are important part of our focus and attention is on delivering this high backlog of orders. And we expect revenues in the offshore in the first half of 2026 to be higher than the second half of 2025. When we talk about the second half, it's true we have an important backlog of Sakarya and other projects. Some of these awards -- additional awards require FIDs. We see some of the FIDs being announced towards the end of this year or even in 2027. So this will depend. So we don't have fully confirmed the backlog of second half of 2026. But we are confident that it will be at least as positive as the first half of 2026. So overall, I would say, the offshore contribution will be important for Tenaris. And if you look at the industry projections, the level of FIDs of deepwater that we are seeing for 2027 are pretty strong, higher than the average of '25 and '26. And we are engaging with our customers early on in those projects much earlier than the FID. So we believe that we're in an offshore cycle that is going to be sustained for a multiyear period. Paolo Rocca: Yes. This is very important. When we look at the estimate of the investment in deep offshore for '27 and '28, the number apparently of estimation are showing level of investment in the range of $120 billion in '28 that are almost 3x some of the low-end years in the past 2, 3 years. So long term, look promising for this. Now Guillermo, maybe you can add on the U.S. operation best vision. Guillermo Moreno: Yes. Thank you, Paolo, and good morning, Sebastian. Well, regarding your question about the trajectory of margins in the U.S. and particularly for our ERW pipes, clearly, the recent increase of prices of the hot-rolled coil and still the reduction of prices for the same products is putting a lot of pressure on our margins. And that is going -- that are going to be reflected mainly in the second quarter. For the following quarters, with all the volatility that we are seeing, it's more difficult to forecast, as Paolo explained before, but -- and will depend mainly on the ability of the Pipe Logix to recover that we think that eventually will based on the push of the cost hot-rolled coil and scrap and also because of the expectation that the imports will continue to go down in the future. Operator: Our next question comes from the line of Stephen Gengaro from Stifel. Stephen Gengaro: So 2 things from me really. One is, can you talk a little bit about your expectations in 2026 for any material changes in working capital as we sort of try to think about free cash flow generation? And then maybe aligned with that, what level of cash do you feel like you need on the balance sheet to run the business? Like what level is excess versus what's sort of normal necessary operational cash? Paolo Rocca: Thank you, Stephen. Well, in general, remember, it's not only a question of the capital we need to run the business, but we also need to have always in mind the capital we need to have available for any expansion or opportunity that may come in front of us. This is an important consideration for the Board, for everybody when we consider the financial strategy in the flows to the shareholder. But as far as the working capital is concerned, I would ask Carlos an overall view because there are some areas like the receivable from some of the clients that is improving. And so you can give us a view of how you see this. Carlos Gomez Alzaga: Sure. Thanks, Paolo. For the 2026, we expect to be quite neutral in working capital, but we will have some swings over the year. Especially in the first quarter, we're expecting an increase in working capital, mainly driven by our accounts receivable. As you saw during the fourth quarter, we have a big reduction in receivables, mainly driven by collections in some -- big collections from Pemex. I think with Pemex, we have arrived to a level that from now on will maintain or increase a little bit. So we won't be seeing a working capital reduction coming from there. And then we are seeing also some terms, we negotiate some terms with customers in the U.S. that might impact a little bit our working capital needs. And also, we are seeing some slight increase in sales for the first quarter that will also imply an increase in account receivables. Paolo Rocca: In terms of inventory, maybe for managing our -- in our balance sheet, the service component of the company is very visible. We have the fixed capital that is slightly higher than our working capital because in the end, we have a lot of inventory to support our service strategy and our Rig Direct strategy. You think, Gabriel, we can imagine some reduction of this streamlining inventory or basically you imagine a stable situation here. Gabriel Podskubka: In general, Paolo, we are always looking for opportunities to improve. This is the case in all our Rig Direct programs, we are managing and balancing the ability to supply and have the right stock at the right moment and have efficient working capital. So this is a constant work. We have done an improvement during the year that we will continue this year on the work in process material. So this is something related to our industrial efficiency where we have been improving, and we have more room to improve. And then there is a part of steel as we have this important LSAW pipelines that we need to buy the steel in anticipation. So typically, there is a longer lead time on these large pipelines that are also reflected throughout the year. But this is an area of attention, and we always think there is room for improvement. Paolo Rocca: It is important for projects like Sakarya. Gabriel Podskubka: For example. Paolo Rocca: Long term, long period of time. Gabriel Podskubka: Yes. Paolo Rocca: And also our operation may demand working capital for serving ADNOC with a long operation and stock demand. Gabriel Podskubka: We are serving every month 550 rigs worldwide. So this requires to have the raw material close to this rig. Paolo Rocca: Serving 550 rigs every day imply to keep all the inventory even in a remote region or at least like in the Gulf. But still, we're working every day to understand how we can optimize this by the way. Sebastian Erskine: No, that's very helpful. Operator: Our next question comes from the line of Alessandro Pozzi from Mediobanca. Alessandro Pozzi: The first one is really going back to the Q2 guidance. You mentioned a bit of an impact from higher raw material costs. I was wondering if you could perhaps quantify or give a sense of what that could be in Q2? And also, as we look throughout the year, I was wondering if there is any quarter where we could see an impact from mix, for example, more line pipe versus seamless and having an idea of the cadence of line pipe volumes, I think it could be quite interesting? And also on maintenance, whether you have any big maintenance quarters? And second question on Argentina. Can you comment on the level of competition you've seen there? We've seen an Indian company getting a contract for a pipeline. And I was wondering your thoughts about the competition there as volumes, as you pointed out, are going up possibly from second half? Paolo Rocca: Thank you, Alessandro. Well, on the first point, there is, let's say, the impact of the row. When we look at the medium term in terms of this, we always keep -- follow basically 4 points: the Pipe Logix for seamless, the Pipe Logix for welded, the cost of hot-rolled coil and the cost of scrap. So on these 4 variables that are moving are acting on our, let's say, the indicator in the formula of our contract many times and also the costs that are underlying. Up till now, I mean, what we see is an increase in the hot-rolled coils that is not followed by the Pipe Logix in welded because there is import from companies that could stay below the line of price, even paying 50%. This is hitting our -- to some extent, in our margin, but we think that this will be a reaction by the Pipe Logix some antidumping action to contain import. And I will ask Guillermo, if you see this happening in medium term, I mean, when we can recover the increased cost of the hot-rolled coils in our top line. Guillermo Moreno: Yes. I think that following what I said before, I mean, remember, there is always a lag between the Pipe Logix and how they reflect in our prices. So normally, we have 1 quarter delay. And while the impact of hot-rolled coils, it comes sooner than that. Our expectation would be that we should start to see some reduction in Q3, but particularly in Q4. Paolo Rocca: Thank you, Guillermo. Now on the line pipe seamless after the acquisition of Shawcor, the line pipe for us is very relevant, and we are I think very competitive. But maybe, Gabriel, you see some changes in the balance between 2. Gabriel Podskubka: Yes, Paolo. Alessandro, regarding your question about the cadence of the pipeline projects, I would say that it's quite stable during the 4 quarters of this year. This is the visibility that we have today and pretty much in line in volumes on what we had on 2025, where we had important projects like Sakarya -- I mean, like [indiscernible] in 2025 in Brazil. This year, we are concluding some pipelines in Argentina in the first quarter and second quarter. Then we will have Sakarya in the third and fourth quarter. We have, I would say, a relatively stable plan of pipelines in Saudi Arabia as well. And then the deepwater pipelines that we have in different parts of the world. So I would say, there is not a significant imbalance in our shipments of line pipe. Paolo Rocca: Thank you, Gabriel. On the last point on the tender in Argentina. Well, this was a tender for a large project for producing LNG in Argentina. The project is carried on by a private company that, let's say, include different shareholders, but it's a private company. They made a tender, a very open tender to everybody. And basically, we lose the tender because they were higher than the lowest bidder. The bidder, as you were saying, was an Indian company. Things like this happens, obviously. Now what we are doing, we are analyzing the offer to see if this is an offer that is following the trade practice or is exposed to potentially an antidumping case raised by us. For the time being, we didn't take the decision here. We are just studying the condition, the condition of the local market for the Indian company, the condition of the pricing of this because we think this is important. We also remember that Argentina had signed an agreement with the United States in which both parties are committing themselves to address the unfair trade practices in both countries. It is logical for U.S. to advance or introduce close of this in the relation with different region, different areas. And this is part of the agreement, the reciprocal trader investment agreement between Argentina. So we think there should be a good environment to analyze the specific situation of this offer and this tender. Alessandro Pozzi: All right. I don't know if I can squeeze in a last one on Venezuela. In your opening remarks, you mentioned that Chevron is ramping up drilling activities. Could you quantify the Venezuela opportunities short term, longer term for Tenaris? Paolo Rocca: Yes. On this, Gabriel, you follow closely this. Gabriel Podskubka: Yes, Alessandro on Venezuela, clearly, the situation is evolving. It's a dynamic environment. But clearly, there are signs that things are going to move positively with the hydrocarbons law and the recent of licenses, I think there are clear signs that some resumption of activity will occur. Today, Tenaris is in a unique position. We are fully serving the Chevron, the only major that is operating in Venezuela. They have a plan to accelerate rigs and demand for 2-wheelers, and we are ramping up for that. This is today something limited, but we expect to expand into 2026. So we are also following the licenses of the other majors that might be coming back to Venezuela soon. So this is, I would say, still in the $50 million for 2026, but with a clear perspective of a higher potential into 2027 and when maybe more clear plans about the other majors are materialized. But overall, a big upside potential in the midterm, depending on how things evolve. Paolo Rocca: Remember, Chevron will not be alone. There will be other company moving. I think our position in Venezuela is unique. Remember, in Venezuela, we're operating the only seamless pipe plant until the plant was expropriated in 2008 by the government by [indiscernible] and at that time, we were the company serving the oil industry in Venezuela. So we also have human resources or people that are familiar with the operation in Venezuela, the service, the complexity on this, the product demand and so even if a lot of time passed, but we still, I think we have a very competitive and differentiated position. Alessandro Pozzi: Right. Sorry, did you say $15 million EBITDA, 1-5? Gabriel Podskubka: $50 million of revenue, 5-0. Operator: Our next question comes from the line of Luigi De Bellis from Equita SIM. Luigi De Bellis: Just one for me. On the Middle East and Mexico, could you share your view on the evolution for the coming quarter for both Middle East and Mexico? Paolo Rocca: Thank you, Luigi. Well, starting, let's say, from Mexico. Mexico, there has been a number of positive events in supporting Pemex. The government capitalized Pemex with a program of $20 billion that is important. And now Pemex is also issuing bonds and getting access into the market for important sum like $1.7 billion. I mean, relevant access with government guarantee. Now what we do not see yet is the definition of the plans that the Pemex will execute during 2026. We do not have clear indication of this. And the private company are moving slowly. And some of the group is moving. Obviously, Woodside in the Trion is moving on. But some of, let's say, the contract that may have enabled private company to come and develop the resources. In my view, this is moving relatively slowly today. Maybe by the end -- the middle of 2026, we will have a better understanding of how they will organize, let's say, the development of the clearly huge resources that Mexico has. Now the question on Middle East, medium-term vision, I think, Gabriel, you also may comment on this. Gabriel Podskubka: Yes, sure. Luigi, for the question on Middle East, I would say, there's not much change on what we have been reporting in the last couple of quarters. Activity remains high. All the main key countries are investing. We have a strong position there with our long-term agreements in Saudi, UAE, Qatar and part of the market in Iraq as well. So I would expect our revenues and shipment in the next 2 quarters, first and second quarter of '26 to be pretty much in line with the last 2 quarters of 2025. The only noticeable news is a probable uptick of drilling activity in Saudi. This is still to be confirmed, but probably during the second quarter of '26, maybe later in the year, we will see a comeback of rigs in Saudi, which reduce rigs during 2025. So we'll monitor that, and there could be a potential upside, but for the second half of this year on the [indiscernible] side. Operator: Our next question comes from the line of Marco Cristofori from Intesa. Marco Cristofori: My question which relate on shale oil, shale industry in the U.S. Let's say that since the end of 2023, we have seen declining rig count, but a growing crude output. So -- and also breakeven are going strongly down according to oil [measure]. So do you think that this trend could allow a further increase of your volumes in the U.S.? And secondly, there are several insights that the shale in the U.S. could reach a plateau in the second half of 2027. So how do you see the evolution of the shale industry in the U.S.? Paolo Rocca: Yes. Thank you, Marco. I would ask to Guillermo to give his view on the evolution of this. In the question of plateau, frankly, I wouldn't -- I don't think we are able to predict the plateau. It will depend on the overall price of oil around. And there are many issues that are unpredictable concerning the major production region and so on and so forth. So in U.S. the plateau has been forecasted in the past at a lower level, and it is continuous surprising us with higher. And so I wouldn't bet on where this number will be in '27. Guillermo, on the question of the productivity. Guillermo Moreno: Yes. I mean, as you said, I mean, the operators in the U.S. have been increasing their efficiency and productivity big time in the last 2 years. So with a much less number of rigs, they are not only producing more, but they are drilling almost the same amount of wells, and they are even going longer. So we are seeing much less rigs, but more production and slightly reduction in the consumption of OCTG compared to what we used -- I mean, so there is no such correlation that we used to have with the rig count. Now looking forward, we still see kind of a stable market for 2026 compared to 2025. We may see some reduction of activity, slight reduction in oil offset by an increase of activity in gas. And as Paolo said, difficult to predict about production. Everybody is talking about plateauing, but at the same time, we see them becoming more creative and producing more oil from each well with the new technologies in terms of fracking, but also in terms of the level of chemicals they use. So we need to see as to where the innovation of the industry can go. But clearly, if we are not at the peak, we are not far from it with this level of activity and rig count. The other variable that we need to take into account is that during the last 2 years, there has been a reduction of drilled by uncomplete wells. So some of the increase of the activity was also coming from wells that were previously drilled but not completed. The level of inventories of those wells has gone -- has come to kind of a bottom. So we don't expect much more of this in the coming quarters. Operator: Our next question comes from the line of Kevin Roger from Kepler Cheuvreux. Kevin Roger: I just have one question to follow on the U.S. and all those stories on the tariff implemented by the Trump administration and notably on the recent news flow that the Trump administration could reduce the tariff on steel and aluminum. I was wondering if you comment a bit more on what should be the implication on your side from a potential reduction on the tariff if, for example, we come back to a 50% steel tariff to 25% or something like that. Just to understand the potential impact on the U.S. OCTG market if we move in that direction, please? Paolo Rocca: Thank you, Kelly. Well, we don't know which is -- I mean, we only have an article on the newspaper. We do not have a written definition. If I should say, the issue may come from the impact of the U.S. economy of the extension of the 232 to the derivative of steel. There are in many products, derivative of steel, which means that they contain steel, there are basically affect price level in the states, but are not having a beneficial impact of industry in the states that is not producing this. Now this universe of derivative increased so much that I think the comment of Trump maybe are just indicating a willingness to reshape what is considered derivative and what is not. Remember, there has been stages of expansion of the definition of derivative 1, 2. And before going to the third, he is considering what would it be, let's say, not creating undue distress in the pricing system. So this is what I understood. We will reconsider the derivative more than reconsidering the level of 50 for 25 because this is a key component of the 232. I don't see this to change. Operator: Our next question comes from the line of Jamie Franklin from Jefferies. Jamie Franklin: So firstly, and apologies if I missed the answer to this one, but I just wanted to focus on your other business segment. Obviously, a big revenue and margin recovery in 1Q, driven by your fracking and coiled tubing services in Argentina. Can you just talk about how you expect that to trend through 2026 and whether we can expect a similar contribution in the first and second quarter and beyond that? And then the second question, just if you could give us an update on your CapEx expectations for 2026 and kind of an outline of where you expect to be spending? Paolo Rocca: Thank you, Jamie. On the oil and gas, I was saying, during the second part of 2026, we are considering that the activity of oil and gas fracking should go up. The drilling activity will also pick up later on. There will be more need to frac. We are just bringing in one additional set of fracking because we are anticipating some increase by the end of the year. And this should drive to some increase on our activity in the second half of '23. This is basically the position on this. The other point, CapEx, I mean, the CapEx will be more or less in line with what we have been spending in 2025. Looking at the forecast, we see even something lower. But I imagine that during the year, new need may come out. Usually, there is something that is coming out from specific intervention. So there will be something lower when we look at this from a planning point of view today. But maybe in the end, we will be close to the level of today. Operator: Thank you. At this time, I'm showing no further questions. I would now like to turn the conference back over to Giovanni Sardagna for closing remarks. Giovanni Sardagna: Well, thank you, Gigi, and thank you all for joining us today. Bye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the review of VGP's financial results over full year 2025. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Jan Van Geet: Good morning, everybody, and welcome to the presentation of our full year 2025 financial results. My name is Jan Van Geet, and I'm the CEO of VGP, as most of you know, I think. I'll first start with a little executive summary and the highlights of 2025. We recorded a pre-tax profit of EUR 338 million, an increase of EUR 19 million or 6% higher than the full year of 2024. Our net asset value grew 8.3% up to EUR 2.6 billion, and that's -- the EPRA NTA is up 9%. We have an EBITDA growth of 28% to EUR 454.7 million, 13.5% increase. And what makes me happy is the historic record of EUR 106.7 million of new and renewed leases, which I will go to more detail later on. The annualized committed leases at the year-end stand now at EUR 468.3 million. We have 1,052,000 square meters under construction and our development pipeline is 75% pre-let. I can add to that, that we have signed a lot of LOIs, which are in final negotiation. We think that by the end of the first quarter, most of them will translate into new lease agreements. And if they do, and we expect they do because we are finalizing the lease agreements with them, we will have a new record of more than EUR 80 million of signed lease agreements to be started up in the new year. So we are having a solid pipeline to be started up already, which is fully pre-let. We delivered almost 500,000 square meters last year, 99% let. And the last unit has just been agreed upon. It's a small unit in Koblenz with somebody from the defense industry. We have 1.4 million square meters of land acquired and our total secured land bank stands at 10.3 million square meter, which represents a development potential of at least 4.3 million square meters. We did a net cash recycling of EUR 389 million through a transaction with our joint venture partner in the Saga joint venture, and that led to an additional EUR 60.5 million realized profits in 2025. And we target another material closing with the Saga, as we already announced it in August last year. We announced that we were going to do EUR 1 billion. I think we'll do a bit more in the second half of 2026, for which we have already all of the assets aligned. It will be a material closing. We'll go more in detail also later on that. And then finally, VGP and East Capital have agreed to set up at least EUR 1.5 billion of gross asset value of pan-European fund with an emphasis on Central and Eastern Europe. We know East Capital already for 15 years. They are a very reputable boutique fund manager from out of Sweden, which have quite some track record in Eastern European assets and they manage the fund, management thereof. The Board of Directors proposes an ordinary dividend of EUR 92.8 million, which is 3% higher than the ordinary dividend of 2024, or EUR 3.4 per share. If we look at the summary of the financial results, and you see that the steady growth of the total portfolio value goes up from -- for the full year at 100%, including the joint ventures portfolio at 100% with EUR 900 million almost from EUR 7.8 billion to EUR 8.7 billion. We have a continued strong growth in committed annualized rental income. It grew 13.5% year-on-year. So we're getting bigger every year. It's more and more difficult to beat that, but we're going to do our best this year. I think we're going to be able to set another nice year. We have a lot of demand in the pipeline. And the full year of 2024, we had EUR 412.6 million at the end of the year committed annualized rental income, and at the end of 2025, we had EUR 468.3 million. The EBITDA increased 28% -- Piet will go more in detail later on -- which followed actually a very solid performance in all of our business segments. It went up from EUR 354.4 million in 2024 to EUR 454.7 million in 2025. And then I already told you about the dividend, which will grow with 3% to -- we're proposing, anyway, to EUR 3.4 per share. I'll first go a little bit on the market and the market update. These are not our slides. These are slides which we got from Jones Lang LaSalle. And I will compare our own performance a little bit to that. If you look at demand and occupier segments, then you see the take-up share by sector, and then you see that the third-party logistics are still the biggest one. We have very little third-party logistics inside of our own portfolio. We have most end users and also longer-term lease agreements. And we see a very big comeback from e-commerce. It is bigger than what we have in here. And what we have in the pipeline now, what we are working on, is also very e-commerce determined. So we see them coming back, and we see that there is more and more and more demand from out of that sector. It's not only Chinese companies. Also, they are here. But it's mostly Western European and American people who are coming back to the market. We also see a lot more demand now from the defense sector. We have been able to secure some of them, and we are also currently negotiating with some of them for some new manufacturing things in the pipeline. The vacancy rate has come up a lot over the past quarters. It actually doubled from 3% to 6.2%. But that compares in our own portfolio to -- we are a little bit more than 98% let at the moment. And we see healthy demand. And we also see that there is a lot less speculative construction in the market. So the vacancy levels, we expect them to go down in the future. If you compare to all the markets which you see right next them, there where we are in Budapest, we have 0 vacancy; Madrid, we have 0 vacancy. If you look at Bratislava, we have 0 vacancy at the moment. In Milan, we have 0 vacancy. In Prague, we have 0 vacancy. Of course, some of these are also speculative buildings which have been started up over the last quarters. On the supply, you can see that the build-to-suit over the last 3 years is quite flat. The 2023, '24 and '25 levels have remained stable. But you see that the speculative development is coming down quite a lot, which gives us a good view on that there will be soon not so much available anymore in the market because there is quite some take-up over the last year also. We have 16.2 million square meter space under construction, which is the lowest level in the past 5 years now. Capital markets, I don't know if we can say something intelligent on it. Last year started very well, and we did a very large transaction, EUR 509 million, in the second half year. So that also contributes to it. But we saw that the -- overall, over the whole year, the transactions went up both in volume and in size. And -- but mostly in the smaller markets on the major markets, only U.K., the Netherlands and Poland posted a year-on-year growth. The yields have been relatively flat. You can see that very well. We've had a devaluation on some of our German assets because our valuator takes the view that vacancy levels in Germany should go up -- no, not should go up, but the reletting should take a longer period. He has made that from 12 months to 18 months. Pete will go in detail to it. But we have seen that in Germany what has come available over the year, we have been able to relet on average in 2 days, not more, and we have a 21% uptake on the rental income of what we have relet. So we can't really concur to that view, but it is what it is in the market. That's what our valuator thinks of it. But it's not visible in our own portfolio. I will go through the operational performance for the full year. Maybe I'll just go back. This is our park in Arad, which we've just started. And the building which you see on the right side is a building which we constructed for VAT. VAT is a vacuum valve producer for the semiconductor industry, a very specialized product production. It's got 12,000 square meters of clean rooms inside at a very high level. And we have achieved with that building, BREEAM outstanding score of 96.2%, which is the highest of any industrial building in the world last year -- no, over all the years in BREEAM outstanding. And this is our park in Valsamoggia, which is also fully let and which we've transacted last year through our joint venture with Saga, with our friends from Areim. As I already said, we had a record year in committed rental income, including the JVs at 100%. The group has 465 tenants, but that's divided over more than 650 lease agreements, as you can see. So we have a lot of tenants which come multi times back into our buildings. The committed annualized leases as of 31st of December stand at EUR 468.3 million; occupancy rate, 98%; and it's filling up really very well. At the moment, we really have quite some demand in our portfolio. And if we make the bridge, then you see that the committed annualized rental income started with -- and I think it's 13 -- yes, EUR 412 million and a bit. We signed new leases, almost EUR 57 million. We had EUR 6.5 million of indexations. We had some amendments in leases, people who wanted some other space or differentiate their space. And that EUR 8.9 million of terminations. And we sold one building in Riga to its user, to Jysk, which declined also EUR 2.4 million of rental income. And that brought us to the EUR 468 million, which we had at the year-end. But meanwhile, we've signed quite some leases already, and we're looking forward to be able to report to you after the first quarter, because, as I said, we have quite some nice LOIs in the pipeline. The majority of the new contracts which we signed were within the Logistics segment. I have some examples. Logistics was 67.9%. But as I said, we have very little third-party logistics. You don't see many third-party logistics also in the names here. We signed with Studenac, which is one of the largest retailers in the Balkan, a very nice cooled warehouse, which is delivered this week. We signed with Aldi a very nice new warehouse, which we're going to start construction in a couple of weeks in Frankenthal. That's a big one, 60,000 square meters. We signed a very nice lease with Movianto, healthcare dedicated logistics. That's a third-party logistics. But you see Heineken, Eureka, Duomed, Ursus, Farmol, Studenac, they are all end users and they use their own facilities and sometimes use somebody to operate it. This is something which changes all the time. But e-commerce was last year 16.5%, and I expect it to be quite a bit higher this year. Light industrial, 14%, but that's just a move in time because we also had quite some demand from light industrial over the past year. Our portfolio is leased to a very diversified and blue-chip tenant base. The weighted average lease term is already here stable. It's 7.8 years. As we keep on growing and most of the leases are relatively long term signed, we have -- the top 10 tenants represent 29.7% of committed leases. But also there, we have -- these represent 28 different lease agreements in many different jurisdictions. So it's well spread, the risk of it. And yes, if you look in here -- but this is a little bit longer term. The logistics represent 47% in our total portfolio, light industrial, 34% and e-commerce, 17%. And we have some others. We have some -- it's mainly Siemens, yes, where Siemens is in Nuremberg. It's a site where we have offices and which we are going to start rebuilding this year completely. This year, we have some quite iconical projects which are upcoming and about which I will tell a little bit more afterwards in the outlook, because we are going to really have some land plots coming online which are -- from which we expect really a very nice contribution in the coming 12 to 24 months. If you look at VGP at a glance and you look -- we are always looking forward in how can we grow and where can we grow, in which segments can we grow. And of course, the main part -- the main raw material to be able to grow is the land bank because we always grow organically, we develop everything ourselves. We don't buy any standing assets. And if you look at the December '24 net cash generative rental income, so things which were delivered and really generated cash, it was EUR 350 million or EUR 240 million at share. During 2025, we activated EUR 39 million of new leases. So it went up with 11% to EUR 389 million or EUR 236 million at share, so including 50% of the joint ventures, if you look at it. The signed leases, which are still under construction and which will be added on in the next 12 to 18 months, is another EUR 79 million. And so that's another 18%, and that takes us to EUR 468 million of income-generating activities or EUR 310 million at share of income-generating lease agreements, of which EUR 321.7 million sits in the joint ventures. But if you look at our land bank which we have today and the ERV of the vacancy and the development pipeline which we have, that's another roughly EUR 300 million, which takes us -- the potential up to EUR 766 million, or, at this moment, EUR 602 million at share. And we are trying to accelerate our development pace as much as we can now. The development activity, talking about acceleration, drives our second strongest EBITDA in our history. And if you look, there is a couple of notes which I need to say to this. You see very well the division between East and West. In 2021 and in 2020, we had big start-ups in Western Europe because we had these big leases in Giessen and in Munich, which started up at that time. You see also that in 2022, we delivered and then we started up a lot less because of the big inflation. I told you that I was standing very much on the brake at that point because I was afraid about having too much vacancy with buildings for which we paid far too much. Now we have our costs very well under control. Our margins are going up relatively quickly. We have very sound margins again, which you can also see in the revaluation result, because the revaluation result in this year, I think it's EUR 183 million, is pure and only revaluations from new activities from things which we have started up. And whereas, in 2021, it was a little bit a distorted image because there was also a big uptick in valuations, of course, in the standing portfolio as yields were going down with very steep declining interest rates. Out of the EUR 634 million record EBITDA in 2021, only EUR 81 million was cash -- was really cash income, recurrent income. Out of the EUR 455 million EBITDA in 2025, it's EUR 249 million, which says a little bit also about the resilience of our result going forward. It's more and more regenerative income. The net rental and renewable energy income at share has grown a lot year-on-year with 18% in 2025. If you look at it, we are now at EUR 223.384 million in 2025, which we expect a continuous growth in 2026. In the renewable energy, about which Martijn will tell you a lot more later on, we have now a lot diversified also into battery projects, battery projects which have a very high yielding on their investment, and of which we have foreseen to construct quite a lot in 2026 as now we have the permits coming into place to -- in order to be able to do that. We also thanks to the brownfields which we have been buying over the past years -- most of them have been big factories with enormous electrical connections. For example, we bought Hagen. Hagen has 90-megawatt connection of energy, which not only allows us, if we can, to deliver back very nice battery projects, big in size, but it also opens the potential. And it's very congested today to be able to do a more data center exercise. So we are trying to take a look at it, whether we could implement a data center also in Hagen, whether the location is the right one. And at the moment, we have 2 identified together with Sarah, our new employee who came from Microsoft. One is in Russelsheim and one is in Bodenheim. And on both, we are very well advanced on our permitting. On the permitting side, we are advancing very well. It will take a little bit more time. These are complex exercises also, but we are on a good way to be able to realize them soon. And it's our ambition to have something by the year-end to be able to say something more concrete about our data center developments going forward. The portfolio is virtually let on a long-term basis, and you can see there is very little variance. Combined occupancy of the portfolio stood at 98%, WALT at 7.8 years, with the first brick at 7.4 years. Top 10 customers, as I said, that's 28 lease agreements, and the biggest one is still Krauss Maffei. But when we first contracted them, they were 21%. And now thanks to all this growth, it's only 6% left of the total portfolio which is now Krauss Maffei. And Opel is 5.1%, which is a short-term lease, but it will be replaced. And we are going to redevelop, of course, Russelsheim, and we expect to be able to do quite a significant uptake in the leases going forward. Our own weighted average lease term on our own portfolio is 9.6 years at the moment. On the delivery side. And here, you see our park in Vejle under construction in Denmark. We delivered 21 buildings, which represented almost 500,000 square meters in gross lettable area. That was EUR 32.9 million rental income, 39 new contracts, and they were 99% let. And as I said, we've now have -- we have a tentative agreement with somebody from the defense sector to take the last unit in these buildings, and it will be 100% leased. 