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Operator: Good morning, good afternoon, ladies and gentlemen. And welcome to Besi's quarterly conference call and audio webcast to discuss the company's 2025 fourth quarter and full year results. You can register for the conference call or log into the audio webcast via Besi's website, www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mrs. Andrea Kopp, Senior Vice President, Finance. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I'd like to remind everyone that on today's call, we'll be making -- management will be making forward-looking statements. All statements other than statements of historical facts maybe forward-looking statements. Forward-looking statements reflect Besi's current views and assumptions regarding future events, many of which are, by nature, inherently uncertain and beyond Besi's control. Actual results may vary materially from those in the forward-looking statements due to various risks and uncertainties including, but not limited to factors that are discussed in the company's most recent periodic and current reports filed with the AFM. Such forward-looking statements, including guidance provided during today's call speak only as of this date, and Besi does not intend to update them in light of new information or future developments nor does Besi undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Blickman. Please go ahead. Richard Blickman: Thank you. For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31, 2025, and update you on the market, our strategy and outlook. First, some overall thoughts on the fourth quarter. Besi's revenue, gross margin and operating expense development in the fourth quarter '25 exceeded the favorable end of prior guidance. Revenue of EUR 166.4 million and orders of EUR 250.4 million, increased by 25.4% and 43.3% versus the third quarter of '25, due principally to a broad-based increase in demand by Asian subcontractors for 2.5D data center applications, renewed capacity purchases for photonics applications and a significant increase in hybrid bonding orders. Net income of EUR 42.8 million increased by 69.2% versus the third quarter of '25 due to higher revenue, increased gross margins from a more favorable product mix and lower-than-anticipated operating expense growth. Besi's progress in 2025 reflected the favorable influence of increased AI infrastructure spending on our business development. Orders of EUR 685 million increased by 16.8% versus 2024 due to strength in AI-related 2.5D demand for data center applications by Asian subcontractors and renewed capacity purchases for photonics applications. Growth accelerated in the second half of the year, with orders increasing 63.6% versus the first half of '25. Orders for AI applications represented approximately 50% of our total orders in '25 and revenue from Besi's computing end user market grew by approximately 40% of revenue in 2024 to 50% in 2025. For the year, revenue of EUR 591.3 million decreased by 2.7% versus 2024 due to lower shipments for mobile, automotive and industrial end user markets as a result of ongoing weakness in overall assembly markets. We continued to maintain attractive levels of profitability with gross operating and net margins realized of 63.3%, 29.3% and 22.3%, respectively. Given profits earned in 2025 and our solid liquidity position, we will propose a cash dividend of EUR 1.58 per share for approval at Besi's April AGM, which represents a 95% payout ratio. Liquidity remained strong at year-end with cash and deposits of EUR 543 million and net cash of EUR 36 million, increasing by EUR 24.4 million and EUR 43.8 million, respectively, versus September 30, '25. We distributed EUR 254.8 million in the form of dividends and share repurchases in 2025, roughly equal to levels of 2024. Next, I'd like to discuss the current market environment and our strategy. Tech insights currently forecast relatively flat assembly market growth between '24 and '25 driven by a push out of the anticipated assembly upturn from '25 to '26. However, they expect growth of 74% between '25 and 2030. Based on increased AI use cases and infrastructure spending, new product introductions, new fabs coming online and a recovery in mainstream assembly applications, we expect to significantly exceed such projected growth rates given our leadership position in advanced packaging. We are pleased with our operational progress in 2025 as we completed a comprehensive strategic plan review with enhanced revenue and profit targets and organized additional production capacity and infrastructure to help support that growth. We also experienced progress on our wafer level assembly agenda as hybrid bonding adoption expanded to 18 customers cumulative order grew to 150-plus systems and new use cases were identified for cold package optics, ASICs and consumer applications. In addition, 6 integrated hybrid bonding production lines were installed at a leading logic customer incorporating 30 Besi-hybrid bonders in collaboration with Applied Materials. The first 15-nanometer placement accuracy prototype system was also completed and available for customer qualification. Our position in the TC market was further enhanced as Besi's TC NXT adoption expanded to five customers for logic, memory and photonics applications. In addition, our Flip Chip and multi module die attach systems gained significant share in the market for AI-related 2.5D assembly structures addressing the rapid growth in demand for data center and photonics capacity. Further, we successfully introduced a variety of next-generation die bonding and packaging systems for each of our traditional mainstream markets as we prepare for the next market upturn. We see market conditions improving in overall mainstream assembly markets based on favorable semiconductor unit growth trends and a significant reduction of excess semiconductor inventory. Green shoots are appearing after an extended downturn of nearly 4 years in each of our principal end user markets. Customer road maps also point to expanded adoption of wafer-level assembly over the next 2 years related to hybrid bonding and TC NXT adoption in HBM 4, 4E, co-package optics, ASICs and new high-performance computing and mobile introductions. In addition, recent announcements of substantial AI-related infrastructure investments are expected to increase demand for advanced packaging. Increased AI investment has created capacity shortages for 2.5D packaging which has caused producers to secure increased production for many Asian subcontractors. Further, many new advanced packaging fabs are planned globally which should increase demand for our advanced packaging portfolio. Now a few words about our guidance. We entered '26 with increased optimism based on strong order momentum experienced in the second half of '25, which has continued to date in the first quarter of 2026. Our current optimism is based on anticipated growth in 3 promising Besi revenue streams, 3D wafer level assembly, AI-related to 2.5D capacity and more traditional mainstream assembly applications. Our optimism also relates to the significant increase in demand from Chinese subcontractors as the country builds out its AI infrastructure. For the first quarter '26, we anticipate that revenue will increase between 5% and 15% versus the fourth quarter of last year with gross margins ranging between 63% and 65%, aided by improved revenue and a more favorable advanced packaging product mix. Operating expenses are anticipated to increase by 10% to 15% as we maintain discipline in overhead growth while continuing to increase development spending to support long-term growth opportunities. That ends my prepared remarks. I would like to open the call for some questions. Operator? Operator: [Operator Instructions] The first question comes from Madeleine Jenkins from UBS. Madeleine Jenkins: My first one is just, Samsung has publicly said that they'll be dual tracking hybrid bonding and TCB 4E in HBM and the samples are being sent to customers. I was just wondering if you could kind of help us understand from a customer's perspective, what would make them choose the hybrid bonding version versus the TCB and vice versa? And then on that, just generally, when are you expecting the first high-volume orders to come through for hybrid bonding for HBM? Richard Blickman: Well, excellent, Madeleine, happy to share some more background. 2026 will be a very important year to understand the adoption of hybrid bonding for HBM stacking. As is publicly shared by Samsung in particular, keynote speech last week in Korea at the SEMICON is a very clear road map to adopt hybrid bonding for very important reasons and that is performance and also heat. And that, with all kinds of tests in previous years should be superior to using a reflow process to build these stacks. We are currently in the evaluation process, customer sample and qualification process. And as was published by that customer in the course of this year, early Q2, maybe Q2, May, June time frame, it should become clear how that inroad of hybrid bonding stacked in HBM 4, but also in the previous three, the 12 stack should find its way into the end markets. That is Samsung. As we all know, our other memory customer started already much earlier in testing and sampling hybrid bonded stacks and they are ready as soon as the market demands these technologies used for either HBM 4E or other stack devices. Also the 12 supposedly shows much better performance using a hybrid process than a refill process. And last but not least, the #3, the largest of all the memory -- the three memory producers, has also announced that it will start qualification of the hybrid bonding process in the second quarter of this year to also come towards the end of this year to the conclusion whether this is a technology used for high-volume mainstream in the generation of HBM 4 or whether that is in preparation of the next generation, the 20 stack. So all these tests, we will update you every quarter on the progress. Also, there's a lot of press coverage and those companies share that with the community also in conferences. So a very important year for hybrid adoption in the memory space. Madeleine Jenkins: That's very helpful. And then just my second question is on China. They're clearly adding a lot of AI capacity. Kind of how sustainable do you see this demand as being? Is it multiple customers? And also how high is your market share in this region for the AI bit? Richard Blickman: The market share is very high. To our surprise, we would have expected and, let's say, solid market share as we have with mass reflow for a long time, but our share has gone up significantly also among the Chinese. How sustainable that is? Well, the answer is that the world expects an enormous increase in building data centers. So for that 2.5D, some qualified that we are only at the beginning. Our position, as I said earlier, is very strong with a very solid market share. And that you can also derive from our margin, our ongoing margin, gross margin but also net margin development. Operator: The next question comes from Sandeep Deshpande from JPMorgan. Sandeep Deshpande: Richard, my question to you is regarding the logic market and the foundry market. I mean you've seen that some orders coming through in the last quarter on the foundry side. Do you expect that these orders from the foundry side continue into the first quarter? And when you say on your release that the order momentum remains strong in the first quarter, how would you quantify it? I mean, are we going to expect a strong sort of orders in the first quarter like you saw in the fourth quarter? Richard Blickman: Well, the answer is, first of all, yes. So as we guided, continued momentum, that also means that we expect more orders in the logic space for hybrid bonders. And as we all know, the program in Taiwan entails several steps to build out a complete new factory. The first install start in June and operators have to be trained, maintenance has to be organized and that's all underway. And you can expect, as was also the case with the current factory, the AP6, that over the course of several quarters, that capacity will be built because supposedly demand is building. So that looks very promising. Sandeep Deshpande: Then following up on that -- on the logic side, do you expect in the logic business this year that is '26 will be much better than in '25 because when you look at how your order intake was at the end of '24, you had about 100 cumulative hybrid bonding orders, you've had 150 at the end of '25. So there was a slight slowdown in terms of the order intake. And if this could accelerate now into '26? I mean, clearly, memory will also contribute to that, but will logic itself accelerate? Richard Blickman: Well, as I just explained to your first question, if all goes according to public shared plans, it should increase because already AP7 is supposedly twice the size of AP6 and that's only one customer. So the adoption for logic is continuing. We saw that in the whole of '25. Again, we now have 18 customers, of which most are the far most are logic oriented customers with all kinds of different device designs. Remember, the first was AMD which has expanded its family throughout. And then we have many others now following. The big question here is when will the largest end customer have a product line using this technology, that should be on the horizon. So that then will create a significantly higher demand than what we have witnessed in '25. But that's according to the road map we've shared forever. There's a nice slide in our deck where we see a development in the past 5 years and an expected significant growth in the next 5 years. As we've said many times, that line of growth, it can have several variations, especially as you said, the adoption of memory will change that landscape significantly in terms of total volume required but we're still on track on that, let's say, road map, we, ourselves derived from what is happening in the market in the past 4 years, which we update every year. So that's in a nutshell, the overall picture, we should or we could expect. Operator: The next question comes from Didier Scemama from Bank of America. Didier Scemama: Richard, I have a couple of questions. So first question is on HBM. If everything goes according to plan and your two lead partners decided to put the trigger on TCB or TC NXT and hybrid bonding, can you give us a sense of the magnitude of orders sort of the volumes that would be required to create a production line? I've got a follow-up. Richard Blickman: Well, as a rule of thumb, typically, one needs a factor more memory supporting a logic device. So when you take the rule of thumb of a factor of 4, then with the installed base so far for logic, which is now over 130 systems, shortly coming up 150. Then if you multiply that, then you know how much capacity you would -- or how many machines you would require to support the capacity for memory. It doesn't work exactly like that, but the factor for number of machines capacity required is significantly higher than for the logic. So that's a major step up what we can expect when that adoption occurs. But that, again, you see in that picture we share on the adoption scenarios. Didier Scemama: Understood. Very clear. My second question is on mobile. So if you remember, like, obviously, a few years back, very high-end smartphone adoption bonding. Can you just give us a sense as to, first, whether we should expect the traditional order intake in the first quarter related to high-end smartphone, new features, cameras, et cetera? And then if you look a bit further out, how this is shaping up to be in terms of hybrid bonding adoption, whether it's '27 or further out in at least your best guess? Richard Blickman: Well, this year, as we already shared a quarter ago, we should see some improvements or new updates on features on high-end smartphones. On the camera front, there are some new developments. But also maybe foldable versions are, let's say, on the road maps, and that requires also different solutions inside those cameras. So those are developments, which we see. But then the next question is what kind of computing power will need to support AI functions? And that is a big, let's say, question and that could have a significant impact and whether they are built with a reflow process or with a hard bonding process, chiplet architectures. As we've shared many times, there's a lot of development going on and certain road maps indicate those new major inflection points in technology, either already in '26 or certainly in '27. That is how it develops and there is no change in that road map. Does that answer your question? Didier Scemama: Yes. Just had a quick follow-up. For your third quarter guidance, I just wonder why your order conversion is quite a lot lower than it normally is? So I think it's about 100% plus or minus. So why on EUR 250 million in Q4, you're sort of guiding to only EUR 185 million or so at the midpoint? Richard Blickman: Well, a very easy answer. The orders were -- or let's say, the order placements were very much to the end of the quarter and the manufacturing throughput time for many of these orders, so take the high-end Flip Chip machines, the CHAMEOs, but also the multi-module attach, which is very much also for photonics, they take 12 to 16 weeks. So you simply can't physically arrange the shipment in the first quarter. So the answer also implies that you should see a significant impact on the second quarter. Operator: The next question comes from Charles Shi from Needham & Company. Yu Shi: The first one -- I want to go back to the comment about the hybrid bonding cumulative revenue orders, it was 150 plus by the end of last year. And if I do the math, and it looks like last year, the number of orders you got was actually more or less comparable with 2024. So the question here is what about 2026? What's the overall sense where the cumulative order number will go? 200 seems possible. I mean that basically assumes, I mean, flattish number of orders you're going to add this year versus 2025. But can you go to 250? Can you go to 300? And I mean, to go to higher numbers, what do you think needs to happen for -- yes? Richard Blickman: Two things need to happen. Number one, the adoption of hybrid bonding for mainstream applications for logic devices next to what is already now using hybrid bonding. So think about the big AI providers, which are still building certain modules using mass reflow, using TC, if they switch to hybrid bonding, that could change the landscape dramatically. And number two is as we discussed to earlier question, is the adoption of hybrid bonding for memory stacking. Yu Shi: Got it. But -- okay. So maybe I'll just go direct into memory. Now Samsung HBM 4E, that is the fact that it's happening. But I mean, on the other hand, if we understand correctly, the other 2 HBM customers have not even have a order from you -- hybrid bonding order from you. Why the hesitancy? That's the question I believe top of the mind for a lot of people here. And what's delaying them? And could they start getting some orders this year? Richard Blickman: Well, it's -- the other two. One of them with the U.S. base. They have ordered already several hybrid bonders to develop HBM stacking for about 3 years now. It's also known publicly that the other one, the Korean, will start evaluating the hybrid bonding process in April-May time frame, we are invited for that, and they have publicly shared that their end customer demands them to have hybrid bonded version available by the end of this year. So although cost is higher using a hybrid process, performance is better in two ways. Number one is speed and number two is heat. So it is gradually moving from TC solutions for stacking to a hybrid version. And the big question, will this move in '26 or certainly in '27? That's how we read the inputs from all three and the biggest end customer driving, ultimately, the change in specification for these end products. Next question. Operator: [Operator Instructions] The next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: Yes. Good afternoon, Richard, maybe the first question would just be around the situation with Apple, which seems to be moving to using SoIC-X for the M5 Pro and M5 Max. Is that beachhead do you think going to be swiftly followed by other SKUs? Or is it going to remain do you think a relatively niche use of SoIC-X for high-end notebook type situations? And I have a follow-up. Richard Blickman: Well, that's precisely put. So they're all preparing from a production and technology readiness to be able to adopt this technology shift when decided. For us, what we can do is continue to offer whatever qualification samples, testing to be ready for that. There is one big question out there, how much additional computing power will be required for AI functionality? And that is what we hear, still the question to be answered. How does that impact the choice of the technology used in these mobile devices? Because in the end, it will increase the cost but then the functionality is significantly more advanced. So that open debate, you follow at conferences directly from customer engineers, and also, we had our technology advisory board meeting 2 weeks ago in Taiwan, where there were also technology persons from the community sharing road maps and thoughts exactly on this subject. Robert Sanders: And just quickly on China. Maybe you could just discuss a bit about what's happening in China. I mean I think it was 27% of your sales in the first half, but it has been higher than 45%. I mean it sounds like it's going to go up to close to 50%. Is that fair? And how do you think about the sustainability of that spending? Richard Blickman: Well, so far, we've always had this typical mix. You have non-Chinese customers producing in China. Since 30 years, all non-Chinese customers have set up assembly capabilities in every technology and that is still today the case. Although there's a lot new established outside China and Asia, in Vietnam, in Thailand, in Malaysia, Philippines and then India, but that's still slow and coming. So to be less dependent upon China. And then you have the emerging Chinese technology, which is growing year by year. And as we said for the 2.5D modules, we are very much engaged in these Chinese versions. So supposedly, the cost of ownership using our equipment is beneficial for local compared to local alternatives. Don't forget, we built all these machines in China. We have a wonderful facility in Leshan, which is expected this year to surpass the peak it achieved in '21. So although there's a lot of expectation that, that will become less, we don't see that at all. But we are expanding in Vietnam. As many of you know, we have set up a factory 3 years ago. We're expanding that significantly this year. By the end of this year, we're also able to build one of our die attach systems in Vietnam. And then as I said earlier, the expansion in Thailand, in Malaysia, the whole Pacific Rim, is preparing to have next-generation products produced in those countries rather than establishing more capacity in China. But the Chinese market itself is growing rapidly. Any next question? Operator: The next question comes from Daniel Schafei from Citi. Daniel Schafei: Basically, the first one would be on TCB NXT. You mentioned 5 players. I was just wondering, just to clarify, this is a testing or are some of them already high-volume manufacturing? And then if hybrid bonding will take longer for some customers, what is your expectation now going forward for TCB, especially given you are now gaining traction within TCB NXT? That would be helpful to understand. Richard Blickman: Well, number one, our system is designed for bond pad pitch below 20 micron. The world today is still above that, 25, 30. So the preparation with these five customers is to be ready once technology moves to smaller bond pad pitches and stretch the life of using a reflow process because the reflow has many advantages compared to hybrid bonding. One of them is simply cost. We have mentioned several times that our system has demonstrated even to be able to bond successfully at 10-micron bond pad pitches, and that comes very close to the crossover point with hybrid. So we cover the space between mass reflow Flip Chip and as mentioned earlier, very successful at this moment. And then the TC space where it becomes difficult for TC and then beyond that, the hybrid bonding. So gradually, always the industry moves to smaller geometries, and that is where exactly this TC NXT is aimed for. Your question, how much in high volume? Not yet. It's in the early stages in qualifications and in two areas. So in the logic space, so single die, but also one of the major memory producers is using TC NXT to prepare for the next generation. And that is what we mentioned last year when we received the order, 5 systems ready to go once that becomes the mainstream. Daniel Schafei: Perfect. And just as a follow-up, then you mentioned also earlier the adoption of hybrid bonding within '26 or '27. Just to understand what your expectations are right now, do you see hybrid bonding being adopted between all the HBM layers or only within certain layers? Yes, that would be just interesting to understand. Richard Blickman: Well, it can be a mix. There are different road maps showing a combination of a certain hybrid part of the stack and also a reflow part. So one has to go into a bit more detail to understand all of the road maps, but that is also why we have this 2-track development strategy that you have to cover both. Daniel Schafei: Okay. Is it then dependent on the HBM structure itself, where I would say the mix is more a hybrid bonding. Basically, the taller you go. My question... Richard Blickman: The reason -- sorry to interrupt you, is simply performance. If you connect direct copper-to-copper you have less heat in operating such as stack. And that allows you to get a higher power out of that stack and the higher the stack, the more, let's say, loss of power you have due to the heat. So a mix can already help in that performance. Operator: The next question comes from Nabeel Aziz from Rothschild & Co Redburn. Nabeel Aziz: So the first was just on hybrid bonding tool maturity. So I was just wondering if you could provide an update on the hybrid bonding tool maturity and progress that you're making on throughput and yield improvements? Richard Blickman: Well, we've come a long way that after 4 years, you certainly can see enormous progress. And where do you see that progress is, number one, the predictability of any application. So understanding the right preparation time required and the preparation processes, remember, cleaning, tracking, wet, clean plasma. And that is the most, yes, let's say, process technology, which sets us apart from many others. There are many bonders in the world which can place accurately. But exactly that bond process is where it's all about. Where are we right now? As I said in the beginning, we certainly have -- but there's still a long way to go. The process itself is, each time you could say every day, improved. One of the issues is always throughput, so the time required to place the die accurately. And the faster you can do that, you have more output of that machine and that influences the cost of ownership. So that [ battle ] is identical to what we have gone through with mass reflow Flip Chip for 25 years every year, either focus on accuracy improvement or focusing on throughput. And that combination is exactly the same challenge we have with now over 130 hybrid bonders operating in the field for larger die, smaller die, stacking dies and that's where we are. Nabeel Aziz: Very clear. And just a quick follow-up on that. A lot of your competitors are starting to develop hybrid bonding solutions of their own and in some cases, shipping R&D tools. So I just wondered how you see the competitive landscape in hybrid bonding evolving? And how competitive are your peers' tools with your own? Richard Blickman: Well, what we did share end of October was the simple fact that for the next round in Taiwan, that was based on the outcome of a complete landscape evaluation where -- because the orders were placed with us and are placed with us, the outcome is what it is today. But if you look at the whole landscape, everyone understands that hybrids sooner or later will become the mainstream technology for advanced packaging. So that's why every bonder company is focused on this market. How can you maintain your leadership? Because after 10 years nearly where we started this development with that big Taiwanese customer, it's all what I just said along the accuracy and speed. So today, the 100-nanometer is sufficient covering the logic and the memory requirements as it looks today. In the next year, we have to move down 250 because of the next-generation technology. And then the accuracy and speed combination is what sets us apart from others. Also, what is very important is the partnerships in this change of technology inflection from the assembly reflow space to hybrid bonding, hybrid bonding has to occur in front end. And front end requires complete different support structure than what we have in back end. Through the partnership with Applied Materials, now for 5 years, we have come at the levels that is supporting the highest end customers in the industry. And that combination is unique. So that support, so not only having a successful bonder, but also how to support customers 24/7 in a front-end environment is a complete different challenge than in the back end. So we see certainly competitors trying to participate in this market as well. But there is a very clear challenge for us to maintain in that lead. Operator: The following question comes from Ruben Devos. Ruben Devos: I just had one on your prepared comments where you talked about new hybrid bonding use cases that were identified for co-packaged optics. I was curious, is that mostly referencing sort of the material you presented at the Investor Day in June? I think you talked about sort of NVIDIA Spectrum X, which requiring 36 hybrid bonding tests per device. I think earlier in this call, you talked a bit about the factor difference between memory and logic, but how does that shape up for maybe co-packaged optics? And yes, I think the mid case was also somewhere around 50 cumulative units through 2030. But with the prepared comments around new use cases, might that really be contributing this year or next year? Richard Blickman: Well, that's a very, very big question. Number one, co-packaged optics is still in early days and a lot of development is going on with the use of hybrid bromine because the accuracy is required. So as shared in the Capital Markets Day or in the Investor Day, that is going on, that's continuous development. How many systems that entails? I can't tell you at this very moment. So that's -- you could qualify that as the next step in technology. So we first have the interconnect and co-packaged optics is a step beyond. Ruben Devos: Okay. And maybe something unrelated, talking about the mainstream market, basically, that's what I was thinking about. It's -- I think you also talked about green shoots, right, after a full year downturn. I think you mentioned smartphones in the mobile market, obviously, automotive and industrial are two other end-user markets. 50% of your business might already be computing. But so yes, a bit more color on maybe what you're seeing across the industry? What are maybe the die bonder utilization rates at this point? That would be very helpful. Richard Blickman: Well, we have seen, as we said, green shoots. We see some of our main customers for years in automotive and industrial after a long time showing signs and having new programs where equipment will be required, which gives a positive outlook for '26. That is referenced to Techinsights, which also expects the market to carefully improve in '26, more sizable in '27. So that's how our comment is also based on. What we have seen in these 4 years of very modest capacity increase only for new devices. We have seen development of many new devices ready for next-generation electronics, especially power devices for automotive, supposedly for hybrid application. So hybrid cars, I mean, not hybrid bonding. So in power, there's a lot happening. But still, the overall picture is not recovering to the extent which we are used to. But the growth in the other areas is so significant that, that offsets the -- yes, usually, our revenue, we've shared that forever. Automotive was between 15% and 20% of revenue. Now it's somewhere around 10% to 15%, depends on which quarter. It probably will drop in the next quarters or it has to turn. But that's about -- well, it is 10% to 15% of revenue. Operator: The following question comes from Marc Hesselink from ING. Marc Hesselink: Yes. Can we have a bit more view on the 2.5D photonics opportunity? I think that is sort of a momentum that's been building up throughout the year in '25. And I think with an extremely strong end with the order intake towards the end of the year, can you maybe see -- I would assume that in this business, maybe the -- because it's strategic investments, the visibility is a bit higher than in your usual mainstream product portfolio. So can you maybe see -- how do you see this ramping the capacity? Is it just a few quarters? Or is this a longer-term trend? Is this going to accelerate from where you are today? It would be very helpful if we get some extra detail there. Richard Blickman: Well, there are two growth drivers. Number one is simply the data center, let's say, capacity built in the world. So the connectors to connect those computers inside those, yes, data center units, that is what we have been involved in for the past -- over 10 years. But the second driver is that there is a technology step and that will require twice the amount of steps, the interconnect steps in these connectors than the current generation. So there is definitely more growth ahead of us for these two drivers. So not just the growth in data centers, but also in technology. I mentioned already, 10 years -- that started, well, over 10 years ago with Cisco modems. And these connectors, it's a set of 5 main customers, and they all produce for the very big end customer. And as long as that is growing as the world expects, we are directly linked to that. Does that answer your question? Marc Hesselink: Yes, it does. And maybe as a follow-up on that. Now that you're also seeing a lot of that volume coming from the OSAT. Is it then fair to assume that implies that it becomes even more mainstream and even more adoption beyond what you just mentioned? Richard Blickman: Yes, certainly. Certainly. And that's also publicly known that the IDMs, as usual, they offload more mature products to the subcontractor space and the more complex the technology, the more attractive that is for the subcontractor space. And we know the big two leaders, both starting with an A. But then there are many subcontractors who are also involved in this expansion into mainstream for data center computing applications. Any further questions? Operator: The following question comes from Martin Marandon-Carlhian from ODDO BHF. Martin Marandon-Carlhian: My first question is on the new fab of your Taiwanese customer, the AP7. Do you think the vast majority of the demand there will come from new customers adopting hybrid bonding? Or do you also expect AMD to be a big contributor since the announcement of its deal with OpenAI? That's the first one. Richard Blickman: Well, what we hear, and I was just there 2 weeks ago, there are several big companies, and we all know the names, either for high-end smartphones or for data center computing who are supposedly on the brink of changing from reflow process designs to hybrid bonded designs in whatever end products. And that is the driver for a factory, which is twice the size of what is currently the AP6. But then there is a next plan, AP7 is not the end. So there are major plans. So look at the model, which is shared by many of the front-end companies, what they expect in the next 3 years, the demand for AI translated into capacity that similar model you can use for the advanced packaging. So the next note plus an enormous expansion in end market demand. Whether that will -- as presented, we all know this industry but anyway, that's the picture driving the programs in Taiwan. Martin Marandon-Carlhian: Okay. Very clear. And the second one is a bit of a different one, is on high-bandwidth flash HBF, some expect HBF to be necessary to improve the memory capacity in future AI chip packaging. So my question is just what do you think about this? Do you think it's a driver for hybrid bonding or TCB? Is it part of the current discussion with your customer? Or is it not really relevant in the near future? Richard Blickman: Well, I can't answer that. Yes, simply, I have no, let's say -- if I would, I would answer it, of course, for you, but time will tell, and we are certainly following that closely. Operator: Ladies and gentlemen, we have arrived at the end of the presentation. I would now like to hand the word over to Mr. Richard Blickman for any closing remarks. Richard Blickman: Well, thank you all for joining us today. And in case you have any further questions, don't hesitate to contact us. Thank you. Bye-bye. Operator: Ladies and gentlemen, you may now disconnect.