100% will be rated BREEAM actually excellent, of which 31% is BREEAM outstanding over the last year, which I think in Europe, at least we believe we have done the best performance with the rating of BREEAM outstanding. You see 2 of our buildings, the VGP Park Parma in Italy, which last year, we delivered to Mutti, the tomato producer, and our Park in Keckemet, where, amongst others, we also have Mercedes as a customer. The deliveries in 2025 trending towards logistics, but you see immediately that there is also some quite big productions inside. Hyundai Mobis was a very nice one. We delivered a 50,000 square meter facility in Pamplona. And we delivered to VAT, as I already said, this building for this vacuum valve producer. On the 2 pictures which you see in the -- you see VGP Park Cordoba, which is a production, by the way. And then you see our VGP Park in Montijo, which we delivered last year and which for the biggest part is a cooled and deep cooled warehouse for Logifrio. The portfolio at share has grown organically and completely organically because we only develop everything ourselves and then we place it in our joint ventures. But it has grown at an annual compounded growth rate of 21.9% and it's gone up from EUR 5 billion to EUR 5.6 billion. We offloaded since 2022 EUR 3.4 billion of gross asset value into the joint ventures. And we aim this model works very well. We aim to continue to do that. Yes, it's -- if you look at it, Germany is still the strongest market, although the others are now growing maybe a little bit faster relatively. The Czech Republic is now almost EUR 1 billion in assets. Spain is growing quite well. And in the Netherlands, this year will be a huge uptick because we already leased out 60,000 square meters, which is under construction. But we are working on a very big new lease agreement in the Netherlands, which will take out our entire park in Nijmegen. The investment portfolio on 100% view has grown to EUR 8.7 million, which is up 11% year-on-year. And Western Europe represents 74% of the total portfolio value as of December 2025. You can see the completed is EUR 7 million. Development land is EUR 770 million or 9% of our total investments. And under construction, we have almost EUR 1.930 billion, which is also 11%. On the development side, the portfolio under construction represents EUR 85.3 million of new leases. And as per today, 43 buildings are under construction, which represents 1 million -- just 1 million of square meters. It's 75% pre-let, including pre-lets on development land. When we finalize these LOIs which we have in the pipeline, it will be well over 80%. So I think it's on a very healthy basis at the moment. We have started last year 761,000 square meter of new buildings in 2025, and we aim -- we have to already start up 450,000 square meters if this materializes, which is already pre-let, which is the highest which we ever had at the beginning of the year, pre-let, to be started up in a given year. So that's a very nice forward-looking thing to have. You can see again on the right side, you see our park in Rouen, which is now virtually fully let. We only have one last unit left. And then -- and a small one, 4,500 square meters out of the total more than 100,000 square meters -- total more than 150,000 square meters, which we are constructing there. And then you see our VGP Park in Veijle, Denmark, where we also have one last unit left, also 4,500 square meters. Yes. Again, it's well spread across our geographical footprint. You saw what is the income-generating assets or the assets overall, which are already that Germany in the income is more than 50%. In the -- what is under development, it's only 36%. You will see that the other countries are relatively growing a little bit faster now. They also are becoming more and more mature. France is a big market. Spain is a big market. The United Kingdom, I'm sure, will come up to speed soon. So we think that we will be able to do some very nice developments all over Europe. 2025 was also the first year where we had buildings under construction in literally every country where we're active in. That's never happened before. So that is now -- we have everywhere now buildings under construction. On the landbank, the picture you see is our beautiful park in Nijmegen, where we have Ahold Delhaize and Bol.com in one of these buildings which you see. And the land bank in front, that's only a very small part of it because we still have more than 20 hectares available, where we now have started groundworks already and we are already under construction for one client which we signed at the end of last year, Pragma Trading. And then we are negotiating -- we have signed an LOI for the rest of the land bank. The land bank, of course, it's something I am very much dedicated to because it is our -- it is the source of our future growth as we develop everything ourselves. And the land bank -- Piet likes to make bridges, so we have also this in a nice bridge. We owned in 2024 when we started or beginning of 2025, 7.4 million square meters, which is fully permitted, by the way. We acquired 1.37 million of square meters, which we always acquire subject to having the permit in place. So that's also fully permitted. We deployed 1.6 million square meters last year. We sold a little bit, a couple of square meters, but that's nothing. And then -- so we owned at the end of 2025 7.09 million square meters. But we committed, and in December, we had 3.15 million square meter of committed. So that's land which we have binding agreements on and which we then buy at the moment when we have the permit in order to be able to use it for its intended purpose. So that brings the owned and committed in December 2025 to 10.25 million. And we have another under option and PV contract of 1.51 million square meters. And this means that roughly -- because the 4.3 million is just the ground floor space, you need to calculate mezzanines and offices to it, but at least 4.5 million can be developed on this total land bank versus the 7 and a bit million of buildings which we currently have either finished or under construction. I also try to take a look -- a very pragmatic look at the land bank. And everywhere, we need to have a nice margin, which, of course, makes it -- in Germany, the yields are a bit lower than the exit yields than they are, for example, in Romania. But we try to target everywhere the same margin. So we -- and we have been able to target lands in all of our countries and the land bank is geographically well diversified. We have some specific countries we really need to take a look at going forward, but we were able to secure quite some really nice land plots, and I will talk a little about it also in the outlook later on. This is the first part of our operational results. I'll come later back to the JVs. But I'm now going to first give the word to Martijn to talk a little bit about our renewable energy company and its income. Martijn Vlutters: Thank you, Jan. First, giving a short overview of how our renewable energy business has now actually developed 2 segments. Jan already mentioned it at the beginning. Photovoltaic has continued to grow, and we added a good 50% to the revenues for the photovoltaic business. But something that is still a bit nascent, but for which we see good prospects is on the battery projects. You see there's in total 258 projects on the photovoltaic side. There's a few less on the battery side. But actually, it's -- in terms of investments, we see a good opportunity both to deploy capital. There's around EUR 4 million invested now, but yes, we see that grow substantially over the coming 2 years. And certainly, if you see the megawatt hour deployment that becomes -- with 173, that's a good 30% of the total in renewable energy. So -- and as Jan mentioned also, the profitability of this business is typically much better than for the photovoltaic. So this will start to add to the EBITDA line for renewable energy in 2026, but even more so in 2027 and onwards. The big constituent of renewable energy remains the photovoltaic business. Certainly, in 2025, we've seen a good growth. As I mentioned, the revenue came from EUR 8.3 million, and we've added another EUR 4 million to the total revenue, which was driven by additional production that was now over 130 gigawatt hours. Energy price at which we've been able to sell has remained broadly constant. If you look at the outlook, we've added another 13% in operational photovoltaic this year. So you will start to see that also in the production figures for 2026. And then there's another 35-megawatt peak that is under construction, which we expect to become operational in the course of this year. And I think the last thing to add is that the overall yield for photovoltaic has now popped over 10%. So the overall investment of the projects that are operational is EUR 110 million. And as said, gross revenues was EUR 12 million. So the gross yield has actually for the first time now popped over 10%. Then maybe also briefly on the corporate responsibility. There is one thing here highlighted on the left-hand side, which was something that was recognized at the end of last year by Time Magazine in cooperation with Statista. They've done sort of a science-based and quantitative assessment of all the listed companies across the globe. And based both on our financial revenue growth as well as the sustainability metrics that we have been able to accomplish in 2025, they've highlighted us as one of the top 100 companies globally in terms of realizing sustainable growth. I think one of the big contributing factors to that is the EU taxonomy, which you see on the third on the left in the smaller boxes. We've now achieved 68% of the total portfolio. But certainly, if you look at the new productions or new construction, we've actually been able to verify EU taxonomy for 95% of the buildings that we are currently constructing. That's all under the EU taxonomy new construction regime. So that's quite a strict regime, which we've set ourselves. And yes, with the 95% you hear, that really has become our internal market practice to adhere to across the group. A couple of other metrics that we've highlighted here that I'll leave to you to read at your leisure. I think we can move on to the joint venture update. Jan, back to you. Jan Van Geet: Yes. Our joint venture model is a little bit the cornerstone of our growth model going forward. And so far -- I'll go to the next slide -- we have -- you can see it's been growing consistently. We have done a new transaction last year with Saga, which is our fifth, sixth, whatever you call it, joint venture. And it's now more than 60% invested. And when we are going to do the next transaction, which is planned for the second half of this year, we will be virtually for a big part already fully invested. There will remain some parts of it, but we foresee a very material transaction in the second half year. And we have very positive and constructive talks ongoing also with Saga to continue with the next stage, next vehicle, which we would like to start up in the course of 2027, then going forward after Saga is fully invested. If you look at Saga -- well, as I said, it's 60% deployed. There remains roughly EUR 600 million of gross asset value. And as some of the parks which we have transferred have some little spaces left, which -- where tenants have expansion option, et cetera, we think that we will do a transaction which will exceed EUR 500 million in the end of the year, where actually everything is already identified. And we have been able to go a lot faster than originally foreseen, also thanks to the fact that we have enhanced the scope of countries in which we do our investments. In the beginning, what you see, the original scope, the dark green, it was Germany, France, Czech Republic, Slovakia and Hungary. And we have added to that Denmark, Austria, Italy and the Peninsula, Spain and Portugal. And so we now have a lot of assets which we can do. We have 989,000 square meters or 39 assets already spread over all these countries which are in site, and that's 60% of the total gross asset value which we have foreseen to deploy over the first 5-year period, which will become a 3-year period, I think, because by the end of this year, we should normally be fully invested. We also announced today for the first time that we are working with East Capital, a company which we know already for a very long time. Very nice people out of Sweden. I don't know if they are looking, but hello. VGP and East Capital is to set up a partnership to launch a Luxembourg-based real estate investment fund focused on European industrial logistics real estate with an emphasis on Central and Eastern European countries, not only but mostly. The targeted gross asset value we have agreed upon is at least EUR 1.5 billion. We hope to be able to do a first closing and we trust to be able to do a first closing in 2026 in the second half of the year. VGP intends to keep up to 50% and the remaining equity should come from third-party investors. The management will be shared between parties. There is no difference between the asset management and property management profile, which we had with the former joint ventures. It will become -- it will be the same. It will be East Capital's responsibility to do the fundraising and to do a little bit of investment advisory. And the portfolio will consist of -- what we are going to buy will be income-generating assets, all ESG aligned in the countries which you see. So it will come a little bit from everywhere, but with an emphasis on Central and Eastern European countries. That's it a bit on the JVs, and I will give the word now to my brother, Piet, for -- to explain the financial performance. And by the way, what you see on the picture is our park in Serbia, where the building on the right side is Ahold Delhaize, which we have built brand new, which has taken into operation. And the second building, the main tenant there is the Metro Group. And both buildings have been also delivered and both buildings also are BREEAM excellent awarded. Piet Geet: You stole my intro Jan. Jan Van Geet: Sorry. Piet Geet: As always, I have prepared for you a usual slide deck with P&L, balance sheet, cash flow movements and some further details. And I'm happy to walk you through and also happy to report an increase in our profitability from pre-tax EUR 319 million to EUR 338 million. And as always, there is really a lot playing through our P&L given the fact that we have a hybrid model between own developments and a JV. So I think the best thing is, as also in former formats, to walk you through it in more line by line. We had an issue with some sound, so... So first and foremost, you see that our net rental and renewable energy income, it has increased with 31% to EUR 88.7 million, basically exists out of the gross rental income or the rental income and the renewable income. The gross rental income on our own balance sheet increased 32.7%, which is EUR 86.7 million --- to EUR 86.7 million. But if you look at it on a proportional basis, meaning this EUR 86.7 million and our share in the joint ventures' gross rental income, this effectively grew from EUR 203 million to EUR 235.5 million of gross rental income. Maybe just to make a quick recap to what has Jan been presenting before, is we have in the group on an annualized basis EUR 468 million of contracted rental income. From that EUR 468 million, EUR 146.6 million is on our own balance sheet, of which EUR 78 million is active. That EUR 78 million could compare to this EUR 86.7 million, but it is, in fact, more. That is because, of course, we had done a transaction with Saga at year-end, and that still delivered us EUR 15 million of rental income that portfolio before we transferred it into the JV. And on an annualized basis, that transfer was actually EUR 29 million of rental income. So that's it about the rental income, a good positive increase, all built up organically. In terms of the renewable income, we also see a strong increase, 43% to EUR 11.9 million, coming from EUR 8.3 million on gross renewable income. As Martijn has presented, this was an effective increase in production from 90 gigawatts to 132 gigawatts or a 47% increase. So that brings it down on the net rental and renewable energy income, an increase from EUR 67.7 million to EUR 88.7 million, but also at share from EUR 189 million to EUR 223 million or up 18% in comparison to 2024. The next line in our P&L is the joint venture management fee or the joint venture fee income. It's EUR 32.7 million last year. That grew with 59% to EUR 52 million. Here, there are also some -- quite some particularities. The joint venture fee income basically exists now out of 3 components. One is our property facility or asset management fee, which on a recurring basis grew with EUR 4 million, and then there is also a provision for EUR 18.4 million on a promote. Just as a quick reminder, we have multiple joint ventures. The first joint venture, Rheingold, comes up to maturity in May 2026. It has already been extended for 10 years. But after the 10-year -- or the lapse of the 10-year period, VGP is entitled to a promote based on the net IRR performance of that joint venture. Now the net IRR performance, and we are particularly proud of it, has been very good, and we have a 12.4%. This is really net IRR really on a cash level basis after all asset management fees, taxes and whatsoever. And since we have surpassed the hurdle, we have now at 31st of December booked a provision of EUR 18.4 million. This provision, of course, will be updated in the first half at 31st of May based on the valuation of the portfolio as of then, plus its operational performance. So it is our best estimate based on the track record until 31st of December. And then finally, the remaining part is the development management income. We perform works on behalf of the joint venture. This decreased with EUR 3.2 million to EUR 2.5 million. But overall -- so the joint venture management fee significantly increased to EUR 52 million. And on a recurring basis, we do expect it to increase further in 2026 because we have done a transaction, for instance, in December, where we also have an asset management fee on, which will be accounted for in 2026. Plus then, of course, all of the transactions that we foresee