Operator: Good morning, everyone, and welcome to the Blue Owl Capital Corporation's Fourth Quarter and Full Year 2025 Earnings Call. As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Mike, please go ahead. Michael Mosticchio: Thank you, operator, and welcome to Blue Owl Capital Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. Yesterday, OBDC issued its earnings release and posted an earnings presentation for the fourth quarter and full year ended December 31, 2025. These should be reviewed in connection with the company's 10-K filed yesterday with the SEC. All materials referenced during today's call, including the press release, presentation and 10-K are available on the News and Events section of the company's website at blueowlcapitalcorporaton.com. Joining us on the cup today are Craig Packer, Chief Executive Officer; Logan Nicholson, President; and Jonathan Lamm, Chief Financial Officer. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not guarantees of future performance or results, and involve a number of risks and uncertainties that are outside of the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in OBDC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations section of our website. Certain information discussed on this call and in the company's earnings materials, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. With that, I'll turn the call over to Craig. Craig Packer: Thanks, Mike, and good morning, everyone. We appreciate you joining us today. There's been a lot of recent investor attention on OBDC and the other BDCs that we manage, as well as the private credit industry more broadly. Much of this focus has been on credit quality and whether fundamentals are holding up. At a certain level, we understand investor concerns as the industry has grown significantly in the last few years. So I'd like to start off by reassuring you that credit quality in OBDC remains strong, and we expect that to continue. Before we get into our results, I want to address our future plans for OBDC II, following the termination of the proposed merger with OBDC that we announced last quarter. OBDC II is a 9-year-old private fund, which was required to eventually consider a liquidity event to return capital to shareholders. We believe the merger into OBDC was the most logical path due to the high asset overlap and benefits of scale. However, in light of the market reaction and working with our Board, we concluded the proposed merger no longer made sense, so we terminated it. Since then, OBDC II has been working to determine the best path forward. Yesterday, we announced a sale of a portfolio of OBDC II assets at book value totaling $600 million, or approximately 35% of the fund's total assets, and plan to distribute most of those proceeds to OBDC II shareholders. We believe this outcome prioritizes shareholders by providing significant near-term liquidity for OBDC II investors at attractive valuations. This asset sale process initially focused on OBDC II. But given significant demand from several high-quality institutional investors, we expanded the process to opportunistically sell modest amounts of additional assets from two other funds, including OBDC. In total, $1.4 billion of assets are being sold, including $400 million from OBDC. These sales are being executed at exactly our book value and at an average price of [ $99.7 ]. Not only is this a strong endorsement of our valuation process and NAV, but it further underscores the high quality of our portfolios. I want to emphasize this. Most industry private secondary sales are almost always executed at a discount to book value, and we are pleased to execute this transaction at our marks across approximately 130 names to a very select group of high-quality leading institutional buyers. We believe this sale sends a clear signal as to the strength of our portfolio and the quality and integrity of our marks. To be clear, this is a partial strip sale across OBDC Holdings, where we are selling small pieces of over 70 individual loans at an average size of $5 million per position, or approximately 5% of each position size. This transaction modestly increases OBDC's portfolio diversity and reduces leverage by approximately 0.05x, positioning OBDC with greater flexibility to deploy capital into the most attractive risk-adjusted opportunities. Moving forward, we are not changing our philosophy. As a buy-and-hold lender, we are not in the regular business of selling our private assets. In this situation, we started out by focusing on returning capital to OBDC II shareholders, and we received so much additional demand that we decided to fine-tune the OBDC portfolio from a position of strength. Alongside these actions, we were also active in supporting OBDC through our share repurchase program. Against the backdrop of volatility post merger and the broader industry selloff, we repurchased $148 million of stock at an average discount to net asset value of 14%. These purchases were accretive to NAV per share and reflect our conviction in OBDC's long-term value. Taken together, we believe that this highlights disciplined capital allocation. We monetized assets at book value and at an average price of [ 99.7 ], repurchased shares at 86% of book value, reinforcing our view that the trading discount does not reflect the underlying strength of the portfolio. Now turning to our performance. In the fourth quarter, we delivered solid results, supported by the continued strength of our portfolio, which generated adjusted NII per share of $0.36, which represents an ROE of 9.7%. These results are consistent with last quarter as headwinds from lower base rates were offset by positive onetime items. NAV as of quarter end was $14.81, down modestly from the prior quarter, primarily reflecting write-downs on a small handful of watchlist names, partially offset by accretive share repurchases. As we look back at 2025, we believe OBDC executed well amid a shifting rate environment. We closed the [ OBD ] merger, increasing our scale and establishing OBDC as the second largest publicly traded BDC in the market. Throughout the year, we prioritized optimizing our capital structure to reduce costs and enhance flexibility while improving our credit profile, highlighted by our very recent Moody's upgrade in January to [ BAA2 ]. On the origination front, in 2025, we deployed more than $4 billion at OBDC, and $45 billion across the Blue Owl direct lending platform while maintaining our disciplined approach to credit selection. Over the past year, we selectively broadened our deal funnel by leveraging Blue Owl's expanded capabilities in alternative and asset-based credit, as well as digital infrastructure to access attractive risk-adjusted opportunities adding accretive non-correlated returns. All the while, our portfolio companies maintain their solid credit quality with revenue and EBITDA growth accelerating in the second half of the year. We are very pleased with our performance over the past year, and we entered 2026 on solid footing with continued confidence in the quality and resilience of the portfolio. Now I will turn the call to Logan to provide more detail on our investment activity and credit performance. Logan Nicholson: Thanks, Craig. Starting with investment activity this quarter, we continue to see healthy deal flow across our core sectors. We had our third largest originations quarter ever at over $12 billion across the direct lending platform, while at OBDC we were more selective, with capital used to reduce leverage and fund share repurchases. This quarter, OBDC had fundings of $820 million against $1.4 billion of repayments, resulting in lower net leverage at 1.19x. Further, with the additional deleveraging from the previously mentioned opportunistic asset sales at book value, we have ample dry powder to lean into the best risk-adjusted opportunities as the pipeline builds in 2026. Our originations this quarter were once again anchored by our existing relationships, with approximately 50% coming from large incumbent borrowers. That incumbency remains a core advantage of the Blue Owl platform. We incrementally deployed capital into our joint ventures and specialty finance investments with $80 million of fundings across several vehicles as we continue to ramp these platforms. Turning to the portfolio. We want to take a step back and provide some perspective on the composition and performance of our borrowers. As a reminder, OBDC is a broadly diversified portfolio with companies spanning 30 industries, and average physician sizes of approximately 40 basis points. We focus on lending to noncyclical defensive sectors and all of our largest sector allocations are performing well, including software. While we appreciate there has been increasing attention on software over the past several weeks, it represents only 4 of the top 25 investments in OBDC. That said, software has been a sector we've always liked and our focus continues to be a mission-critical, scaled enterprise software providers. Borrowers in our software portfolio saw LTM revenue and EBITDA growth of 10% and 16%, respectively, in the fourth quarter, outpacing the average earnings growth rate of all other sectors in the portfolio. Our 40-person technology investment team reviewed our exposures again through an AI lens and confirm the fundamental health of our assets. This, coupled with the fact that our software investments are primarily first lien, senior secured loans with LTVs of approximately 30%, gives us confidence that our portfolio remains well positioned. We see a similar pattern in health care, where we have 45 investments totaling $2.5 billion. The majority of these names are also performing well, with revenue and EBITDA growth of 11% and 10%, respectively. The strength is broad-based. Overall, in the fourth quarter, every subsector in our portfolio delivered positive year-over-year growth, with revenue and EBITDA increasing 8% and 11%, respectively, and both metrics accelerated as compared to the fourth quarter of 2024. Across our key credit KPIs, the story is similarly constructive. Interest coverage ratios remain healthy at approximately 2x, revolver draws declined over the year, and amendment activity was stable. Our [ 3 to 5 rated ] names currently represent 9% of the portfolio, which is consistent with a year ago. Additionally, we saw refinancings of several of our PIK investments in the quarter, which reduced PIK income to 10.3% of total investment income, down from 13.2% a year ago. As we've highlighted in previous earnings calls, approximately 90% of our PIK names were underwritten that way at inception, and we have never taken a principal loss on those intentionally structured positions. Our nonaccrual rate decreased to 1.1% at fair value this quarter, down from 1.3% in the prior quarter due to the addition of 3 small positions and the removal of another position. Our nonaccruals have been relatively stable over the past few years and are well below public market default rates. Finally, I'd like to share some perspective on our specialty finance and joint venture investments. We view these as differentiated complements to our core lending platform designed to help offset rate and spread volatility and support NAV growth. Today, OBDC has 7 joint venture and specialty finance partnerships spanning multiple verticals, including asset-based finance, equipment leasing, life sciences and life settlements. These investments benefit from strong underlying diversification with exposure to more than 300 loans and approximately 10,000 individual asset line items. Each of these platforms generate predictable income streams that are less correlated with base rates than our traditional direct loans, and have generated ROEs of over 14% over the last year. We also established 2 vehicles last year, that once fully ramped, we expect will generate attractive low double-digit yields accretive to fund level ROEs over time. These are great examples of how we leverage the breadth of the Blue Owl platform to create value for shareholders. Across all our specialty finance and joint ventures, OBDC's exposure is approximately 12%, providing us with ample opportunity to selectively increase our allocation as market conditions warrant. To close, the breadth and strength of our portfolio remains resilient in a shifting and more recently uncertain market backdrop. With 10 years of operating history, and an even longer tenure of experienced professionals, underwriting and managing the book, we are seeing durable fundamental performance of our borrowers, and we remain convicted in our diversified lending strategy. Now I'll turn it over to Jonathan to review our financial results. Jonathan Lamm: Thank you, Logan. In the fourth quarter, OBDC earned adjusted investment income of $0.36 per share, in line with the prior quarter. Our adjusted NII had a few moving pieces this quarter that I want to spend a moment discussing. Despite headwinds from lower base rates and a modest decrease in average spreads throughout 2025 that are making their way through our book, there were several nonrecurring events, including higher onetime income and lower operating expenses. These nonrecurring items had a positive impact of approximately $0.02 per share this quarter which is elevated relative to our historical average. The Board declared a first quarter base dividend of $0.37, which will be paid on April 15, 2026, to shareholders of record as of March 31, 2026. Our spillover income continues to remain healthy at $0.36 per share, and supported our base dividend this quarter. Moving to the balance sheet. Our fourth quarter NAV per share was $14.81, down from $14.89 last quarter, following additional breakdowns of existing watch list positions, partially offset by accretive share repurchases. As Craig mentioned earlier, we executed on our repurchase program in the fourth quarter, where we bought back $148 million of stock. In total, the company repurchased 11.6 million shares, which was accretive to net asset value per share by approximately $0.05. This was the largest share repurchase in the history of OBDC. OBDC's Board of Directors has also authorized a new share repurchase program of up to $300 million, replacing our current $200 million share repurchase plan. Despite this repurchase activity, we were able to manage our net leverage down to 1.19x from 1.22x, which is within our target range of 0.9 to 1.25x, as we intentionally reduced leverage. On liquidity, we manage the balance sheet closely and conservatively to be prepared for unforeseen situations or uncertain market environments. We remain well capitalized with approximately $4 billion in total cash and capacity on our facilities, which comfortably exceeds our unfunded commitments, and provides ample capacity to meet all of our funding needs. Also demonstrating the strength of our business and credit profile was the Moody's upgrade that we received in late January to [ BAA2 ] credited to only a few other BDCs. This ratings upgrade was a reflection of our strong portfolio and liability management capabilities, and our long-term track record of disciplined underwriting and solid credit performance. We are very focused on reducing borrowing costs, and we are optimistic that the ratings upgrade will help us achieve better execution on new unsecured issuance in the future. Overall, we remain pleased with the strength and durability of our portfolio and believe our balance sheet is well positioned to support continued portfolio performance in 2026. Now I will turn it over to Craig for some closing remarks. Craig Packer: Thanks, Jonathan. To close, I want to underscore our confidence in the portfolio. Credit quality is solid, and losses overall remained low, consistent with our downside focused approach of lending to large, highly diversified recession-resistant businesses. Looking ahead, we anticipate that our forward earnings will be impacted by two important dynamics. Lower base rates flowing through our majority floating rate book, and tighter spreads on new and repriced assets. We are focused on the impact of lower rates on the earnings power of our portfolio, and having managed this fund for 10 years across various interest rate environments, we view rate sensitivity as a natural driver of BDC results. Importantly, there is a delay from the time when rates are lowered to when we see the full impact on the portfolio. At the same time, industry spreads have tightened resulting in the weighted average spread on our portfolio compressing by approximately 30 basis points over the last year. For this quarter, given our strong results, we are maintaining the regular dividend of $0.37. However, we will continue to discuss this carefully with our board and evaluate the dividend each quarter, particularly as the full effect of these lower rates and spreads are now impacting the portfolio. While lower rates and [indiscernible] spreads will compress asset yields and NII returns across the industry, they generally improve borrower fundamentals and, in turn, credit quality. Against that backdrop and given the solid borrower performance we continue to see, we do not expect broad-based credit issues in our portfolio. This contrasts with what seems to be reflected in our stock price, where the dividend yield is approximately 10% on NAV, but over 12% based on current trading levels. You've heard me say this before, but this is a very high-quality portfolio built through disciplined underwriting, with the appropriate structures and protection to perform across cycles. The recently announced $1.4 billion Blue Owl BDC asset sale transaction reflects the full book value of the underlying investments, and provides clear third-party validation of the strength of our book, the rigor behind our marks, and the discipline in our underwriting. We have conviction in our strategy and are focused on acting in the best interest of our shareholders, supported by our share repurchase activity and prudent management of our balance sheet. As we close our call, I want to mention that over the past year, spreads have generally trended tighter, but renewed macro uncertainty could drive widening, which we are currently observing in the public [indiscernible] markets. Should this environment persist, it could present an opportunity to selectively deploy capital at higher spreads on new deals. The market is asking questions [ of ] private credit managers. We believe we will continue to deliver and ultimately, that performance is what will matter. Thank you for your time today, and we will now open the line for questions. Operator: [Operator Instructions] Our first question today is coming from Brian McKenna from Citizens. Brian Mckenna: Okay. Great. So there are some headlines out there this morning that OBDC II is halting redemptions permanently. Is that how you view last night's announcement? And then can you just remind us how much of that portfolio is turning over on a quarterly basis? And then what you plan to do with those [indiscernible] Craig Packer: Thanks, Brian. I appreciate the question. First, I want to reiterate, we think this is a terrific transaction for the investors in the funds that are affected OBDC II, OBDC and [indiscernible] and also extremely endorsing for our entire credit platform. I think it's a really strong statement for us to be able to complete the sale of $1.4 billion of private assets in a very short time line at book value at [ 99.7% ]. I think that's strong for any asset class to clear that kind of size at that kind of price at book value, and an extremely strong statement. As you noted, there are a few headlines. I think most of the feedback has been quite positive, but there are a few headlines that we think are a complete mischaracterization of what's happening here. We aren't halting redemptions. We've been tendering [indiscernible] of the shares of this fund for 8 years. We instead of resuming 5% a quarter, we are, in fact, accelerating redemptions, and we're going to return to this investor group, 30% of their capital at book value in the next 45 days. So investors that would have thought they were getting 5% are getting 6x the amount of capital in cash at book value immediately. So we're not halting redemptions. We're simply changing the method by which we're providing redemptions. A tender offer, as you know, is subject to the investor choosing to get their capital back, in a fund that can place different incentives for investors that are [ hitting ] the redemption or waiting. It can treat investors differently. We thought it was more important to treat all investors the same. So we're doing a 30% pro rata distribution. So investors don't have to elect into this, or worry if they don't elect into a tender that they'll get a weaker portfolio. They're all going to get the same 30% distribution at the same time. As you asked, what should investors expect going forward? I want to remind everyone this fund is a different structure than our non-traded perpetual BDCs. This fund was raised 8 years ago, and was raised more akin to a private institutional fund. It was always anticipated that at some point, this fund would have some type of strategic transaction, whether that be a merger, a listing, or an IPL. And the other alternative that was stated very clearly at the outset was at some point, we may just choose to return the investors' capital. That is the path that we are choosing here. We are going to accelerate the return of the investors' capital, and we're starting with a very significant down payment of 30% immediately. This fund has significant earnings. We're going to continue to pay our dividend. But as you know, we also get regular repayments. And so as we get those repayments, we're going to discuss with our Board, but our intention is to continue to return capital on an accelerated basis. So we assume for this purpose, we'll get redemptions of 5% a quarter. Every quarter investors should expect we will evaluate a return of capital of 5%. We've got some debts. We have to make sure we're properly handling the debt. But basically, if you assume 5% per quarter, we could be in a position by the end of this year that we've returned half of the investors' capital. So again, not only are we not halting redemptions, but I think it's going to be significant cash flow to these investors. And more to the point, I want the audience to appreciate, we've had extensive conversations with the investors and the financial advisers that work with them over the last couple of months discussing alternatives for what we would do with this fund. And as we discuss those alternatives, we are confident that the plan we're pursuing is going to be extremely well received by those investors for the reasons I've outlined. Brian Mckenna: That's helpful, Craig. And then just a follow-up on OBDC. Cash ended the year at $570 million, you have the additional $400 million coming in from the sale. So depending on where leverage [ shakes out ] you have about $1 billion of capital to deploy before assuming any additional prepayment. So what's the most accretive use of capital today? Where are you leaning in from a deployment perspective? And you mentioned maybe an opportunity with spreads widening here. We'll see exactly how that plays out. And then are buybacks still on the table at current prices? Craig Packer: So we -- as we noted in the press release, but maybe everyone hasn't had a chance to review it yet. We started this process really focused on solutions for OBDC II. However, in our conversations with the small group of buyers that we went out to, we saw very significant additional demand for these assets, well in excess of what we were planning to sell out of OBDC II. And so we thought it was important to consider taking advantage of that strong demand at a very high price, and see whether there were additional tactical goals that could be accomplished. With respect to OBDC, the portfolio is in extremely good shape, but we use this as an opportunity to -- really with a scalpel like precision, modestly trim some larger positions just in the name of good housekeeping portfolio management. I do think it's an environment where we're seeing capital start to constrict a bit. We're seeing it in the public loan market. We're seeing that in some of the private markets. And so we're hopeful that, that will lead to a better environment to deploy capital and start to see some spread widening on some attractive investments. And by selling these assets, we put OBDC in an even stronger position to be able to deploy capital. However, as you know, our stock price is also trading significantly below book value. We just completed the largest repurchase of shares in the company's history, and the stock price still stayed -- is at a very depressed level. And so we increased our stock buyback program with our Board, replenished it to $300 million. We increased it, and we're going to actively look at comparing buying stock versus deploying capital into the market. But again, maybe not everybody has had a chance to study this carefully, I just want to call your attention to it. We think it's quite striking that we can easily sell $1.4 billion of assets at book value, or [ 99.7% ], and at the same time, a portfolio of those same assets trading in the low 80s to high 70s percent of book value. So we will continue to look at the stock and continue to find ways to do accretive things for shareholders. Operator: Our next question today is coming from Finian O'Shea from Wells Fargo. Finian O'Shea: A follow-up on the [indiscernible] Craig Packer: Fin it's hard to hear you. Sorry, can you try to get a little bit closer to the microphone? Finian O'Shea: Yes, sorry. So yes, to follow up on the portfolio. I appreciate how the LPs had more interest. But with OBDC, was there -- you just answered this a little bit with Brian. You've pruned some [indiscernible] positions. But just looking at it like you didn't have too much need for liquidity. You're not too concentrated either. It's something like 70-something names you guys sold. So is there a -- I guess, if it's a fine-tuning issue on concentration, is that roster of names say, concentrated in your top 10 or top 20? Or is there another benefit to the portfolio sale? Craig Packer: Sure. So look, this was a really thorough process involving 4 really high-quality institutional investors in a very tight time frame. We -- they were very engaged with us. They did detailed due diligence on the names in the portfolio, even though several of them knew us well, they were buying a portfolio, they did detailed due diligence. And we certainly wanted to make sure if they were to do that work, that they would have an opportunity to make an investment. And so as we work this through with them and we're looking at our portfolio, we settled on these asset sales splits. I think for OBDC II -- for OBDC, at the end of the day, we sold 2% of the assets. It's really immaterial. This would be like we got one repayment in a quarter. It's not material. But as I said, we thought we have this interest. It's at a very high price. The market is starting to loosen up. We just bought back some stock, if we can, on the margin, create a little bit of liquidity, it's worth doing. It also accomplishes the goal of having 4 large investors who each bought, by the way, the same exact amount, the same exact price all have transactions that they were excited about. So I think it accomplished that goal as well. But I guess I would also say, and I said this in the prepared remarks, but I think it's worth revisiting. We understand and we see the same things that you're reading. There's skepticism about marks, the skepticism about valuation. We've always been saying we feel really good about the quality of our portfolio and the quality of our marks. But just saying it in some [indiscernible] doesn't seem to have done enough. So we're putting our money where our mouth is. We sold the assets to 4 different third parties at [ 99.7% ]. I should point out that while OBDC only sold $400 million worth of assets, these -- very sliver portion of 75 different line items, our exposure in OBDC to those line items is almost half the portfolio. So we view the sale at OBDC as validating almost half the portfolio. Not only at book value, but at [ 99.7 PAR ] sold these assets at [ par ]. That's not only for OBDC, but it's true for the entire Blue Owl direct lending platform. The assets we're selling here represent our largest names, our biggest exposures, and we had resounding demand at [indiscernible] I think that's a really strong statement and I think it was a statement worth making in an environment where people are asking questions and they're skeptical about marks. People read one article about 1 mark and one portfolio somewhere and they extrapolate it out, and we're giving a stake in the ground with a different set of facts, and a set of facts that spread across 130 positions in our portfolio. Finian O'Shea: I appreciate that. Sort of a follow-up on, I guess, a continuation of this discussion in the mechanics. One small part, can you clarify. We just get a lot of inbound on this. Is there any sort of, like, delayed settlement accrual, like extra -- I don't know if I'm working this right, but the extra sort of compensation to the buyer? And then also, given the sort of -- we don't see this often in [indiscernible] vehicles selling to another account managed by the same adviser you guys. Is there anything to this structure where maybe this runs down quickly? Maybe this is a swath of the portfolio that you expect to repay really soon, and therefore, it's not truly a fun kind of thing, or anything else that... Craig Packer: If I could rephrase your question, is there something we're missing behind the scenes, right? I get it. I get it. I -- again, we're in an environment now where there's a high degree of skepticism about private credit. And unfortunately, that skepticism can be amplified by folks that aren't even in private credit and don't spend any time in the industry, and don't hesitate to forward things and amplify them in a way that makes them seem more prominent than they are. The transaction is exactly what appears. We're selling 128 positions at [ 99.7 ] to 4 different institutional investors, that each made their own investment decision at the same time and not only bought this portfolio, they would have bought multiple amounts more. It is common when you do secondary asset sales for them to come at a discount to book value, these didn't. Sometimes, you'll see other types of transaction structures, particularly with a continuation vehicle structure where perhaps the purchaser is getting the benefit of elongated interest payments that's reducing their basis. And that's behind the scenes, and it doesn't -- it's not obvious. That's not happening here. They're buying it at [ 99.7 ] and we're using standard LSTA loan trade settlement procedures, just like every trading desk is using every day, it's plain vanilla. The buyers, arm's length, several of them just had accounts already set up with us. As we've highlighted, we are going to continue to own most of the positions in these loans and manage them. And so the buyers found it convenient to keep their portion of that strip in an account they have set up with us, made it easy to do, but it's their economic risk. We'll help them manage the position. They made an arm's length economic decision, and there's nothing behind the scenes that would any way undermine that conclusion. Operator: Our next question is from Arren Cyganovich from Truist Securities. Arren Cyganovich: One of the questions we got from investors was why not sell all of OBDC II? Is there something just maybe just from a debt perspective, or we're just trying to understand why not just kind of get rid of that, I don't know, perceived issue or perceived problem from investors? Craig Packer: Sure. We had -- we canceled the merger in November. We thought it was really important to be able to do something very quickly. The merger and the cancellation caused a lot of confusion for the OBDC II investors and for investors in our other funds. And we thought it was important to be able to do something quickly and to demonstrate the quality of the portfolio and to return capital very quickly. This was that transaction. This -- we went through a number of alternatives. We wanted to do something of significant size. We returned 30%. We wanted to do something that demonstrated our marks, which it did. But we also wanted to do something quickly and that left the remaining portfolio in really good shape. That portfolio has about 0.5 turns of leverage. It has plenty of liquidity. It's diversified. It will be easier for us to continue to run it, and harvest it, and return the capital. There could have been other possibilities. As you said, sell the whole portfolio. I'm sure we could have done that. It would have taken longer, it would have been more complicated. As you might imagine, there are shareholder protections. If you're going to sell an entire portfolio that results in a much longer process. We opted for something faster, certain and that we put cash in the investors' pockets by the end of March. We'll continue to manage this fund. Again, this is a fund of loans. They contractually repay. We have high visibility on these repayments. We're not speculating about getting the capital back. We're going to continue to get capital back, and we'll continue to return the capital. As I mentioned earlier, by the end of this year, we may wind up returning half the investors' capital. So we'll continue to evaluate it. There's nothing particularly unique here. Funds in the private markets return capital to their clients all the time in the private credit markets, in the private equity markets. And there's nothing unique to this particular fund. Its just akin to any other fund and we'll manage it in a way that benefits investors. Arren Cyganovich: Yes, it makes sense. And to your point, you are returning it more quickly. And for OBDC shares, you're selling it NAV and having the ability to buy that at -- the big discount. So it's a benefit for OBDC. I totally get it. These are just the questions we're kind of getting from investors. The other thing I had was just on software. Obviously, this is an area that you guys have been very confident in all along. You have BDCs that are completely kind of designed towards this. What's your appetite for, kind of, new software loan purchases in -- is this creating more of a beneficial opportunity, I guess, as maybe some other peers might be a little bit afraid to step into the area? Craig Packer: So we covered this a bit in the comments. Look, we've always liked software. We have a significant team. We think we're one of the largest investors and have the capacity to differentiate between a software business that's going to be well protected in an AI world, and one that's going to be more vulnerable. We also have funds that are dedicated to the technology sector that have capacity to do software. OBDC was designed as a diversified fund as Logan mentioned, software is the biggest sector, but it's a relatively small percentage of the overall fund. So we have capacity to do best-in-class deals that we have extreme high levels of confidence are going to continue to hold up well. That bar has always been high. It's even higher now. We're certainly not taking lightly the potential impact for AI. Having said that, we continue to see our best-in-class companies perform well [indiscernible] think they'll endure. And if we see opportunities, we'll do it. But I would say we're going to be very discriminating. And I don't think our software percentage will go up. If anything, I would expect it to modestly decline over the next year or 2, but it will depend upon the opportunity set. Operator: Our next question today is coming from Robert Dodd from Raymond James. Robert Dodd: I think you've covered OBDC II pretty well on that front. On the sales book, I mean, there's some disclosure in there that, obviously, about, I think, 13% was Internet and software. Any information you can give us on like what vintage were those assets? I mean they are the larger assets. I'm going to presume, and we know what that makes me, that those were probably lower spread assets as well as the larger side of the portfolio. I mean any color like on those assets being sold, what was the weighted average spread versus what it is on the portfolio? You gave us Software and the Internet, but I mean, was there less PIK in that book, or more PIK in that book? Any other metrics you can give us on how it's going to evolve the -- modestly, right, because it's not that big a piece. But how it's going to impact the portfolio on those kind of metrics? Logan Nicholson: Yes. So -- thanks, Robert. It's Logan. The portfolio sales were a slice across mostly first liens and the weighted average spread was just over 500. So relatively consistent with the broader portfolio. It wasn't a select few that were outliers across the book. And from a PIK exposure percentage, it was about in line with our PIK exposure. So again, we just referenced, we've got about 10% PIK exposure and the portfolio sold. It was about 10% to 11% PIK exposure across the book. So consistent across how our portfolio looks really no different. And it's not changing the portfolio in any meaningful way at OBDC. In particular, first lien percentages, non-accrual percentages, everything is the same pre and post. As Craig mentioned, on diversity, it helps to touch 3 of our top 5 position percentages go down a little bit as part of the transaction. And it helps us with some opportunistic capital to redeploy into a market that's increasingly more interesting. Robert Dodd: Got it. Got it. I mean, that's -- as we look forward, I mean, as you mentioned, spreads have started to widen a little bit, I mean, and we'll sell them those stick. But I mean, what's the view for the remainder of the year? I think you've covered all the things that have gone on this quarter and last year. But I mean -- are you optimistic on spreads staying wider and creating some incremental accretive opportunities from that perspective? On the other hand, you're saying you don't expect credit to deteriorate, which I probably agree with. And normally, if that doesn't happen, spreads -- sooner or later tighten back up despite what the public equity markets seem to think at the moment. So I mean -- how do you -- anything that's going to play out? Craig Packer: Yes. It's a good question. Look, from our perspective, we commented on this pretty regularly over the last year. Spreads have been extremely tight in all credit markets over the last 12 to 18 months. And not just private credit, leverage loans, IG, high yield, all spreads are tight. And we anticipate at some point, it would widen just to get to more of a baseline not to be wide, but just to get -- to be more of a baseline. You're starting to see that. I'm hopeful that, that will continue. Again, not dramatically so, but just get to more of a typical range. When the public loan markets arts to back up, private credit spreads move quickly. Our comments on the economy -- or excuse me, on the portfolio just based on the sectors we're in and the companies and they're doing well and they continue to do well. And we're seeing low single-digit, high single-digit growth rates, revenues and EBITDA. The companies are performing really well. That's why we're confident. Let me put it this way. I -- you can't have a view that there's a massive credit problems coming and spreads are going to be really tight. Like those things are, as you say, not compatible. What I expect is credit performance [ will continue ] to be good, not only for us but for the large players in the private credit space. And I think you'll see some modest widening of spreads and hopefully, some modest pickup in M&A activity. I do think that will favor the larger platforms that have capital and the smaller firms that don't have as much capital. I think the private equity firms, they -- they've had a lot of opportunity to talk to different liners in the last year or so, but when they see conditions start to tighten up, they moved to the largest funders and the ones that know them the best and they have to wear with [indiscernible] We're one of them. So I think it will be a better environment, but I'm cautious on it. We'll see how long it lasts. Operator: Our next question today is coming from Kenneth Lee from RBC Capital Markets. Kenneth Lee: Just one more on the loan sales transaction there. To clarify the mark that you received, the 99.8%, how does it compare with the previous fair value marks in general? Craig Packer: I mean it's -- we sold it at our marks. Marks -- the fair value was [ 99.7% ]. It's very consistent with where marks have been every quarter. Most of our book for the last year has been valued close to [ par ]. And we sold this basket of loans at [ par ], consistent with the last year or so. I just want to make sure we're being clear on this. We didn't negotiate price by price with investors. We said we want you to pay our book value. And we did our same valuation process that we always do, and we said we want you to pay book value. They agreed to pay book value. So not only is that endorsing of -- we got par, it's also endorsing of our valuation process. They trusted our valuation process the same way we trusted it. For independent parties doing their own work, agreed to pay book value. And we updated that book value. Jonathan Lamm: As of February 12 [indiscernible] a valuation for us on that day. So they're up to date, and the moves in the valuations were minor across the portfolio as a whole. Kenneth Lee: Got you. Very helpful there. And just one follow-up, if I may, just on the dividend. And could you talk about some of the inputs or considerations that the Board may take into account, or present the common dividend, [ then go forward ]? Craig Packer: The -- our process with the Board on dividend is the same we've been doing for 10 years. We looked at all the kinds of metrics that you would expect. What we're earning, what we expect to earn, credit performance, dividend coverage. But the outlook is -- we generally like to have a stable base dividend. We put in place the supplemental a couple of years ago because we're earning a lot with higher rates. But look, as we said in the script, and I think you're hearing from other managers, although credit performance is very strong, it's different rate environment. Rates are lower. Rates are expected to continue to go lower. Spreads [indiscernible] and so particularly as a result of rates. Rates went up, we earn more. Rates have come down. We're earning less. This quarter, we looked at it and we earned $0.36 with a $0.37 dividend. We felt it was reasonable to continue to keep the dividend where it is. But as we said in the script, we're going to see, we're seeing now the full impact of rates and the full impact of spreads, and we're going to sit down with the Board every quarter, but certainly next quarter, see where our earnings are coming in, see what our outlook is over the next few quarters and assess the dividend. And we don't like to move the dividend around every quarter. So we'll have a thorough discussion, just completed our Board meetings yesterday, we talked about this early, and we'll continue to do that just like we have since inception. Operator: Your next question today is coming from Casey Alexander from Compass Point. Casey Alexander: I can appreciate your frustration that in this environment right now, everything is being looked at through the most skeptical lens possible. And that's kind of what happens when the market paints things [indiscernible] brush. But what I want to ask is now that the market knows that Blue Owl II is in runoff, and you did this transaction with just 4 investors, there's a tremendous amount of dry powder that is still out there in LPs and places like that. I would expect that your inboxes might be pretty busy from other folks that would like to take a look at that Blue Owl II portfolio and see if there are things that they might want to buy. Would you guys consider additional asset sales out of that portfolio to accelerate the process of winding it down? Craig Packer: Casey, we'll consider anything that's going to deliver great value to our investors. And you're right, we got inbound since November. And I already highlighted that these investors that we sold assets to had additional demand that would have taken more of the paper now. Look, [indiscernible] folks appreciate, these are great questions. The answers are complicated, how you decide to wind something down, when does something require some type of shareholder vote or engagement? These processes are not -- these aren't public loans where we're just selling out in an afternoon. This is a company, it has a Board and it has a process. We've been following that process as we always have and we'll continue to do so. But I think the guts of your question is we would like to continue to accelerate the return of capital. This, again, not -- as it has always meant to be, as it has always meant to be, it was always meant that at this point in the fund's life cycle, we would come up with a strategic transaction that result in the investors getting liquidity. And so we are -- we now have a defined path. This is the path, and we will look for repayments, earnings and also potential additional asset sales to continue to return that capital. I just want to come back to something I said earlier. I know there's a lot of questions. And part of the question is, how are the investors feeling? A lot of folks that are wondering, they're speculating. The investors feel like we've treated them very well. Investors really [indiscernible] with this transaction, and I think they'll continue to be happy with us if we continue on a path of really carefully managing it and getting the capital back at a good price. We're not getting pushed by the investors to try to sell out quickly and not get fair value. They just want us to manage it prudently like we always have. And if I could, I would broaden the lens. Again, we recognize our platform is very much in the public's eye. We also think we've treated investors really well in our non-traded funds, where we've stepped up and met increased redemptions. So the client base there, I think, also appreciates that we continue to try to put our investors first. So that's what we'll do. If we see transactions that are at a great price and can accelerate the return of capital, we're very open to that. But it's a little more complicated than deciding tomorrow morning to just sell the assets. Casey Alexander: I could certainly appreciate that, and thank you for that answer, Craig. Since this is an OBDC call, ask a question that is relevant to OBDC. Jonathan, can you give us a little more granularity on the onetime income and the lowering OpEx that produced the $0.02 tailwind? Just give us a feel for where some of that came from? Jonathan Lamm: Sure. The majority of it was from a repayment where we got some call protection. And then on the OpEx side, call it, $0.05 or so, is really just when we completed the merger at the beginning of the year, OBDC and OBDE. Although we promised synergies, we budgeted in the context of in a conservative manner in terms of not necessarily hitting all of those synergies. And so when you get a lot of your invoicing and your expenses coming through at the end of the year, we effectively saw a positive true-up, which is nonrepeatable related to those synergies. And so that contributes to what I'll call a onetime OpEx adjustment. Operator: Next question today is coming from John Hecht from Jefferies. John Hecht: Just looking at the published material. If you look at the principal amount of investments sold or repaid, it's -- and you addressed this in some of the remarks earlier, it's fairly elevated. I'm wondering, can you break that down versus what you proactively sold last quarter, versus what was a scheduled paydown versus -- what might have been a prepayment? And then what's your perspective on -- obviously, you've announced the additional sales this quarter. But what's your perspective on that type of activity beyond the planned sales, right, or announced sales at this point in time? Logan Nicholson: Sure. Great. Great question. We reported the number of just over $1 billion of repayments, that's entirely repayments in normal course. The asset sales of $400 million or not in those numbers yet. They will be forthcoming and closing over the next few weeks, and we'll be in the first quarter numbers. So everything was normal course in the last quarter. Kabir Caprihan: And is that -- do you expect that pattern to persist? Or was it just sort of a confluence of a lot of maturities or something like that, that happened last quarter? Logan Nicholson: I'd say it's in a normal course that we saw repayments in the fund at around $1 billion. It's been consistent with our last few quarters. And we have the opportunity in any given quarter to decide how much we reinvest or not. And as mentioned, we prioritized other things during the quarter like paying down debt as well as share repurchases in particular. And so it's our opportunity to take a look at that normal accordance repayment cycle that happens every quarter, and then choose to reinvest a portion or not depending on our priorities. And that's really on the reinvesting side was where we made the decisions, the repayment side was all normal course. John Hecht: Okay. That's helpful. And then where are we at with respect to like [ rate floors ] and ongoing sensitivity to potential Fed rate declines? Logan Nicholson: Sure. rate floors are not yet in effect. Where we have rate floors on a portion of the portfolio. They're typically around 1% and they were really a legacy of the zero interest rate environment of years ago. And so at this point, as with most lenders in the space, our loans would still be floating rate and true to that level of SOFR as we go down, it would be effectively one-to-one. Operator: Our final question today is coming from Paul Johnson from KBW. Paul Johnson: In terms of the mix of the transaction, I noticed you mentioned both funded and seems like funded and unfunded commitments. What is, I guess, kind of the composition mix for OBDC in terms of what was funded on the balance sheet and what's leading in terms of a commitment? Logan Nicholson: On the asset sales, it's about 10% unfunded. It's consistent with our existing. So if you look across the portfolio, it's really a slice of the [ existing ] and consistent with our unfunded revolver and DDTL mix. And so when we say [ 400 ], that's the full commitment size about 90% of that is funded and 10% of that unfunded. Again, broadly across the 3 different portfolios involved that's consistent. Paul Johnson: Got you. Okay. That makes sense. And then maybe just a little bit more on the transaction. I was wondering if you could just, maybe kind of, give us an idea of like what was, I guess, kind of the process here? I mean, was this like a solicited transaction? I mean you mentioned excess demand here. And the other question I have, maybe an odd question, but I'm just curious, where do the assets actually go? You mentioned like you have -- they have an account with you. So do they stay in one way or another on the platform? Or are these transferred into structures that are off the platform? Craig Packer: Look, the process we went through, we -- when we canceled the merger, we reached out to a very small handful of investors that knew us and that we thought had the [ wherewithal ] to make a sizable investment in private credit assets, high-quality private credit assets at book value. We had limited time and limited bandwidth, and we got great reception. And worked with the 4 that we're closing on, and they all got there. And so just a private process that we went through in expedited time frame, and they did their work and we made our teams available, and it was a very efficient process. Do you want to speak to the -- I mean in terms of -- again, it's no -- on the platform, I mean we set up vehicles or, in some cases, they had vehicles already set up with us where those vehicles bought these assets. I guess maybe if you're not familiar, big pension plans and insurance companies generally work with outside managers to manage their private credit exposure. These aren't public securities that they have the systems and team to monitor and they typically roll eye on managers like [indiscernible] to do that work for them to follow the credits, provide the information, track the assets, track the payments, and that's what's happening here. They didn't have to have us manage these assets. They could have a [indiscernible] to manage these assets. But not only do we [indiscernible] all these assets extremely well. We also own 90% of the positions. And so we're ideally suited to continue to manage them. But that's just typical of any purchase for -- from an institutional investor. That's how they would do it with us or any other big manager. Paul Johnson: Got it. I appreciate that, Craig. That's helpful. Last question I'd ask just bigger picture broadly on bank competition. Just love to get your thoughts there. It feels like the banks are positioning fairly competitively here. Just be curious to get your thoughts just kind of with the recent volatility, if that's changed at all and what the outlook may be is for the year? Craig Packer: I don't think there's anything new. The banks are -- the public loan market is a competitor to ours. It has been since the start of the firm, always will be. There are times where both markets are strong. Last year, that was the case. The public loan market tends to be more volatile, and that's the way the banks participate in the leveraged loan market. You've seen some volatility pick up and that impacts -- generally impacts how banks think about underwriting risk when things are backing up. They just tend to get more cautious and that can swing deals in our direction where we're seeing a few deals that would have otherwise gone to the public markets, that are quickly moving to the private markets. I don't want to extrapolate a trend for a few weeks to infinity. But in the last couple of weeks, we've seen that. I expect that will continue. But we have great relationships with the big banks. They do -- we do lots of business with them. They are a big source of financing. And there's no profound change to the competitive environment, but it's more a function of just where market demand is. And again, I suspect the pendulum swing a little bit more to private credit, but we'll see. Operator: Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments. Craig Packer: Look, we obviously covered a lot of ground. I would just urge everyone, please read the release that we put out on the asset sales. Don't just read the headline, don't just read the tweet. Read the announcement. We put a lot of information in there. I'm confident if you read the details of what we did, it will be very clear. And you have clarifying questions, we welcome them. Please ask us. We think this is a really strong outcome for the investors in our funds and I think a really strong endorsement of the quality of our assets, and want to make sure that you see it that way as well. Thank you, and have a great day. Operator: That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Welcome to the Teekay Group Fourth Quarter and Fiscal 2025 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead. Lee Edwards: Before we begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the Teekay Group's Fourth Quarter and Annual 2025 earnings presentation. Kenneth will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth quarter and annual 2025 Teekay Group earnings presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation and Teekay Tankers' President and CEO, to begin. Kenneth Hvid: Thank you, Ed. Hello, everyone, and thank you very much for joining us today for the Teekay Group's Fourth Quarter and Annual 2025 Earnings Conference Call. Joining me on the call today for the Q&A session is Brody Speers, Teekay Corporation's and Teekay Tankers' CFO; Ryan Hamilton, our VP, Finance and Corporate Development; and Christian Waldegrave, our Director of Research. Starting on Slide 3 of the presentation, we will cover Teekay Tankers' recent highlights. Teekay Tankers reported GAAP net income of $120 million or $3.47 per share and adjusted net income of $97 million or $2.80 per share in the fourth quarter. For the full year, Teekay Tankers reported GAAP net income of $351 million or $10.15 per share and adjusted net income of $241 million or $6.96 per share and realized gains on vessel sales for the year totaling $100 million. Spot tanker rates during the quarter were the second highest for a fourth quarter in the last 15 years. With our significant spot exposure and a low free cash flow breakeven, the company generated approximately $112 million in free cash flow from operations and at the end of the quarter, had a cash position of $853 million with no debt. This excludes $99 million of cash held in escrow at the end of the year related to payments for vessel purchases. Teekay Tankers continues to execute on its fleet renewal strategy. In January, we acquired three 2016-built Aframaxes for $142 million and bareboat chartered the vessels back to the seller on short-term contracts. We expect to take over full commercial and technical management of these vessels in the second and third quarter this year. In addition, we sold or agreed to sell two older Suezmaxes for gross proceeds of $73 million. And just this week, we finalized an agreement to sell our only VLCC for gross proceeds of $84.5 million with delivery during Q2. We expect to recognize total gains from these sales of approximately $45 million in the first and second quarter of 2026. Looking at our first quarter to date, the tanker market has continued to strengthen, and we have secured spot rates of $79,800, $56,900 and $51,400 per day for our VLCC, Suezmax and Aframax LR2 fleets, respectively, with approximately 78% spot days booked for our VLCC and around 65% spot days booked for our midsized fleet. Lastly, Teekay Tankers has declared its regular fixed dividend of $0.25 per share. Moving to Slide 4. We look at recent developments in the spot market. Spot tanker rates strengthened in the fourth quarter of 2025 due to a combination of fundamental drivers, geopolitical events and seasonal factors. Global seaborne oil trade volumes were near record highs during the fourth quarter due to the unwinding of OPEC+ supply cuts, coupled with rising oil production from non-OPEC+ countries, particularly in the Americas. In addition, tighter sanctions against Russia, Iran and Venezuela created trading inefficiencies, which have benefited tanker ton-mile demand while pushing more trade volumes away from the dark fleet towards the compliant fleet of tankers. Midsized tanker spot rates were further supported by disruptions on the CPC terminal in the Black Sea during November 2025, which led to a reduction of crude oil exports for around 2 months. This outage opened up the arbitrage to bring U.S. oil across the Atlantic to Europe, while poor weather in Europe prevented ships and ballast from returning across the Atlantic, giving rise to very strong rates for both spot voyages and lightering in the U.S. Gulf region. Spot tanker rates have strengthened at the start of 2026 with midsized rates trending above the 5-year high in February as many of the factors which supported the tanker market during the fourth quarter remain in place. Turning to Slide 5. We look at the impact of sanctions on tanker trade patterns. Geopolitical events continue to shape global oil trade flows and in recent months have pushed an increasing portion of global seaborne oil trade to the non-sanctioned or compliant fleet of tankers. As shown by the chart on the left, both Russia and Iran have found it increasingly difficult to sell their oil due to stricter sanctions leading to a more than 70% increase in sanctioned barrels at sea over the past 12 months. This includes both tankers in transit as well as oil held in floating storage and reflects the increasing complexity of the logistics chain for sanctioned oil exports. The end result is that buyers of Russian and Iranian barrels are having to find alternative sources of oil using the compliant fleet in order to compensate for the loss of sanctioned oil. This trend is most evident when looking at Indian crude oil imports. India became the top buyer of Russian crude over the past 2 to 3 years with imports averaging 1.6 million barrels per day in 2025. However, sanctions on Russian oil companies, Rosneft and Lukoil, coupled with an EU ban on the import of refined products made from Russian crude oil has led to a drop in imports to around 1 million barrels per day as of January 2026, with replacement barrels being sourced from the Middle East and Atlantic Basin via the compliant fleet. In addition, the U.S. and India recently signed a trade deal, which reportedly involves India further reducing the imports of Russian crude oil, which may push even more trade to the compliant fleet in the coming months. Finally, recent U.S. action in Venezuela is incrementally shifting trade flows to the benefit of compliant tanker demand. Close of Venezuelan oil to China via the dark fleet, which averaged 550,000 barrels per day in 2025 have fallen to 0 since the onset of the U.S. naval blockade in December. Venezuelan oil is now being transported entirely by the fleet of compliant tankers with most volumes in January being directed to the U.S. Gulf and Caribbean on Aframaxes. In the early part of February, we have also seen several loadings destined for Europe on Suezmaxes, while we understand that some Indian refiners have also booked cargoes for April delivery using VLCCs. To give an illustration of the potential impact going forward, an extra 500,000 barrels per day shift from Venezuela to the U.S. Gulf creates demand for approximately 20 Aframaxes. Turning to Slide 6. We review the key drivers for the medium-term tanker market outlook. Underlying tanker demand fundamentals remain positive. Global oil demand is projected to increase by 1.1 million barrels per day in 2026, which is in line with levels seen in 2024 and 2025. Demand could be further boosted by strategic stockpiling, particularly in China, where the country is projected to add just under 1 million barrels per day to strategic reserves during 2026 as per estimates by the U.S. Energy Information Administration. Non-OPEC+ supply growth is projected to increase by 1.3 million barrels per day in 2026, led by the Americas, which should lead to meaningful midsized tanker demand growth. The OPEC+ Group, which unwound over 2 million barrels per day of voluntary cuts in 2025 has announced a pause on further unwinds during the first quarter of 2026 and its supply policy for the remainder of the year is uncertain. On the supply side, over the recent months, we have seen an increase in tanker ordering, particularly for large crude tankers, which has pushed the size of the order book to a 10-year high when measured as a percentage of the existing fleet. As a result, tanker deliveries are set to increase in 2026 with a further acceleration in 2027. Though actual fleet growth will depend on the level of vessel removals through scrapping or via the migration of vessels from the compliant fleet to the dark fleet and the utilization of older vessels. While the order book size has increased over the past year, we should keep in mind that the tanker fleet is aging with the average age of the fleet now the highest in over 30 years, meaning that there will be a significant amount of replacement demand in the coming years. In fact, the order book, which now stretches into 2029 is completely offset by the number of compliant tankers reaching age 20 over the same time frame, not to mention the dark fleet of tankers, which already has an average age of over 20 years. So in short, while the tanker order book appears large on the surface, these vessels are needed to replace the older fleet of tankers, which are approaching the end of their trading lives in the coming years, although the timing of when vessels will exit the fleet is uncertain. Turning to Slide 7. We highlight TNK's key achievements in 2025. Reflecting on the year, the tanker market for 2025 was strong but volatile, influenced by several dynamic geopolitical factors. With our exposure to the spot tanker market and our low free cash flow breakeven levels, Teekay Tankers generated $309 million of free cash flows while returning approximately $69 million of capital to our shareholders via our regular quarterly dividend and $1 special dividend in May of last year. We commenced our fleet renewal process, including our recent transactions in January and February, the company acquired 6 vessels for $300 million, while selling 14 vessels for $500 million, booking estimated gains of approximately $145 million. As a result of these transactions, we have made progress towards reducing our fleet age. These transactions highlight our ability to act opportunistically given the dynamic market conditions. In addition to the fleet renewal transactions, we outchartered 3 vessels, extended an in-chartered vessel for another 12 months and sold our investment in Ardmore, generating a gross return of over 14% on this investment. Overall, our strong financial result was supported by our exceptional operational performance with 0 lost time injuries and 99.8% fleet availability, important metrics measuring the safety of our crews and reliability of our operations. Turning to Slide 8. We highlight Teekay Tankers' value proposition. First, as a result of our fleet profile, our operating leverage remains strong and the company is well positioned to generate significant cash flows in nearly any tanker market. With our 3 out charters and no debt, we have a low free cash flow breakeven of approximately $11,300 per day, which is down significantly from $21,300 per day in 2022. For every $5,000 per day increase in spot rates above our low free cash flow breakeven is expected to produce about $55 million of annual free cash flow or $1.60 per share. Second, Teekay Tankers has a strong balance sheet with no debt and a large investment capacity for future growth. Having $853 million cash position, we can transact quickly in this dynamic tanker market. And lastly, the company's performance is underpinned by our integrated platform. We believe our in-house commercial and technical management is a competitive advantage. Combined with over 50 years of operating experience in the tanker industry, we provide superior service to our customers and transparency through the value chain, which drives shareholder returns. In summary, the company's strategy over the last several years has been to maximize shareholder value through our exposure to the strong spot market. In 2025, we made progress to renew our fleet by making incremental investments in more modern vessels, while at the same time, selling some of our oldest tonnage. As we look ahead, our best-in-class operating platform and strong financial footing positions the company well to continue renewing our fleet, earning cash flow, building intrinsic value and returning capital to shareholders. With that, operator, we are now available to take questions. Operator: We'll take our first question from John Chappell with Evercore ISI. Jonathan Chappell: Brody, a couple of questions for you today on modeling. So the bareboat charters for the Aframaxes that you acquired and will take full commercial ownership in the second and third quarters. Between January and taking that full ownership, the P&L impact, is that you're just getting the bareboat rate that you chartered back to the previous owner. There's no OpEx, there's no D&A. There's no other impact except a revenue. Brody Speers: Yes, that's right. We're just getting the bareboat back. And those ships will actually dry dock in the first half of the year during that period, too, but we'll continue to get the bareboat rate during the dry docking. Jonathan Chappell: Okay. Great. The other thing I wanted to ask you was the G&A run rate. So you did the whole management reorg, et cetera. So as we look at kind of the last 3 quarters, is that the right run rate to think about going forward, maybe with some inflationary impact on there? Or is there anything that would either make that go up or down significantly from, let's call it, the last 3 quarter run rate? Brody Speers: Yes, I think that's right. I think if you look at even our annual G&A for the year, around $46 million. Going forward, I think we should be about that or maybe a little bit lower. So it approximates the run rate from the last few quarters. Jonathan Chappell: Okay. Final thing, sorry, just to harp on this stuff. It's the strategic stuff to market. I think we've covered that pretty well already. The D&A. So you've done a lot of fleet renewal, taken out the V, a couple more Suezmaxes. And then obviously, you're not going to add the 3 acquired Afras until, call it, the middle of the year. What do we think about for a first quarter starting point on D&A? Is it similar to 4Q? Or would it be a step down from there? Brody Speers: Yes. Yes, it should be pretty close to what we had in Q4 there at about $21.5 million or $22 million in the first quarter. Operator: Our next question will come from Omar Nokta with Clarksons Securities. Omar Nokta: Obviously, things are progressing quite nicely. You were mentioning the $850 million of cash you've got that gives you plenty of flexibility in this market to act quickly when an opportunity arises and you're getting close to that $1 billion number here, seemingly, I would say, in the next -- presumably the next few weeks or months. But -- and you have no debt. So just wanted to get a sense from you in terms of how you're feeling about this cash position you have on the balance sheet. Do you feel compelled to put that to work? And is there like a sense of urgency that you have either at your -- at the management level or at the Board level that you want to put that to work? And I guess maybe kind of related, obviously, to that is, how are you thinking about putting that to work when it's time? Is it more kind of drip fee dynamic in acquiring assets in the sale and purchase market? Or are you thinking more big picture M&A? Kenneth Hvid: Thanks, Omar. Welcome back. Good question. Obviously, it's a bit of a high-class problem we're sitting on here. But it's not something that's a big surprise to us. I mean we could obviously project this out. I think what has surprised us maybe in this quarter, last quarter and this quarter we are in here is how strongly the market has performed. That's obviously positive. We have still a lot of operating leverage and generating a lot of cash flow in this market. Had the market been low, we probably would have been a bit more active on the buying side. We still found a couple of ships, and we're happy about that. The way we look at it in a strong market, which very clearly, and we've seen the big uplift in tanker values here is that we're still an operator. We still want to renew our fleet. We still believe that there are deals that we can find in this market. So -- but at the same time, we also recognize that asset values have had another step up here, and that's natural as we are seeing spot rates as we have. I expect that we will continue to do a couple of purchases throughout the year here. I think it's a very tough environment to see that we do a major acquisition just because of the relative asset values. So I think the short answer to your question in terms of big acquisition versus drip feeding, I think, was your words. It will probably be more drip feeding with a couple of ships here and there. And the way we think about it is that we can still do it on a basis where we are selling maybe 1 old ship and buying 2 new ones and using a bit of the arbitrage that we have as we have seen a nice uplift also on the values of the older tankers that we have. Omar Nokta: Yes. Makes sense. And then I guess, perhaps a follow-up and clearly related. We're coming up on the 1Q dividend potential. I know you've declared $0.25. The past 3 years, you've conditioned us to anticipate a special with 1Q. Is the plan still to stick to that? And I know it's a Board decision, you can't just speak openly like that. But can we presume that the payout for the first quarter will be higher than what was done last time around? Kenneth Hvid: Yes. I'm just looking for my note to your question from exactly a year ago, Omar. And I think my answer at that time was that it's something we discussed with the Board at our March Board meeting and as we've done in the last couple of years, we typically announce any specials in connection with the May earnings release. Omar Nokta: Okay. I will try to remember that for next year. Operator: We'll now take our next question from Ken Hoexter with Bank of America. Ken Hoexter: Brody, I love going back to the May script to repeat it. So thoughts on -- you mentioned the 500,000 barrels increase in Venezuela can provide the increased demand for a number of vessels. Your thoughts on timing of Venezuela getting back up and running? Or is there an immediate amount that they've talked about kind of revamping and being able to scale up with speed before long-term capital investments have to be made. Is there a potential of that increase of 500,000 barrels? Kenneth Hvid: Yes. I think the -- it's Kenneth here. I'll pass it on to Christian. The oil is obviously being transported already now, as we said in our prepared remarks, but I'll let Christian comment on kind of our outlook for Venezuela. Christian Waldegrave: Yes. So last year, Venezuelan crude exports averaged about 800,000 barrels a day. We obviously saw in December and January after the U.S. naval blockade that those volumes fell to about 500,000 barrels a day, and it was all the long-haul flows to China that disappeared. Just looking at where it's tracking in February, we're already back up to about 700,000 barrels a day of exports. So the oil is starting to move again, and it's all going on non-sanctioned ships, primarily to the U.S. Gulf Caribbean region, but we've also seen 2 or 3 cargoes to Europe. And we know that India is starting to buy some barrels as well. So it looks like we're going to get back up to the normal run rate of 800,000 barrels a day of exports fairly soon. And then I think there's an expectation as well that with the Venezuelan oil industry opening up and foreign companies coming in and doing more investment that production and exports could be boosted within the year by another 200,000 to 300,000 barrels a day, but that's obviously dependent on how quickly they can get things moving there. So I think it's a good story for the tanker market in terms of the exports are shifting from the dark fleet to the compliant fleet. And then if we can get some extra production and volumes moving as well, then it's just going to benefit the midsized tankers, especially even more. Ken Hoexter: Great. How about the same thing, Christian, on an update on the Canada shipments? Christian Waldegrave: Yes. So it's an interesting one because, obviously, a lot of that Venezuelan crude, which is heavy sour was going to China. And so some of the Chinese state-owned refiners that were getting that heavy sour crude will probably be looking for replacement. And there are two areas they could replace it from. One is Middle East heavy crude and the other is Canadian. We have seen an increasing trend of the TMX exports going directly on Aframax to Asia. And I think it's a natural replacement for some of that Venezuelan crude. And we're also seeing a trend of the U.S. West Coast requirements are coming down because there's been some refinery closures there and the Benicia Refinery, I think, is in the process of closing down as well. So again, that just frees up more Canadian crude to flow to China. So I think we will see some volumes picking up there directly on Aframaxes, which again is going to benefit the Aframax market. Ken Hoexter: Yes. So it's staying on Aframaxes. It's not transloading the load. Christian Waldegrave: So now it doesn't seem to be transloading. It's going more directly on Afras rather than transloading a pile on to Vs. Ken Hoexter: Ken, how about a little history lesson, right? I mean it seems like something -- I don't know, maybe it's getting a little more antagonistic with Iran the last couple of days. If there is action, maybe a little history lesson on what's happened with rates and volumes with military action in the region? Kenneth Hvid: Yes. I think it's a good question. Right now, it's more in anticipation of something happening. And as you're probably alluding to, it's -- we go back to last time that we had action in the region where there was military action, and we looked at it back then, we saw a run-up in rates. We saw some security fears. I think we -- at the time, we pointed out that -- historically, we've never seen a closure of the Strait of Hormuz. But of course, that's what everybody is speculating about in the event that we see an escalation there, how is that going to drive up rates. And I would say the one difference we have this time around is that we've seen also consolidation in the VLCC segment. So it's a slightly different dynamic this time around in the event that charterers will be looking to secure tonnage quickly. But I think at this point, I mean, we see rates which are as high as we saw last time, but for slightly different reasons. And I think it's just a situation we need to watch. Christian, do you want to add anything? Christian Waldegrave: No, I think like Kenneth said, when we had the last time, obviously, it was last June during that 12-day conflict. And as Kenneth said, I think the big thing was during that time, there was no actual disruption to flows and to movements. It was more of a security sort of premium that caused the rates to spike and they came down pretty quickly. So it will depend if there's military action. Obviously, we don't know that. That's kind of speculative. But if there is military action, it depends on whether actual shipping and oil infrastructure is impacted or not. If the oil keeps flowing, then presumably, it will be a bit like last time, the effects might be short-lived, but it really depends on how it unfolds. Ken Hoexter: So if no attack on shipping or infrastructure, then rates -- you're saying they've already run up in anticipation and we see it cooling off. Okay. Got it. And then last one for me is the tanker order book. Now you mentioned 18% of the fleet, the highest since 2016, but you said optically, it's different as I think you said some of the vessels needed to replace an aging fleet. So maybe thoughts on -- your thoughts on supply/demand, Christian. How do you think we see the balance in the year ahead? Christian Waldegrave: Yes. It's going to be a timing issue, I guess, because as we laid out in the prepared remarks, the order book, while on the surface, it looks quite big. If you look at the fleet age profile, there was a lot of ships that were built in the late 2000s, especially 2008, 2009, 2010. So we're approaching a big hump in the fleet age profile that needs to be replaced. So the ships that are on order right now are needed to replace the older ships, but it's a matter of timing, right? We know when the ships are coming into the fleet, we don't know when ships are going to be exiting either through scrapping or other means. So in the meantime, like I said, the deliveries will ramp up this year and further into next year. So there's quite a bit of tonnage that needs to be absorbed. But for now, as we're seeing in the rate environment, the fact that the underlying demand is still positive. We're seeing more and more trade getting pushed to the non-sanctioned fleet. There are factors there that in the near term, at least suggest that the market should stay firm. But beyond that, it's going to depend on the timing of the order book coming in versus some of these changes that are going on, on the geopolitical side. So that's why we take a more balanced outlook on the medium term. But certainly, in the near term, I think things still look pretty positive. Operator: And that does conclude our question-and-answer session for today. I'd like to turn the conference back to the company for any additional or closing comments. Kenneth Hvid: Thank you very much for tuning in today. We look forward to reporting back to you next quarter. Have a great day. Operator: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Reliance Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with Investor Relations. Thank you. You may begin. Kimberly Orlando: Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Fourth quarter and Full year 2025 financial results. I am joined by Karla Lewis, President and Chief Executive Officer; Steve Koch, Executive Vice President and Chief Operating Officer; and Arthur Ajemyan, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the Investors section of our website at investor.reliance.com. Please read the forward-looking statement disclosures included in our earnings release issued yesterday and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release. I will now turn the call over to Karla Lewis, President and CEO of Reliance. Karla Lewis: Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2025 results. In 2025, we demonstrated strong operational execution and continued to expand our market share, underscoring the strength of our business model amid a complex macroeconomic backdrop and competitive operating environment. Our commitment to smart, profitable growth once again fueled strong results. In 2025, we increased our tons shipped by 6.2%, resulting in record tons sold of 6.4 million, outperforming the industry by over 7 percentage points with our U.S. market share increasing to approximately 17% in 2025 from 15% in 2024. In addition, we increased our tolling tons by 1.2% to 7.4 million customer-owned tons processed through our tolling operations. Our shipment growth was in carbon long and flat-rolled products, where we also increased our gross profit margin year-over-year. By continuing to focus on exceptional customer service and maintaining our strong relationships with key domestic suppliers, we were successful winning new business, and we were able to better leverage our operating expenses over higher volumes, leading to increased FIFO profits that further strengthen our long-term industry-leading position. We increased our FIFO gross profit margin by 90 basis points in 2025 compared to 2024 through strong pricing discipline, mainly on increased mill prices for carbon products, supported by healthy demand. However, significant tariff-related aluminum cost increases were more difficult to pass through due to plentiful supply and soft demand, especially in our commercial aerospace and semiconductor markets. Our 2025 non-GAAP gross profit margin of 28.8% is just outside of our estimated sustainable range, which we attribute primarily to tariff-driven annual LIFO expense of $114 million. We expect our gross profit margin to improve in 2026 as the impact of tariffs and trade uncertainty lessens, maintaining our annual range of 29% to 31%. We increased 2025 non-GAAP FIFO pretax income by $80 million. However, full year 2025 earnings per diluted share declined 10.2% from 2024. Excluding the impact of significant LIFO adjustments in both periods, 2025 non-GAAP FIFO earnings per diluted share increased 13.5% year-over-year, thanks to the talented teams we have throughout the Reliance family. Our strong cash flow generation continues to fuel profitable growth and deliver meaningful returns to our stockholders. In 2025, we generated $831 million in operating cash flow, which we redeployed into high-value initiatives, including investments in advanced processing equipment and other projects that support our long-term growth objectives. For 2026, we're announcing a capital expenditure budget of $275 million as we focus on maximizing returns on the significant capital deployed in recent years. Including carryover spending, we anticipate 2026 total CapEx spending of $300 million to $325 million with approximately half directed toward growth initiatives. Our scale, financial strength and operational capabilities position us to pursue compelling opportunities that may emerge in 2026, including acquisitions of well-run profitable businesses that broaden our footprint and strengthen our portfolio of metal solutions and through additional capital expenditure investments as attractive customer opportunities arise. We also remain committed to returning capital to our stockholders, delivering $849 million in 2025 through dividends and share repurchases. We increased our dividend by 4% to an annual dividend rate of $5 per share in the 2026 first quarter. In summary, Reliance's diversified business model and unrivaled scale help to offset market-specific weaknesses and support stable performance through economic cycles. Our expansive capabilities and financial strength enable us to invest when others retreat, positioning us to capture market share and accelerate growth as markets stabilize and improve. As we enter 2026 in a healthy demand and strong pricing environment, we are seeing increasing optimism from our customers and increasing activity around large-scale projects across several key end markets, including infrastructure, data centers, energy and defense. Reliance has the capabilities, talent and capital to continue to grow both our core small order quick turn business while also winning new business from these larger projects. We are excited to continue delivering disciplined profitable growth in the year ahead. I'll now turn the call over to our COO, Steve, who will review our demand and pricing trends. Stephen Koch: Thanks, Karla, and good morning, everyone. I'd like to begin by recognizing our teams for their solid operating performance and continued commitment to safety. Our 2025 total recordable incident rate improved in 2025, reflecting the discipline and care they bring to serving our customers each and every day. I also want to acknowledge our mill suppliers. When tariffs were imposed, our supply chain remained uninterrupted, which we attribute to our long-standing relationships with our mill partners and our disciplined supply chain strategy. Finally, we appreciate our customers, and we look forward to continuing to be their valued, reliable metal solutions provider and supporting their growth and success in 2026 and beyond. Turning to our demand and pricing trends. Fourth quarter tons sold declined 5.4% from the third quarter of 2025 and increased 5.8% from the fourth quarter of 2024, significantly outperforming the service center industry, which reported a decline of 1.2% over the same period last year and exceeding our expectations of up 3.5% to 5.5%. Delivering this level of outperformance in a market shaped by cautious buying and intense competition reflects the strength of our smart, profitable growth strategy and the benefits of our continued investments. Carbon volumes remain the primary driver of growth, particularly in the nonresidential construction and certain subsectors of manufacturing. Our fourth quarter average selling price increased about 1% from the third quarter of 2025, exceeding our expectation of relatively flat pricing. Aluminum pricing continued its upward trend in response to tariffs raising the Midwest premium. As Arthur will discuss in our outlook, we believe pricing for most products will improve in the first quarter of 2026. Turning to our end markets. Nonresidential construction represented roughly 1/3 of our fourth quarter sales, primarily from carbon steel tubing, plate and structural products. Shipments remained strong in the fourth quarter, supported by overall demand in heavy civil and public infrastructure work, along with record levels of data center and