to do, one with Saga and also with the new East Capital fund, which will also lead into increases of our fee income with the JVs. The next line, that's always a strong influencer on our P&L, that's the net valuation gains that we record on the investment properties. These increased from EUR 187.1 million to EUR 243.6 million, and they are actually composed out of 2. Jan has already hinted to it also that we have an unrealized gain of EUR 183 million, which is an increase of EUR 89 million, which is mainly related to our development activities. That's the profit on our developments. Whereas there's also a second component, which is the realized gains. That means that we have sold assets towards the JVs or, for instance, also the disposal of VGP Park Riga at a higher level than it had been recorded for in our books, versus the fair value in our books. This led to a EUR 6.5 million additional profit. And our own portfolio has a weighted average yield of 7.48% versus 7.22%. Of course, the number, sometimes we get a question, is a bit higher than in our JVs. But in JVs, it's 5.22%. That is because it's more skewed to Western European countries in the JVs and fully stabilized assets, whereas here, we are still having assets under construction and also quite some Central and Eastern European assets, which have a higher yield, on which, of course, we have also now the nice opportunity with East Capital. The next line on our P&L is the administration expenses. They are quite, you could say, broadly in line with last year from EUR 61 million to EUR 63 million. In average, the remuneration went up with EUR 1.6 million. But we also had a depreciation increase of EUR 2.2 million. That is mainly related to our renewable energy installations, which are recognized in a cost model, so at acquisition cost and depreciated. We have a general -- I need to move this -- EUR 5 million increase in general admin. Part of that was also the marketing campaign that we launched in 2025. And then since we have more assets under construction in comparison to previous years, we have also higher capitalized expenses on our assets or investment property, which offsets the extra cost of the above with EUR 6.7 million. And at year-end, we have 434 FTE. Next line is the share in the net profit. And there, we actually see a decline from EUR 92.7 million to EUR 41.3 million. But I can actually explain, I think, what has happened there in the bridge versus last year. First and foremost, the -- and I don't know if you see it also what I'm seeing, but there is a line missing. There is a -- but anyway, the net rental income increased from EUR 121 million to EUR 134.7 million. That's an increase of 10.7%. But the big driver or change in the JVs is the net valuation gains, where it was a positive of EUR 54 million, it actually reduced with EUR 65 million to minus EUR 10 million. This was driven by a number of facts. One is we have done a few settlements with the JVs where the JV had to pay us a top-up on previous closings, which was a negative impact on the valuation in the JVs. But the second element was mainly that there was -- and there is a strong German portfolio inside of the JVs, which was negatively impacted by a valuation change. So the average yield went from 5.05% to 5.22% in the JVs and the German part was a devaluation of approximately 2%. The appraiser effectively reviewed its prime yields for the country, and as Jan was referring to before, also had -- updated also his discounted cash flow model, foreseeing rather an 18-month vacancy period than a 12-month vacancy period when contracts would come to an end. Now as we mentioned before, we do not see that trend at all in our German portfolio. In fact, everything what we released last year was at 21% prices, averagely higher, as well as the average term to release something was 2 days. So we didn't really see this. But nonetheless, it did impact a bit our German portfolio and within the joint ventures. Then the other expenses that you see there, it's actually the promote at share. All of these -- what we see on the bottom table is at share. So it's EUR 18.4 million for us. But it's a cost to the JV. And at share, since we own 50% of the JV, it's EUR 9.2 million. Admin expenses were broadly in line. And I think if we disregard once the valuation movements, then we are actually seeing a very strong set of EPRA results on the joint venture, which is a testament to the very strong operational performance of the joint venture because the EPRA earnings are up 25%, but also our cost ratios are down. So in general, we are actually very satisfied with the performance of the joint ventures. Hence, also, for instance, the above 12% net IRR that we could achieve on the Rheingold joint venture. Next point in our P&L is the net financial result, which went from an income to a cost of EUR 24 million. This is -- of course, we raised the EUR 576 million of debt last year at a coupon of 4.25%, which gives already a delta in a higher interest cost. On the other hand, also in 2024, we profited quite a lot, also in 2025, but the interest came down on interest on cash on hand. We usually put quite some money on term loans and try to optimize it maximally as possible. But last year, this was an income for us of EUR 12 million. Now it was EUR 5 million. So it's a decrease of EUR 7 million. We have some higher capitalized interests of EUR 3 million. That is because we -- just like the capitalization on the admin expenses, we have higher amount of volume of assets under construction. So this leads to a high capitalized interest of EUR 3 million. And we have a decrease in our interest income from the JVs. I would say the shareholder loans in the JVs, they effectively increased. But of course, there have been distributions through repayments of shareholders during the year. And only at the end of the year, we created a new shareholder loan with the Saga joint venture because the transaction only materialized in the second half of December. And also, we partly capitalized part of the noncurrent receivables or the shareholder loans on the Deka JV, which also decreased a bit the interest income. And then finally, as you may recall, we raised EUR 576 million of bonds. But we also bought back in 2025 EUR 200 million worth of bonds, for which we paid EUR 195 million. So we made a profit on that of EUR 5 million. Going to the next slide. He doesn't want to go to the next slide. Jan Van Geet: Yes, he did. Unknown Executive: Okay. Where Jan also already referred to, and it's a particularly good performance over EBITDA. So the EBITDA is up EUR 100 million versus 2024. So up to EUR 455 million or an increase of 28%. And the increase is to be noted in all of our segments. So in the Investment segment, where we show the EBITDA of our completed portfolio, excluding any valuation gains, you see an EBITDA going from EUR 204 million to EUR 249 million. This represents, actually, if you look at into our balance sheet, EUR 2.9 billion of our total assets. In terms of Development, as I explained before, net valuation gains of EUR 243 million, composed of the good development profit traction that we have -- something is happening here on the -- with the -- yes, I'm back here. The good traction that we have on the development profits and realized gains. So our EBITDA also increased from EUR 145 million to EUR 199 million. And then the gross renewable energy also has a nice EBITDA increase given also the 47% extra production that we managed to produce in '25 or a 43% increase in its gross renewable energy income. In terms of the balance sheet, we see a strong increase of our total assets and total liabilities from EUR 4.6 billion to EUR 5.2 billion. The investment property is now EUR 2.4 billion, which, of course, composed of a completed portfolio of EUR 915 million, under construction EUR 777 million versus EUR 579 million. So you see here also the increase versus '24. And then development land, as we did buy quite some very attractive land plots, also increased from EUR 645 million to EUR 728 million. We did about a total CapEx of EUR 660 million, which is composed of about EUR 490 million on assets and EUR 150 million roughly on land acquisitions. And I mentioned already the weighted average yield of our investment property, 7.48%. The property, plant and equipment, the EUR 141 million, it's an increase of EUR 18 million versus last year. This is mainly related to our renewable energy installations, where we had a EUR 19 million CapEx. And the completed installations, where also then the EUR 11.9 million of gross renewable energy income is coming from, is generated from a complete installation of EUR 109 million, and what is still under construction is EUR 18.6 million. And our investments in joint ventures increased quite significantly with EUR 109 million. Now we have done quite some transactions with the JVs, not only the Saga closing, but as I mentioned also before, there were some settlements on previous closings which were to the benefit of us, which increased the equity contribution into our joint ventures altogether with roughly EUR 100 million or EUR 98 million. Then we, of course, have -- since it's reported under equity methods, the allocation of our result or our share in the result of the JVs, which is EUR 41 million. And then we received equity repayments from the JVs, so dividends of EUR 30 million. I will come back on the distributions of the joint ventures in the cash flow statement. I already mentioned the other noncurrent receivables. So they increased with EUR 63 million following the transactions with Saga, but we also got EUR 32 million of joint venture loan repayments. These were the 2 main movements, I would say, on the noncurrent receivables. And then we ended the year with a cash position of EUR 523 million, got EUR 31 million more than we had last year. And on the disposal group held for sale, the EUR 27 million, that is the VGP Park Tiraines, which is going to be sold in H1 '26. That is under a call option of its tenant. It's located in Latvia, and the transaction is about to be materialized. Everything is more or less done. The shareholders' equity increased, as already mentioned before, from EUR 2.4 billion to EUR 2.6 billion, very easy movement, EUR 290 million profit, EUR 90 million dividend going out. So that makes the movement there. And then in terms of our financial liabilities, that increased from EUR 2 billion to EUR 2.360 million (sic) [ billion ]. This follows a EUR 576 million bond that we raised in H1. It was actually EUR 500 million with a top-up of EUR 76 million. Then from out of that, we did a tender on our outstanding bonds of January '27 and '29 of EUR 200 million. And '27 was reduced with EUR 179.9 million. The one of '29 was reduced with EUR 20.1 million. But we effectively paid EUR 195 million on that. And then there was also a bond that came to maturity in March of EUR 80 million, which was also repaid. And then we moved to current financial debt at year-end, now the EUR 190 million bond, which is due in March. I'll come back on the debt also in one of the next slides. But our average cost of debt is now at 2.7% as at 31st of December '25. And as you may recall, we have also revolving credit facilities, which are untapped. They amount to EUR 500 million. We increased them during the year, and we also prolonged to them. There are more -- there's more info to that in our press release on what and to what extent it has been prolonged. But in the end, it comes up to a consolidated gearing ratio of 35% or a proportional LTV of 50%. We also have a Fitch, and also since 2025, an S&P Global rating. Both investment grade with BBB- and a stable outlook. I already made a reference to this I think in -- on the previous slide. So our average cost of debt increased to 2.7%. We have a significant liquidity position. And the bond maturities, I've updated it here already, given the January '26 -- in January '26, a few weeks ago, in fact, or 1 month ago, we raised EUR 600 million bond. And from that bond, we also repaid EUR 100 million on the outstanding January '27 bond, which was originally EUR 500 million. We reduced it with EUR 180 million in '25, and we reduced it again in January with EUR 100 million. So it's now still EUR 220 million. And then the remaining bonds to be paid are listed there. But you can see the one in 2025 has a maturity, the EUR 576 million, in '31, and the new one, which was raised in January, has a maturity in 2032. Speaking of the cash flow statement, we started the year with EUR 492 million. The net cash generated from operating activities is EUR 51 million. Just as a side note, we did an update to our cash flow this year, where interest paid, as you can see now in financing activities, has been moved from operating to financing activities. We felt it's more correct there. It has also been restated in '24. So we go from EUR 33 million to EUR 51 million. I have a bridge on the left. But in essence, we have spent EUR 171 million in investing activities. The proceeds from disposal, the EUR 389 million, is related to the Saga JV and the disposal of Riga, plus some settlements with the joint ventures. From the EUR 660 million of CapEx that we see on investment property, an effective EUR 642 million has been spent. The remaining will move through our working capital on CapEx payables. Loans to JVs is a loan to one of our development joint ventures. And then distributions by joint venture, what I referred to before, EUR 82.7 million, broadly in line with last year. The EUR 82.7 million is a combination of interest payments of EUR 20 million, shareholder repayments of EUR 32 million and equity distributions of EUR 30 million. It depends a bit joint venture-by-joint venture, how we take out the excess cash that is inside. That's why I also group it here for simplification purposes. But we all consider this as distributions. There were no investments in joint ventures. That's mainly then related to development joint ventures. And then in our financing activities, so we paid an interest of EUR 48 million. We paid out a dividend in May of EUR 90 million, which we now propose to increase from EUR 3.3 to EUR 3.4 in '26. So that will go to EUR 93 million as cash out in '26. Then we had proceeds from loans, which is the bond raise of EUR 576 million. After costs and deductions, it's EUR 565 million net cash in. And then the loan repayments, it was a bond that we paid back of EUR 80 million. And then the EUR 200 million that we paid back for EUR 195 million. So EUR 195 million plus EUR 80 million is EUR 275 million that we actually repaid. So that means that we end the year with EUR 523 million of cash. I think I maybe explained all of this already, but maybe there's one more nice thing to note that is that we raised the bond in April of EUR 576 million at a coupon of 4.25%. We did one in January at 4%. But underlying, there is quite a big difference, because the EUR 600 million bond that we raised in January was at our historic lowest spread ever, 150 basis points. Of course, it was a bit upset and offset with the increase of interest versus the previous bond. But nonetheless, it was still at a cheaper and it was a very successful transaction that we've done. And now the maturity profile of our bonds are as follows. I believe this was, I think, my last slide. So I hand it over back to Jan. Jan Van Geet: Yes. Thank you all for listening until now. A summary and the outlook. I am personally very happy that our result is even more and more cash generative and that the profitability of our new developments going forward is going up again. With all that we are going to start up this year, and we are quite bullish on it, we think that we are having a good year in front of us in 2026. On the relettings, as we have seen, our portfolio is -- we've never had to transact something to the joint ventures with a loss. And if you look at our relettings, they were during 2025, 14% higher than the rental price which they were let at before. And as Piet already said, on average, it took us 2 days to relet in Germany, where our reletting was 21% higher than the one before. And we have heard through the former reporting periods a lot of concerns about the German market, where we have a big exposure to. But we feel very confident in site, and we also see a lot of activity. We have a lot of new things going on. So we feel really very confident on that. The margins on our new developments, they are EUR 103 million. But there is really a lot in the pipeline, and I already talked about it. There are a couple of LOIs on which we are now finalizing. So cost reimbursement agreements is a better term for it, where we have agreed with tenants mainly out of the e-commerce sector that we're already going to line up everything so we can negotiate the relatively complex lease agreements because they are also relatively complex buildings. But we are on track to close them all before the end of the first quarter, some of them even in this month. So we're really in final negotiations. We already signed one with [ PE ] Capital last week in Bucharest. And if we look at it, we see that e-commerce is back on track and starting to look really again -- what they had over rented in 2021 and '22 has now been consumed, and they are back on track with growth, which is I think a very positive for us. So if these things materialize, we will at least start 450,000 square meters now in 2026, EUR 80 million which we need to start of rental income, which is already contracted, which is the best position I think we've ever had in our history. So looking forward. And that's very much supported also by the unlocking of some of the historical iconical parks which we have bought and which are mainly brownfields. And brownfields always take a little bit of a longer time to develop. But if I look at it, we're going to start construction this year on La Naval in Bilbao. We are going to start demolishing Nuremberg, for which we have a lot of demand. It's a super location, and we're going to start construction. We also are talking to some people out of the defense industry. We have already paid a visit to Hagen, which we bought just after the year-end with a very big tenant and which has been welcomed. Hagen is Dortmund, right next to Dortmund. It's a very nice site, which disposes of a 90-megawatt peak capacity of electricity, which is active. And so which opens a lot of opportunities for us. We're well proceeding on our Russelsheim development, and we're also very well proceeding on our permitting there because we needed to do a new B plan in Russelsheim, in which we also incorporated our data center and development which we aim to do. And I was puzzled by the presentation which Sarah gave to me about data centers coming from Microsoft. If you look at the actual installed capacities in the big conurbations of Europe where it is -- where everybody talks about, it's actually not that much as you would think. London is 1.7 gigawatts, Frankfurt also. And if you think about us in Russelsheim probably being able to do quite a bit more than 100 