related energy infrastructure builds. These areas of strength outweigh pockets of softness in private nonresidential construction. Our broad participation and scale across a wide geographic footprint continue to support market share gains in this space. General manufacturing, also about 1/3 of fourth quarter sales remained highly diversified across products, industries and geographies. Shipments increased year-over-year, driven by strength in military, industrial machinery, including data center equipment, consumer products, rail and shipbuilding. We are also seeing higher nuclear-related demand tied to emerging small modular reactors activity and data center energy needs. Our performance across key product groups and our ability to move quickly into emerging markets continue to differentiate Reliance in the important general manufacturing market segment. Aerospace products accounted for approximately 10% of fourth quarter sales. Commercial aerospace demand remains subdued due to continuing elevated inventory levels in the supply chain, which we anticipate will gradually improve in 2026 as record OEM backlogs convert to increased build rates. Defense and space-related aerospace programs remained consistent at strong levels throughout the fourth quarter. Automotive, which we primarily serve through our toll processing operations and therefore, are not included in tons sold, represented about 4% of fourth quarter sales. Underlying demand has remained solid, supported by our recent capacity investments. Semiconductor market remained under pressure due to ongoing excess inventory in the supply chain during the fourth quarter. Overall, our people, our strong mill relationships and our commitment to customer service continue to differentiate Reliance and support solid performance. The capital investments we've made over the past several years are meaningfully contributing to our growth and our commercial and operational discipline drive our industry-leading profitability. I will now turn the call over to our CFO, Arthur Ajemyan, to review our financial results and outlook. Arthur Ajemyan: Thanks, Steve, and thanks, everyone, for joining today's call. We delivered a strong fourth quarter with record shipment levels, driving continued market share gains, improved profitability and solid cash flow. As Steve mentioned, volumes were strong and pricing improved 90 basis points sequentially, mainly due to tariff-driven increases in aluminum product pricing. Although we're able to pass through most of the tariff-driven aluminum cost increases during the quarter, ample supply limited the incremental margin benefit, resulting in modest near-term margin compression. Higher-than-anticipated aluminum costs contributed to fourth quarter LIFO expense of $39 million, above our $25 million estimate and increased full year LIFO expense to $114 million compared to our $100 million annual estimate. On a FIFO basis, which is how we measure our day-to-day performance, fourth quarter non-GAAP pretax income rose 28% year-over-year. This reflects the combined benefit of roughly 6% higher volumes and 6% higher selling prices, which more than offset the modest 30 basis point decline in our non-GAAP FIFO gross profit margin. Non-GAAP fourth quarter earnings per diluted share were $2.40, an 8% increase year-over-year. LIFO expense represented $0.56 per share for the quarter compared to the $0.35 per share assumption embedded in our guidance. Including the year-end LIFO and income tax true ups, our results reflected a net unfavorable impact of $0.25 per share. Adjusting for these items, non-GAAP EPS would have been within management's guidance at $2.65. For the full year 2026, we currently estimate LIFO expense of $100 million, mainly from higher carbon and aluminum product costs. Accordingly, we expect $25 million of LIFO expense for the first quarter of 2026. Turning to expenses. Same-store non-GAAP SG&A expenses increased 6.7% in the fourth quarter and 4.4% for the full year compared to 2024, driven by inflationary wage adjustments and higher variable warehousing and delivery costs associated with our increased tons sold. We also incurred higher incentive compensation in both periods from improved FIFO profitability. On a per ton basis, same-store non-GAAP SG&A expenses were down nearly 1% for the full year, highlighting the operating leverage generated by our growth strategy. I'll now address our balance sheet and cash flow. We generated strong cash flow from operations in the fourth quarter of $276 million. Our ability to consistently produce strong operating cash flow across market cycles supports our disciplined and opportunistic capital allocation strategy. During the quarter, we funded $73 million of capital expenditures, paid $64 million in dividends and repurchased $200 million of our common stock at an average price of roughly $279 per share. During 2025, repurchases reduced our total shares outstanding by 4%, and we have about $763 million available for additional share repurchases under our current share repurchase program. In addition, we increased our quarterly cash dividend rate by 4.2%. This marks our 33rd increase since our 1994 IPO to a current annual rate of $5 per common share. At the end of the year, our total debt was $1.4 billion. Our leverage position remains favorable with net debt-to-EBITDA ratio of less than 1, providing significant liquidity to support continued execution of our capital allocation priorities. Looking ahead, we expect healthy overall demand in the first quarter of 2026 in several key end markets, subject to ongoing domestic and international trade policy uncertainty. For the first quarter of 2026, we estimate our tons sold will be up 5% to 7% compared to the fourth quarter of 2025, which is consistent with seasonal trends and relatively flat compared to the first quarter of 2025, mainly due to tariff-related demand pull forward in Q1 2025. We expect our average selling price per ton sold for the first quarter of 2026 will improve 3% to 5% compared to the fourth quarter of 2025 due to healthy demand and higher mill pricing. As a result, we anticipate these dynamics will contribute to a modest improvement in FIFO gross profit margin in the first quarter. Based on these expectations, we anticipate first quarter 2026 non-GAAP earnings per diluted share in the range of $4.50 to $4.70, reflecting year-over-year growth of approximately 19% to 25% and inclusive of quarterly LIFO expense of $25 million or $0.36 per diluted share. In summary, we are pleased with our strong organic growth, continued market share gains and disciplined pricing execution in 2025. While we experienced some temporary margin headwinds from tariff-driven cost increases and excess inventory in the supply chain for certain pockets of the commercial aerospace and semiconductor end markets. Tariffs have had an overall positive impact on our business with higher selling prices supporting a meaningful year-over-year increase in FIFO profitability as 2025 progressed and as we head into 2026. This concludes our prepared remarks. Thank you again for your time and participation. We'll now open the call for your questions. Operator? Operator: [Operator Instructions] The first question is from Katja Jancic from BMO Capital Markets. Katja Jancic: Maybe starting on the gross profit side. So you expect the margin to improve modestly in first Q, which I think based on your guide implies you will be getting kind of closer to the lower end of your sustainable range. How should we think about margin in the rest of the year? In other words, is there opportunity to further increase it? Or is this the new norm where you might be leaning more on the lower end of that range? Karla Lewis: So from a gross profit margin standpoint, while we did have some headwinds during 2025, most specifically on the aluminum side with the tariffs driving up the price of the Midwest premium significantly. And typically, we can get ahead of those price increases, and it was more difficult given the reason for the price increase being tariff-driven. There was plentiful supply of inventory, aluminum inventory available and demand was soft to okay. So typically, when you have price increases, they're driven by healthy increasing demand, and that wasn't the backdrop for the aluminum price increases also with stainless. So we had a little margin pressure there. But what we were really proud of were our teams on the carbon side who are both growing their tons sold significantly and getting ahead of the price increases because those increases, there was demand to support that. And as we go into 2026 and towards the end of 2025, you saw continued price increases in certain of the carbon products that are strong, and we're seeing really good activity and increasing demand as we go into 2026 for those products. So that -- those are really good markets for us. On the margin pressure on the aluminum, remember, costs continue to increase during Q4 for aluminum products, and our teams have basically caught up and they're able to pass through the increased cost from the tariffs. But given the demand outlook, which is improving a bit, we're still seeing some pressure on getting a premium on those tariff costs, but we think that's going to improve as demand improves for those products as we move through 2026. So while Q1 2026, we may be near the low end of the range, as we see continued price increases, we would expect margins to trend up from that during the year as long as there's demand supporting the price increases. Katja Jancic: And then you mentioned that the outlook on the demand side, at least right now, it seems still pretty healthy. But there are some potential tailwinds from lower interest rates and manufacturing activity seems to be picking up. How are you thinking about the kind of volume growth in the second half of the year, especially with you focusing on profitable growth? Karla Lewis: Yes. So Katja, we do anticipate -- it's hard for us to look out a full year. It depends a lot of -- there are a lot of factors in the market that can change. But we are very positive at this point on 2026 based upon the quoting activity we're seeing right now. We are seeing, especially on the carbon side, which is the majority of our volume, we are seeing, like I mentioned earlier, good activity. There are a lot of large projects out there in different areas that are being quoted. There are purchase orders in place on some of that. We are seeing some of our customers on the carbon side buy a little heavier than they had historically. We think part of that is because they're coming off of low customer inventory levels. But also mill lead times are going out, which is always a positive sign. And people are looking to be able to secure the metal. I think with Reliance, we really appreciate our strong relationships with our domestic mill partners who are there to help support us to be able to get the metal to increase our shipments and support our customers. Operator: The next question is from Martin Englert from Seaport Research Partners. Martin Englert: I wanted to touch on structural products. It was a larger portion of the mix in fourth quarter. Just can you provide an update regarding what you're seeing with demand and also remind us of the margin profile of these products and how your demand typically compares to what's happening upstream at the mill level? Stephen Koch: So for structural beams, we just experienced another price increase last week. The base price is the highest it's ever been recorded. And that's due to demand throughout the non-res markets. Lead times are being pushed out. That's one of our larger products that we do stock. So we're seeing demand in public infrastructure, energy infrastructure and data centers. So our outlook for wide flange beams and structural tubing is very bullish. Martin Englert: And can you remind us generally if there's any timing difference between when you see activity and the mills see activity and just overall how the margin profile compares to the average margin for the group? Karla Lewis: Yes. From your question on the lag from the mills, I mean, in general, on kind of the nonresidential infrastructure side, typically, we've seen about a 6- to 9-month lag on large projects in particular. But we are -- we seem to be participating a little more in those larger projects. We're not the prime on the large projects in most cases, but we are getting more meaningful share in some of those large projects. So could the lag be a little less now? Possibly, but that's kind of been the trend historically. And from a margin side, we have healthy margins on our structural book of business. Years ago, people who followed us for a long time, we used to talk about higher return businesses in aerospace and energy and semiconductor. They have higher value products. But for the last few years with, I think, the pricing improvements we've seen generally in the market on the carbon side as well as our companies doing more value-added processing with the investments we've made to expand their capabilities. The carbon margins for most of our products are right up there, and we don't see the big difference. So a very good margin profile on our structural book of business. Martin Englert: Appreciate that color. Semiconductors, the inventory overhang persisting here in the end market. When was the last time that there was an up cycle here, if you can remind me and any signs or visibility as to when the inventory situation may abate and kind of how the cycle might -- downcycle might compare to other ones historically? Karla Lewis: Yes. Well, Martin, if you'll recall, I mean, semiconductor had been on an uptrend for quite some time. And I would say through most of 2023, industry-wise, it was record level shipments in semiconductor. We were participating in that. We had really good years at record levels. We believe a lot of customers were very concerned about being able to secure the metal they needed with how strong the market was. And so they bought ahead quite a bit. And quite honestly, for us, some of our book of business in the U.S. is somewhat dependent on which customers you're with because some are participating in the AI upswing more than others. So I would say, just being honest, we're a little behind on that side with certain parts of our customer base. But we have seen some slight improvement in some of the equipment makers, but we're expecting late this year, we might see that inventory being worked through and start to see a bit of an improvement there. Operator: The next question is from Phil Gibbs from KeyBanc Capital Markets. Philip Gibbs: Karla and team, maybe just talk about the M&A environment. I know you weren't very active in 2025, but certainly a big part of your longer-term growth trajectory. So just curious in terms of what may be out there, how is the valuations -- how are the valuations looking for some of the things that might be appealing to you all? Karla Lewis: Yes, on the M&A front, I guess, I would say I felt like we were active in 2025. We were looking. We were -- there were deals out there. We just didn't close any in 2025. So there are opportunities out there. There are some that are attractive to us. But to your question on valuations, we have to be able to agree upon that. And in some instances, we are. Others, there are some other companies who might be willing to pay more than we are. Maybe there's a strategic reason for them that's different from our view. And with the -- we are still very interested in acquiring the right companies, and we're continuing to look at those and will complete where we think it's appropriate, and we can agree on the valuation. But I would also point out that 2025, our 6% tons growth over 2024, that was over 300,000 tons of incremental volumes we were shipping. And if you compare that to a dollar value if we acquired a company, that would be like acquiring a $650 million revenue plus company. And it was a significantly lower cost for us to make some investments in facilities and processing equipment to be able to increase our volumes like that as opposed to paying a premium to buy a $650 million company out there through an acquisition. And that doesn't mean that there aren't $650 million companies out there that we would want to acquire. But I just want to highlight the efforts that our team has made and the significance of being able to grow organically. Philip Gibbs: And then on the gross margin piece, the 29% to 31%, just wanted to qualify that, that is a LIFO range that you all are talking about as being sort of your long-term sustainable range? And then also to that, any way to size up the drag on gross margins maybe in 2025 from the aerospace and semis headwinds, which doesn't sound like that it's all going to completely normalize this year, but maybe by 2027. Karla Lewis: Yes. So on the gross profit margin, the 29% to 31%, that is an annual LIFO range. LIFO makes it less volatile than on FIFO on a FIFO basis. And as we mentioned, we did increase our FIFO gross profit margin in 2025 over 2024. Again, a lot on the carbon side with great execution by our teams in the market. Kind of, I guess, somewhat unique, we would say, in 2025. Aluminum is typically around 15-ish percent of our sales, but it made up over half of our LIFO expense because those increased tariff costs also impact our LIFO adjustment. So we had kind of an outsized impact because of those tariffs. And as we said, if prices start to stabilize a little more on the aluminum side, we can catch up with our margins and maybe start to see some improvement there. But again, we feel strong with how our people are executing, but LIFO did have a big impact on 2025 from aluminum. Arthur, anything you would add. Arthur Ajemyan: Yes. I think, same thing kind of headed into 2026, the LIFO estimate, you have a fair amount of aluminum carryover, right? So the cost increases that happened in Q4, you're going to be receiving that material throughout '26. So again, we're going to have disproportionate contribution from aluminum to LIFO expense. So it's somewhat unique, like this is not a typical dynamic that we've experienced before, this type of a mismatch from LIFO to the FIFO margin side. But nonetheless, we're executing really well. I think the one nuance that perhaps kind of gets lost is aluminum prices have been going up. While there's been some slight margin compression, we're still realizing higher gross profit per pound. So from that perspective, overall profitability is improving from higher selling prices. It's just you're mathematically experiencing some margin compression because to Karla's point, on the cost increases, while they're being passed through, we may not be able to get the full margin on that as we would on other cost increases that are supported by solid demand. Philip Gibbs: And then anything you all could discuss on aerospace and semis in terms of maybe how much that's impacting the gross margins right now from a basis point perspective? Arthur Ajemyan: Good question, Phil. So I think there'll be a little bit of an overlap with aluminum. But if you look at aerospace and semiconductor, let's say, less than 10% to 15% of overall sales and consolidated margin impact 50 basis points plus. Operator: The next question is from Bennett Moore from JPMorgan. Bennett Moore: In the context of the lower expected CapEx spend this year and notwithstanding the recent dividend hike, how might this directionally impact your appetite for share buybacks in '26? Karla Lewis: I don't know that it significantly changes because we've consistently had an appetite -- strong appetite for acquisitions, for organic growth, for share buybacks and consistently increasing our dividend. So we continue to look for opportunities in all of those areas and not changed from the last few years. We've got the resources and the financial strength to execute in all of those areas. Our capital expenditure budget for 2026 is a little lower than the last few years, but we've had kind of outsized budgets the last couple of years. We've had some good greenfield projects in there. We've had a lot of investment in value-added processing equipment, which we're continuing to do, but we're really challenging our teams to look at the investments we've already made and make sure that we are maximizing the capabilities. And the equipment that we buy now is much more technologically advanced. It can do things faster. It's increasing some of our productivity. So we're really pushing our teams to maximize and look at what they have before we go out and spend more on additional capital. But that being said, the $275 million for this year, it's a good budget. It's rightsized. But as we've mentioned, there is a lot of activity as we -- from our customers as we go into 2026. And we are very open to increase our CapEx budget to support those customers and those opportunities if we see good profitable opportunities come in front of us. So that budget could increase as we go through the year, given solid opportunities in front of us. Bennett Moore: And then coming to SG&A per ton, I think it was up around 1.2% in the fourth quarter despite record shipments. So wondering if anything to flag here, maybe it was the incentive comp. And then do you expect that this year-over-year growth trend to reverse in the first quarter? And what's your confidence that, I guess, for the balance of the year, we can see this metric trend lower? Arthur Ajemyan: Yes. Good question. So at a high level, that's what we've been focusing on, right, leveraging our cost structure with our smart profitable growth strategy. I mean, on a full year basis, our SG&A per ton, I think, trended down roughly 1%. So that's us basically being able to leverage our cost structure and drive incremental profit from the organic growth. I think quarter-on-quarter, Q4 to Q4, important highlight from a FIFO perspective, profits were up nearly 28%. So yes, absolutely, there's going to be year-over-year some incentive comp that is associated with that, that's going to affect the comparability. But overall, yes, that is an area of focus. And every year, there's inflation, obviously, and that's something that we have to give our people wage increases, et cetera. But to the extent that we're leveraging our cost structure and focusing on growth and driving profitable growth, that should work out the way we intend it to be. Operator: The next question is from Matt Dushkin from Wells Fargo. Matthew Dushkin: Just curious, are you all seeing any substitution to or away from aluminum? We're just kind of wondering what the boots on the ground are seeing with all the price volatility and you guys play into both the aluminum and the steel markets. Karla Lewis: That is -- we have not seen that, at least not in a material way coming through. We know there's buzz about that out there, but we haven't seen any real impact in any of our markets from that. And as you commented on, we're in all markets. And so we're happy to support our customers in whatever products are the best use for their needs. Stephen Koch: In some architectural usage, there's been substitutions from copper to aluminum or other products, which isn't a huge part of our business, but the copper spike has been substantial. So our customers are looking for more economical alternatives. Matthew Dushkin: Okay. That's helpful. Yes, we've heard from copper to aluminum. Just shifting over on the plate markets. We seem to be gaining a lot of momentum there. Can you all provide any color on what's driving the relative strength versus other products? And whether or not you think it's underlying demand? Or is it more customer restocking right now? Stephen Koch: So we're seeing customer restocking. We're seeing mill price increases. We're seeing mill lead times extend for the first time in quite some time. There's a lot of energy infrastructure, onshore wind, shipbuilding, defense work that's driving up the price and demand. There's also recently with the hot-rolled coil market being pretty tight, there's been substitution from sheet to plate, which is usually linked to sheet because it's more economic. So we think that when we see something like that, we think that there's real demand behind it. Operator: The next question is from Phil Gibbs from KeyBanc Capital Markets. Philip Gibbs: Just regarding headcount and hiring, Karla, can you describe the environment there? I mean I know you guys grew your tonnage pretty solidly last year and seemingly have a reasonably positive outlook for your markets in 2026 as well. So just curious in terms of where you all stand on headcount or hiring and what your intentions may be? Karla Lewis: Yes. I think at the end of 2025, our actual headcount was down a bit from the beginning of the year, up slightly during the year, which, again, I mentioned earlier, the advancements in some of the equipment we use, and our company is focusing on being more efficient. We shipped 6% more tons but had a pretty modest increase in headcount. As far as being able to fill positions and hiring, I would say the labor market is a little better than it had been, certainly better than just after post-COVID. But a lot of our jobs in the warehouses for drivers, those still take more time to fill. To get qualified people in, we have to do more training than we did 10 or 15 years ago as we're bringing people into the workforce. So it's not easy. It's still -- maybe you get -- you end up with one good, qualified person who stays out of 5 to 7 that you try out. But we're able and I think at Reliance, people like to work for a company that's growing and doing well. We try to treat our people well and pay them fairly, provide good benefits and do things to help give us an advantage in the market. Operator: This concludes the question-and-answer session. I would like to turn the floor back over to Karla Lewis for closing comments. Karla Lewis: Thanks again for joining our call today and for your continued support of Reliance. And before we close out today's call, I'd like to remind everyone that we'll be in Florida next week presenting at BMO's 2026 Global Metals, Mining & Critical Minerals Conference, where we hope to meet with many of you there. But I'd also like to once again thank our team throughout Reliance for all of your efforts that you do every day and for keeping our employees safe. And also, I like to remind everyone that even though there were some headwinds in 2025, we're really proud of what Reliance and our team accomplished then. And we're really excited moving into 2026, a healthy demand environment, a lot of good large projects that we're seeing out there that we've got the capabilities to participate in and strong pricing environment. So we're looking forward to 2026. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Mastech Digital Fourth Quarter 2025 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, Jenna Lacey, Manager of Legal Affairs for Mastech Digital. Please go ahead. Jennifer Lacey: Thank you, operator, and welcome to Mastech Digital's Fourth Quarter and Full Year 2025 Conference Call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastechdigital.com. With me on the call today are Nirav Patel, Mastech Digital's Chief Executive Officer; and Kannan Sugantharaman, our Chief Financial and Operations Officer. I would like to remind everyone that statements made during this call that are not historical facts are forward-looking statements. These forward-looking statements include our financial growth and liquidity projections as well as statements about our plans, strategies, intentions and beliefs concerning the business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify certain forward-looking statements. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements, including those listed in the company's 2024 annual report on Form 10-K filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Additionally, management has elected to provide certain non-GAAP financial measures to supplement our financial results presented on a GAAP basis. Specifically, we will provide non-GAAP net income and non-GAAP diluted earnings per share data, which we believe will provide greater transparency with respect to the key metrics used by management in operating the business. Reconciliations of these non-GAAP financial measures to their comparable GAAP measures are included in our earnings announcement, which can be obtained from our website at www.mastechdigital.com. As a reminder, we will not be providing guidance during this call nor will we provide guidance in any subsequent one-on-one meetings or calls. I will now turn the call over to Nirav for his comments. Nirav Patel: Thanks, Jenna. Good morning, everyone. Thank you for joining us today as we review our fourth quarter and full year 2025 results. When I started in 2025 as CEO, I set 3 transformation priorities: mobilizing our leadership team; establishing clarity on where we are headed; and moving our organization towards that direction. We believe we have made meaningful progress across each of these priorities. The market backdrop remained challenging throughout 2025. Clients remain cautious with their technology budgets while pushing their modernization agenda as best as they could through prudent discretionary spending. Despite this environment and the revenue pressures that accompanied it, we delivered stable margins in Q4 and the full year. We believe this outcome reflects deliberate choices around stronger pricing discipline, tighter operational controls and a focus on revenue quality. Beyond financial discipline, we believe we also took meaningful strides in establishing the foundational layer for our core capabilities. We expanded our data platform build and scale-up, moving our relationship with GCP and Snowflake to the next level alongside our established Informatica partnership that we announced earlier in the year. We also established our industry solutions practice where we are building AI-powered industry-led workflows as we help companies reimagine themselves in an AI-first world, whether they are accelerating with AI, transforming with AI or reimagining with AI. Now let me provide you a brief summary of our segment performance. In our IT Staffing Services segment, revenues during the fourth quarter of 2025 declined 7% year-over-year, while headcount fell 16.7%, underscoring our focus on higher-value work and improved revenue quality. Kannan will provide more color on this in his remarks. Despite these volume pressures, we believe our business continued to perform well operationally even with the seasonal impact we typically face in Q4 from the holiday season. We achieved our highest ever average bill rates at $87.32, reflecting our disciplined approach to pricing and our emphasis on higher-value engagements, and we are increasingly positioning our staffing consultants, not just as capacity, but as enablers of our clients' AI modernization journey. In our Data and Analytics Services segment, revenues for the fourth quarter of 2025 declined 24% year-over-year, largely due to backlog reversal from some of our 2024 engagements and reflecting a challenging comparison against the results in the second half of last year. However, we saw strong bookings activity during the fourth quarter of 2025, up nearly 37% over the same period last year, driven by strong renewals, which we believe reflects our customers' confidence in our ability to continue delivering value for them. We believe the market is at a crossroad. We are seeing traditional business models being disrupted by AI, and this disruption is accelerating as leading AI hyperscalers like OpenAI and Anthropic become more enterprise focused. To survive and thrive in this environment, we believe companies with strong fundamentals and forward-leaning leadership that can quickly pivot to the new will build a more sustainable moat over the long run. There is an open canvas to invest in, and we intend to position ourselves to capture that demand as it materializes. 2025 was a foundational year. As we look ahead, we believe 2026 will be a year of execution. We are seeing the strategic actions we took last year, putting us in a position of strength as we implement our vision to build an AI-first services company. We have 3 clear priorities for 2026: to deliver long-term sustainable growth; unlock substantial value for our customers; and invest in building truly differentiated capabilities to win in the future. We believe we are entering 2026 with clarity on our direction, conviction in our strategy and confidence in our ability to execute and win in the market. As I've said from day 1, growth is only meaningful when it is sustainable and profitable. We intend to drive efficiency across the organization, operate with accountability and ensure that every investment we make creates lasting value for our customers, employees and shareholders. With that, let me turn it over to Kannan to walk through the financials. Kannan Sugantharaman: Thanks, Nirav. Good morning, everyone. I will now discuss our fourth quarter and full year financial results. During the fourth quarter, we delivered consolidated revenue of $45.5 million, a year-over-year decrease of 10.4% as compared to the prior period. Our IT Services segment -- IT Staffing Services segment delivered revenue of $37.7 million, 7% lower than the prior year period. As Nirav noted, our focus on revenue quality resulted in all-time high Mastech bill rates at $87.32, though our billable consultant base declined by 168 consultants since the fourth quarter of 2024, a 16.7% decline that was largely concentrated towards the last 2 weeks of the quarter. The decline was driven largely by 2 main factors: first, a notable impact driven by in-sourcing from one of our top 10 customers, a strategy they implemented in Q4 consistently across all vendors, which has impacted us as well. We expect the impact of this to continue through the first half of 2026. The second, our focus on quality of revenue and high-margin deals has resulted in us consciously exiting nonstrategic staffing positions. Our Data and Analytics Services segment reported revenue of $7.8 million, a decrease of 24% as compared to the prior year period, largely due to backlog reversal from some of our 2024 engagements. Fourth quarter bookings totaled $11.3 million as compared to bookings of $8.2 million in the prior year after accounting for project reversals of $2.8 million in Q4 of '24. Gross profit totaled $12.9 million, representing a decline of 12.5% compared to the same period last year. Gross margin decreased by 70 basis points relative to the fourth quarter of 2024. Although both segments individually showed improved performance in Q4 '25 versus Q4 '24, the overall margin was impacted primarily by changes in business mix and a reduced share of revenue from the Data and Analytics Services segment compared to the prior year period. GAAP net income was $1 million or $0.08 per diluted share compared to a net income of $0.3 million or $0.02 per diluted share in the prior year period. We incurred $0.7 million in severance and finance and accounting transition costs during the fourth quarter of 2025 as compared to $2.1 million in the fourth quarter of 2024, which was -- which are reflected in the year-on-year increase in GAAP net income. Non-GAAP net income was $2.5 million or $0.21 per diluted share compared to $2.8 million or $0.23 per diluted share in the prior year period. Full year 2025 -- for the full year 2025, we delivered consolidated revenue of $191.4 million, a year-over-year decrease of 3.8% compared to the prior year period. Our IT Staffing Services segment delivered revenue of $158.1 million or 2.6% lower than the prior year period. Our Data and Analytics Services segment reported revenue of $33.3 million, a decrease of 9.1% as compared to the prior year period. Gross profit of $53.1 million was a decrease of 4.6% as compared to the prior year period. Gross margins remained flat year-on-year, largely driven by decreases in revenue of our Data and Analytics Services segment. GAAP net income was $0.6 million or $0.05 per diluted share compared to a net income of $3.4 million or $0.28 per diluted share in the prior year period. As we had previously discussed, we expected to incur transition and severance costs that would impact near-term reported financial results. We incurred $5 million in severance and finance and accounting transition costs during 2025 as compared to $2.1 million during 2024, which are reflected in the year-on-year decline in GAAP net income. Non-GAAP net income was $8.6 million or $0.72 per diluted share compared to $8.6 million or $0.71 per diluted share in the prior year period. This was a year where we fundamentally reimagined how we operate. We didn't just talk about transformation, we acted on it. The EDGE initiative, Efficiencies Driving Growth and Expansion, which we launched in Q3 of 2025, has begun reshaping our cost structure, sharpening our resource allocation and freeing up investment capacity for the capabilities that we believe will define our competitive advantage in the years to come. We maintained positive momentum on EDGE during the fourth quarter as we continued focusing on optimizing our organization and the operating model. We now believe EDGE has created the capacity we need to invest in execution in 2026, in our offerings, in our go-to-market strategies, in our leadership and to fuel sustainable value creation as we become an AI-first organization ourselves. SG&A expense items not included in non-GAAP financial measures, net of tax benefits are detailed in our fourth quarter 2025 earnings release for the periods presented, which are available in our website. Our financial position. During the fourth quarter of 2025, our liquidity and overall financial position remained solid. On December 31, 2025, we had $36.5 million cash balances on hand, no bank debt outstanding and cash availability of $19.9 million under our revolving credit facility. Our days sales outstanding measurement on 31st December 2025 was 54 days, which is well within our target range and in line with our DSO measurement a year ago. During the fourth quarter, we repurchased approximately $0.7 million worth of Mastek common stock at an average price of $7.2 per share. For the full year, we repurchased approximately $2.2 million worth of Mastek common stock at an average price of $7.49 per share. At the end of the fourth quarter, we had approximately 123,556 shares available under our previously announced share repurchase program that expired on February 8, 2026. Finally, I am pleased to share that our Board of Directors has authorized a new share purchase program effective February 16, 2026. Under this program, the company is now authorized to repurchase shares of the company's common stock up to an aggregate value of $5 million. We believe this authorization underscores the Board's confidence in our strategy and the trajectory of our business. We also believe our strong financial position enables us to enhance shareholder value while continuing to invest for sustained growth. Operator, this concludes our prepared remarks. We will now open the line for questions. Operator: [Operator Instructions] And our first question comes from Lisa Thompson at Zacks Investment Research. Lisa Thompson: So I have a few little questions, and then I just want you to go over the big strategy for this year and next. First off, what did you end the quarter with how many consultants? Kannan Sugantharaman: So we ended our headcount for December at billable headcount 8-4-0, 840 billable consultants in IT staffing services as of December '25. Lisa Thompson: And how many employees do you have in total now? Kannan Sugantharaman: 1,488 as of December '25. Lisa Thompson: Right. So first question is, are we done with onetime expenses and severance or no? Kannan Sugantharaman: Our finance and accounting transition is complete. So there are no more of transition costs that we are likely to incur. And in most cases, most of our severances are already done with respect to the reorg that we had done. So we don't expect anything more material or significant to hit us in the future. Lisa Thompson: Great. So now that you've had some time to implement all your cost cutting, how much more do you think you're going to be saving in 2026 versus what you spent in 2025, excluding all the onetime stuff? Kannan Sugantharaman: Right. So let me explain that in terms of the overall program of EDGE, right? So the idea was efficiencies that drove growth and expansion. That program, which was focused on driving quality of revenue, process simplification and automation and disciplined self-management was effectively to unlock capacity for investment, which we believe most of them has already gone in and has been delivered as of Q4. There were 2 tracks, efficiency to free capacity and the growth to reinvest. So our efficiencies, we were focused on cost optimization, diagnostics, process simplification, operational excellence, rationalization of our contracts and so on. And Q3 '25 actions continue to have positive impact in Q4 of '25. But one of the major milestones in Q4 '25 was the completion of, of course, the finance transition, right? Our growth, our focus on enhancing talent, competency building and market expansion, we are now starting to invest a lot more on some of those elements. We now have the senior leadership team in place for our AI and analytics solution, and we are beginning to start traction in there. And we are also hiring leaders in the banking and financial services domain to target new logos in this space. So we see multiple levers playing a part in the transformation journey, and we are hoping that all of these will fill in seamlessly as we reinvest and reorient for growth in 2026. So look at 2025 as the laying foundation year, 2026 as the year of execution and investment where in Q1 of 2026, we will start disproportionately investing in our offerings, in our go-to-market strategy and in our leadership. Lisa? Lisa Thompson: Okay. All right. So what are your -- what's the grand plans for 2026 and 2027? Are you looking to increase revenues or increase profits? Or what's the plan for this year? And then what do you think you'll come out of this year looking at 2027 like? Nirav Patel: Lisa, this is Nirav. Let me take that question. So look, I think growth is paramount for us. And all that we began last year from a strategy and sort of a transformation standpoint was to serve that single most purpose of driving growth for us. And everything that we are doing around EDGE, reorganizing ourselves towards more of a new way of working with AI and then preparing the capability organization and partnerships to scale in that area, right? So where we are right now, right? We believe now we have kind of a clarity of thought on 3 fundamental questions, in my opinion. Who we serve, what we serve and last, how we serve. And we have identified a few industry segments that we would like to focus and double down on, particularly in spaces like health sciences, financial services and also retail and consumer markets because those tend to be right now continuing to be somewhat disrupted, but also providing a backdrop of an opportunity for us to offer multi-scale growth in that. We also want to try to refocus our energies on targeting what I call the Global 2000 customers so that we are working with the largest of the customers that define the market. So to me, I feel that who we serve addresses that. And when we talk about what we serve to them, we want to try and offer a suite of offerings that help companies reimagine themselves in an AI-first world. I mean, needless to say, the world is quickly trying to modernize themselves with all things AI. And so depending on where they are in the journey, I think clearly, there is a huge, what I call, pilot to scale gap where more and more companies are sort of no longer looking at pilots, but are accelerating their path to scaling up AI adoptions in their organizations. And those offerings are very central for us. We have to build the core capabilities that we think we can -- allows us to win in that future. And finally, I would say on that, transforming them with AI, accelerating with AI and reimagining with AI are the set of kind of offerings that I feel our clients find a lot more resonating today as well as in the future. And how we serve is really all about our commercial and delivery model. I think we have reoriented ourselves. We began that journey doing that last year, where we are relooking at how we organize ourselves commercially from a go-to-market standpoint, but more importantly, drive a delivery excellence and delivery model to reorient ourselves to suit our customers. So we are disproportionately investing in our people and preparing the organization to be AI-ready. And I think that the direction going forward between '26 as well as in 2027 is all around the pivot to the new and driving what I call a somewhat of a credible moat for us in the company that can deliver sustainable growth. Sorry for this, a little bit of a long answer, but Lisa, this was important to understand how we are reshaping ourselves internally to prepare for the future. Lisa Thompson: Yes. So given the environment out there for using IT consulting and staffing, can you grow this year? Or is the market just not going to cooperate? Nirav Patel: I think if I kind of talk about the market trends, right, the macro backdrop continues to be volatile. Let's be clear on that. We are operating in an environment where kind of geopolitics, macroeconomics are driving what I call significant changes across trade, regulatory frameworks and other areas that impact enterprise decision-making, right? Historically, the effects of these types of policy shifts usually takes a quarter or 2 to fully reflect in your client spending behaviors and IT budget decisions. What we are trying to do is to stay extremely focused and stay close to our, what I call, the biggest of the customers we serve to assess how many of these macro elements are impacting them. And so hence, try to gauge about where we think we are going to go as a direction with our clients we have today. As it relates to our top customers, this becomes a very important point. That said, I think so far in Q1 and the discussions that we have been having as the new year has been taken off, we haven't seen any like a radical shift or a pressure that really concerns us. I mean we are seeing reasonable confidence from our clients and a continued focus on modernization and accelerating that journey. I mean this is something they really want to push forward through 2026. While near-term visibility remains limited, which is consistent with what we have been seeing in the market, the underlying demand drivers haven't weakened to say the least. Our clients still need to move forward, and I think we are well positioned to help them do that. Operator: And our next question comes from Marc Riddick of Sidoti. Marc Riddick: I wanted to touch on first with the consultant count reduction, sort of how that sort of plays into SG&A levels. Is it -- can you talk a little bit about maybe the timing of that? And does the SG&A level for, say, the fourth quarter, is that a reasonable quarterly run rate that we should be looking at? Or how should we think about SG&A levels and sort of how that tracks to EDGE program efforts? Kannan Sugantharaman: Yes. So I think from an EDGE program, we have been able to achieve the efficiencies that we want thus far. So what you're seeing in our Q4, I would say, is reasonably efficient in our mind. But what, Marc, as I was talking and explaining, the EDGE has 2 parts to it, right? There is an efficiency part and there is the investment part. And from Q1 onwards, we do plan to have outsized investments that we are making on the talent and enhancing talent, competency building and the overall market expansion in the AI and the analytics space, right? So that's what we intend to do at this point in time is to double down on some of those investments and making ourselves ready to capture the market, especially in the space that Nirav explained. Marc? Marc Riddick: Okay. Great. And then maybe we could shift gears and go toward the bill rate improvements there and maybe sort of talk a bit about some of the things that you're seeing there and sort of the potential upside that may take place, whether it's ongoing pricing discipline or the like. Kannan Sugantharaman: Sure. No. As you would have seen in what I spoke in my script, right, our headcount reduced 16.7%, but our revenues dropped only by 7%, right? And that's the factor of our focus on the quality of revenue, right? We were deliberate in choosing better margin projects with higher bill rates over low-margin staffing, and you will see that reflected in our average bill rate going up to $87.32, right? And we believe the strategy has helped us so far. And expanded the kind of work that we do with our customers. And we intend to continue with this while also focusing on expanding our current relationships and creating new pipeline for the staffing business. Marc? Marc Riddick: Okay. And then also, I think in your prepared remarks, you made commentary around booking trends versus a year ago period as you were exiting Q4. Can you talk a little bit about that and maybe put some numbers on sort of where those were and maybe as an offshoot from that, what you're seeing with different client verticals, maybe what might be driving that? Kannan Sugantharaman: Yes. And Nirav, you can chime in as required. But as we explained in the last quarter, there has been a good uptick with respect to our overall bookings. As I said in the prepared remarks. Our bookings is north of $11 million that we had closed for the Q4 as against 8.2 million that was after the project reversal. That's $11.3 million is what we closed. And at this time, our demand is largely broad-based, Marc. We have made inroads this past quarter with our health care customers, our financial services customers, our consumer clients and are also actively pursuing large transformation initiatives and opportunities across these industries. So that's been our bookings. So we have been pretty encouraged by what we saw in Q4. Nirav Patel: And if I can just add to what Kannan said, Marc, Nirav here. I think, look, the -- I think the bookings really reflect to me a couple of things, right? One is renewals give me a very, very strong belief that our customers continue to find us relevant. So today, the way I think about it is our strength in our Q4 bookings largely came from a significant amount of renewals that customers got back to us in reinforcing that, hey, we would like to continue to work with us. And so to me, that definitely is a very strong signal in the way you think about renewals securing that. Now what that also does and the second point that I was wanting to say is that it actually presents us a platform and a play in many of these customers to go aggressively and help them with the AI pivot. So if I were to go build a lot of these new capabilities that we are already on our way to go scale them up, these renewals give me a renewed sense of confidence for our commercial organizations and teams to say, hey, we want to go back to the same financial services clients. We want to go back to the same retailers that we work with as our customers. And that's probably the best thing an organization can do when your macro backdrop and the market volatility continues is to somewhat centrally stay focused back on the customers you have and serve them more deeply. So I think to me, this is a huge win for us in some form to really secure that levels of confidence from our clients in Q4 and gives me a sense of optimism in the way we think we can possibly shape 2026 with new bookings and new deals that we can scale up into these accounts. Marc Riddick: Great. And then last one for me, and I'm certainly encouraged to see the authorization announcement. That certainly is a positive signal. I was wondering if you could talk a little bit about one of the other benefits that we saw was improved cash. I think we're just $36.5 million of cash at the end of the year. How should we think about other cash usage prioritization potentially beyond EDGE, I guess, I mean, and maybe how you think about the potential for either M&A activity or appetite and thoughts on what valuations you may be seeing out there if you are inclined to consider those? Kannan Sugantharaman: Yes. No, thanks for that, Marc. And yes, the company has had generated a very good and strong cash flows, especially driven by solid operating cash generation, low capital expenditures. This performance reflects largely, in my mind, significant improvement in working capital particularly in receivables and accrued liabilities, which helped offset some of the transition costs that we had on finance and account -- reorganization and the structural optimization that we did. And we continue to manage cash conservatively with absolutely no debt in our balance sheet yet. And we are looking to optimally use this for our strategic priorities. Of course, one part of that is about the continued share repurchase program, but a larger part of it necessarily is going to be on the invest part, right? So as we look to invest on partnership, as we look to invest on capabilities and when there is an opportunity to also be acquisitive, those are all opportunities we are looking at to optimally invest the cash in our balance sheet. So that is exactly what we are trying to do as part of the EDGE program, and that is what we will do as part of our continued investment program, investment in terms of capabilities, in terms of our people, in terms of talent acquisition and into making sure that we have the appropriate partnerships and the capabilities driven either organically or when there is an opportunity to also go inorganic about it. Operator: [Operator Instructions] I'm showing no further questions at this time. I'd like to turn it back to Nirav Patel for closing remarks. Nirav Patel: Thank you, operator. If there are no further questions, I would like to thank you for joining our call today, and we look forward to sharing our first quarter 2026 results with you in May. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Thank you for standing by. This is the conference operator, and welcome to the Equinox Gold Fourth Quarter and Full Year 2025 Results and Corporate Update. [Operator Instructions] The conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Ryan King, EVP of Capital Markets for Equinox Gold. Please go ahead. Ryan King: Well, thank you, operator. Well, good morning, everyone, and thank you for taking the time to join the call this morning. Before we commence, I'd like to direct everyone to our forward-looking statements on Slide 2. Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties and factors that may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to the risks identified in the section titled Risks Related to the Business in Equinox Gold's most recently filed annual information form, which is available on SEDAR+, on EDGAR and on our website. Due to the Calibre merger, asset sales and classifying Brazil as discontinuing operations, the audit is taking a bit longer. We do not expect any changes compared to the unaudited results we have released, and we will issue a news release once the final audited results are filed in the coming days. Finally, I should mention that all figures in today's presentation are in U.S. dollars unless otherwise stated. With me on the call today are Darren Hall, Chief Executive Officer; Peter Hardie, Chief Financial Officer; and David Schummer, Chief Operating Officer. Today, we will be discussing our fourth quarter and full year 2025 production and cost results, provide an update on ramp-up progress at our Greenstone and Valentine Gold Mines. Darren will also discuss the improvements of our balance sheet that allowed us to announce capital return initiatives, and then we will take questions. The slide deck we're referencing is available for download on our website at equinoxgold.com. And with that, I'll turn the call over to Darren. Darren Hall: Turning to Slide 3, and thanks, Ryan. Good morning, and thank you for joining the call today. Firstly, I would like to thank the entire Equinox Gold team, including all of our business partners across the Americas for their commitment to safety, operational excellence and disciplined execution. There is no better demonstration of their commitment than delivering a year with no material environmental events and a 30% reduction in our all injury frequency rate. Well done, and thank you to the entire team. 2025 was a transformational year for Equinox Gold, one that not only reset the foundation of the business, but marked the beginning of a new chapter. The team delivered record gold production, streamlined the portfolio and dramatically strengthened the balance sheet, positioning the company to deliver meaningful value as we look to the future. The entire organization is aligned on creating shareholder value by consistently delivering on their commitments, which are focused on demonstrating operational excellence, maintaining strict cost discipline and advancing high-return organic growth. We have made material progress on all fronts, including delivering 922,000 ounces in 2025 with cash and all within cash and all-in cost guidance. This strong finish to the year reflects continued progress at Greenstone and Valentine alongside reliable performance from the balance of the portfolio. Greenstone ramped steadily throughout the year with Q4 gold production 60% higher than Q1. Valentine commissioning progress exceeded expectations with first gold achieved in September and commercial production declared in November. The result of the team's focus and commitment to deliver is also measured in the significant transformation of our balance sheet. In June 2025, our net debt was approximately $1.4 billion. And at the end of January, we had reduced it to $75 million. All while completing construction and commissioning of Valentine. With a stronger balance sheet and consistent robust cash flow, we are well positioned to take the next step in returning capital to our shareholders. Given this strong position, I am pleased to announce the company's inaugural quarterly cash dividend of $0.015 per share. Additionally, we are filing our notice of intent to initiate a share buyback of up to 5% of the issued and outstanding shares. Together, these actions mark the start of a disciplined capital return strategy and reinforce our commitment to delivering long-term per share value. Turning to Slide 4. Touching briefly on the financial results, and Pete can provide additional color as required. Equinox had a strong finish to the year with 247,000 ounces (sic) [ 247,024] produced in Q4. We sold over 242,000 ounces (sic) [ 242,392 ] at a realized price of $4,060 per ounce, generating $579 million in adjusted EBITDA and $272 million (sic) [ $272.9 million ] in adjusted net income or $0.35 per share. Importantly, we exited 2025 with over $400 million in cash and minimal net debt, giving us financial flexibility heading into 2026. Looking forward, we are encouraged by the strength of the gold price. However, the organization's focus is clear: cost control, disciplined capital allocation and delivering consistent performance across the portfolio. As our cornerstone assets ramp up to nameplate, we see a clear path to expanding margins and strengthening free cash flow generation. Turning to Slide 5. Greenstone finished with a strong fourth quarter, producing over 72,000 ounces, a 29% increase over Q3. We saw meaningful improvements in mining rates, mill throughputs and grade with the plant achieving nameplate capacity for 30 consecutive days during December. For 2026, we anticipate production of 250,000 to 300,000 ounces at all-in sustaining costs of between $1,750 and $1,850 per ounce. To support continued performance gains, we are making targeted investments in the operations, including the purchase of a trommel and other mobile equipment designed to optimize mine and process plant performance. Our long-term objective remains clear at Greenstone to establish life-of-mine production around 300,000 ounces annually. We've demonstrated that the mill can process 30,000 tonnes a day. With the team we now have in place, I'm confident that we'll continue to build on the demonstrating meaningful operational improvements. Consider the progress on the key metric of daily tonnes processed greater than nameplate over the last year. In H1 2025, we delivered 17% of the days greater than nameplate. In Q3, we increased to 28% in Q4 to 36%. Looking at Q1 to date through yesterday, we're at 50%. So we're demonstrating continued and demonstrated steady ramp-up of the assets, which sets us up well for the future. At Valentine, we poured over 23,000 ounces (sic) [ 23,207 ] of gold in Q4, its first quarter with the plant averaging 90% of nameplate capacity. We expect to achieve constant or consistent nameplate throughput during Q2 2026 as we anticipate Valentine to contribute 150,000 to 200,000 ounces of gold this year. We are working on the feasibility study for the Phase 2 expansion that would increase throughput to 4.5 million to 5 million tonnes per year and result in production of greater than 200,000 ounces a year for more than the next decade. I anticipate completing the feasibility study over the next couple of months, which will then go to the Board for investment approval in Q2 with work anticipated to commence in the second half of the year. Valentine continues to show strong exploration upside. Our 2025 drill results confirm consistent high-grade mineralization over broad width at the Frank Zone, supporting the potential for a fourth open pit. In 2026, we have 25,000 meters of drilling plan, planned to advance the Frank Zone. We also announced a new discovery, the Minotaur Zone located 8 kilometers north of the mill with a 20,000-meter drill program set to begin this spring, the zone remains open for expansion. Importantly, the Minotaur discovery confirms that significant gold mineralization exists well outside of the main Valentine Lake Shear zone, opening the broader property and reinforcing the long-term growth potential of the Valentine District beyond the current mine plan. Turning to Slide 6. As we close, I want to underscore the momentum across the business. We have the key ingredients in place to deliver top quartile valuation, new high-quality, long-life assets in Tier 1 jurisdictions, and organic growth pipeline, a team focused on delivering into expectations, which deliver strong free cash flow and return capital to shareholders. In 2026, our priorities are clear: ramp up Greenstone and Valentine to nameplate capacity, allocate capital in a disciplined and balanced manner across the portfolio, sustaining investment and shareholder returns while maintaining a strong balance sheet. Our inaugural dividend and application for a share buyback are key steps in this strategy. Consistent with our focus on disciplined growth, we are investing in the long-term value creation. This year, we will advance Phase 2 at Valentine, refresh Castle Mountain studies and progress Los Filos, both technically and socially. At Los Filos, I'm encouraged by the continued engagement with our host communities and support from the state and national governments as we remain focused on realizing the asset's full potential and unlocking significant long-term value for all stakeholders. With a stronger portfolio, solid cash flow and clear execution priorities, we are entering into 2026 from a position of strength. Our focus remains on disciplined growth, operational delivery and creating long-term value responsibly and consistently for our shareholders and all stakeholders. With that, we'll turn it over to the operator for any questions. Operator: [Operator Instructions] And the first call for today will come from Francesco Costanzo with Scotiabank. Francesco Costanzo: I'll start with my first one here. It's great to see the announcement of an inaugural dividend alongside an NCIB. And with production and free cash flow growth on the horizon, can you speak to the potential for this dividend to grow in the future and maybe your approach to fixed versus variable dividends? And then on the buyback program, can you explain your strategy for how you plan to deploy those funds? Darren Hall: Yes, Francesco, thanks for the comments. And I'll pass it across to Pete to talk about some of the capital allocation and specifically address the questions in around dividends and buybacks. Peter Hardie: Yes. Thanks, Darren. Yes, we're really excited to be in a position to announce the inaugural dividend. It's been a long-term goal for the company, something we have talked about it over the past years. So we're really pleased to be able to do that now. And it underscores the confidence we have in our forward production profile and in our forward cash flow. We started small with our inaugural dividend. We started with a fixed dividend. You can expect it to stay there for the coming future, probably the next 12, 24 months. As we firm up the development pipeline, the peer-leading development pipeline that we have, starting with our Valentine Phase 2 that Darren already mentioned and then looking forward to Castle Mountain heading into 2027. So with that development in front of us, you can expect we'll stay on a fixed dividend, and we will be looking to increase that over time. And that will be a bit of a stay tuned story with respect to those plans. But again, we're just really excited to have been able to announce the inaugural dividend. With respect to the share buyback, we still feel there's a lot of opportunity in our stock price. And at these levels and again, being conservative in our approach, we want to be in a position to when we felt like we -- the shares were not trading as we think they should to be able to buy some of those back and also return capital to shareholders in that manner. And you can expect us to continue to do that. But again, with the peer-leading pipe development pipeline we have and the dollars we're going to devote to that over the coming years for it to remain somewhat conservative. Darren Hall: Thanks, Pete. And just kind of layer there, Francesco, is that we will take a somewhat conservative view, but as we work through 2026, and we have a fulsome understanding about our capital requirements in '27 in light of Valentine Phase 2, importantly, Castle Mountain with the record decision anticipated at the end of the year and the positivity we see in and around the dialogue in Mexico, we will have some demands in 2027. We feel very comfortable in being able to fund those organically, but we want to make sure we don't put ourselves in a position where we overcommit to a return on capital through dividends and find ourselves compromised to fund the organic growth, which we don't anticipate, but I think that we've got an outstandingly positive look forward on our organic growth. So thanks for the question. Francesco Costanzo: Yes, that's great. And maybe just one more, switching gears here. The sale of the Brazilian assets definitely simplified the portfolio and it accelerated deleveraging with the transaction closing in late January and the $900 million check already cleared. Although post close, there was a bit of news out of a certain Brazilian regulator. So I'm just wondering, Darren, if you can just explain the situation from your side of the table and tell us if there's anything to be concerned about here. Darren Hall: Yes. No, thanks, Francesco. No, it's an interesting situation there. I mean we're confident that the sale of the Brazilian operations fully comply with all laws and contractual obligations. And I'll provide a little context and bear with me as I do in. In Brazil, mineral resources are constitutionally owned by the federal government and the mining titles are granted and administrated by the National Mining Agency. Mining titles such as those for Aurizona, Fazenda and RDM are administered through this federal framework. A group in Bahia, CPPM has made claim that their consent was required regarding the sale of the Santa Luz operation. However, the transaction took effect through the sale of the outstanding shares of 2 non-Brazilian wholly owned subsidiaries that then indirectly own all of the Brazilian operations. So we're kind of arm's length away from that claim. But again, we as Equinox and the partners on the other side of the transaction are confident that the sale of the Brazilian operations fully complied with Brazilian law and all contractual obligations were met, and we remain committed to constructive dialogue with any party who wants to raise an issue. And as you mentioned, as the sale closed on January 23, we deployed proceeds towards debt reduction, strengthening the balance sheet. And along with cash flow from operations resulted in ending cash with net debt of around $75 million, which has positioned the company to commence the capital return programs, which we just discussed. Operator: The next question will come from Jeremy Hoy with Canaccord Genuity. Jeremy Hoy: I'd just like to revisit something that was asked about a month ago when some of the team was through Toronto. And that's with -- if there was to be a positive development at Los Filos, it seems like the timing of that build could coincide with Castle Mountain. Could you give us an update and a refresh on your thinking about how you would approach the development of both of those opportunities if they were both available at the same time? Darren Hall: Yes. Jeremy, I mean, it'd be great to be in that "Sophie's Choice, first world" sort of situation. But we are encouraged by the dialogue we're having in Mexico. We've got still a lot of work to do to establish robust 20-year land access agreements, which sets us up for most reliable production over the long term. But Filos is a significant asset. If we think about 16 million ounces in all resource category, the opportunity that sits there is significant. So our focus this year is really about understanding scope and scale. And the early works that were done there back in '21, 2022 with the feasibility study were all conceived at a $1,350 gold price in terms of the designs and around the open pits and the underground. Not suggesting we would plan around [Audio Gap] that this year, which will allow us to be in a much more intelligent decision at the -- position at the end of the year to make a decision if we're presented with the opportunity to develop. But we are comfortable in. We see great opportunity in. And to my earlier comments in and around the rate at which we increase dividends and buybacks will be somewhat foreshadowed by the rate at which we see these organic growth opportunities presented. But to make a decision between those 2 properties, we're a long way from that right now. We're confident in what we're seeing at Los Filos. But we do have a guaranteed record of decision at Castle Mountain here in December of this year. So that is a known entity. We are working on that feasibility to be able to firm up those estimates. So we're well positioned to be able to make a commitment decision there in H1 of 2027. So let's see how the year progresses. But yes, "spoiled for choices" is kind of the way I would characterize it and funded as well for whatever choices we make, which will be great. Jeremy Hoy: Yes. Thanks, Darren, and we'll watch for developments at Los Filos and Castle eagerly. You did mention that we're going to see a refreshed study for Castle Mountain. Also, we would see the same for Los Filos if positive developments come there. Are you planning to release anything on Greenstone as we've spoken often about expectations for that operation to be somewhat different from what was presented in the last feasibility study. Just wondering what we might see in terms of an updated life-of-mine plan? Will it come in the form of a study, what the timing might be, et cetera? Darren Hall: Yes. No, absolutely, Jeremy. To remove any ambiguity, we will provide updated technical reports for both Greenstone and Valentine right around the end of this quarter associated with our annual filings. So we get everything current, nice and ticked and tied with the AIF and the AIF will also include a refresh and clarity on our reserves and resources as at December 31st as well. So that's the timing for those properties. For Castle, we're continuing to work in the background on the feasibility study and, yes, no surprises from what we've articulated over the last 6 months. We're just going through crossing Ts, dotting Is, firming things up so that we have a high level of confidence in and around the scope of work, so we can go out there and have constructive discussions with EPCM contractors and the like in the back half of this year. Filos is a little earlier in the process. We're in the process of kind of doing an order of magnitude study to understand scope and scale associated with that property. And I would anticipate that, that will probably lead into a, I'll call it, a pre-feas, if you will, early in Q2 as we have a bit of an appreciation for scope and scale. Hopefully, we're in a situation where we've debottlenecked some of the land access agreements, which will allow us then to actively explore across all portions of the deposit and then allow us to appropriately scope and scale. So a little bit of what might sound like confusion there in Filos, but it's actually very positive. And again, we see -- again, I think the stat is probably somewhere in the fourth or fifth largest not operating gold asset in the Americas right now. So the talk there is significant. The opportunity is real, and we're definitely seeing a change in narrative out of Mexico, which is great. Operator: The next question will come from Anita Soni with CIBC World Markets. Anita Soni: Just a few on Greenstone. So I was just wondering, the recovery rate declined a little bit from third quarter to fourth quarter. Could you give us some color on why that was? Darren Hall: Yes. Anita, thank you. And absolutely did. As I think we've discussed previously that there is an association with arsenic and grade. We did see much higher grades in the fourth quarter and a consequence saw lower recoveries associated with the arsenic lockup. So not an issue per se. It's kind of all anticipated and expected as part of the metallurgy of the deposit. Anita Soni: And then just a similar question, just on the unit cost. The G&A was a little bit higher this quarter. Was there anything specific that was happening this quarter that would be alleviated in the go forward? Darren Hall: Yes, there is. I'll pass it to Pete. Peter Hardie: Yes. Anita, sorry, I don't have the G&A detail at hand. Can I reach out to you or one of your associates after the call? I'll pull that together. Anita Soni: And then I had one more on just a question that I noticed for both Valentine and Greenstone. I wanted you to explain to me how you guys are calculating the recovery rates as they come out? Because when I put the tonnes to grade and the output of production, I'm getting to recovery rates that are a little bit different. Said differently, I would have got about 75,000 ounces of gold by the 3 numbers there, and you reported 72,000 and Valentine is a similar issue. So I'm just wondering like are you calculating it as it exits the mill? Or is there a different point at which you're saying this is production? Darren Hall: No, I think we'll find that the small differences we may see there is that -- the numbers we quote as production are poured and bullion and some of the tonnes grade recovery will be metallurgical as well. So there will be a minor change there based on inventory changes. And to your point, I think you'll probably end up with a marginally higher recovery at Greenstone in Q4 than maybe what we reported if you back into the metal content because we actually did see an inventory build at Greenstone in fourth quarter. But we can -- we're happy to sit down and walk through that in a model discussion, happy to do that. But I think we'll find it's kind of the metallurgical production versus the poured production differences. Operator: The next question will come from Mohamed Sidibe with National Bank. Mohamed Sidibe: I maybe staying on Greenstone. And given your comments on the throughput and the ability to achieve over the nameplate capacity, how should we think about the throughput levels in 2026 and call it, in the medium term at Greenstone? Should we still be thinking about 27,000 tonnes per day or work towards increasing it towards that 30,000 tonnes per day to maybe offset some of the out updates that may be coming in the tech report? Darren Hall: Yes. Thanks, Mohamed. And as I say here, is that have a good Ramadan, right, day 1. So -- if we think about throughput, we've guided 250,000 to 300,000 ounces at Greenstone this year, and we hold firm on that. We will see opportunities over the course of the year to continue to improve throughput. Some of that is already baked into our numbers. We've demonstrated the ability to do more than 30,000 tonnes a day, which will be more longer term. But through this year, I think that the big round numbers are, if you think about 9.5 million tonnes of around 1.1 grams per tonne at feasibility recoveries, you get into that midpoint of guidance. And I think that's a good place to hang our hats. So I think of recoveries average over the year in that 25,000, 26,000 tonnes a day. There will be days we do better. And as we're demonstrating as we -- when we operate the plant, as I mentioned earlier, I mean, month or quarter-to-date, we've got 49% or 50% of the days greater than nameplate. So we are seeing sustained and improved performance on a daily basis. Our focus now is reducing downtime and getting the operations guys more time to be able to run the plant. And that's our focus. And it's going to be a journey through this year, and there will be dips and weaves along the way. The grades will be higher and lower depending on where we're mining. The recoveries, as Anita foreshadowed, will be different based on different metallurgical types. So there will be some peaks and valleys through the year, but the trends on a quarter-by-quarter basis will remain positive. And I would like us to see us coming out of 2027, looking to be talking more intelligently to those 30,000 tonne a day rates going forward. As we -- the HPGRs have installed capacity of probably mid-30,000s, 34,000, 35,000 tonnes a day. But we've got to get the reliable performance through the plant before we can start to talk about those sort of numbers openly and publicly. I am now, but to be able to commit to those is we've got some work to do this year. Mohamed Sidibe: Maybe if we could switch quickly to Valentine. And given the asset is in ramp-up phase, can you give us some color on the cadence in terms of quarter-over-quarter production? Should we expect higher production in the second half? And what magnitude should we be modeling for 2026? Darren Hall: Yes. No, absolutely. I mean we're in the second quarter of a ramp-up. And Newfoundland threw some surprises at us in January, full disclosure, and we think about -- we had 90% throughput in percentage of nameplate in Q4. And we think about January and January was 70%, right? It got cold, it got better. There were some learnings associated with the winter, and we've worked through those. I mean, -- in February, we're now at 110% of nameplate. So there's peaks and troughs and valleys as we work through. But the team are systematically addressing those things. We will continue to see quarter-on-quarter improvements in reliability in the plant, which will lead to higher tonnes, which will lead to improved confidence in feeding higher-grade materials. So we'll see that grades will be manifested that way as well. So we're still comfortable with our guidance of 150,000 to 200,000 ounces, but it's definitely H2 weighted as a function of throughput and also grade and making progress in developing the Berry Pit. So -- but we're happy to sit down and walk through a model and fill in some blanks for you as well quarter-on-quarter. Not fill in, but with that. Operator: Your next question will come from John Tumazos with John Tumazos, Very Independent Research. John Tumazos: Looking at the big picture, the current gold price is $5,000 neighborhood and say, $800 million of CapEx, you generate something like $600 million more cash paying off all the debt. It looks like you're -- you got a couple of extra dollars laying around. Are you planning the business on $400 gold plus success at all 5 locations where all the capital calls come in because you've got more gold to produce as opposed to building a war chest for acquisitions. Darren Hall: Yes. John, no, it's a first world predicament we're in, I guess, is that our focus is given the opportunities we see with organic growth is ensuring that we exit this year well funded to be able to do that organic growth. M&A is not on our radar. If something passes our screen that makes sense, we will do something. But I can assure you, as of today, we do not have a CA signed with anyone. So our focus is absolutely optimizing what we've got. We spent a lot of time and effort putting all of these assets together over the last 6 or 7 years, and now is our time to be able to start to realize that from that growth. With 400,000 to 500,000 ounces of organic growth in our portfolio that we can see over the next 5 years. I mean that's where our focus is. So there's a bit of positive confusion in our story right now as we've significantly delevered from $1.5 billion worth of net debt to 0. We're generating cash. We see the opportunities that present in 2027 and beyond. And let's make sure that we do the intelligent thing for the long term in 2026, which is to remain absolutely focused on operational performance and don't lose sight of the fact that we produce widgets at a cost. So let's keep that business focused on that so we can maximize our margin at whatever gold price there is and then use that capture to be able to fund our organic growth. I don't know, Pete, anything you'd layer on that? Peter Hardie: We're -- you've highlighted, John, really well that we're in a great position to fund this future growth. And we're really focused on ensuring that we retain the very solid and build on the very solid foundation that we've laid in place here over the last several months, as Darren said, to build out these world-class assets that we are very fortunate to have in our pipeline. John Tumazos: If I can ask one more. Darren Hall: Sorry, go ahead John. John Tumazos: No, you go ahead. You're the boss. Darren Hall: No, no, no. You guys, we work for you, right? So as the investors, I mean, our focus is we're aligned with you. John Tumazos: So in Nicaragua, you projected $1,800 cash costs up 40% or a little more on 225,000 ounces of output. The second half came in better than that. Could you give us some color on how the costs are going up so much in Nicaragua? Darren Hall: Yes. No. Thanks, John. It's a bit of a first world problem. What we're seeing here is the majority of the cost increase is not cost inflation per se, but it's volume driven. As we develop some newer pits in an underground that are going to basically fund or fuel a level of production at that 200,000 to 250,000 ounces a year over the next 5 years, there's some increased capital that results in those higher strip ratio and reflects in a higher all-in sustaining cost. So that's really where that comes from. It's not a drive in a kind of cost per tonne mine or a cost per tonne process. It's volume driven as we go from arguably what I'll call smaller pitlets to larger pits, higher strip ratios this year, and that's manifested itself in higher all-in sustaining costs. So which lays us up well for the next 5 years, which is kind of what our story has been over the last 5 years in Nicaragua is to take some assets that were headed towards closure. And we produced, what, [1.2 million, 1.3 million ] ounces from those properties in the last 5 years, and we've taken reserves from extensively 0, 100,000 ounces to in excess of 1 million ounces. So let's say, 5 years at 400,000 ounces a year of organic growth. Now we're starting to see track in front of the train. We're investing in that from developing these larger pits, which will continue that momentum for the next 5 years. So that's really what it is, John. John Tumazos: Well, the cash costs and the second year out 2027 drop, say, the $1,500 in Nicaragua after this surge? Darren Hall: I mean I think we'll see that the strip ratio go down, and that will have a positive impact on all-in sustaining costs. John Tumazos: Congratulations. Darren Hall: Appreciate, John. Thanks for your support. I know you've been a shareholder for a long time and persistent through the journey. So thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Darren Hall for any closing remarks. Please go ahead. Darren Hall: Yes. Thank you, operator. And I'd like to thank all of our shareholders for their continued support and your participation and the questions today. It is appreciated and valued. As always, Ryan, Dave, Pete and I are always available if you have any further questions. And take care, be well, and I'll pass it back to the operator. Operator: This brings a close to today's conference call. You may now disconnect your lines. Thank you for your participation, and have a pleasant day.