megawatts, that gives a total different perspective about the possibilities of our land plots. And we also have a very nice opportunity in Italy, and we're looking at other land plots in Germany. We think that, that would be nice. We also are going to have Verona coming online this year, our new land plot in Velizy, Paris, which is now -- for which we have also received the building permit and for which we're going to sign our first lease in the next couple of weeks. So all-in-all, we think that we have a very sunny future in front of us, as you can see on this picture, which is our park in Montijo, which is in Portugal. And then, of course, we are looking very much forward to the further diversification of our joint venture model. We are in continuous talks with our friends from Areim to do the follow-up of our Saga transaction. And also now we have announced it now publicly and we're very much looking forward to our cooperation with East Capital. And we have 2 legs to stand on them going forward and we hope it's going to be a big success. That's a bit, I think, the summary and the outlook for the next year. And I think that we can now move to questions from your side. Operator: [Operator Instructions] The next question comes from Marios Pastou from Bernstein. Marios Pastou: I've got a question mainly around the new partnership with East Capital. I think on the slide, you mentioned the potential for at least EUR 1.5 billion of gross asset value in scope. So I'm just thinking maybe part of the agreement, if you could give some more details on kind of what that total investment volume could scale to, if you've agreed a time frame or a target to reach that fully invested level? And whether the structure is broadly similar to what you've agreed in your prior partnership? Jan Van Geet: Yes. Shall I take it? We can develop on our total -- on the total land bank at the moment, roughly something between EUR 6.5 billion to EUR 7 billion of new assets, which we are -- including what we have already -- which we still have on our balance sheet. So that is all possible to transfer into new joint ventures going forward. And we have already envisaged and we've already defined quite a large portfolio, which we could transact because it's already income generating and delivered in this year. So we have said we want to do at least EUR 1.5 billion. I think we're targeting more, something like EUR 2 billion. But that is a momentarily view at the moment. When we start, it can also grow bigger. We're very confident on the fact that we are going to be able to deliver -- well, VGP is delivering all the time new assets and all the time starts up new assets. So it will keep on growing in the future. Piet Geet: I think in general, it's indeed more or less a copy of our current joint venture model with an investment period, 3, 4, 5 years. And what we develop, we will offer. And it's broadly similar. We will retain the asset management services on the -- as it is in the current joint venture basically. Jan Van Geet: Yes. Structurally, it's actually the same. What is different is that we are not targeting one single partner per JV, that we are targeting multiple partners at the other side. More something like a fund structure than just a single JV with one single investor at the other side. Operator: The next question comes from Vivien Maquet from Degroof Petercam. Vivien Maquet: I hope you can hear me. I had a follow-up question also on the JV. Just to understand from the fundraising perspective, what kind of precommitment do you have on the third-party investor because I just wanted to see because you mentioned a closing in the course of the year. But do you have the -- I would say, the equity already being raised within the fund? Or what [ commitments ] you have on that fund? And also on the structure. Is it closed-ended or open-ended fund? Jan Van Geet: It's foreseen to be a closed-end fund. And the raising of the funds is an ongoing exercise, which East Capital is predominantly occupied with, knowing that, of course, East Capital has a solid investor base inside of their existing funds. And this is an addition, more of a unique product that they can offer. But it is an addition to what they have in their current fund business. And the exercise is currently ongoing. We are targeting a closing by the end of the year. I think that's about it what we can say today. Martijn Vlutters: Yes. It's a regulated business, Vivien, raising capital. So we can't really say what's been committed already. It's prescribed quite precisely what can and cannot be set in such exercises. Vivien Maquet: Okay. And then just on the shares management agreement. I understand that deviate a bit from the previous joint venture. What does it mean for you in terms of recurring income you're going to drive from that joint venture? Jan Van Geet: We expect a similar income model that we have with our current joint ventures also. There is indeed a sharing of services with East Capital, but it's somewhat similar, for instance, with what an Areim or an Allianz also does with their investors behind who are invested into our joint ventures. So East Capital will mainly look into gathering the funds and also doing the investor relations with the investors that they have been able to target. But other than that, our services remain the same. And we expect broadly the same revenues to be incurred from all of the disposals into the JVs. Operator: The next question comes from Wim Lewi from KBCS. Wim Lewi: I've got 2 questions. One is a small one on East Capital, if I can bother you with, is does the new fund also allow for countries that were not eligible for the other joint ventures to be transferred? I'm thinking, for instance, on Serbia or maybe other countries that you can now offload more into the future? Jan Van Geet: The East Capital fund is a Pan-European fund. So every country where we are active in is, in fact, targeted. But it will be skewed more to the Central and Eastern European countries. But in essence, everything -- all countries are on the target list of the fund. Wim Lewi: Okay. And then a follow-up, if I may. It's really on these valuators increasing yield in Germany and then especially in the JVs to 5.22%, which you explained that it's based on vacancy. Now you obviously have good leasing activity, which you explained many times. But could there be like a timing difference, because they do that at the end of the year, whereas you have done the re-leasing over the year. Can you give an indication of the amount of re-leasing you have to do in '26 and what you expect from that? Jan Van Geet: We have very little re-leasing to be done in 2026. And so far, what we see is that, again, also for the things in 2026, which are coming available, we already know on beforehand and mostly months on beforehand that we are going to have a follow-up tenant. So what the valuators have taken as an assumption from a 12-month vacancy period, which we never had in Germany, to an 18-month vacancy period, we find it -- and we've tried to argue about it, but they take a view of the market. We find -- we can't say that we see that reflected in our own portfolio. I don't know what it is about. Maybe it's about older buildings or maybe it's about the total market view. But in our own portfolio, Wim, we are very confident and very -- that we have solid demand for everything. So we don't see, neither expect any deterioration of that in the months going forward. On the contrary, we have a lot of new lease negotiations ongoing also for new buildings. Wim Lewi: Maybe if I may, because what we see or what we hear from WDP and Montea is that they can't find anything to buy above 5%. So could there be deals maybe in the near future that could review their case, that if we see that yields come down in deals. Is that something that you expect? Jan Van Geet: Well, we hope so. We certainly hope so. Also the promote calculation which we have done is based on our risk valuation at the year-end. So it's just our current valuation, where okay --when we are going to have the valuation in May that's going to be based on the capital markets valuation, where the valuator really looks at the transactions as if we were to really sell -- and that's probably going to be a little bit different. We don't know north or south. But we think it's going to be different than what is our risk valuation. Until now, every transaction which we have done with our joint venture partners when we had a real discussion about the valuation, we always had a better exit yield or we always achieved a better exit yield than what we had it in our books for. So we're trying, of course -- we want to be a fair partner, but we are trying, of course, to defend our position also. That is more than normal, I think, in business. And I don't... Operator: [Operator Instructions] The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: At the end of last year, you had 780,000 square meters under construction. Deliveries came to just short of 500,000 square meters. Were there some delays in the deliveries? And if so, what has been the reason for these delays? And looking at your pipeline going forward, it's currently sitting at a pre-let ratio of 75%, and you're saying that you're seeing quite some strong demand. So how do you think about the size of the pipeline under construction? And what are your thoughts about more speculative developments over the next 12 months? Jan Van Geet: Yes. Yes, when you report, you always have a cutoff, which is at the 31st of December, and you need to take a look at it. Whereas in development, it's not always really linear. You have sometimes customers which have demands for changes in the building, which entail relatively complicated situations and which makes the delivery going over the reporting period. That's one of the things where we are. So I think you need to look over a period of -- a longer period of time to see really the tendency and not just in the cutoff of 1, 6 months period. That's the thing. We -- I want it to be -- although we have a big incentive to construct more because we now have our costs really back under control as inflation has come down tremendously. And in the construction industry, in every country at the moment, we can achieve attractive pricing. At the same time, we're also trying to manage our portfolio, so not to create too many vacancy or too many speculative buildings. So we look at on a country-by-country basis, but we try to limit really our speculative buildings to an acceptable level, which for us is -- it should be -- we should be pre-let above 70%. And ideally, by 8 months under construction, we should be above 80% -- above -- after 6 months under construction, above 80%, which we currently also are. So that's the parameters in which we make the decision internally, do we do speculative developments, yes or no. And it's also depending on the demand which we see in the locations, because not all countries run at the same pace at the moment. So we are also a bit careful in starting up too much square meters where we don't see the demand for it. And on the contrary, where we see a lot of demand, we start up a little bit more. But as I already said, and I hope I was -- it came across enough, at the moment, we really have a very strong pipeline in demand. We divide up our demand, we categorize it in a first contact, a second where we already have commercial negotiations, a third where we have virtually an LOI agreed, and a fourth where we started the negotiations on the lease agreement. And if I take the 2 last things, we have roughly EUR 50 million of negotiations ongoing, which I don't say we're going to sign all of it, but it's a very healthy indication that there is really demand which wants to contract at some point, because people don't engage with teams and with lawyers and with things if they have no intention to close the lease agreement. So from that point of view, we, at VGP, with our current portfolio and our land bank and the quality of what we offer, we feel comfortable to start a bit more construction over the year. But I can't tell you a number. As I already said, we have roughly 450,000 which we need to start up anyway because it's already pre-let if these LOIs also materialize. And then, of course, we'll do a bit more because it will bring our vacancy levels -- our pre-let levels up. And then we have a bit more room to also start a bit of speculative buildings in those jurisdictions where we feel demand is strong and supply is very low. Operator: The next question comes from Francesca Ferragina from ING. Francesca Ferragina: I have 2 questions. The first one is about guidance. I understand that you never disclose the guidance. But can you just give at least some qualitative type of comments on 2026? Consensus is pretty dispersed and it doesn't help. And then the second question is on data centers. You managed to hire a dedicated person. Can you provide an update about the opportunities you see here? Jan Van Geet: We -- indeed, it's a bit difficult for us to give a guidance because we are not a REIT. Our VGP is a multiline model, where we have the development portfolio, where we have the rental income and we have -- it's different than a REIT. If you would only look at a REIT, it would be a little bit more easy to say what it's going to do. And going forward, we can also maybe make a projection of the rental income, what we expect for the year, because there we -- but also there, because we always transact between our own balance sheet and the JVs, it's not so easy to give you a reasonable view because we -- there is always movements from rental income, which is either on our own balance sheet and then it goes into the JVs and then it only accounts for 50%. So we'd rather not say something which we then cannot fulfill. We always give guidance on things where we think that they are achievable and where we feel ourselves also comfortable that we can achieve. And so far, I think, we've never promised something which we haven't delivered. That's something which we are proud of. On the data center things, so we are not actively buying land plots with the aim of developing really a data center. I see too many accidents in the market. Just last week, there was a big announcement in the press in Germany where a EUR 2.7 billion investment in [indiscernible] was stopped by the local authorities. People had paid a tremendous land price for it and done all the efforts and then it was stopped. So it is really a very risky business because we have a huge congestion in electric energy. And starting to build a land plot and then going for it, it is a very difficult business going forward. But VGP has a very big land bank, in the very big land bank, has some brownfields. Those brownfields come with a very big historical electric connection, which is there and available. And that's already a very big part of the transaction. And by coincidence, we are also 10 minutes away from Frankfurt Airport in Russelsheim. We've signed an agreement with Stellantis. That's the only one who can develop a data center on that land plot. They also still have a big reserve. But we have an exclusivity on data centers. And we have an agreement with the city on where the data center will come. And that it is going to be incorporated. It's currently part of the new B plan. And Sarah is working on that one and another one in Milan, where we also have a similar constitution, and where we think that -- and where we also have very intensive negotiations ongoing with most of the hyperscalers and some of the colocation investors, and where she is trying to manage that. And we are trying to take a look at where in the value scale of from just selling the land to core and shell to power shell to completely finished, build-to-suit, and then to completely finished and operational, what we are going to offer and whether we should do that alone or whether we should do that with a partner who has already all the accreditee to -- because he already has done it, something. And as you can hear from me, we are in a very intense process of aligning ourselves in order to be able to bring the best result. But this is a work which is not just -- it's not like developing a logistic warehouse. There are so many parts running around that it really -- it doesn't go so quick. So also the energy connection, it's not from today and tomorrow. Yes, in our case, it is. And then there is also the connectivity, the grid, et cetera, which you need to do for. And then we still have also to demolish in Russelsheim because now there is building standing on it. So it is not for tomorrow. But we're well on track. And that's everything which I can describe about it and disclose about it. Paul? Unknown Analyst: A couple of questions from me. Just wanted to check. Coming back on the pre-letting point, because I think that's been declining since 2022. I think you had a high of 89%. Now you're down at 69%. Just wonder what level are you comfortable going to in terms of pre-letting level? And what gives you the comfort in starting more and more speculative schemes as you have been over the last few years? And second question is, linked to that, is just looking at the yield on cost on completed developments. Did you have to give any rent concessions to lease these up? I think in the past you talked to tenant incentives or rent-free periods. Just to get a sense on that. And if you could quantify those, it would be great. And then I do have a very quick third question, but let's see if you let me ask that one. Jan Van Geet: Paul, on the first one, I think I already answered quite a lot of it. So yes, we've done a bit more speculative construction last year because our construction price came so much down. And we are currently -- after 6 months period, if you look at it, we are 80% pre-let. And we also have a lot of things in the pipeline where we feel very comfortable that we're going to sign it, which will take our pre-lets even more up. So we feel comfortable with today's level of pre-lets of speculative buildings under construction because we also see good activity and good demand on that pipeline going forward. So -- and we've built it for a very good price. On the activity for the -- from the tenants, we are always -- because we did not buy land at excessive prices and because -- at the time when the land was so expensive, I told you all, I don't find this thing sustainable. In 2022, we really stopped. We didn't buy anything, if you look at it going backwards. We only bought Russelsheim, which we bought for a very good price. But the rest, we couldn't make working. So today, we are in a very good position because we can be aggressive on the rental price but still make a very beautiful margin. Our margin is actually going up instead of going down because we have so good control of our construction cost. So we don't see anywhere where we need to give excessive rental incentives more than what we have been doing over the last 5 years. It's still the same. So we are -- it's a healthy market, I would say. Also the vacancy level