Operator: Good day, everyone, and welcome to the Fortuna Mining Corp. Fourth Quarter and Full Year 2025 Financial and Operational Results Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Carlos Baca, Vice President of Investor Relations. Sir, the floor is yours. Carlos Baca: Thank you, Matthew. Good morning, ladies and gentlemen, and welcome to Fortuna Mining's conference call to discuss our financial and operational results for fourth quarter and full year 2025. Hosting today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; David Whittle, Chief Operating Officer, West Africa. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to the reader advisories included in yesterday's news release, in the webcast presentation or management discussion and analysis and the risk factors outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder of Fortuna Mining. Jorge Durant: Thank you, Carlos. Good morning, and thank you for joining us today. I'll start very briefly with the quarter before moving to our growth outlook. In the quarter, we delivered record adjusted net income of $0.23 per share, generally in line with analysts' consensus. Net cash from operations before working capital adjustments was a strong $0.48 per share, exceeding consensus estimates of $0.43. We also generated record free cash flow of $132 million for the quarter and again, record $330 million for the full year, highlighting the strength of our operations and balance sheet, which ranks amongst the strongest in our peer group, with over $700 million in liquidity and a net cash position of approximately $380 million. With that context, let me turn to the more important part of the story now, which is growth and value creation. As we have stated, our objective is clear: to grow Fortuna to more than 0.5 million ounces of annual gold production from long-life assets, achieving this over the next 24 months. This will represent approximately 65% growth from current production levels. Importantly, this is growth that we control. The ounces are already contained within our mineral inventory across advanced projects in our portfolio. As this production comes online, we expect it to translate into meaningful growth in free cash flow per share, supported by scale, asset quality, good geographic distribution and capital discipline. The delivery of this growth is driven by 2 core assets: Diamba Sud in Senegal and Seguela in the Ivory Coast. Starting with Diamba Sud, the project continues to advance on a fast track approach towards a formal construction decision in midyear, aligned with the publication of the feasibility study. This morning, we released an updated mineral resource estimate, showing a 73% increase in indicated resources to 1.25 million ounces of gold, which will form the key foundation for the study. For 2026, we have approved a $100 million budget at Diamba Sud, with $67 million of that allocated to early works, which include the camp facilities, major excavations and other enabling infrastructure. We began breaking ground this week and we filed our exploitation permit application earlier this month, marking important execution milestones. Mineralization at Diamba remains wide open, and we continue to carry out aggressive drilling in parallel with project development activities as we pursue further resource growth while growing, continuing and derisking project time line. Turning to Seguela. We're preparing for the next phase of growth through a plant upgrade study currently underway, evaluating throughput expansion options that potentially take the mine to 200,000 ounces of annual production. This work builds on recent reserve growth and position Seguela to deliver higher production and cash flow from an already high-quality long-life asset. In summary, Fortuna's growth to over 0.5 million ounces is visible, controlled and executable, supported by a strong balance sheet, a sound base of mineral resources and reserves and a clear focus on per share value creation. With that, I'll turn the call over to the operating team. David, do you want to share your update? David Whittle: Thank you, Jorge. Seguela delivered another strong quarter and for the second consecutive year, exceeded the upper end of production guidence. This consistent outperformance reflects the strength of the operation and the quality of the asset. Encouragingly, recent exploration drilling results providing further momentum, presenting opportunities to increase production levels beyond the current mine plan assumptions. At Diamba Sud in Senegal, the project continues to advance on schedule, early works programs have been approved, key contracts have been tendered and awarded and the project team is mobilizing in preparation for the next development phase. Importantly, during the fourth quarter, no significant incidents were recorded across our West African operations, underscoring our commitment to maintaining a safe and healthy workplace for all personnel. At Seguela, we produced 36,942 ounces of gold in the fourth quarter, consistent with prior quarters and ahead of the mine plan. For the full year, production totaled 152,420 ounces, exceeding the upper end of guidance by 4%. Mining during the quarter totaled 340,000 tonnes of ore, at an average grade of 3.71 grams per tonne gold, along with 3.92 million tonnes of waste, resulting in a strip ratio of 11.5:1. The processing plant created 410,000 tonnes of ore at an average grade of 3.01 grams per tonne gold, with throughput averaging 214 tons per hour. Ore was primarily sourced from the Antenna Ancien and Koula pits with waste mining also commencing for the Sunbird pit. The Sunbird underground project continues to advance strongly. Based on drilling completed through to the end of June 2025, we declared a reserve of just over 400,000 ounces. During the second half of 2025, 5 diamond drill rigs were allocated to Sunbird, delivering excellent results that support further resource growth. Given the strength of the Sunbird underground and the incorporation of Kingfisher Open pit into the life of mine plan, we've identified an opportunity to increase plant capacity. Like a [ podium ], the original plant builder has been engaged to evaluate expansion options, targeting throughput of between 2 million and 2.5 million tonnes per year. Early indications are positive and we expect to complete the study early this year. So again a strong operational performance translated into a cash cost of $710 per ounce of gold for the quarter and $679 per ounce for the year. AISC was $1,576 per ounce of gold for the quarter and $1,560 per ounce for the year, at the midpoint of guidance, despite an $86 per ounce impact from higher royalties lead to increased gold prices. Cost discipline remains a clear strength of the operation. In 2026, exploration drilling will continue at pace, with increased focus on infill drilling and step-out testing along [ stopes ] and at depth at Kingfisher as well as continued evaluation of additional targets across the 35 kilometers strike length from the Seguela [ land ] package. Drilling at Sunbird underground will also continue as we advance technical studies and progress permitting activities. Capital has already been allocated for long-lead underground mining equipment. Turning to Diamba Sud, exploration, environment permitting and feasibility work advanced meaningfully during the quarter. Government approvals were received for early works programs the ESIA during its final stages of approval. Following the rainy season, drill rigs were remobilized at SEMARNAT and other deposits with continued positive results, further strengthening our confidence in this already robust package. Thank you. Back to yourself Jorge. Jorge Durant: thank you, David. Now sure, Cesar will share the update on Lat Am operations. Cesar, please? Cesar Velasco: Thank you, Jorge, and good afternoon, everyone. Our Latin Africa operation delivered resilient performance in 2025 with no reportable safety incident, supported by strong production execution during the first 3 quarters of Lindero and consistent results at Caylloma throughout the year, where base metal production exceeded the upper end of guidance. Fourth quarter results at Lindero by impacted by mechanical downtime in the crushing circuit, which affected full year production. At Lindero, full year gold production totaled 87,489 ounces, approximately 6% below the lower end of guidance, affected entirely by the fourth quarter production, which totaled 19,201 ounces of gold, driven by 2 independent mechanical interruptions during the same period. An engineering review identified the structural fatigue risk in the primary crusher foundations. To address the root cause, we have approved a 35-day foundation replacement schedule for late March 2026 at an estimated cost of $2.2 million. Ore is being pre-stockpiled to maintain stacking continuity during the repair. This has been fully considered within our production plan and guidance for the year. From a financial perspective, Lindero generated $294.2 million in annual gold sales and EBITDA margin remained strong at 57% to sales. Cash cost of $1,117 per ounce of gold for Q4 and $1,132 for the year, well within guidance range. Q4 all-in sustaining cost improved to $1,639 per ounce of gold due to lower sustaining capital and reduced stripping, offset by the impact of maintenance interventions and temporary crushing solutions. AISC for the full year of $1,716 per ounce within guidance range. We are currently conducting approximately 6,500 meters of diamond drilling below the pit bottom, where mineralization remains open at depth. The objective of this program is to upgrade and estimated 40,000 ounces of inferred resources to the indicated and measured categories. These resources are located beyond the limits of the current final pit design and the resources pit shell. Lindero remains a high-margin, long-life mine with strong fundamentals. Now turning to Caylloma, the operation continued to deliver consistent and disciplined performance throughout 2025. In the fourth quarter of 2025, Caylloma produced 250,000 ounces of silver at an average head grade of 65 grams per tonne, maintaining production levels in line with the previous quarter. Zinc and lead production totaled 12.1 million and 8.4 million, respectively, at an average head grades of 4.32% zinc and 2.95% lead. Production remained steady quarter-over-quarter as mining continued from the same levels and stopes, supporting predictable milled feed and recoveries. For the full year production of [Technical Difficulty] Operator: Ladies and gentlemen, please remain on the line while we reconnect the speaker to the conference room. Thank you for your patience. Once again, ladies and gentlemen, please remain on the line while we reconnect the speaker to the conference room. Once again, ladies and gentlemen, please remain on the line while we reconnect the speaker to your conference. And Carlos your line is connected. Your line is live. Carlos Baca: Yes. We're back. Okay. Jorge Durant: I think we can move on to the financial summary with the CFO. Luis, please go ahead. Luis Durant: Thank you. So attributable net income for the quarter was $68.1 million or $0.22 per share. On an adjusted basis, excluding noncash charges, net income was $71.3 million or $0.23 per share. This represents a significant increase over the $0.06 reported in Q4 of 2024 and the $0.17 in Q3 of 2025. Year-over-year, that increase was primarily driven by higher gold prices. We realized an average price of 4,166 per ounce, an increase of over $1,500 per ounce, while consolidated cash costs rose only marginally by 5% to $971 per ounce. This pricing benefit was partially offset by lower production volumes stemming from the HPGR downtime at Lindero in December, as referenced by Cesar. Compared to Q3 of 2025, the $0.06 increase in EPS was similarly driven by a $700 per ounce rise in realized gold prices. I will take a couple of minutes to make a few other comments pertaining to certain items of our annual results. We recorded $26 million in general and administration expenses for Q4, which includes $6.9 million in stock-based compensation. This total is $9.5 million higher than Q4 of 2024. This increase was driven by 2 main factors: $5.3 million related to higher stock-based compensation due to our year-over-year share price appreciation; and $3.5 million in higher site level G&A, primarily due to timing of expenses. A full breakdown is available on Page 10 of our MD&A. Looking ahead, we expect quarterly G&A, excluding stock-based compensation to range between $14 million and $16 million across our corporate and site operations. Continuing with G&A, full year expenses totaled $97.7 million, an increase of $29 million over 2024. About 2/3 of this variance, approximately $20 million stems from stock-based compensation, driven once again by the year-over-year appreciation of our share price. We recorded a foreign exchange loss of $2.9 million for the quarter and $7.8 million for the full year. The annual figure includes a $13.8 million realized foreign exchange loss, primarily driven by our operations in Argentina. Notably, over $6 million of this realized loss stemmed from cash balances held [ in country ] during the first half of the year. However, this was fully offset by hedging strategies we implemented to protect the U.S. dollar value of our local currency. Interest and finance costs for the quarter were $2.6 million, which is $3 million lower than Q4 of 2024. And for the full year, interest costs totaled $12.3 million. This is a $12 million decrease from the previous year. This improvement was driven primarily by a significant increase in interest income which rose to $14.5 million in 2025 compared to $3.7 million in 2024, reflecting our growing cash balances. Finally, on the income statement, our effective tax rate for the fourth quarter was 33%, while the full year 2025 rate was 26%. These figures reflect the statutory tax rates in our operating jurisdictions as well as withholding taxes associated with the repatriation of profits. Looking ahead to 2026, we expect our effective tax rates to average between 30% and 33%. Moving to cash flow and liquidity. Our total capital expenditures was $44.5 million for the quarter and $178.1 million for the full year. Of the annual total, $109 million was dedicated to sustaining capital and $69 million to growth initiatives. This growth spend included $48 million for exploration across Diamba Sud, our operating sites and greenfield initiatives, along with $14 million to advance the Diamba Sud project. Free cash flow from ongoing operations, which accounts for sustaining capital reached $132 million for Q4 and $330 million for the full year. This represents an EBITDA conversion rate of 84% and 60%, respectively. We ended 2025 with $704 million in total liquidity, a $327 million increase over 2024, driven by our strong operating results and the sale of Yaramoko earlier this year. Back to you, Jorge. Jorge Durant: Carlos. That's all for management, and we can open the floor for Q&A. Operator: [Operator Instructions] Your first question is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe my first question, I can start with Diamba Sud and the positive resource update that you provided this morning. How should we think about the upcoming technical report? Will the increased resource be geared towards extending the mine life there? Or should we think about an improvement of the production profile in the first 2 to 5 years with maybe a little bit tonnage than previously expected. Any color would be great there. Jorge Durant: Yes. No, we do not anticipate this will lead to a change in throughput against what we presented in the PEA, which was released in October. So this will, I believe, have 2 impacts this new update Mohamed, one will lead to an extension of life of mine, right? And second, the new resources coming in come at a higher grade. So the new deposit in the inventory is Southern Arc, which today is the largest deposit at the Diamba Sud camp. And it is also the highest grade one. So at 1.9 grams, I do would expect that annual production -- the annual production profile benefits to some degree from that uplift as well. Mohamed Sidibe: That's clear on that front. And then so I guess a little bit more high grade in the front and then the lower grade material from the other assets can be used to extend the mine life there. If I can maybe ask yourself or David, maybe on the gold price assumption. So Diamba, you took it from about $2,600 to $3,300 per ounce. What was -- what are the key drivers behind that assumption? And if you can walk us through any reasoning behind that, using that price for the resource, please? Jorge Durant: Yes. That is the resource that we have used. Right now, everybody is adjusting their price decks and we are using the methodology we use, the number we derived is $3,300 for the resource. So you should anticipate that for the reserve estimate, we use a lower gold price. Just as a reference, for our budgets and reserves for 2026, it's something we estimate with a cutoff date of -- in the second half of the year. And we use $2,600 gold for the resources and $2,300 gold for the reserve. So you should anticipate we use for reserves a lower number, a lower gold price compared to the 3,300 in the resource. Mohamed Sidibe: That's great. And then maybe my final question on just the broader portfolio. I know you already guided to 2026, but how should we think about the cadence of production in the first half versus second half, specifically as with shipping at Seguela and production at Lindero? Just any color there would be appreciated. Jorge Durant: Production through the year should be, in general, steady. The only one is Lindero, where production in Q1 should be -- Q1, Q2 should be expected to be a bit on the softer side as -- that's part of our plans. As Cesar described, we are engaged in improvements, changes to the foundations of the primary crusher and then gradually picking up a bit better in the second half of the year once all of those works are complete. Where do -- we do see an more variation is in AISC through the year. We do expect a bit of a higher AISC in the beginning of the year, smoothing out, lowering throughout midyear into the second half to be where we guided, right? And that is just a function of capital expenditures being a bit more heavier in the first half of the year compared to the second half. Operator: [Operator Instructions] Your next question is coming from John Pereira. John Pereira: Sorry, I -- my line got disconnect. I'm not sure if there's any duplication from the previous caller. My questions are -- 1 of my questions is similar and really in terms of -- you talk about your plan to get to 500,000 ounces. And I'm just wondering if we could hear a little bit more color around that when you look at Seguela at current running rate of, we'll say, 160,000 ounces annually, if you can indeed achieve a 40% increase through your studies, that takes you to 225,000. And then obviously, Diamba Sud, if that goes forward, would contribute. So I'd just like to understand a little bit more color on from the various projects, how you equate to 500,000 when you expect or how does that ramp over '26, '27 and '28? Answer whatever you can. I know I'm asking a lot here. And then in terms of cost for the various projects for example, in Seguela, if we want to move that from 160 to 225, do you have a sense of what the CapEx cost would be for that? Diamba Sud talked about in terms of previous news releases and in terms of capital costs. But can you just give a little bit more flavor and then maybe if there's any increase in production expected from Lindero as well? Jorge Durant: Yes, absolutely. Let's start with Seguela. Seguela is a mine that was originally designed to operate at a throughput rate of 1.25 million tonnes per year. That was the nameplate capacity of what we built and commissioned in mid-2023. Today, the mine is operating. For 2026, we have budgeted and guided for 1,750,000 ounces of throughput in the year, right? Our aim is to take it to 2.2 million, 2.3 million tons per year. That is a brownfields expansion of the processing plant. We're well advanced with the studies, and we have confidence right now that technically, it's a very straightforward project. Most of the work will reside on the wet portion of the circuit, be it that thinners, pumping capacity, leach tanks. And we will certainly have to add a regrind ball mill. But as we understand it today, very little work will likely take place on the combination. So I can give you a broad range of the figure, we believe, will be required to materialize this expansion right now as the study is not complete, but the order of magnitude is in the range of probably $50 million, $60 million to $100 million on the high end. And by midyear, we will have a trade-off between the different options that we have and certainly final numbers for that. But in terms of order of magnitude, those are the magnitude we're talking about, right? In -- but of course, the processing capacity is just a portion of this project because the foundation for this resides in the resource and in the reserve. And we just published a few weeks ago, an updated reserve and resource estimate for this mine. And what we're showing is that we have 1.5 million ounces of gold in reserves and 400,000 ounces in the indicated category and 700,000 ounces in the inferred. And we continue drilling and finding more. So you should expect that before midyear, probably April, May, we will be updating again the resources and reserves for this mine. And it will be a constant deterioration for the next foreseeable future because we are having -- enjoying a lot of success with our drilling. So that is the foundation really for the expansion. And we are targeting 2.2 million tonnes per year, 2.3 million in that range. That range still needs to be well defined in the study. And that, with the grades we have in the reserve and in the resources that we do our modeling, should lead to a production in the range of 200,000 ounces of gold annually. So that is our target based on the work we're delivering. When can we achieve this? If we have a study completed by mid-2026, I think a project of this nature, advancing it at a fast pace, we're not subject to any financial limitations on this one, we can advance it quickly and expectation would be that 12 to 18 months, I think, would be -- probably the limiting factor is delivery times on key equipment, for example, a rig or a mill, right? Right now, delivery times are around 12 months. So 12 to 18 months, I believe, is what should be expected from the gold decision. We might a long way decide to derisk the time line, advancing with some early purchases. That's something that we can consider. But we are not there yet. We're still in the study phase. Moving on to the Diamba Sud, the same. Diamba Sud has a robust rich resource. We just updated it. We are very confident on the technical viability and economics of this project. We have a very strong PEA published in October that using $2,750 gold yields, an internal rate of return of 72% for our investment. So -- and that was with a smaller resource. So now with the figures we just updated, those -- this new resource, 1.25 million ounces indicated are going to inform the feasibility study that we aim to publish in May, June. But we are confident and the best use of our funds right now is advance the project in a way that we derisk the time line for first gold. So we have decided to commit this year $100 million for the Diamba Sud project and $67 million of that $100 million figure are allocated for early works. What does that entail? We're building the camp. We are initiating excavations. We plan to initiate excavations on the water storage facility and other ancillary infrastructure. We are planning to purchase -- place early purchase orders for critical equipment packages, power generators, SAG mill and other equipment packages. Placing those early orders will not only help secure our budget through the construction but also safeguard or time line to first gold. Everybody is happy right now about $4,000, $5,000 gold, but no one is thinking that everybody now wants to build a gold mine and the delivery times on the critical equipment that we use, the consumables or mines require, the people needed to execute all of these are quickly going to come in high demand and shortage, right? So how are we mitigating that risk? Putting our capital to work and advancing as much as we can, placing early -- getting ourselves early in the queues for critical equipment, securing the best people and the best teams from the engineering firm. So we're doing a lot of that right now. John Pereira: What do you consider long life? So you took a long life mine. You talked about 8 to 10 years is what you may be comfortable with? Jorge Durant: The target for us is a decade. We need to see not solely on reserves, but also considering at least our resources, we need to see a decade, a decade plus. Yes. John Pereira: So that tells me that we say within the next 2 or 3 years, you want to ramp to 500,000, 0.5 million ounces per year, then you are obviously in aggregate, going to target a resource of close to 5 million ounces through the various projects. So I guess you're well underway, certainly with Seguela, right? And Diamba Sud at 1.5 million [ ounces ] already, right? Jorge Durant: Let me help you there. if I do something in -- currently today in our aggregate or consolidated reserves, if you look at our website, what you will see is that we have 3 million ounces in reserves today on a consolidated basis, 2.2 million ounces in indicated resources, which are of good quality and it's just a function of timing until we start converting a big chunk of that into the reserve. And we have 2 million ounces of gold in inferred categories, plus $50 million in drilling being spent this year in exploration, not just drilling, but exploration. So the aggregate number, if I aggregate, which the regulators don't like, but if I -- just for the sake of conversation, the aggregate is over 7 million ounces. So we feel comfortable we have the resource base and reserve base to achieve our ambition. John Pereira: Right. Do you still have anything -- any exploration going on in Mexico? Jorge Durant: Yes. We do have some early stage exploration at 2 projects. One is being currently drilled. We don't talk much about those because those are early stage exploration. But yes, we still do some work. It's not a significant portion of the overall budget, but we're still there. John Pereira: Okay. Great. And then just lastly on Lindero. Where do you see that the production for Lindero going? Is there any growth or expansion plans planned for Lindero? Jorge Durant: Today, Lindero enjoys a decade in reserves, right? Reserves and resources, we clearly have a -- we're comfortable with 19 years there, right now as it sits. And Cesar touched on this during his intervention. We currently have a drill program because at the pit -- at the bottom of -- below the bottom of the pit, we have a open mineralization and we are targeting -- this is a target of 400,000 ounces of gold that we're currently drilling at the bottom of the pit. How much of that are we going to capture? Let me get back to you once the drilling is complete, but that is the target. And we're drilling -- we're set to start drilling in March, I believe, and so before year -- midyear, that program should be completed, and I expect we'll see a big portion of those ounces coming into the inventory mid in the second half of the year. Our budget there for exploration is about $5 million this year. Yes. Operator: Your next question is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Just Seguela, maybe as you relate to the underground, could you share some color on when -- about the underground development plans you have there for Sunbird and when we could start to see ore from the underground within your plan? I'm not sure if you can give any color on that front. Jorge Durant: Yes. We have, Mohamed, a budget this year of around $14 million that will likely grow some. This year, we want to start the box cut and some purchases of underground equipment. The idea is that we are doing excavations in 2027, so probably late 2027, early 2028 is when we can start seeing production. Remember that we're still permitting. We're still permitting underground. So we expect we can achieve our permits late this year. I was at Indaba with the team, David and the team, we had a good meeting with the Director of Mines. For Sene -- Ivory Coast, and he was very keen to advance with the permitting and with the aim of having it permitted this year. So if we take his word, if we're permitted this year, we can initiate mining next, right? This will require ramps and crosscuts and ancillary infrastructure that will likely be developed throughout 2027 and first production in 2028. Operator: [Operator Instructions] That concludes our Q&A session. I will now hand the conference back to Carlos Baca, Vice President of Investor Relations, for closing remarks. Please go ahead. Carlos Baca: Thank you, Matthew. If there are no further questions, I'd like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining. Have a great day. Operator: Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the N-able Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Griffin Gyr, Investor Relations. Please go ahead. Griffin Gyr: Thank you, operator, and welcome, everyone, to N-able's Fourth Quarter 2025 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.enable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now, I will turn the call over to John. John Pagliuca: Thanks, Griffin. We entered 2026 with momentum, following another year of profitable growth and with confidence that we can drive continued strong performance. Cybersecurity is a matter of survival, and our AI-powered cybersecurity platform delivers the business resilience customers need. Our fourth quarter and full year results reflect this strength with strong results across our key operating metrics. Both fourth quarter and full year 2025 revenue grew 9% year-over-year in constant currency. We exited 2025 with ARR of $540 million, growing 8% at constant currency. Our adjusted EBITDA in the fourth quarter was $39 million, reflecting a 30% margin and $153 million for the full year, also reflecting a 30% margin. Beyond the financial results, we made exceptional progress across the business in 2025. We solidified our presence in the AI SOC market with the successful integration of our Adlumin acquisition, crossed $200 million of ARR in data protection and expanded into the VAR channel to broaden our sales reach. We also opened up a new R&D center in India to deepen our engineering capacity, elevated our cybersecurity brand and accelerated innovation across the platform with AI-driven capabilities. Our teams executed exceptionally well, and the business is meaningfully stronger as a result. Building on this progress, let's now discuss our strategy and approach moving forward. In particular, there's a lot of debate about the impact of AI on software, and I want to share how N-able is approaching AI and the tailwinds we see. First and foremost, we continue to think long term. N-able was founded over 25 years ago on the belief that small and midsized organizations would keep digitally evolving and would rely on technology experts to help guide that journey. This enduring belief anchors our business. AI accelerates digital evolution, which we believe is the fundamental driver of our business and fuels even greater opportunity. Durable truths guide this evolution. Businesses need to be secure, and they want to achieve this efficiently. N-able helps them accomplish both. AI enhances our ability to deliver these outcomes by automating routine tasks, strengthening threat detection and helping customers scale. For N-able, we believe AI is a fundamental tailwind, and we are not only embracing, but actively capitalizing on it. Second, our foundation is rock solid. With telemetry from 11 million IT assets across more than 500,000 businesses and decades of trust and cybersecurity expertise, we have the structural attributes to succeed in the AI era. We want to be clear about our stance on the AI-related debates unfolding in the industry. One narrative is that businesses will look to replace existing software tools with low-code and vibe coded solutions. We see our position in cybersecurity as fundamentally different. Building cybersecurity solutions isn't a part-time or easy job. The difficulty in stakes are too high. One mistake and your business can become extinct. Our cybersecurity software solutions are a foundational part of complex business infrastructure. Sitting at the cybersecurity table requires deep domain expertise, meeting stringent compliance standards, mastering a long tail of edge cases and an innovation engine capable of quickly responding to new and emerging threats. Businesses aren't looking for component parts to assemble. They want complete products and dependable cybersecurity outcomes. Coding is a component, N-able delivers the full product and the outcomes that actually matter. In fact, the democratization of coding is contributing to an increase in the scale, speed and sophistication of attacks. This has created a more dangerous AI-empowered adversary and makes our innovation, domain expertise and ability to deliver trusted outcomes more critical than ever. Another discussion is that new AI solutions will replace existing software workflows. We believe this view overlooks a key insight. Probabilistic AI doesn't replace deterministic workflows. It complements them. We are combining our SaaS system of record in context with an AI system of action. This unlocks step function value that we believe will take us to $1 billion of ARR and beyond. Let me be clear. The way we see it, AI doesn't erode our moat, it widens it. Third, and perhaps most importantly, we are delivering value with AI now. AI is embedded across our cybersecurity platform, reducing risk and improving customer efficiency. Each solution has exciting progress and use cases. I'll detail some product specifics in a moment. Underpinning our opportunity is a threat landscape that is constantly growing more difficult for businesses to manage. Attack services are widening, data volumes are growing and IT complexity is increasing. These challenges are further compounded as bad actors are utilizing AI to execute more advanced and widespread attacks. Business' need for cybersecurity has never been more critical and will only continue to grow. We believe N-able is well positioned to capture this growing demand. From a go-to-market perspective, our channel-led approach unlocks efficient global scale. And from a solution standpoint, our purpose-built platform, which spans security operations, data protection and unified endpoint management drives compelling value. We enable customers to identify and stop threats, protect and recover data and efficiently manage complex IT environments to realize true business resilience. This balanced platform breadth is our strategic advantage. By maintaining focused product development, we can continue to deliver technical excellence in each category where we compete. And by offering a wide breadth of solutions, we can also deliver platform-level value, including economic and technical benefits. Our approach improves technician feasibility and enables solution consolidation for our customers, helping them reduce risk and improve profitability. A near $300,000 ARR fourth quarter customer win demonstrates this value proposition in action. The customer consolidated the unified endpoint management, security operations and data protection on to N-able, displacing 5 separate competitors. We addressed 3 critical pain points that included automation gaps, alert fatigue and high data protection overhead costs. A deal of this magnitude from a customer with only approximately 50 employees speaks directly to the power of our strategy to deliver enterprise-grade security to every business. The combination of our best-of-breed capabilities and efficiency of our platform approach drove compelling value. Bringing it all together, our positioning is sound and our opportunity is significant. AI is a positive demand driver and a technology we are integrating across our platform. More broadly, as we seek to be a business that compounds value over the long term, our fundamental objective remains the same, focus on solving ever-evolving customer problems, deliver security and efficiency and unrivaled business resilience. With that said, let's now turn to key tenets of our 2026 plan. Our priorities span product innovation, strengthening our trusted brand and continued improvements in go-to-market operations. On the product side, we plan to continue to develop AI as a core differentiator. For our UEM solution, we are excited to debut N-zo, our powerful AI workflow assistant that users will be able to command to complete tasks and better run their IT and security operations. We believe this is a game changer. With a single query, customers will be able to derive insights and complete actions in seconds that previously took hours. As it evolves, our AI workflow assistant is intended to diagnose issues, recommend next steps, write and execute scripts, summarize device health and turn raw data from millions of endpoints into safe, reliable and efficient actions. Adding this orchestration layer is a force multiplier on top of our already powerful autonomous management capabilities. The industry faces a well-documented IT and security skills gap. Our customers operate labor-intensive businesses in a market with tight employment. AI can change that equation. We're empowering customers to automate more tickets, streamline workflows and amplify the capabilities of every technician. Closing the skills gap with technology rather than a headcount unlocks a new frontier of scalable, profitable growth. Additionally, we have received industry recognition positioned in the 2026 Gartner Magic Quadrant for endpoint management tools. Our roadmap also includes furthering our investment in AI within our security operations solution. AI unlocks security scalability that manual approaches simply cannot match. Within our security operations solution, AI now handles 90% of identified threats automatically, up from 70% a year ago, freeing customers to focus on higher-value strategic tasks. In addition to our AI advantage, we bring multiple proven differentiators, including interoperability across a spectrum of EDR providers and shared visibility into our data system. On the back of our product strength, we were excited to recently introduce a new cyber warranty program. We believe this warranty will help derisk adoption and bolster customer confidence. Our solution is scaling quickly, driving strong net new ARR dollar growth. A recent customer incident illustrates the real-world difference we make when it matters most. At 5:00 a.m. Christmas morning, attackers identified a transportation company as an easy target for a holiday heist. Fortunately, our security operations solution was standing guard and spotted the targeted server attack and moved quickly to lock down the compromised asset. Leveraging our AI-powered SOC, time to containment was mere minutes. No data was taken, no downtime occurred and what could have been a major business disruption was completely avoided. Threat actors don't take the holidays off and neither do our AI agents. Each of our 3 solution pillars is AI infused. And in data protection, our AI-enabled recovery testing saves customers hours of time and eliminates the guesswork involved in ensuring their backups are safe and secure. We aim to extend our advantage in data protection this year by adding Disaster Recovery as a Service or DRaaS and Google Workspace workload coverage. These are 2 highly requested billable capabilities across our 14,000 data protection