which we see today in the market, 6%, it's not like we haven't had before, a lot more even than that. And I find it still very healthy that people finally have something they can look at, take a look at. And it's an advantage for us as a developer offering new things, where we can be aggressive on the price, that we can grow in a healthy way going forward. And yes, we can be maybe more aggressive than somebody else on some of our land plots because also we act as a general contractor in every country nowadays. And I think we have our -- I wanted to use the word shit, but it's our things very well under control. So it's really going well. Did you have another question? Unknown Executive: Rent incentive wise? Jan Van Geet: That's what I said, just answered, [ Tom ]. So no special rent incentives, yes. And you had a third question, Paul. No. Operator: The next question comes from Steven Boumans from ABN AMRO, ODDO BHF. Steven Boumans: So I have some questions on what to expect for signing new leases. So on the LOIs that you mentioned, could you please remind me how much in annualized rental income you expect to sign in Q1? And second, to respond to John's earlier question, how does the EUR 50 million in lease discussions you talked about compare to 6 months ago? Jan Van Geet: As we said, we don't give guidance. So you've asked me to give a guidance on the first quarter. Well, we have really, let's say, EUR 25 million of lease agreements in final negotiations at the moment ongoing. Whether it will all be signed in the first quarter? I do think so that there is quite some nice things which are in final negotiations. And that's about the guidance which I can give. And if I look at going backwards, I think that the market today, it's -- last year, we signed a lot of lease agreements, really a tremendous amount of lease agreements, but they were all relatively small to the years before when we always had these 1 or 2 big ones standing out, which were really very big lease agreements. Last year, it was a lot more spread over many, many little -- or not little, but smaller lease agreements. On average, before, we signed 22,000 square meters. I think last year, on average, it was below 20,000 square meters. So that was a bit different in demand than it is maybe today, because today, again, we are looking at some very big leases which we are negotiating on. Yes, the one in the Netherlands is huge. There are a couple of very huge ones in Germany ongoing. There is a very big one in Spain ongoing at the moment in final negotiations, I would say. So that's about what we can say about it. Operator: The next question comes from Thomas Rothaeusler from Deutsche Bank. Thomas Rothaeusler: Just one question on data centers. I understand you plan to provide concrete plans by the year-end, yes. But maybe you could provide a rough idea about the capacity for Milan and Hagen already. And any indications if it will be powered cell or fully fitted? I mean, considering the high-profile recruitment you have announced, I assume it won't be gas powered land. Jan Van Geet: You're asking me difficult questions to answer, Thomas. Yes, we hired a high-profile person, and she's a very lovely lady if you meet her with a lot of ambitions. And that's good because that's why we hired her for. We can do quite big -- I don't want to say anything about numbers because I'm going to say something and then it's going to be different, because we actually don't really know yet. But we have -- at the moment, we have a 50-megawatt connection available in Russelsheim from the grid. There is a power plant on our land plot, which is another 100-megawatt available. The question is, can we use it, yes or no, because it's a gas-powered power plant, and we are looking into it. We can expand that power plant quite significantly with gas turbines, and the gas can come from several ways. And that's an exercise which is ongoing. So it's quite complex to give an answer to your question, as you understand yourself because we are still looking and puzzling the pieces together. And we need to take a look also at what is acceptable for a hyperscaler, which risk he wants to go because he needs to have absolute reliability and the Tier 2 at least supply of energy, which we don't have our things all aligned yet because it's really complex. And the same is ongoing for our land plot in Milan, where, yes, we do have an agreement on the power supply. We know, plus/minus, when the power supply also will be available. But it's -- we are dependent on a third party. And yes, it's a very big capacity which we have been awarded. And the land plot is perfectly suited for it because it lies really on the super location for it. But as I said, there is a bit of work to be done on it. And we are going to disclose in the right time when it's ready to disclose where we are and what we do. And I don't want to overpromise. I just wanted to give you an update on where we stand today. And that's in all honesty what I can tell you today. Frederic. Operator: The next question comes from Frederic Renard from Kepler. Frederic Renard: A lot of questions already been answered, too, on it. Maybe to have a view on Allianz and the intention from here? And anything new with regard to potentially new JV? And then maybe another question. If I look at the sequential increase in H2 from new construction activity, and you mentioned already a good LOI of demand, so should we expect H1 2026 to actually be sequentially even more bigger than H2 '25? Jan Van Geet: I will answer first on your last question, whether it's going to be more in H2... Piet Van Geet: Which one? Jan Van Geet: In H1 versus H2 last year is -- I don't have immediately in my mind. But we are going to start up roughly -- we have to start up quite some buildings in the first half year of 2026 because they are pre-let and we need to deliver within a certain time frame. So we need to start up. But I would need to calculate how much that is that is going to be for sure in the first half of 2026. On general, I expect somewhere between the same amount as last year and a bit more to be started up during the year. I think we feel confident that we are going to start up a bit more than last year. So that's the answer on your last question. And then on the first question regarding the JVs, I think we disclosed -- because it's a regulated business, so we've disclosed on the new JVs where we could. We can't say anything more than what it is. In the current JVs running, actually, everything is running well. There are no divestment plans immediately there. And all partners seem to be very happy with the performance of the things. As Piet said also, the EPRA results of the JVs are outstanding. The relationship -- the day-to-day relationship with Allianz but also with Deka and all the others is going very well. And the only real discussion which is ongoing at the moment is about our promote, where we have now tentatively agreed on the metrics of how we are going to do it. Because originally, it was, of course, foreseen that there would be after 10 years a liquidation of the JV. But that is not going to happen. So now it's an exercise on which we need to agree. And that will crystallize by -- in the next few weeks. But I'm sure we will find an agreement with Allianz about what it is about. And for the rest, operational-wise, everything is running well. We are going to -- we have also a refinancing upcoming in the Rheingold joint venture. That's all agreed. We have the term sheet signed. So there is no -- everything is aligned. So there is no clause on the horizon as far as I can see. Everything is good. I think I answered on your questions. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Jan Van Geet: Yes. I want to thank you all first in the first place for being here, both my colleagues and analysts and investors. Thank you very much for listening to what we had to say. I'm looking forward to speaking to you again on our Annual Shareholder Meeting maybe or then in August with the update of our half year results and then we have this year or maybe before on some conference. I hope that I can see all of you soon. As you could have heard from our side, it was a very busy year because we've done so many things and going forward, and it's grown all the time. But all-in-all, I have a good confidence in our sector that it has still a lot of growth capacity and growth possibilities and that VGP can play a significant role in that. And I hope all the others too, there is room enough on the market. Thank you for listening, and goodbye. Unknown Executive: Goodbye. Thank you. Piet Geet: Thank you. Operator: Thanks for participating. You may now disconnect.
Operator: Hello, and welcome to the Claros Mortgage Trust Fourth Quarter 2025 Earnings Conference Call. My name is Becky, and I will be your conference facilitator today. [Operator Instructions] I would now like to hand the call over to Anh Huynh, Vice President of Investor Relations for Claros Mortgage Trust. Please proceed. Anh Huynh: Thank you. I'm joined by Richard Mack, Chief Executive Officer and Chairman of Claros Mortgage Trust; and Mike McGillis, President, Chief Financial Officer and Director of Claros Mortgage Trust. We also have Priyanka Garg, Executive Vice President, who leads Credit Strategies for Mack's Real Estate Group. Prior to this call, we distributed CMTG's earnings release and supplement. We encourage you to reference these documents in conjunction with the information presented on today's call. If you have any questions, please contact me. I'd like to remind everyone that today's call may include 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 disclosed in our other filings with the SEC. Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will also be referring to certain non-GAAP financial measures on today's call, such as distributable earnings, which we believe may be important to investors to assess our operating performance. For reconciliations of non-GAAP measures to the nearest GAAP equivalent, please refer to the earnings supplement. I would now like to turn the call over to Richard. Richard Mack: Thank you, Anh, and thank you all for joining us this morning for CMTG's Fourth quarter earnings call. CMTG made a meaningful amount of progress last year, executing on several critical path items. In 2025, we accomplished the priorities we established at the start of the year, including resolving watchlist loans, enhancing liquidity and further deleveraging the portfolio. One year ago, we established a $2 billion total resolution target for 2025, and I'm pleased to report that we meaningfully exceeded this target, closing the year with $2.5 billion of total resolutions. This included the resolution of 11 watchlist loans, representing an aggregate UPB of $1.3 billion. This activity reflects our commitment to repositioning the portfolio by transitioning out of watchlist loans through thoughtful and decisive action. We also generated significant liquidity over the course of the year, which we used to meaningfully delever the portfolio and to reduce corporate debt. This momentum has carried into the new year with $389 million of full loan repayments happening, including a New York City land loan that was a watchlist loan that had been on nonaccrual since 2021. More importantly, subsequent to year-end, we retired the Term Loan B that was scheduled to mature in August of 2026. The term loan had a balance of $718 (sic) [ $712 ] million in the first quarter of 2025 and was replaced with a new $500 million senior secured loan from HPS. This facility has 4 years of duration. Mike will provide additional color on this financing later in the call. We view this financing agreement with HPS as a positive for CMTG as it extends the maturity of our corporate debt to 2030 and provides the necessary flexibility to continue executing our business plan of resolving watchlist loans, delevering our balance sheet and reducing our capital costs over time. Looking ahead to the coming year, we remain optimistic but mindful of the macroeconomic backdrop and the uncertainty that has been a defining theme across the broader financial markets. With regard to real estate, we do not believe there will be a single catalyst that will drive an overnight recovery. Rather, we anticipate a period of gradual and steady improvement that will support transaction volume and investor confidence over time, especially if the bond market rally holds and rate cuts continue as expected. As it relates to property market fundamentals, we continue to observe encouraging indicators, including a reduction in new supply, tightening credit spreads and improving financing costs for new originations. We also see increased demand for industrial space and significant investments in areas such as artificial intelligence and domestic manufacturing. We believe that investments in domestic manufacturing will support job growth and incremental demand for real estate over time. While AI investments are likely to support future productivity gains, the impact on commercial real estate, excluding data centers, is still quite uncertain. Overall, we see a constructive backdrop for commercial real estate and CMTG in the years ahead. But in 2026, our focus will remain on asset management and decisive execution as we continue to resolve watchlist loans and work through our REO assets. Our goal is to position the company to begin to evaluate new lending opportunities towards the end of 2026 and lay the groundwork for portfolio growth in subsequent years. Before turning the call over to Mike, I want to acknowledge that the last 24 months have been the most challenging business period of my career and for many others in the real estate industry. And so I want to thank Mike, Priyanka and our entire team for their dedication and hard work during this difficult time and their commitment to overcoming the remaining challenges that are still ahead. I look forward to providing an update on our continuing progress in the coming quarters. And now I would like to turn the call over to Mike. John McGillis: Thank you, Richard. For the fourth quarter of 2025, CMTG reported a GAAP net loss of $1.56 per share and a distributable loss of $0.71 per share. Distributable earnings prior to realized gains and losses were $0.02 per share. CMTG's held-for-investment loan portfolio continued to decline in the fourth quarter, decreasing to $3.7 billion at December 31 compared to $4.3 billion at September 30 and $6.1 billion at year-end 2024. Over the course of 2025, we reduced our exposure to select asset types that have generally been experienced secular headwinds. As of the end of 2025, the portfolio no longer includes stand-alone life science, office exposure decreased from $859 million to $589 million and land exposure decreased from $489 million to $187 million. It's worth noting, however, that the decline in portfolio UPB over the past year was an inherent result of our strategy to turn over the portfolio and prepare for an eventual return to originations. Specific to the fourth quarter, the quarter-over-quarter decrease in UPB was primarily the result of 4-loan resolutions, consisting of 2 regular way loan repayments, one on a multifamily asset and the other on a life science asset, both in Pennsylvania. The other 2 were resolved by way of a discounted payoff and a foreclosure. In addition, as previously reported, we executed a sale of a $30 million Boston land loan. This transaction did not impact fourth quarter portfolio UPB because it was previously classified as held for sale at the end of the third quarter. The discounted payoff related to $150 million previously 4-rated office loan in Connecticut. Given the valuation of the collateral, we agreed to repayment at approximately 70% of par, which we view as a good outcome given current market values and a challenging submarket and tenancy. The borrower was motivated to arrive at a resolution due to additional credit support that had been provided. This transaction enabled us to resolve a watchlist loan, reduce CMTG's office exposure and generate approximately $35 million in net liquidity for CMTG, which was then used to reduce outstanding debt. The discounted payoff resulted in a $46 million principal charge-off. However, it's worth noting that the impact to fourth quarter book value was marginal as the potential loss had been previously contemplated within our general CECL reserve. Additionally, we resolved an $88 million New York City watchlist and nonaccrual land loan through a foreclosure process. The underlying collateral is a well-located undeveloped land parcel adjacent to Hudson Yards that allows for a mixed-use development. After reviewing the facts and circumstances of this loan's history, we concluded that foreclosing and ultimately marketing the land for sale was the best path to resolving the loan. Upon foreclosure, we assigned a carrying value of $94 million based on a third-party appraisal, approximately $6 million greater than our UPB, which further supported our decision to foreclose as a means to optimize recovery. We do not anticipate being long-term holders of this land and expect to seek an exit sometime in 2026. As Richard mentioned, last year, we exceeded our $2 billion loan UPB resolution target, achieving $2.5 billion of UPB and resolutions for the year. This progress has continued into the new year with CMTG reporting an additional $389 million in UPB of resolutions across 4 loans, which include 2 regular way repayments. The first repayment was on a $67 million New York City land loan that was previously a 4-rated loan that had been on nonaccrual since 2021. The other was $174 million loan collateralized by a newly built multifamily property in Salt Lake City, which generated net cash proceeds of approximately $52 million. This asset delivered last fall, which allowed the borrower to secure refinancing to lower its cost of capital. In addition, in line with our previously mentioned plans, we foreclosed on a multifamily property in Dallas with $77 million of UPB that was previously 5 rated. Previously, the loan had a carrying value of $49 million and was written down to $37 million upon foreclosure. And last, we resolved a $71 million loan collateralized by a newly completed but vacant office property located in Seattle. Given the collateral value relative to our equity position, net of nonrecourse note-on-note financing, we determined the most prudent path was to transfer our rights and interests in our loan and the underlying collateral to the financing counterparty. Turning to portfolio credit. During the fourth quarter, the portfolio experienced a mix of ratings, upgrades and downgrades. We downgraded a $220 million loan collateralized by a luxury hotel property located in Northern California to a 4 risk rating. We continue to have conviction in the asset given the exceptional asset quality and highly desirable location and meaningful year-over-year improvement in operating performance. That said, the loan matured in August of 2025, and we have not reached terms in a modification with the borrower, which resulted in the downgrade to the loan's risk rating. We have also commenced foreclosure proceedings to provide additional optionality of outcomes. We also downgraded 3 loans to a 5 risk rating. In each case, the downgrades primarily reflect our decision to take a more aggressive approach in turning over the portfolio. I'd like to provide some color on these loans. The first loan is a $170 million loan collateralized by a multifamily property located in Denver. We're actively pursuing a near-term resolution for this loan and are currently in the process of executing our plans related to the asset. While we are limited in what we can share at this time, we have adjusted the carrying value of the loan as of December 31, 2025, to appropriately reflect our expectations for the anticipated resolution. We look forward to providing an update on this loan in the near future. The second loan is a $225 million loan collateralized by an office property located in Atlanta, Georgia, which matures in March. This asset, similar to other office assets in the area, continues to experience the challenges that have generally weighed on the office sector. We're currently evaluating our options for this loan. The last loan was the Seattle office loan that I just spoke to that we resolved subsequent to the quarter. During the fourth quarter, we recorded a provision for current expected credit losses of $212 million, which primarily consisted of $283 million provision to our specific CECL reserve prior to principal charge-offs and $62 million decrease in our general CECL reserve. The $283 million specific CECL reserve provision was primarily attributable to the 3 loans that were downgraded to a 5 risk rating during the quarter, changes to collateral values of previously 5-rated loans and the previously mentioned $46 million principal charge-off relating to the Connecticut office loan. It's important to note that of the $283 million specific CECL provision, $75 million was related to loans that were resolved during the fourth quarter or in 2026 year-to-date. The decrease in general CECL reserve was primarily attributable to a reduction in the UPB of loans subject to general CECL reserves. As a result, our total CECL reserve on loans receivable held for investment increased from $308 million or 6.8% of UPB at September 30 to $443 million or 10.9% of UPB at year-end. Our general CECL reserve decreased from $140 million or 3.9% of loans subject to our general CECL reserve to $78 million or 2.9% of UPB of loans subject to our general CECL reserve. Turning to REO assets. We made significant progress with our mixed-use New York City REO asset during the quarter. As a reminder, we completed the commercial condominiumization of the building in May. And as of year-end, we've sold all of the office floors as well as the signage component, generating total gross proceeds of $67 million, which was generally in line with our carrying value. We now intend to conduct a sale process for the fully leased retail component of the property. We believe this asset has served as an example of how we can leverage our sponsors' real estate expertise to creatively execute asset-level strategies and optimize outcomes. The New York REO hotel portfolio continues to perform well with operating results, exceeding expectations and annual NOI growth of approximately 14%. This asset has been accretive to earnings and given the refinancing, we executed last year. We will continue monitoring the market for an opportune time to pursue an asset sale. Over the course of 2025, we strengthened the balance sheet by focusing on generating liquidity and reducing leverage by $1.7 billion. We continued this focus into the new year by reducing leverage by an additional $300 million, of which $90 million was applied to asset level deleveraging payments and towards the repayment of the Term Loan B. As Richard mentioned, at the beginning of 2025, the Term Loan B had a balance of $718 million and was scheduled to mature in August of 2026. In January 2026, we subsequently retired the Term Loan B and replaced it with a $500 million senior secured term loan from HPS, which matures in January 2030. This new senior secured term loan is priced at SOFR plus 675 basis points. And in connection with this financing, CMTG issued 10-year detachable warrants to purchase approximately 7.5 million shares of its common stock at an exercise price of $4 per share, which represents a 46% premium to the closing price for CMTG's common stock on January 30, 2026. In conjunction with the closing of the new term loan, we aligned and relaxed financial covenants across all of our financing facilities, which provides additional flexibility to execute our business plan going forward. Over the course of 2025, we decreased our net debt-to-equity ratio from 2.4x at December 31, 2024, to 1.9x at December 31, 2025. Following the closing of the senior secured term loan, we now have $153 million in liquidity, representing a $51 million increase compared to the prior year-end despite the significant deleveraging that occurred in 2025. We accomplished a great deal in 2025, and we recognize there is more work ahead. By resolving watchlist loans, generating liquidity, reducing leverage and subsequently addressing the Term Loan B maturity, we have strengthened the balance sheet and positioned the company well for the coming year. We look forward to building on this progress as we continue to execute across the portfolio. I would now like to open the call up to Q&A. Operator? Operator: [Operator Instructions] Our first question comes from Rick Shane from JPMorgan. Richard Shane: Look, I realize there's a lot of progress, both in terms of repayments and loan sales and foreclosures. Obviously, the significant reserves allow you guys or put you in a position to be able to negotiate resolutions for the loans. But obviously, the stock is trading at an enormous discount to book. It's a very, very long path to earning -- generating a return that's anywhere near your hurdle rate. I think you guys know where I'm headed, which is we've seen at least one transaction in the space where a REIT who was much further along the path in terms of recovery decided to sell their assets near NAV. Are there opportunities here outside of resolving this portfolio to extract shareholder value or to create -- not extract, but to create shareholder value? Richard Mack: Rick, thank you for that question. We are clearly always open to everything. But our goal right now has to be cleaning the book up so that it is a much more transparent and easier to understand business. And I think we have to wait until we're able to deliver that before we can really understand if the market can evaluate our business properly. And so I think that's where we are headed at the moment. Richard Shane: Okay. And then to follow that up, [ NAI ] has fall -- has been cut in half throughout the -- over the course of the year. I am curious as we head into Q1 '26 and you think about the nonaccruals and the movement in the portfolio, NII just pure net interest income was about $12.5 million in the fourth quarter. Is it likely that it will be again lower in the first and second quarter of the year, given how the portfolio is marked at this point? John McGillis: Yes, Rick, I think that's -- this is Mike. I think that's a fair assumption because what's -- as we resolve loans and delever the book and get regular way payoffs, that top line interest income level is going to continue to compress. Deleveraging will offset that to a degree on the interest expense side. And then further resolutions of the nonaccrual loans or sub-earning assets should give us some capital to delever, which should help further reduce interest expense. But I think it's -- I think that's a reasonable assessment. But we are in a process of transitioning the portfolio. So that net interest income line is going to be choppy until we sort of turn the corner on the book and can get back to originations. Richard Shane: Got it. And then just one last question. I apologize for asking -- going first and then asking so many questions. But obviously, you guys are -- you've indicated that the reserve levels position you to aggressively start to resolve or continue to resolve loans during 2026. When we look at the reserve levels and it's over $400 million, and I apologize, I won't look up the specific number. Realistically, what percentage of that reserve do you think could be translated into losses over the next 12 months? Is it 25%, 50%, 75% just -- so that we can start to get some sense without knowing specifically what you guys are going to resolve, how quickly you think you're going to start resolving things? Priyanka Garg: Rick, it's Priyanka. I'll take that one. I'll start. Look, we're reserving based on what we think is appropriate at this time. We've resolved a tremendous number of loans in 2025. Half of them are on our watchlist. And year-to-date, we've already resolved 3 additional loans on our watchlist. So we think we have a good sense of the reserves that we need to take in order to accelerate resolutions and turn over the book. And so we think we're appropriately reserved for that. Now, there can be new information and we might have changes in this really dynamic environment depending on where negotiations with borrowers or financing counterparties or anything may go, but we think we're appropriately reserved today, and we have a lot of data points in a lot of different ways in terms of loan sales, which have really tapered off throughout 2025, more doing DPOs and other transactions, foreclosures, we think we have a really good sense of where the reserve level should be. Richard Shane: Okay. But I appreciate that. The question is more about the timing of those resolutions as opposed to the level of the reserve. Priyanka Garg: Yes, the timing -- look, I think -- I was just going to say, I think we -- okay. I'm going to start. So I think that the pace -- I mean, we're really, really focused on accelerating the pace of dispositions. I mean, both within the loan book as well as in the REO book. We realize the value exactly what Richard said earlier, we need to turn over this portfolio, and we need to make very clear where -- to demonstrate our book value. So I can't -- I don't want to give you specific time frames, but I would hope that 2025 and our progress in 2025 suggests that we're moving very quickly, and we hope we're continuing to accelerate that. And furthermore, the stability of our balance sheet after the transaction that we just closed in January really helps us do that with even more strength and speed. Operator: Our next question comes from John Nickodemus from BTIG. John Nickodemus: With the Term Loan B refinancing completed, several more resolutions completed as well since we last spoke, how are you thinking about liquidity levels here in '26? I know you're looking to improve them and it is up year-over-year, but we did see it come down significantly since November, which is to be expected. Just trying to get a better handle on how we should think about the trajectory there for this year. John McGillis: Sure. Thanks for the question. Well, I think a lot of the liquidity that was generated over the course of the year was used to deleverage the balance sheet, which we expect to continue to do as we continue resolving loans and REO assets over the course of 2026. We -- given the deleveraging that we've done, we now have a pretty significant level of liquidity cushion over a minimum liquidity requirement. And faced with that and a very de minimis amount of future funding on our -- that we expect to occur on our existing loan portfolio, we feel that our liquidity is in a very good position right now. And to the extent we generate incremental liquidity above those levels, we'll continue to look to deleverage the balance sheet. But success for this year, by the end of the year, we're evaluating a variety of capital allocation options for available liquidity, whether that's originating new loans, further deleveraging the balance sheet or other kinds of capital allocation alternatives. John Nickodemus: Great. That's really helpful. And then for my second question, this kind of goes into what Priyanka was mentioning in response to Rick's last question. But we've heard a lot about improvements for the greater commercial real estate sort of transaction activity, liquidity and also I have seen some of your peers talk about being more aggressive about resolving challenged loans or REO assets during this round of earnings. Given that backdrop, has that changed your expectations for sort of the pace or timing of sales out of both the REO portfolio as well as resolutions from the watchlist? Richard Mack: So John, thanks for that. This is Richard. I think we're in a much more constructive environment such that things that we had held off resolving, we're going to have much better performance out of. However, I want to say that the market is not fully back. Transaction volume is still lower than we had anticipated we'd be by this time. So I think we are trying to both react to the market and make the best execution that we can while being mindful that we need to quickly clean up our book. So it's a balance. I think on the whole, we are more focused on execution and delivering a clean book than we are waiting for the market to recover, but we're getting a little bit of the benefit of having waited on some of the assets that we're going to be able to resolve this year. And just -- I think I'm sure Priyanka would like to add something to this. Priyanka Garg: Yes. Thanks, Richard. The only thing I would add, I agree with everything Richard said. I would add, though, that the -- because of the healthier capital markets, both CMBS, banks coming back into the mix, we're just -- we're seeing more regular way repayments on larger loans. So I think the theme we're going to see in this coming year are fewer extensions and modifications and more repayments, which -- on performing loans, which will then have an impact on NII as we talked about during Rick's question, but it will still help turn over the book, getting that excess cash and then having the decision on how to allocate that capital. Operator: [Operator Instructions] Our next question comes from Chris Muller from Citizens Capital Markets. Christopher Muller: I guess looking at your REO portfolio, most of the properties have some financing against them. And I see your comment that the hotel portfolio is the most profitable than the aggregate contribution to DE. But can you guys talk about some of the individual NOIs within that REO portfolio? Priyanka Garg: Yes. Chris, I'll take that one. It's Priyanka. The NOI, so in the -- we have the mixed-use asset, which we're now -- the only thing we're retaining is the fully leased retail. And so that's 100% leased, tenants paying rent. So there's NOI coming off of that. That happens to be one that we're holding unlevered. In the multifamily assets that we have, REO, it is a mixed bag. There are some that are generating real NOI, others that are a little bit more challenged from an NOI standpoint, but that is all part of the plan to foreclose. The ones that are now generating NOI weren't generating NOI when we foreclosed. So the point is to come in there and make sure that we're spending capital in smart ways accretively to market the asset appropriately to potential renters and also be a present owner who's holding the property managers accountable. So I think that to the extent that assets don't have positive NOI or meaningful NOI, it's all part of the plan and certainly was expected. And the last thing I would say is that capital that we're putting in there, you mentioned that these are financed, the financing facilities have structure in them where there is capital being held back for us to spend at the properties, and that's not cash coming off the balance sheet. Christopher Muller: Got it. And that's a good segue into my follow-up here. Do you guys expect a lot -- or could you give a ballpark dollar amount of what you're expecting on CapEx for these REO properties? Priyanka Garg: It's not going to be a meaningful amount. I mean, it's -- I hesitate to give you a specific number because a lot of that is going to depend on our hold periods. So again, we are -- we're accelerating dispositions. You can see that in our earnings supplement on Page 8, we sort of call out where we're accelerating dispositions. And so I think to the extent these are shorter-term holds, we're going to spend less capital, but we want to be prepared to spend more if the hold is longer. Christopher Muller: Got it. That makes a lot of sense. And just one last quick one, if I could. Does the new term loan allow financing of watchlist loans? John McGillis: It's -- we have a -- we already have a facility that allows us to finance those loans. The new term loan is more of a corporate debt facility. So those aren't -- even though it's senior secured, it's more of a corporate mezzanine loan kind of structure as opposed to an asset-specific financing structure, which is what we use at the direct asset level. Christopher Muller: Got it. Makes lot of sense. Operator: We currently have no further questions. So I'll hand back over to Richard for closing remarks. Richard Mack: Well, I want to thank everyone for joining and for the questions and maybe summarize some of the things that we've mentioned today. 2025 and beginning of 2026 have been about resolving watchlist loans, enhancing liquidity, deleveraging the book by $2 billion. In 2025, there was $2.5 billion of resolutions. 2026, almost $400 million so far. We got the TLB retired. We now have a relationship with HPS, who's part of BlackRock, the largest asset manager in the world. All this amidst a constructive and improving real estate credit market and real estate capital markets in general. And so while we're not here to declare victory, we are seeing life at the end of the tunnel, and we are getting closer to a clean book that we expect will allow the [ Street ] to more appropriately value our stock. And that's really our goal every day when we come to the office. And so it's been hard. It's been a long road, but we are really excited to be feeling like we're -- we can see the light at the end of the tunnel and that the capital markets are cooperating with us. So we thank you for joining us and for monitoring our progress and for the questions, and we look forward to speaking again at the next quarterly call. Thank you all. Operator: This concludes today's call. Thank you for joining us. You may now disconnect.