customers and both represent meaningful TAM expansion. DRaaS solves multiple pain points. Customers are challenged to manage backup infrastructure themselves. They face large upfront hardware costs, expensive and time-consuming setup, ongoing maintenance and potential liability associated with storing data. At the same time, expectations are rising and businesses are seeking shorter return to operation timelines. These dynamics are particularly acute among upmarket customers. Our Disaster Recovery as a Service will allow customers to quickly launch virtual servers in our secure cloud environment. This delivers real-time restore capabilities, seamless business continuity and eliminates the need for them to have to manage backup ecosystems themselves, significantly reducing costs, time, risk and headache. Google Workspace coverage addresses another important customer need. Google Workspace has a large and growing footprint, particularly in the education sector and among cloud-first organizations. And customers want to ensure this data is protected and recoverable. Adding coverage will expand our strike zone significantly and unlock opportunity for N-able with both existing and new customers. Our high confidence and expectations from both DRaaS and Google Workspace are supported by a robust demand environment and our market trajectory. As customers manage rapidly growing data estates and ransomware attacks escalate, our data protection solution delivers the simplicity and robust performance customers value and continues to grow meaningfully faster than our total ARR. From a marketing perspective, 2026 is about capitalization on our brand strength. We protect over 500,000 businesses and bring 25 years of service excellence. The N-able name carries weight, underscored by Omdia recently naming N-able as a cybersecurity titan. That recognition validates the 3-pillar strategy we've been executing across unified endpoint management, security operations and data protection. The positioning is resonating. Partners and end customers alike are responding to the N-able brand, and we're seeing that translate into both deeper retention and new logo growth. From a sales and customer success perspective, our priority is accelerating portfolio adoption and deepening engagement across our full channel for both MSPs to VARs. Security operations is a standout growth lever and key to both objectives. Penetration of our AI-powered security operations solution remains in the early stages and more broadly, a large portion of MSPs still operate without a security operations solution. In fact, over 75% of our new lands are entering the category for the first time. We believe we are tapping into a sizable greenfield market with considerable upside. Pertaining to full channel development, we continue to expand our VAR outbound motion. This includes investments in field reps and channel account managers, which establishes critical in-market boots on the ground. From a product perspective, we are also seeing particularly strong traction with UEM in the VAR channel. Our all-in-one highly autonomous IT management and security value prop is resonating with enterprises struggling with vendor sprawl and tool complexity. With our UEM platform, we're replacing multiple point solutions with a single converged offering that spans patching, vulnerability management, remote access, endpoint management and endpoint security. This not only delivers cost savings and operational efficiency for our customers, but positions N-able to capture a larger share of endpoint spend as organizations consolidate their security and IT management stacks. We plan to double down on this momentum with increased field events, up level of account teams and continued investment in prospect pipeline generation. The success of our strategy and execution is reflected in our financials. We are sustaining a strong top line trajectory. N-able is not slowing down. Constant currency ARR growth in fiscal year '25 was 8% and the midpoint of our fiscal year '26 guide calls for the same. We are excited but not content. Our go-to-market and product strategy are aligned with customer demand. The foundation in place is to reach greater heights over time. Key to achieving this acceleration is the success of our channel expansion, new product introductions and monetization opportunities created by AI. We're executing today, while building for tomorrow. We've never been more energized and appreciate you're being part of the N-able journey. With that, I'll turn it over to Tim and then circle back for closing remarks. Tim? Tim OBrien: Thank you, John, and thank you all for joining us today. N-able continues to execute with focus and purpose. We exited 2025 with $540 million in ARR, growing 12% year-over-year, while delivering 30% adjusted EBITDA margin. Operationally, we deepened our presence in data protection and security operations, expanded our channel reach and accelerated AI innovation, all while maintaining a healthy balance of growth and profit. The acquisition of Adlumin was successful with cross-sell to our existing MSP customers performing well and ahead of our acquisition plan. I'll now walk through our fourth quarter and full year results, provide additional detail on the drivers of our performance and discuss our 2026 outlook. First, let's discuss our results for the fourth quarter and full year. For our fourth quarter results, total ARR was $540 million, growing at 12% year-over-year on a reported basis and 8% on a constant currency basis. Total revenue was $130 million, $3 million above the high end of our guidance, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis. Subscription revenue was $129 million, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis. As a reminder, we purchased Adlumin on November 20, 2024. As such, we only recognized approximately half a quarter of revenue in that period, while the fourth quarter of 2025 reflects a full quarter of Adlumin revenue contribution. This dynamic bolsters our fourth quarter 2025 revenue growth rate relative to our guidance for Q1 2026 revenue growth. We ended the quarter with 2,671 customers that contributed $50,000 or more of ARR, which is up approximately 14% year-over-year. Customers with over $50,000 of ARR now represent approximately 61% of our total ARR, up from approximately 57% a year ago. Our momentum upmarket has been consistent and pronounced. This customer cohort has grown from 46% of total ARR at the time of our 2021 spin-off and has historically retained at rates roughly 2% to 3% above the total company average, supporting our continued upmarket and cross-sell focus. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 103% on a reported basis and 102% on a constant currency basis. For the full year, we finished 2025 ahead of our outlook with total revenue of $511 million, representing year-over-year growth of 10% on a reported basis and 9% on a constant currency basis. Subscription revenue was $506 million, growing approximately 10% year-over-year on a reported basis and 9% on a constant currency basis. Approximately 45% of our revenue was outside of North America in the quarter and the full year. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. Fourth quarter gross margin was 80% compared to 82% in the same period in 2024. Full year 2025 gross margin was 81% compared to 84% in 2024. Fourth quarter adjusted EBITDA was $39 million, $4 million above the high end of our guidance, representing approximately 30% adjusted EBITDA margin. Full year 2025 adjusted EBITDA was $153 million, representing an adjusted EBITDA margin of 30%. Unlevered free cash flow was $28 million in the fourth quarter and $101 million for the full year. CapEx, inclusive of $2 million of capitalized software development costs was $7 million or 5% of revenue in the fourth quarter. CapEx was $29 million, inclusive of $11 million of capitalized software development costs or 6% of revenue for the full year. We ended the year with approximately $112 million of cash and an outstanding loan principal balance of approximately $400 million, representing net leverage of approximately 1.9x. We refinanced our credit facility in the fourth quarter. increasing our commitment from approximately $336 million to $400 million. This new facility enhances our flexibility and supports our broader capital allocation strategy, including evaluating potential share buybacks and M&A. Non-GAAP earnings per share was $0.06 in the fourth quarter based on 188 million weighted average diluted shares and $0.39 for the full year based on 189 million weighted average diluted shares. Note that both the fourth quarter and full year non-GAAP earnings per share experienced approximately a $0.02 negative impact from onetime fees related to the new debt facility. We executed $30 million of share repurchases in the year, reflecting our belief in the business and our commitment to disciplined share count management. Turning to our financial outlook. Our guidance incorporates the following elements. First, our guidance assumes FX rates of $1.17 for the euro and $1.34 for the pound. More broadly, our outlook reflects our expectations for steady demand trends, stable retention and continued execution across our platform and sales channels. Key initiatives spanning our growth algorithm give us confidence in this view. In gross retention, we see our contract initiative and ongoing shift upmarket driving sustained strong performance. In net retention, we see cross-sell traction in security operations and data protection powering continued success. And on the new business side, our channel expansion, enhanced marketing engine and broader portfolio position us well to deliver consistent new logo growth. From an investment standpoint, in 2026, we intend to continue to make disciplined investments in AI and product innovation as well as go-to-market expansion. We are excited to make these growth-oriented investments, while materially improving our unlevered free cash flow on a year-over-year basis as we realize synergies from our Adlumin integration and begin to see benefits from our India development site investment. With that in mind, for the first quarter of 2026, we expect total revenue in the range of $131 million to $132 million, representing approximately 11% to 12% year-over-year growth on a reported basis and 6% to 7% on a constant currency basis. We expect first quarter adjusted EBITDA in the range of $35.5 million to $36.5 million, representing an adjusted EBITDA margin of 27% to 28%. For the full year 2026, our total revenue outlook is approximately $554 million to $559 million, representing approximately 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. Our full year ARR outlook is $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis. To be clear, the high end of our full year 2026 ARR guidance calls for approximately 20% more net new ARR dollars on a constant currency basis than in 2025. We expect full year adjusted EBITDA of $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%. We expect CapEx, which includes capitalized software development costs to be approximately 5% of total revenue for 2026. We also expect our unlevered free cash flow to be approximately $114 million to $118 million. We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. This cash flow outlook equates to a 17% increase in unlevered free cash flow dollars at the high end. Our model is built for profitable growth, and our outlook reflects this strength. We expect total weighted average diluted shares outstanding of approximately 188 million to 189 million for the first quarter and 188 million to 191 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 24% to 27% for both the first quarter and the full year. We are delivering strong financial results, while positioning the company for long-term success. Our 2026 guide calls for meaningful growth in constant currency, net new ARR dollars and unlevered free cash flow dollars. Our growth algorithm remains healthy across gross retention, net retention and new customer acquisition. We are executing well, and our AI-powered cybersecurity platform is resonating. Importantly, we are achieving these results, while continuing to invest for the long term with an exciting AI road map and clear path to further build our global go-to-market engine. Now I will turn it over to John for closing remarks. John Pagliuca: Thanks, Tim. We move forward with a strong financial profile, a durable position in cybersecurity and a focused strategy. AI is amplifying what we do, and we are delivering AI capabilities today. 2026 is a year of execution for N-able. And on behalf of nearly 2,000 N-ableites across the globe, I'm excited for what we will deliver. And with that, operator, we'll open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Joe Vandrick with Scotiabank. William Vandrick: John and Tim, so ARR grew about 8% on a constant currency basis in 4Q. Can you talk a little bit more about what you're seeing today that gives you confidence to guide to that slightly higher constant currency ARR growth in 2026? John Pagliuca: Sure. Yes. Joe, thanks. This is John. So I think the -- really, the guidance is underwritten, I would say, with a lot of confidence in that it's steady. There's a lot of steady assumptions in there. We're expecting steady to slightly improved gross retention. We're seeing that in the business. We have a list of new SKUs that some are in the market already that are gaining nice traction like our AI-powered XDR, but also in data protection, Disaster Recovery as a Service, Google Workspace that we mentioned in the prepared remarks. So it comes with a couple of combinations from the growth algorithm: one, the GRR improving; two, better expand on some of these new SKUs; and three, continued acceleration in our reach with the VAR community as well. So we have a multipronged approach. And I would say the guidance is baking in a moderate level of those performance -- of those things performing. William Vandrick: Makes sense. And then if I could just sneak in one more on the product side. You talked a lot about AI innovations that you have in the pipeline and one that you called out, I think it was called N-zo, which seemed really interesting. Just wanted to clarify, is this a product that you expect to be released in the coming year? And can you just talk a little bit more about the -- what value this is going to create for customers? John Pagliuca: Sure. So it's N-zo, and it's N-Z-O. Make sure we get the spelling right in the script. And so yes, it's in actually customers' hands right now and limited preview. We're learning from it and getting the behavior. So far, the reviews have been fantastic. It is an in-product AI agent. It's an in-product AI workflow assistant. So embedded today in our UEM, but the plan is to really embed these AI assistants or these AI agents in all of our -- all or most of our offerings. So what it will allow MSPs to do today right out of the gate, it allows them to really get a better assessment as to what their environments might look like with simple natural language, if an MSP wants to know if they have any devices that might be vulnerable, if there's a process that needs to get done. And that's today. And then in the go forward, it will actually be a source of action. So they'll be able to put in a request to understand what's going on in their customer environments, but then actually take a proactive action and remedy what might be a vulnerability or some type of operation. So it might have taken hours to do like a script or some type of level of automation. Now what we're seeing with the customers is they're able to go through their environments, assess their environments and take action in honestly, minutes using natural language. So that's the play. And if I think about AI in general, I would say there's a 3-pronged strategy to how we're approaching this. Number one, we have AI infused in our products today, right? And so both machine learning and Agentic AI, as an example, our AI SOC or XDR has AI in it today. What is that doing? That's making our customers and their customers more secure. That's providing a better experience. That's also giving us a competitive advantage over other solutions out there because I believe we are ahead as it relates to AI and our XDR. So today, not just in XDR, but across our offerings, we have in our products today, that should make our GRR better, that should make our expansion better because the solutions are better, there's better experience. And then we talked about the second prong, and that prong is more the in-product AI agents. Again, that should have a better experience, improve our GRR, but also give us an opportunity to even charge for a premium type of experience. And then the third prong are AI-specific SKUs and AI-specific agents that we can go charge for that have their own line item. So it's a 3-pronged strategy. I'd say we've already executed the first prong with the end product and we'll continue. And N-zo is the first example of that in-product AI agent helping the MSPs and their internal IT departments with their workflows. Operator: Your next question comes from the line of Mike Cikos with Needham. Michael Cikos: Congrats on the finish here -- and the strong finish to calendar '25. I wanted to cycle back first question to the prepared remarks, and I believe it was Tim's commentary regarding Adlumin. It sounds like the cross-sell to the existing customer base is coming in ahead of what you guys had originally mapped out at the time of the acquisition. Could you just help us think through what is driving that earlier-than-expected success? It's great to hear, but just any other guardrails you could put around that? And then I have a follow-up. John Pagliuca: Sure. Look, we knew we had a winner with the AI solution with Adlumin. And just as a reminder, this was a top 1 or 2 need that we saw in the MSP community. They needed help with the threats, and not just assessing the threats, but taking action on threats. And if you recall, Mike, this started off as an OEM arrangement. So we did our own extensive research, looked at all the solutions that are out there, bigger shops, other types of shops. We chose Adlumin because of the technology stack, the level of AI that was in it, number one. Number two, the fact that it was agnostic. And so what does that mean? That means regardless of an MSP or their end customers' environments, if they're using different firewalls or if they're using different EDR, different endpoint security, different manners to get their logs, we can ingest all of that. And I believe it's a combination of the AI-infused technology, the fact that we can actually assess but take action in minutes where competitive solutions might take hours or days, it's resonating, number one. Number two, we separate the software and the service so that we can allow the technicians eyes on glass as well. So what does that mean? A lot of offerings, it's more like a black box service. MSPs can see the same things that our AI SOC analysts are looking at, and that's resonating. There's a big push out there right now. Compliance is driving a lot of this need. And I think our original estimates, we -- I don't think we fully grokked the breadth of the demand. We knew that for our bigger MSPs, this was top of mind. The nice thing here is we're seeing our large MSPs picking this up, but even our very small shops. And compliance is driving a lot of that, the ongoing cyber threats, AI as a new adversary is driving that. MSPs are now baking this to the -- effectively their standard stack. And so I believe a solution like this will be a table stakes part of every MSP's service going forward. And I think the fact that it's a broader swath of the MSP base is what's driving some of that upside. Tim OBrien: Mike, I would probably just add, and John hit on it in his prepared remarks, is the mix of greenfield opportunities versus incumbents as well. We're seeing about 70%, 75% of the opportunities coming in from a greenfield perspective. So I think that's also been a catalyst in the equation as we've executed through 2025. Michael Cikos: That's great. That's very encouraging. And then a quick follow-up, again, just to drill into the guidance assumptions. If I look at what's -- the constant currency growth we're looking for in Q1 versus the full year, it implies some stronger growth maybe as we get into 2Q and then the second half of the year. And I'm just trying to get a better sense, is there anything we should be thinking about from a seasonality standpoint or maybe those data points you have on the slightly improvement or the stable GRR translates to an improved NRR in the back half of the year, the new products incubating? Again, can you just give us some more to underwrite this guide from where we stand today? John Pagliuca: Yes. Mike, looking back at 2025, we saw some seasonality in Q1. We actually kind of built ARR up from a growth standpoint, more so in the second half than the first half from a 2025 perspective. I think as we look at 2026, I'd expect some similar seasonality, probably more akin to what you touched on was the impact of some of the newer product initiatives will have heavier weight in the second half of calendar 2026 versus the first half. We've got a few things in customer preview that we plan to flip GA in the first half, which I'd expect to have more impact on the net new ARR in the second half of the year. So I would expect a similar kind of flow on a constant currency basis. 2025 blended a bunch of choppiness from an FX perspective. But kind of from a sequential standpoint, I would expect a little bit more seasonality in Q1 versus the rest of the year with better performance in the second half. Operator: [Operator Instructions] Your next question comes from the line of Matt Hedberg with RBC. Matthew Hedberg: John, I appreciate your comments at the start of the call around all of the market confusion around AI and certainly feel like, especially within your core customer base, you guys could serve as a bit of a catalyst for even customer AI adoption. When you look at your 3 pillars of N-able today, do you think there's -- do you think that they all could benefit from customers' increased focus on Agentic AI? Or do you think -- I'm just sort of curious how you think -- especially when we think of like Disaster Recovery as a Service. But just any sort of thoughts on like what elements of your business might actually see maybe even stronger uplift with customer AI adoption? John Pagliuca: Sure. Look, the key tenets of our business, and this is part of the durable truth, Matt, it's really about security and efficiency. And that plays into all 3, right? So we have our data protection suite, which we mentioned is over $200 million, is growing nicely. You mentioned Disaster Recovery as a Service that's coming in the middle of the year. The way that we're going to make sure that we're driving that experience for our MSPs and their clients and even some of the mid-market folks is by leveraging a good amount of AI. There's definitely an ability to make sure that the backups themselves are active, ready to go and continuing to collapse that RTO and RPO kind of metrics of XDR, of course, right? So XDR minutes matter in this world, right? You want to be able to contain a compromised asset. The example that we put in the script is a good example of that. So being able to drive more efficient, but also just taking action, leveraging AI is a big thing. And with our UEM, look, that's where we're driving a lot more of the efficiency, but also adding SKUs and AI SKUs in the future to help MSPs with compliance matters, right, to help MSPs with posture management. The best way to do that efficiently is by leveraging AI, right? So helping MSPs with their posture management across the cloud, across their complex environments. Going forward, Matt, one of the things I always say is that the verbs in our business have been the same for 25 years, and they'll continue to be the same for the next 25 years. We monitor, we manage, we secure, we protect, we recover, right? And the nouns continue to stack. In our future, the new nouns that will be coming is LLMs and agents and how does an MSP help make sure that, that data is protected. That data is secure, that data can be recovered. So these new nouns will stack on the old nouns and it will provide a tailwind for the MSPs and it will provide a tailwind for cybersecurity vendors and those that are servicing the MSPs. And then the last point I'll make, Matt, is it's also a big unlock, right? When I speak to MSPs and I speak to hundreds, if not thousands of MSPs annually, a top 3 issue for them is labor. And the fact that we can unlock the labor, it will allow these MSPs to go out and grow and service more SMEs in a scalable, more profitable way. And so our tools allow them to do that securely. Our tools allow them to do that efficiently. And really, our tools with AI will really provide an unlock for the labor bottleneck for the MSP community. And that's why we -- I agree with you. I believe we -- our job is to be a catalyst for this MSP market so that they can scale and service more and more, not just of the SMB, but also of the Fortune 1000. More and more MSPs, some of our studies suggest more than 3/4 of our MSPs are also going into a co-managed approach, where they're walking into a CIO or a CISO's office and saying, let me help with part of your security, let me help with your disaster recovery. And we're there to help make sure those MSPs can get into those bigger accounts, driving a bigger TAM and a bigger SAM for the MSP market itself. Matthew Hedberg: That's super helpful. And then I think one of the things you guys do really well is you balance stable topline growth with obviously EBITDA margin expansion. When we think to 2026, and obviously, we're anniversarying Adlumin and you're rolling out new organic products that you talked about in your script. How do we think about capital allocation when we look to 2026? I mean, should we expect a little bit of M&A, should -- obviously more organic investments? You mentioned VARs. But yes, just a little bit more on capital allocation, sort of balancing that growth and profitability. John Pagliuca: Sure. Look, Tim and the team did a great job with the structure of the new debt that we have. That gives us some flexibility. We take a look and we look at all different aspects. And I think you said it best, Matt, it's a balanced approach, right? We have the ability to buy back some shares as we did last year. So that's one option. But yes, I do expect us to continue to look at solutions that both MSPs and VARs and the mid-market look at to complement these 3 best-in-class offerings. And we'll continue to see if we want to build, which would potentially involve some R&D or OEM like what we did successfully with Adlumin and we've done successfully in other places or acquire. And it's really driven off of that North Star. And that North Star is what do the small, medium enterprise need to make sure that they are secure, that they are compliant, that they're staying one step ahead of the adversary. And so we have the flexibility to meet that need using a couple of different tactics, and we'll continue to look at and evaluate all the different avenues. And I think our strong balance sheet and our strong financial health gives us a leg up on a bunch of other folks, and therefore, that probability or optionality should allow us to meet the need of our customers. Operator: [Operator Instructions] Your next question comes from the line of Keith Bachman with BMO. Adam Holets: This is Adam on for Keith. But I wanted to follow up on the last AI question. So it's good to see the different prongs in growth levers there, but I was wondering if you can quantify the monetization opportunity there. And I know it's early, but in the past, you guys talked about the $3 per device per month opportunity. And I was wondering if AI adds meaningfully to that opportunity. And then second, on the other side, I know device headwinds have come up in the past, primarily from the macro. I was just wondering, is it possible in the future that AI use among MSPs and SMBs can create a headwind there? And if so, how do you defend against that? John Pagliuca: Thanks, Adam. So look, a couple of things. What we monitor, what we manage, what we protect, what we recover is more than just the endpoint, right? It's servers, it's virtual machines, it's SaaS applications, it's data and data growth. So that's number one. A good chunk of our revenue is really -- is on those kind of metrics or those kind of volume metrics. Number two, look, the SME, you guys have our power numbers, and you can do the math, right? We talk about 25,000 customers and over 500,000 or so small and medium organizations. I always say averages are for dummies, but the average there is 200. And I believe the SME is a little bit better insulated on potentially some of this like headline that people think about in the Fortune 1000. In other words, if you think about the end markets that the MSPs are servicing, it's health care, right? It's your doctor's office, your dentist's office, it's the financial adviser, it's education. And so I feel that, that's really well insulated. And then on the third part, we do continue to look to increase the ASP per MSP and per user by offering more SKUs. And a lot of those SKUs will be AI infused or AI-powered. So I believe it's going to increase our economic stack. It will expand our TAM. It will expand the TAM and the reach of our MSPs. And as we look to bring on AI-specific SKUs in the future, that will just add to that $30 economic stack as we go forward. So we're optimistic and it's all about making sure that we're delivering that need for the customer. But overall, our multipronged approach leaves us optimistic that we can expand and get more revenue per the MSP because they should be able to get more from their customer and they should have a better reach as they go forward. Operator: There are no further questions at this time. I will now turn the call back to CEO, John Pagliuca, for closing remarks. John Pagliuca: Thank you, operator, and thank you, everyone, for joining us today and your ongoing interest in N-able. See you next time. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator, and welcome to the Equinox Gold Fourth Quarter and Full Year 2025 Results and Corporate Update. [Operator Instructions] The conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Ryan King, EVP of Capital Markets for Equinox Gold. Please go ahead. Ryan King: Well, thank you, operator. Well, good morning, everyone, and thank you for taking the time to join the call this morning. Before we commence, I'd like to direct everyone to our forward-looking statements on Slide 2. Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties and factors that may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to the risks identified in the section titled Risks Related to the Business in Equinox Gold's most recently filed annual information form, which is available on SEDAR+, on EDGAR and on our website. Due to the Calibre merger, asset sales and classifying Brazil as discontinuing operations, the audit is taking a bit longer. We do not expect any changes compared to the unaudited results we have released, and we will issue a news release once the final audited results are filed in the coming days. Finally, I should mention that all figures in today's presentation are in U.S. dollars unless otherwise stated. With me on the call today are Darren Hall, Chief Executive Officer; Peter Hardie, Chief Financial Officer; and David Schummer, Chief Operating Officer. Today, we will be discussing our fourth quarter and full year 2025 production and cost results, provide an update on ramp-up progress at our Greenstone and Valentine Gold Mines. Darren will also discuss the improvements of our balance sheet that allowed us to announce capital return initiatives, and then we will take questions. The slide deck we're referencing is available for download on our website at equinoxgold.com. And with that, I'll turn the call over to Darren. Darren Hall: Turning to Slide 3, and thanks, Ryan. Good morning, and thank you for joining the call today. Firstly, I would like to thank the entire Equinox Gold team, including all of our business partners across the Americas for their commitment to safety, operational excellence and disciplined execution. There is no better demonstration of their commitment than delivering a year with no material environmental events and a 30% reduction in our all injury frequency rate. Well done, and thank you to the entire team. 2025 was a transformational year for Equinox Gold, one that not only reset the foundation of the business, but marked the beginning of a new chapter. The team delivered record gold production, streamlined the portfolio and dramatically strengthened the balance sheet, positioning the company to deliver meaningful value as we look to the future. The entire organization is aligned on creating shareholder value by consistently delivering on their commitments, which are focused on demonstrating operational excellence, maintaining strict cost discipline and advancing high-return organic growth. We have made material progress on all fronts, including delivering 922,000 ounces in 2025 with cash and all within cash and all-in cost guidance. This strong finish to the year reflects continued progress at Greenstone and Valentine alongside reliable performance from the balance of the portfolio. Greenstone ramped steadily throughout the year with Q4 gold production 60% higher than Q1. Valentine commissioning progress exceeded expectations with first gold achieved in September and commercial production declared in November. The result of the team's focus and commitment to deliver is also measured in the significant transformation of our balance sheet. In June 2025, our net debt was approximately $1.4 billion. And at the end of January, we had reduced it to $75 million. All while completing construction and commissioning of Valentine. With a stronger balance sheet and consistent robust cash flow, we are well positioned to take the next step in returning capital to our shareholders. Given this strong position, I am pleased to announce the company's inaugural quarterly cash dividend of $0.015 per share. Additionally, we are filing our notice of intent to initiate a share buyback of up to 5% of the issued and outstanding shares. Together, these actions mark the start of a disciplined capital return strategy and reinforce our commitment to delivering long-term per share value. Turning to Slide 4. Touching briefly on the financial results, and Pete can provide additional color as required. Equinox had a strong finish to the year with 247,000 ounces (sic) [ 247,024] produced in Q4. We sold over 242,000 ounces (sic) [ 242,392 ] at a realized price of $4,060 per ounce, generating $579 million in adjusted EBITDA and $272 million (sic) [ $272.9 million ] in adjusted net income or $0.35 per share. Importantly, we exited 2025 with over $400 million in cash and minimal net debt, giving us financial flexibility heading into 2026. Looking forward, we are encouraged by the strength of the gold price. However, the organization's focus is clear: cost control, disciplined capital allocation and delivering consistent performance across the portfolio. As our cornerstone assets ramp up to nameplate, we see a clear path to expanding margins and strengthening free cash flow generation. Turning to Slide 5. Greenstone finished with a strong fourth quarter, producing over 72,000 ounces, a 29% increase over Q3. We saw meaningful improvements in mining rates, mill throughputs and grade with the plant achieving nameplate capacity for 30 consecutive days during December. For 2026, we anticipate production of 250,000 to 300,000 ounces at all-in sustaining costs of between $1,750 and $1,850 per ounce. To support continued performance gains, we are making targeted investments in the operations, including the purchase of a trommel and other mobile equipment designed to optimize mine and process plant performance. Our long-term objective remains clear at Greenstone to establish life-of-mine production around 300,000 ounces annually. We've demonstrated that the mill can process 30,000 tonnes a day. With the team we now have in place, I'm confident that we'll continue to build on the demonstrating meaningful operational improvements. Consider the progress on the key metric of daily tonnes processed greater than nameplate over the last year. In H1 2025, we delivered 17% of the days greater than nameplate. In Q3, we increased to 28% in Q4 to 36%. Looking at Q1 to date through yesterday, we're at 50%. So we're demonstrating continued and demonstrated steady ramp-up of the assets, which sets us up well for the future. At Valentine, we poured over 23,000 ounces (sic) [ 23,207 ] of gold in Q4, its first quarter with the plant averaging 90% of nameplate capacity. We expect to achieve constant or consistent nameplate throughput during Q2 2026 as we anticipate Valentine to contribute 150,000 to 200,000 ounces of gold this year. We are working on the feasibility study for the Phase 2 expansion that would increase throughput to 4.5 million to 5 million tonnes per year and result in production of greater than 200,000 ounces a year for more than the next decade. I anticipate completing the feasibility study over the next couple of months, which will then go to the Board for investment approval in Q2 with work anticipated to commence in the second half of the year. Valentine continues to show strong exploration upside. Our 2025 drill results confirm consistent high-grade mineralization over broad width at the Frank Zone, supporting the potential for a fourth open pit. In 2026, we have 25,000 meters of drilling plan, planned to advance the Frank Zone. We also announced a new discovery, the Minotaur Zone located 8 kilometers north of the mill with a 20,000-meter drill program set to begin this spring, the zone remains open for expansion. Importantly, the Minotaur discovery confirms that significant gold mineralization exists well outside of the main Valentine Lake Shear zone, opening the broader property and reinforcing the long-term growth potential of the Valentine District beyond the current mine plan. Turning to Slide 6. As we close, I want to underscore the momentum across the business. We have the key ingredients in place to deliver top quartile valuation, new high-quality, long-life assets in Tier 1 jurisdictions, and organic growth pipeline, a team focused on delivering into expectations, which deliver strong free cash flow and return capital to shareholders. In 2026, our priorities are clear: ramp up Greenstone and Valentine to nameplate capacity, allocate capital in a disciplined and balanced manner across the portfolio, sustaining investment and shareholder returns while maintaining a strong balance sheet. Our inaugural dividend and application for a share buyback are key steps in this strategy. Consistent with our focus on disciplined growth, we are investing in the long-term value creation. This year, we will advance Phase 2 at Valentine, refresh Castle Mountain studies and progress Los Filos, both technically and socially. At Los Filos, I'm encouraged by the continued engagement with our host communities and support from the state and national governments as we remain focused on realizing the asset's full potential and unlocking significant long-term value for all stakeholders. With a stronger portfolio, solid cash flow and clear execution priorities, we are entering into 2026 from a position of strength. Our focus remains on disciplined growth, operational delivery and creating long-term value responsibly and consistently for our shareholders and all stakeholders. With that, we'll turn it over to the operator for any questions. Operator: [Operator Instructions] And the first call for today will come from Francesco Costanzo with Scotiabank. Francesco Costanzo: I'll start with my first one here. It's great to see the announcement of an inaugural dividend alongside an NCIB. And with production and free cash flow growth on the horizon, can you speak to the potential for this dividend to grow in the future and maybe your approach to fixed versus variable dividends? And then on the buyback program, can you explain your strategy for how you plan to deploy those funds? Darren Hall: Yes, Francesco, thanks for the comments. And I'll pass it across to Pete to talk about some of the capital allocation and specifically address the questions in around dividends and buybacks. Peter Hardie: Yes. Thanks, Darren. Yes, we're really excited to be in a position to announce the inaugural dividend. It's been a long-term goal for the company, something we have talked about it over the past years. So we're really pleased to be able to do that now. And it underscores the confidence we have in our forward production profile and in our forward cash flow. We started small with our inaugural dividend. We started with a fixed dividend. You can expect it to stay there for the coming future, probably the next 12, 24 months. As we firm up the development pipeline, the peer-leading development pipeline that we have, starting with our Valentine Phase 2 that Darren already mentioned and then looking forward to Castle Mountain heading into 2027. So with that development in front of us, you can expect we'll stay on a fixed dividend, and we will be looking to increase that over time. And that will be a bit of a stay tuned story with respect to those plans. But again, we're just really excited to have been able to announce the inaugural dividend. With respect to the share buyback, we still feel there's a lot of opportunity in our stock price. And at these levels and again, being conservative in our