Operator: Good day, and welcome to the Seven Hills Realty Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Murphy, Manager of Investor Relations. Please go ahead. Matt Murphy: Good morning. Joining me on today's call are Tom Lorenzini, President and Chief Investment Officer; Matt Brown, Chief Financial Officer and Treasurer; and Jared Lewis, Vice President. Today's call includes a presentation by management, followed by a question-and-answer session with analysts. Please note that the recording, retransmission and transcription of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Seven Hill's beliefs and expectations as of today, February 19, 2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be accessed from the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP financial numbers during this call, including distributable earnings and distributable earnings per share. A reconciliation of GAAP to non-GAAP financial measures can be found in our earnings release presentation, which can be found on our website at sevnreit.com. With that, I will now turn the call over to Tom. Thomas Lorenzini: Thank you, Matt, and good morning, everyone. On our call today, I will start by providing an update on our fourth quarter performance and an overview of our loan portfolio before turning it over to Jared to discuss current market conditions in our pipeline. Then Matt will discuss our financial results and guidance before we open the call for Q&A. Yesterday, we reported strong fourth quarter results driven by a fully performing loan portfolio and ongoing capital deployment. Distributable earnings for the fourth quarter came in at $4.6 million or $0.28 per share. As previously announced, we successfully completed our rights offering in December, raising $61.5 million in net proceeds. This transaction meaningfully increased our investment capacity by over $200 million, allowing us to accretively deploy capital into compelling opportunities while maintaining a conservative balance sheet. In addition, as part of the rights offering, our manager increased their ownership percentage to just over 20%, further aligning their interest with Seven Hills shareholders. Our increased capacity allowed us to accelerate our activity during the fourth quarter, investing in 3 new loans with total commitments of $101.3 million. These included a $37.3 million loan secured by a student housing property in College Park, Maryland, the acquisition of a $37 million loan secured by a hotel in Boston and the acquisition of a $27 million loan secured by an industrial property in Wayne, Pennsylvania. Following these transactions, we entered the first quarter of 2026 with significant available capacity as a result of the rights offering, positioning us to continue executing on our strategy and selectively deploying capital into attractive opportunities. So far in the first quarter, we have closed one additional loan for $30.5 million on a medical office property in Atlanta, have 2 loans scheduled to close within the next week or so for another $37 million combined and 2 additional loans in diligence for approximately $39 million scheduled to close at the end of Q1 or shortly thereafter. Collectively, these investments reflect the breadth of opportunities in our pipeline with new originations spanning multiple property types and geographies. We also received the full repayment of a $15.3 million loan during the fourth quarter secured by a retail property in Sandy Springs, Georgia, which we were able to redeploy into new originations, consistent with our underwriting and return objectives. Turning to our loan portfolio. As of December 31, 2025, we had total commitments of $724.5 million across 24 floating rate first mortgage loans, including $36.9 million of unfunded commitments. Year-over-year, we were able to increase our portfolio by $83 million or approximately 13%. Our weighted average all-in yield was 7.92%. Our weighted average risk rating improved to 2.8, and our weighted average loan-to-value at origination was 66%. Importantly, all loans were current on debt service and we had no past due or nonaccrual loans at year-end. In addition, all but one of our loans are covered by SOFR floors, which provide support to earnings in a declining rate environment and helped to partially offset the impact of lower base interest rates. Later, Matt will provide additional details on how active SOFR floors are currently providing earnings protection across our portfolio. We expect limited repayments beyond perhaps 1 or 2 loans over the next several months, followed by almost $300 million of maturing loans beginning in the second half of 2026. Many of these loans, particularly those secured by office properties with conservative leverage, will allow for increased investment capacity and further portfolio growth as they roll off. In summary, we believe Seven Hills is well positioned to capitalize on attractive middle market lending opportunities. With enhanced liquidity following the rights offering and improving visibility into near-term repayments and originations, we remain focused on disciplined execution and capital deployment as transaction activity continues to improve. We look forward to providing further updates on our portfolio growth throughout the year. With that, I'll turn the call over to Jared to discuss current market conditions and the opportunity set in our pipeline. Jared Lewis: Thanks, Tom. During the fourth quarter, market conditions continued to improve, supported by abundant debt liquidity and greater visibility around interest rates. As expected, we saw 2 additional 25 basis point rate cuts during the quarter, bringing the target Fed funds rate down to a range of 350 to 375 basis points, which helped to drive an increase in financing activity and investment volume during the quarter. Although refinancing activity continues to be a key driver of new loan originations, we saw a meaningful increase in sales volume across all property types, making it the most active period for the industry since the third quarter of 2019. While multifamily and industrial continue to account for the majority of the investment and financing activity, we also saw growth in retail and hospitality. Most notably, office transaction volume increased 25% year-over-year, signaling that buyers and sellers are increasingly finding common ground on pricing and that debt capital is becoming more available for the asset class. Despite increased acquisition activity, lender demand for our loan collateral continues to exceed supply. Many debt investors continue to view commercial real estate debt at an attractive relative value compared to corporate bonds and certain areas of private credit that have been under increased scrutiny as of late. The competition for quality lending opportunities continues to put downward pressure on credit spreads, particularly in the industrial and multifamily sectors, where certain lenders continue to aggregate loan collateral to sell into future CRE CLO securitizations. We believe that market conditions exist for transaction activity to continue to increase in 2026 as acquisition and refinancing volumes recover and pricing stabilizes across markets. Higher overall transaction volumes across all property sectors should lead to substantial increase in the number of viable lending opportunities available to lenders. As such, we expect to remain disciplined while evaluating a broader range of transactions across property types and geographies. In many cases, we are identifying attractive risk-adjusted opportunities in sectors beyond multifamily and industrial, including medical office, necessity-based retail, self-storage and selectively within the hospitality sector. Overall, demand for short-term, floating-rate bridge loans remains strong as improving fundamentals and expectations for a more accommodative rate environment in the latter half of the year drive borrowers to seek flexibility while they execute their business plans and maximize asset values. Borrower and broker engagement with Seven Hills remains strong, and we are currently evaluating over $1 billion of loan opportunities as we move through the first quarter of 2026. As always, we remain focused on deploying capital into transactions that align with our underwriting standards and leverage our platform's expertise. And with that, I'll turn the call over to Matt to discuss our financial results. Matthew Brown: Thank you, Jared, and good morning, everyone. Yesterday, we reported fourth quarter distributable earnings of $4.6 million or $0.28 per share, which included $0.03 of dilution related to the shares issued in connection with our rights offering completed in December. Last month, our Board declared a regular quarterly dividend of $0.28 per share, which equates to an annualized yield of approximately 14% based on yesterday's closing price. Adjusted for the impact from the rights offering, fourth quarter distributable earnings would have been $0.31 per share, which was at the high end of our guidance range. Loan investments since July 1 contributed $0.03 per share to distributable earnings, whereas loan repayments over the same period negatively impacted results by $0.01 per share. For the full year of 2025, distributable earnings was $1.21 per share. Our run rate annual dividend of $1.12 per share represents a 93% payout ratio based on these full year earnings. During the fourth quarter, interest rate floors became active for 7 of our loans, which limited the impact of rate cuts in the quarter and provided earnings protection of $0.01 for the quarter based on SOFR as of December 31. As Tom mentioned, although one of our loans contain interest rate floors ranging from 25 basis points to 4.34% with a weighted average floor of 2.81%, further declines in SOFR would be mitigated by additional loans becoming subject to these floors. It is important to note that none of our secured financing facilities contain floors. As Tom highlighted, since quarter end, we have closed one loan totaling $30.5 million and have 2 additional loans expected to close in the coming weeks for approximately $37 million combined. We also have 2 loans currently in diligence totaling approximately $39 million that are expected to close at or shortly after the end of the first quarter. Overall, we expect first quarter distributable earnings to be in the range of $0.22 to $0.24 per share. This guidance reflects the impact from our rights offering, which we expect to be temporary. As the proceeds from the rights offering are invested and capital from expected loan repayments in the second half of the year is redeployed, we expect the incremental earnings contribution to offset the impact of the higher share count. Our CECL reserve remains modest at 130 basis points of our total loan commitments, down 20 basis points from last quarter and is supported by a conservative portfolio risk rating of 2.8, which has improved since last quarter. Our portfolio remains well diversified by property type and geography and all loans are current on debt service. We do not have any 5-rated loans, collateral-dependent loans or loans with specific reserves. This highlights the strength in our underwriting and asset management functions, which provide long-term value for shareholders. We ended the quarter with $123 million of cash on hand. Since quarter end, we extended the maturities of 2 of our secured financing facilities and increased the maximum size of one of these facilities by an additional $125 million. Pro forma for this increased facility size, we have $377 million of capacity on our secured financing facilities. This activity demonstrates our strong relationships with our banking partners and positions us to continue to grow our loan investment portfolio with proceeds from our rights offering. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Jason Weaver with Janney Montgomery Scott (sic) [ JonesTrading ]. Jason Weaver: Actually, it's from JonesTrading. I don't know how that got mixed up. But I wonder if you could talk a bit just given how the portfolio has evolved and how the pipeline is looking today. You mentioned one thing like moving from strict multifamily over to something like student housing and industrial and hospitality as well. How specifically are you thinking about finding pockets of inefficiency across the pipeline given the heightened amount of competition in the space right now? Jared Lewis: Jason, this is Jared. That's a good question. So it's obvious that the multifamily sector contributes to the lion's share of the activity that we see both on our pipeline but also sort of overall in the markets. It's an extremely liquid sector. But what we found is that it's sort of a race to the bottom in terms of yield and pricing. We certainly looked at a lot and we did a lot of those assets and transactions, but given the securitization markets' demand for that paper, we just haven't decided to go there yet. And where we do find opportunities, and I think a big part of that is because of the breadth of the platform that we have here with our manager, we see assets in the pockets, as I mentioned, storage, industrial, medical office. We've got a pretty wide range of property level managers and asset managers that see opportunities across the country. So we don't have to deploy billions of dollars of capital. We can be really selective and find good opportunities that we can get outsized risk-adjusted returns rather than just bidding multifamily assets at the bottom, if that makes sense. Jason Weaver: Got it. That's helpful. And then I wonder, without implying taking risk up to a huge degree, are there any opportunities that you're sort of evaluating outside of the first lien space maybe in a bit more of the junior tranches? Thomas Lorenzini: At this time, we're not really focused on that, Jason. We like to stick with our knitting currently, which is senior secured positions. We've certainly discussed mezzanine and preferred equity and things and we certainly understand that space and have those capabilities. But the focus remains on senior secured positions. Operator: And the next question comes from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Matt, on your $0.22 to $0.24 distributable EPS guidance, does that assume that the incremental capital that you raised is fully levered and deployed in the first quarter? Matthew Brown: No. So we talked about in the first quarter, we've closed one loan for $30.5 million. We have 2 loans expected to close in the near term for another about $37 million and then 2 loans under app that will close kind of towards the very end of Q1, if not trickling into the beginning of Q2 for about $39 million. So by the end of Q1, we haven't fully deployed the rights offering capital. But we have increased the weighted shares for the period, and that's really driving down earnings for the first quarter. As I noted in prepared remarks, this is temporary. We expect by the end of the year to get DE back around where it was in the fourth quarter of this year. Christopher Nolan: Understood. Also with the change in the bank facilities, was there any change in the advance rate? Jared Lewis: No, no specific changes to the advance rates. But what I will say is that all of our banking partners have been really supportive of what we've been doing here with the upside of one of the facilities and the extension terms that we've received. They continue to support what we're trying to accomplish here. So it's been super helpful. Christopher Nolan: Great. And then I noticed that your investment spreads widened a little bit in the quarter. Is there a delayed impact from rate change from Fed moves of short-term interest rates? Does it take a quarter or 2 for it to filter down to you guys? Matthew Brown: No, it doesn't take any time to filter down. I think part of what we're seeing is we have 7 active floors. So that's kind of supporting the trends a little bit. In addition to that, on loan investments being made, that's further supporting our total portfolio net spread. Christopher Nolan: Great. And final. Am I correct where, when you guys did the rights offering, the current dividend is secure at least through the end of 2026. Is that still the case? Matthew Brown: That is. We still remain committed to our $0.28 per quarter dividend. We know there's a temporary drag on earnings as we deploy the rights offering capital. In addition, we have a lot of loan repayments in the second half of the year. Some of those have reduced leverage, which should increase our overall investment capacity and get us back to more current levels. So we do remain committed to the dividend for the foreseeable future. Operator: And the next question comes from Chris Muller with Citizens. Christopher Muller: Congrats on a solid quarter here. I guess originations came in really strong in the quarter, and it looks like the first quarter is on a similar pace. Do you guys expect that run rate around $100 million to continue into 2026? And then I guess the flip side of that is, how are you guys thinking about portfolio growth this year following the rights offering? Do you have a target portfolio size that you would like to reach by year-end? Thomas Lorenzini: Yes. So I think from a production standpoint, I think across the industry, everybody is seeing more transaction flow, which is very welcome. We're expecting Q1, depending on timing, it could be about $100 million. We might see one of those trickle into Q2. And then Q2, Q3 and into Q4, we're hopeful about $200 million per quarter of new originations. And part of that will be driven by the repayment that we're going to see in the back half of the year, Chris. As far as where we hope to end at the end of the year or expect to end at the end of the year, it should be close to about $1 billion of total loan portfolio size. And part of that, again, just depends a little bit on some of the repayments that we're expecting into Q3 and Q4. Christopher Muller: Got it. Very helpful. And then I guess just a quick clarifying one. On the 2 loans you guys acquired in the quarter, were those purchased from another lender? Or did that come through the RMR pipeline? Thomas Lorenzini: Those loans were underwritten and were asset managed by our team. They were loans that would have just, under normal circumstances, gone into SEVN as a production. RMR had them on their balance sheet. If you recall, RMR was considering a private financing vehicle. These were going to be seed assets for that. But they were originated by our team here, closed by our team and the asset managed by our team. So they met our approval and credit requirements. So there was really no uncertainty when we acquired those loans as to what we were buying. So they fit very nicely into the portfolio. And given the rights offering, with the excess capacity that we had, it just made sense for us to acquire those loans and put them into the SEVN portfolio. Christopher Muller: Got it. And are there additional loans like that, that could filter through in the coming quarters? Or is that kind of the rest of it? Thomas Lorenzini: Those are the only 2. We don't expect any other loan acquisitions to occur. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tom Lorenzini, President and Chief Investment Officer, for any closing remarks. Thomas Lorenzini: Thanks, everyone, for joining today's call. Please reach out to Investor Relations if you are interested in scheduling a call with Seven Hills. Operator, that concludes our call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.