approach, we want to be in a position to when we felt like we -- the shares were not trading as we think they should to be able to buy some of those back and also return capital to shareholders in that manner. And you can expect us to continue to do that. But again, with the peer-leading pipe development pipeline we have and the dollars we're going to devote to that over the coming years for it to remain somewhat conservative. Darren Hall: Thanks, Pete. And just kind of layer there, Francesco, is that we will take a somewhat conservative view, but as we work through 2026, and we have a fulsome understanding about our capital requirements in '27 in light of Valentine Phase 2, importantly, Castle Mountain with the record decision anticipated at the end of the year and the positivity we see in and around the dialogue in Mexico, we will have some demands in 2027. We feel very comfortable in being able to fund those organically, but we want to make sure we don't put ourselves in a position where we overcommit to a return on capital through dividends and find ourselves compromised to fund the organic growth, which we don't anticipate, but I think that we've got an outstandingly positive look forward on our organic growth. So thanks for the question. Francesco Costanzo: Yes, that's great. And maybe just one more, switching gears here. The sale of the Brazilian assets definitely simplified the portfolio and it accelerated deleveraging with the transaction closing in late January and the $900 million check already cleared. Although post close, there was a bit of news out of a certain Brazilian regulator. So I'm just wondering, Darren, if you can just explain the situation from your side of the table and tell us if there's anything to be concerned about here. Darren Hall: Yes. No, thanks, Francesco. No, it's an interesting situation there. I mean we're confident that the sale of the Brazilian operations fully comply with all laws and contractual obligations. And I'll provide a little context and bear with me as I do in. In Brazil, mineral resources are constitutionally owned by the federal government and the mining titles are granted and administrated by the National Mining Agency. Mining titles such as those for Aurizona, Fazenda and RDM are administered through this federal framework. A group in Bahia, CPPM has made claim that their consent was required regarding the sale of the Santa Luz operation. However, the transaction took effect through the sale of the outstanding shares of 2 non-Brazilian wholly owned subsidiaries that then indirectly own all of the Brazilian operations. So we're kind of arm's length away from that claim. But again, we as Equinox and the partners on the other side of the transaction are confident that the sale of the Brazilian operations fully complied with Brazilian law and all contractual obligations were met, and we remain committed to constructive dialogue with any party who wants to raise an issue. And as you mentioned, as the sale closed on January 23, we deployed proceeds towards debt reduction, strengthening the balance sheet. And along with cash flow from operations resulted in ending cash with net debt of around $75 million, which has positioned the company to commence the capital return programs, which we just discussed. Operator: The next question will come from Jeremy Hoy with Canaccord Genuity. Jeremy Hoy: I'd just like to revisit something that was asked about a month ago when some of the team was through Toronto. And that's with -- if there was to be a positive development at Los Filos, it seems like the timing of that build could coincide with Castle Mountain. Could you give us an update and a refresh on your thinking about how you would approach the development of both of those opportunities if they were both available at the same time? Darren Hall: Yes. Jeremy, I mean, it'd be great to be in that "Sophie's Choice, first world" sort of situation. But we are encouraged by the dialogue we're having in Mexico. We've got still a lot of work to do to establish robust 20-year land access agreements, which sets us up for most reliable production over the long term. But Filos is a significant asset. If we think about 16 million ounces in all resource category, the opportunity that sits there is significant. So our focus this year is really about understanding scope and scale. And the early works that were done there back in '21, 2022 with the feasibility study were all conceived at a $1,350 gold price in terms of the designs and around the open pits and the underground. Not suggesting we would plan around [Audio Gap] that this year, which will allow us to be in a much more intelligent decision at the -- position at the end of the year to make a decision if we're presented with the opportunity to develop. But we are comfortable in. We see great opportunity in. And to my earlier comments in and around the rate at which we increase dividends and buybacks will be somewhat foreshadowed by the rate at which we see these organic growth opportunities presented. But to make a decision between those 2 properties, we're a long way from that right now. We're confident in what we're seeing at Los Filos. But we do have a guaranteed record of decision at Castle Mountain here in December of this year. So that is a known entity. We are working on that feasibility to be able to firm up those estimates. So we're well positioned to be able to make a commitment decision there in H1 of 2027. So let's see how the year progresses. But yes, "spoiled for choices" is kind of the way I would characterize it and funded as well for whatever choices we make, which will be great. Jeremy Hoy: Yes. Thanks, Darren, and we'll watch for developments at Los Filos and Castle eagerly. You did mention that we're going to see a refreshed study for Castle Mountain. Also, we would see the same for Los Filos if positive developments come there. Are you planning to release anything on Greenstone as we've spoken often about expectations for that operation to be somewhat different from what was presented in the last feasibility study. Just wondering what we might see in terms of an updated life-of-mine plan? Will it come in the form of a study, what the timing might be, et cetera? Darren Hall: Yes. No, absolutely, Jeremy. To remove any ambiguity, we will provide updated technical reports for both Greenstone and Valentine right around the end of this quarter associated with our annual filings. So we get everything current, nice and ticked and tied with the AIF and the AIF will also include a refresh and clarity on our reserves and resources as at December 31st as well. So that's the timing for those properties. For Castle, we're continuing to work in the background on the feasibility study and, yes, no surprises from what we've articulated over the last 6 months. We're just going through crossing Ts, dotting Is, firming things up so that we have a high level of confidence in and around the scope of work, so we can go out there and have constructive discussions with EPCM contractors and the like in the back half of this year. Filos is a little earlier in the process. We're in the process of kind of doing an order of magnitude study to understand scope and scale associated with that property. And I would anticipate that, that will probably lead into a, I'll call it, a pre-feas, if you will, early in Q2 as we have a bit of an appreciation for scope and scale. Hopefully, we're in a situation where we've debottlenecked some of the land access agreements, which will allow us then to actively explore across all portions of the deposit and then allow us to appropriately scope and scale. So a little bit of what might sound like confusion there in Filos, but it's actually very positive. And again, we see -- again, I think the stat is probably somewhere in the fourth or fifth largest not operating gold asset in the Americas right now. So the talk there is significant. The opportunity is real, and we're definitely seeing a change in narrative out of Mexico, which is great. Operator: The next question will come from Anita Soni with CIBC World Markets. Anita Soni: Just a few on Greenstone. So I was just wondering, the recovery rate declined a little bit from third quarter to fourth quarter. Could you give us some color on why that was? Darren Hall: Yes. Anita, thank you. And absolutely did. As I think we've discussed previously that there is an association with arsenic and grade. We did see much higher grades in the fourth quarter and a consequence saw lower recoveries associated with the arsenic lockup. So not an issue per se. It's kind of all anticipated and expected as part of the metallurgy of the deposit. Anita Soni: And then just a similar question, just on the unit cost. The G&A was a little bit higher this quarter. Was there anything specific that was happening this quarter that would be alleviated in the go forward? Darren Hall: Yes, there is. I'll pass it to Pete. Peter Hardie: Yes. Anita, sorry, I don't have the G&A detail at hand. Can I reach out to you or one of your associates after the call? I'll pull that together. Anita Soni: And then I had one more on just a question that I noticed for both Valentine and Greenstone. I wanted you to explain to me how you guys are calculating the recovery rates as they come out? Because when I put the tonnes to grade and the output of production, I'm getting to recovery rates that are a little bit different. Said differently, I would have got about 75,000 ounces of gold by the 3 numbers there, and you reported 72,000 and Valentine is a similar issue. So I'm just wondering like are you calculating it as it exits the mill? Or is there a different point at which you're saying this is production? Darren Hall: No, I think we'll find that the small differences we may see there is that -- the numbers we quote as production are poured and bullion and some of the tonnes grade recovery will be metallurgical as well. So there will be a minor change there based on inventory changes. And to your point, I think you'll probably end up with a marginally higher recovery at Greenstone in Q4 than maybe what we reported if you back into the metal content because we actually did see an inventory build at Greenstone in fourth quarter. But we can -- we're happy to sit down and walk through that in a model discussion, happy to do that. But I think we'll find it's kind of the metallurgical production versus the poured production differences. Operator: The next question will come from Mohamed Sidibe with National Bank. Mohamed Sidibe: I maybe staying on Greenstone. And given your comments on the throughput and the ability to achieve over the nameplate capacity, how should we think about the throughput levels in 2026 and call it, in the medium term at Greenstone? Should we still be thinking about 27,000 tonnes per day or work towards increasing it towards that 30,000 tonnes per day to maybe offset some of the out updates that may be coming in the tech report? Darren Hall: Yes. Thanks, Mohamed. And as I say here, is that have a good Ramadan, right, day 1. So -- if we think about throughput, we've guided 250,000 to 300,000 ounces at Greenstone this year, and we hold firm on that. We will see opportunities over the course of the year to continue to improve throughput. Some of that is already baked into our numbers. We've demonstrated the ability to do more than 30,000 tonnes a day, which will be more longer term. But through this year, I think that the big round numbers are, if you think about 9.5 million tonnes of around 1.1 grams per tonne at feasibility recoveries, you get into that midpoint of guidance. And I think that's a good place to hang our hats. So I think of recoveries average over the year in that 25,000, 26,000 tonnes a day. There will be days we do better. And as we're demonstrating as we -- when we operate the plant, as I mentioned earlier, I mean, month or quarter-to-date, we've got 49% or 50% of the days greater than nameplate. So we are seeing sustained and improved performance on a daily basis. Our focus now is reducing downtime and getting the operations guys more time to be able to run the plant. And that's our focus. And it's going to be a journey through this year, and there will be dips and weaves along the way. The grades will be higher and lower depending on where we're mining. The recoveries, as Anita foreshadowed, will be different based on different metallurgical types. So there will be some peaks and valleys through the year, but the trends on a quarter-by-quarter basis will remain positive. And I would like us to see us coming out of 2027, looking to be talking more intelligently to those 30,000 tonne a day rates going forward. As we -- the HPGRs have installed capacity of probably mid-30,000s, 34,000, 35,000 tonnes a day. But we've got to get the reliable performance through the plant before we can start to talk about those sort of numbers openly and publicly. I am now, but to be able to commit to those is we've got some work to do this year. Mohamed Sidibe: Maybe if we could switch quickly to Valentine. And given the asset is in ramp-up phase, can you give us some color on the cadence in terms of quarter-over-quarter production? Should we expect higher production in the second half? And what magnitude should we be modeling for 2026? Darren Hall: Yes. No, absolutely. I mean we're in the second quarter of a ramp-up. And Newfoundland threw some surprises at us in January, full disclosure, and we think about -- we had 90% throughput in percentage of nameplate in Q4. And we think about January and January was 70%, right? It got cold, it got better. There were some learnings associated with the winter, and we've worked through those. I mean, -- in February, we're now at 110% of nameplate. So there's peaks and troughs and valleys as we work through. But the team are systematically addressing those things. We will continue to see quarter-on-quarter improvements in reliability in the plant, which will lead to higher tonnes, which will lead to improved confidence in feeding higher-grade materials. So we'll see that grades will be manifested that way as well. So we're still comfortable with our guidance of 150,000 to 200,000 ounces, but it's definitely H2 weighted as a function of throughput and also grade and making progress in developing the Berry Pit. So -- but we're happy to sit down and walk through a model and fill in some blanks for you as well quarter-on-quarter. Not fill in, but with that. Operator: Your next question will come from John Tumazos with John Tumazos, Very Independent Research. John Tumazos: Looking at the big picture, the current gold price is $5,000 neighborhood and say, $800 million of CapEx, you generate something like $600 million more cash paying off all the debt. It looks like you're -- you got a couple of extra dollars laying around. Are you planning the business on $400 gold plus success at all 5 locations where all the capital calls come in because you've got more gold to produce as opposed to building a war chest for acquisitions. Darren Hall: Yes. John, no, it's a first world predicament we're in, I guess, is that our focus is given the opportunities we see with organic growth is ensuring that we exit this year well funded to be able to do that organic growth. M&A is not on our radar. If something passes our screen that makes sense, we will do something. But I can assure you, as of today, we do not have a CA signed with anyone. So our focus is absolutely optimizing what we've got. We spent a lot of time and effort putting all of these assets together over the last 6 or 7 years, and now is our time to be able to start to realize that from that growth. With 400,000 to 500,000 ounces of organic growth in our portfolio that we can see over the next 5 years. I mean that's where our focus is. So there's a bit of positive confusion in our story right now as we've significantly delevered from $1.5 billion worth of net debt to 0. We're generating cash. We see the opportunities that present in 2027 and beyond. And let's make sure that we do the intelligent thing for the long term in 2026, which is to remain absolutely focused on operational performance and don't lose sight of the fact that we produce widgets at a cost. So let's keep that business focused on that so we can maximize our margin at whatever gold price there is and then use that capture to be able to fund our organic growth. I don't know, Pete, anything you'd layer on that? Peter Hardie: We're -- you've highlighted, John, really well that we're in a great position to fund this future growth. And we're really focused on ensuring that we retain the very solid and build on the very solid foundation that we've laid in place here over the last several months, as Darren said, to build out these world-class assets that we are very fortunate to have in our pipeline. John Tumazos: If I can ask one more. Darren Hall: Sorry, go ahead John. John Tumazos: No, you go ahead. You're the boss. Darren Hall: No, no, no. You guys, we work for you, right? So as the investors, I mean, our focus is we're aligned with you. John Tumazos: So in Nicaragua, you projected $1,800 cash costs up 40% or a little more on 225,000 ounces of output. The second half came in better than that. Could you give us some color on how the costs are going up so much in Nicaragua? Darren Hall: Yes. No. Thanks, John. It's a bit of a first world problem. What we're seeing here is the majority of the cost increase is not cost inflation per se, but it's volume driven. As we develop some newer pits in an underground that are going to basically fund or fuel a level of production at that 200,000 to 250,000 ounces a year over the next 5 years, there's some increased capital that results in those higher strip ratio and reflects in a higher all-in sustaining cost. So that's really where that comes from. It's not a drive in a kind of cost per tonne mine or a cost per tonne process. It's volume driven as we go from arguably what I'll call smaller pitlets to larger pits, higher strip ratios this year, and that's manifested itself in higher all-in sustaining costs. So which lays us up well for the next 5 years, which is kind of what our story has been over the last 5 years in Nicaragua is to take some assets that were headed towards closure. And we produced, what, [1.2 million, 1.3 million ] ounces from those properties in the last 5 years, and we've taken reserves from extensively 0, 100,000 ounces to in excess of 1 million ounces. So let's say, 5 years at 400,000 ounces a year of organic growth. Now we're starting to see track in front of the train. We're investing in that from developing these larger pits, which will continue that momentum for the next 5 years. So that's really what it is, John. John Tumazos: Well, the cash costs and the second year out 2027 drop, say, the $1,500 in Nicaragua after this surge? Darren Hall: I mean I think we'll see that the strip ratio go down, and that will have a positive impact on all-in sustaining costs. John Tumazos: Congratulations. Darren Hall: Appreciate, John. Thanks for your support. I know you've been a shareholder for a long time and persistent through the journey. So thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Darren Hall for any closing remarks. Please go ahead. Darren Hall: Yes. Thank you, operator. And I'd like to thank all of our shareholders for their continued support and your participation and the questions today. It is appreciated and valued. As always, Ryan, Dave, Pete and I are always available if you have any further questions. And take care, be well, and I'll pass it back to the operator. Operator: This brings a close to today's conference call. You may now disconnect your lines. Thank you for your participation, and have a pleasant day.
Operator: Good morning, good afternoon, ladies and gentlemen. And welcome to Besi's quarterly conference call and audio webcast to discuss the company's 2025 fourth quarter and full year results. You can register for the conference call or log into the audio webcast via Besi's website, www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mrs. Andrea Kopp, Senior Vice President, Finance. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I'd like to remind everyone that on today's call, we'll be making -- management will be making forward-looking statements. All statements other than statements of historical facts maybe forward-looking statements. Forward-looking statements reflect Besi's current views and assumptions regarding future events, many of which are, by nature, inherently uncertain and beyond Besi's control. Actual results may vary materially from those in the forward-looking statements due to various risks and uncertainties including, but not limited to factors that are discussed in the company's most recent periodic and current reports filed with the AFM. Such forward-looking statements, including guidance provided during today's call speak only as of this date, and Besi does not intend to update them in light of new information or future developments nor does Besi undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Blickman. Please go ahead. Richard Blickman: Thank you. For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31, 2025, and update you on the market, our strategy and outlook. First, some overall thoughts on the fourth quarter. Besi's revenue, gross margin and operating expense development in the fourth quarter '25 exceeded the favorable end of prior guidance. Revenue of EUR 166.4 million and orders of EUR 250.4 million, increased by 25.4% and 43.3% versus the third quarter of '25, due principally to a broad-based increase in demand by Asian subcontractors for 2.5D data center applications, renewed capacity purchases for photonics applications and a significant increase in hybrid bonding orders. Net income of EUR 42.8 million increased by 69.2% versus the third quarter of '25 due to higher revenue, increased gross margins from a more favorable product mix and lower-than-anticipated operating expense growth. Besi's progress in 2025 reflected the favorable influence of increased AI infrastructure spending on our business development. Orders of EUR 685 million increased by 16.8% versus 2024 due to strength in AI-related 2.5D demand for data center applications by Asian subcontractors and renewed capacity purchases for photonics applications. Growth accelerated in the second half of the year, with orders increasing 63.6% versus the first half of '25. Orders for AI applications represented approximately 50% of our total orders in '25 and revenue from Besi's computing end user market grew by approximately 40% of revenue in 2024 to 50% in 2025. For the year, revenue of EUR 591.3 million decreased by 2.7% versus 2024 due to lower shipments for mobile, automotive and industrial end user markets as a result of ongoing weakness in overall assembly markets. We continued to maintain attractive levels of profitability with gross operating and net margins realized of 63.3%, 29.3% and 22.3%, respectively. Given profits earned in 2025 and our solid liquidity position, we will propose a cash dividend of EUR 1.58 per share for approval at Besi's April AGM, which represents a 95% payout ratio. Liquidity remained strong at year-end with cash and deposits of EUR 543 million and net cash of EUR 36 million, increasing by EUR 24.4 million and EUR 43.8 million, respectively, versus September 30, '25. We distributed EUR 254.8 million in the form of dividends and share repurchases in 2025, roughly equal to levels of 2024. Next, I'd like to discuss the current market environment and our strategy. Tech insights currently forecast relatively flat assembly market growth between '24 and '25 driven by a push out of the anticipated assembly upturn from '25 to '26. However, they expect growth of 74% between '25 and 2030. Based on increased AI use cases and infrastructure spending, new product introductions, new fabs coming online and a recovery in mainstream assembly applications, we expect to significantly exceed such projected growth rates given our leadership position in advanced packaging. We are pleased with our operational progress in 2025 as we completed a comprehensive strategic plan review with enhanced revenue and profit targets and organized additional production capacity and infrastructure to help support that growth. We also experienced progress on our wafer level assembly agenda as hybrid bonding adoption expanded to 18 customers cumulative order grew to 150-plus systems and new use cases were identified for cold package optics, ASICs and consumer applications. In addition, 6 integrated hybrid bonding production lines were installed at a leading logic customer incorporating 30 Besi-hybrid bonders in collaboration with Applied Materials. The first 15-nanometer placement accuracy prototype system was also completed and available for customer qualification. Our position in the TC market was further enhanced as Besi's TC NXT adoption expanded to five customers for logic, memory and photonics applications. In addition, our Flip Chip and multi module die attach systems gained significant share in the market for AI-related 2.5D assembly structures addressing the rapid growth in demand for data center and photonics capacity. Further, we successfully introduced a variety of next-generation die bonding and packaging systems for each of our traditional mainstream markets as we prepare for the next market upturn. We see market conditions improving in overall mainstream assembly markets based on favorable semiconductor unit growth trends and a significant reduction of excess semiconductor inventory. Green shoots are appearing after an extended downturn of nearly 4 years in each of our principal end user markets. Customer road maps also point to expanded adoption of wafer-level assembly over the next 2 years related to hybrid bonding and TC NXT adoption in HBM 4, 4E, co-package optics, ASICs and new high-performance computing and mobile introductions. In addition, recent announcements of substantial AI-related infrastructure investments are expected to increase demand for advanced packaging. Increased AI investment has created capacity shortages for 2.5D packaging which has caused producers to secure increased production for many Asian subcontractors. Further, many new advanced packaging fabs are planned globally which should increase demand for our advanced packaging portfolio. Now a few words about our guidance. We entered '26 with increased optimism based on strong order momentum experienced in the second half of '25, which has continued to date in the first quarter of 2026. Our current optimism is based on anticipated growth in 3 promising Besi revenue streams, 3D wafer level assembly, AI-related to 2.5D capacity and more traditional mainstream assembly applications. Our optimism also relates to the significant increase in demand from Chinese subcontractors as the country builds out its AI infrastructure. For the first quarter '26, we anticipate that revenue will increase between 5% and 15% versus the fourth quarter of last year with gross margins ranging between 63% and 65%, aided by improved revenue and a more favorable advanced packaging product mix. Operating expenses are anticipated to increase by 10% to 15% as we maintain discipline in overhead growth while continuing to increase development spending to support long-term growth opportunities. That ends my prepared remarks. I would like to open the call for some questions. Operator? Operator: [Operator Instructions] The first question comes from Madeleine Jenkins from UBS. Madeleine Jenkins: My first one is just, Samsung has publicly said that they'll be dual tracking hybrid bonding and TCB 4E in HBM and the samples are being sent to customers. I was just wondering if you could kind of help us understand from a customer's perspective, what would make them choose the hybrid bonding version versus the TCB and vice versa? And then on that, just generally, when are you expecting the first high-volume orders to come through for hybrid bonding for HBM? Richard Blickman: Well, excellent, Madeleine, happy to share some more background. 2026 will be a very important year to understand the adoption of hybrid bonding for HBM stacking. As is publicly shared by Samsung in particular, keynote speech last week in Korea at the SEMICON is a very clear road map to adopt hybrid bonding for very important reasons and that is performance and also heat. And that, with all kinds of tests in previous years should be superior to using a reflow process to build these stacks. We are currently in the evaluation process, customer sample and qualification process. And as was published by that customer in the course of this year, early Q2, maybe Q2, May, June time frame, it should become clear how that inroad of hybrid bonding stacked in HBM 4, but also in the previous three, the 12 stack should find its way into the end markets. That is Samsung. As we all know, our other memory customer started already much earlier in testing and sampling hybrid bonded stacks and they are ready as soon as the market demands these technologies used for either HBM 4E or other stack devices. Also the 12 supposedly shows much better performance using a hybrid process than a refill process. And last but not least, the #3, the largest of all the memory -- the three memory producers, has also announced that it will start qualification of the hybrid bonding process in the second quarter of this year to also come towards the end of this year to the conclusion whether this is a technology used for high-volume mainstream in the generation of HBM 4 or whether that is in preparation of the next generation, the 20 stack. So all these tests, we will update you every quarter on the progress. Also, there's a lot of press coverage and those companies share that with the community also in conferences. So a very important year for hybrid adoption in the memory space. Madeleine Jenkins: That's very helpful. And then just my second question is on China. They're clearly adding a lot of AI capacity. Kind of how sustainable do you see this demand as being? Is it multiple customers? And also how high is your market share in this region for the AI bit? Richard Blickman: The market share is very high. To our surprise, we would have expected and, let's say, solid market share as we have with mass reflow for a long time, but our share has gone up significantly also among the Chinese. How sustainable that is? Well, the answer is that the world expects an enormous increase in building data centers. So for that 2.5D, some qualified that we are only at the beginning. Our position, as I said earlier, is very strong with a very solid market share. And that you can also derive from our margin, our ongoing margin, gross margin but also net margin development. Operator: The next question comes from Sandeep Deshpande from JPMorgan. Sandeep Deshpande: Richard, my question to you is regarding the logic market and the foundry market. I mean you've seen that some orders coming through in the last quarter on the foundry side. Do you expect that these orders from the foundry side continue into the first quarter? And when you say on your release that the order momentum remains strong in the first quarter, how would you quantify it? I mean, are we going to expect a strong sort of orders in the first quarter like you saw in the fourth quarter? Richard Blickman: Well, the answer is, first of all, yes. So as we guided, continued momentum, that also means that we expect more orders in the logic space for hybrid bonders. And as we all know, the program in Taiwan entails several steps to build out a complete new factory. The first install start in June and operators have to be trained, maintenance has to be organized and that's all underway. And you can expect, as was also the case with the current factory, the AP6, that over the course of several quarters, that capacity will be built because supposedly demand is building. So that looks very promising. Sandeep Deshpande: Then following up on that -- on the logic side, do you expect in the logic business this year that is '26 will be much better than in '25 because when you look at how your order intake was at the end of '24, you had about 100 cumulative hybrid bonding orders, you've had 150 at the end of '25. So there was a slight slowdown in terms of the order intake. And if this could accelerate now into '26? I mean, clearly, memory will also contribute to that, but will logic itself accelerate? Richard Blickman: Well, as I just explained to your first question, if all goes according to public shared plans, it should increase because already AP7 is supposedly twice the size of AP6 and that's only one customer. So the adoption for logic is continuing. We saw that in the whole of '25. Again, we now have 18 customers, of which most are the far most are logic oriented customers with all kinds of different device designs. Remember, the first was AMD which has expanded its family throughout. And then we have many others now following. The big question here is when will the largest end customer have a product line using this technology, that should be on the horizon. So that then will create a significantly higher demand than what we have witnessed in '25. But that's according to the road map we've shared forever. There's a nice slide in our deck where we see a development in the past 5 years and an expected significant growth in the next 5 years. As we've said many times, that line of growth, it can have several variations, especially as you said, the adoption of memory will change that landscape significantly in terms of total volume required but we're still on track on that, let's say, road map, we, ourselves derived from what is happening in the market in the past 4 years, which we update every year. So that's in a nutshell, the overall picture, we should or we could expect. Operator: The next question comes from Didier Scemama from Bank of America. Didier Scemama: Richard, I have a couple of questions. So first question is on HBM. If everything goes according to plan and your two lead partners decided to put the trigger on TCB or TC NXT and hybrid bonding, can you give us a sense of the magnitude of orders sort of the volumes that would be required to create a production line? I've got a follow-up. Richard Blickman: Well, as a rule of thumb, typically, one needs a factor more memory supporting a logic device. So when you take the rule of thumb of a factor of 4, then with the installed base so far for logic, which is now over 130 systems, shortly coming up 150. Then if you multiply that, then you know how much capacity you would -- or how many machines you would require to support the capacity for memory. It doesn't work exactly like that, but the factor for number of machines capacity required is significantly higher than for the logic. So that's a major step up what we can expect when that adoption occurs. But that, again, you see in that picture we share on the adoption scenarios. Didier Scemama: Understood. Very clear. My second question is on mobile. So if you remember, like, obviously, a few years back, very high-end smartphone adoption bonding. Can you just give us a sense as to, first, whether we should expect the traditional order intake in the first quarter related to high-end smartphone, new features, cameras, et cetera? And then if you look a bit further out, how this is shaping up to be in terms of hybrid bonding adoption, whether it's '27 or further out in at least your best guess? Richard Blickman: Well, this year, as we already shared a quarter ago, we should see some improvements or new updates on features on high-end smartphones. On the camera front, there are some new developments. But also maybe foldable versions are, let's say, on the road maps, and that requires also different solutions inside those cameras. So those are developments, which we see. But then the next question is what kind of computing power will need to support AI functions? And that is a big, let's say, question and that could have a significant impact and whether they are built with a reflow process or with a hard bonding process, chiplet architectures. As we've shared many times, there's a lot of development going on and certain road maps indicate those new major inflection points in technology, either already in '26 or certainly in '27. That is how it develops and there is no change in that road map. Does that answer your question? Didier Scemama: Yes. Just had a quick follow-up. For your third quarter guidance, I just wonder why your order conversion is quite a lot lower than it normally is? So I think it's about 100% plus or minus. So why on EUR 250 million in Q4, you're sort of guiding to only EUR 185 million or so at the midpoint? Richard Blickman: Well, a very easy answer. The orders were -- or let's say, the order placements were very much to the end of the quarter and the manufacturing throughput time for many of these orders, so take the high-end Flip Chip machines, the CHAMEOs, but also the multi-module attach, which is very much also for photonics, they take 12 to 16 weeks. So you simply can't physically arrange the shipment in the first quarter. So the answer also implies that you should see a significant impact on the second quarter. Operator: The next question comes from Charles Shi from Needham & Company. Yu Shi: The first one -- I want to go back to the comment about the hybrid bonding cumulative revenue orders, it was 150 plus by the end of last year. And if I do the math, and it looks like last year, the number of orders you got was actually more or less comparable with 2024. So the question here is what about 2026? What's the overall sense where the cumulative order number will go? 200 seems possible. I mean that basically assumes, I mean, flattish number of orders you're going to add this year versus 2025. But can you go to 250? Can you go to 300? And I mean, to go to higher numbers, what do you think needs to happen for -- yes? Richard Blickman: Two things need to happen. Number one, the adoption of hybrid bonding for mainstream applications for logic devices next to what is already now using hybrid bonding. So think about the big AI providers, which are still building certain modules using mass reflow, using TC, if they switch to hybrid bonding, that could change the landscape dramatically. And number two is as we discussed to earlier question, is the adoption of hybrid bonding for memory stacking. Yu Shi: Got it. But -- okay. So maybe I'll just go direct into memory. Now Samsung HBM 4E, that is the fact that it's happening. But I mean, on the other hand, if we understand correctly, the other 2 HBM customers have not even have a order from you -- hybrid bonding order from you. Why the hesitancy? That's the question I believe top of the mind for a lot of people here. And what's delaying them? And could they start getting some orders this year? Richard Blickman: Well, it's -- the other two. One of them with the U.S. base. They have ordered already several hybrid bonders to develop HBM stacking for about 3 years now. It's also known publicly that the other one, the Korean, will start evaluating the hybrid bonding process in April-May time frame, we are invited for that, and they have publicly shared that their end customer demands them to have hybrid bonded version available by the end of this year. So although cost is higher using a hybrid process, performance is better in two ways. Number one is speed and number two is heat. So it is gradually moving from TC solutions for stacking to a hybrid version. And the big question, will this move in '26 or certainly in '27? That's how we read the inputs from all three and the biggest end customer driving, ultimately, the change in specification for these end products. Next question. Operator: [Operator Instructions] The next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: Yes. Good afternoon, Richard, maybe the first question would just be around the situation with Apple, which seems to be moving to using SoIC-X for the M5 Pro and M5 Max. Is that beachhead do you think going to be swiftly followed by other SKUs? Or is it going to remain do you think a relatively niche use of SoIC-X for high-end notebook type situations? And I have a follow-up. Richard Blickman: Well, that's precisely put. So they're all preparing from a production and technology readiness to be able to adopt this technology shift when decided. For us, what we can do is continue to offer whatever qualification samples, testing to be ready for that. There is one big question out there, how much additional computing power will be required for AI functionality? And that is what we hear, still the question to be answered. How does that impact the choice of the technology used in these mobile devices? Because in the end, it will increase the cost but then the functionality is significantly more advanced. So that open debate, you follow at conferences directly from customer engineers, and also, we had our technology advisory board meeting 2 weeks ago in Taiwan, where there were also technology persons from the community sharing road maps and thoughts exactly on this subject. Robert Sanders: And just quickly on China. Maybe you could just discuss a bit about what's happening in China. I mean I think it was 27% of your sales in the first half, but it has been higher than 45%. I mean it sounds like it's going to go up to close to 50%. Is that fair? And how do you think about the sustainability of that spending? Richard Blickman: Well, so far, we've always had this typical mix. You have non-Chinese customers producing in China. Since 30 years, all non-Chinese customers have set up assembly capabilities in every technology and that is still today the case. Although there's a lot new established outside China and Asia, in Vietnam, in Thailand, in Malaysia, Philippines and then India, but that's still slow and coming. So to be less dependent upon China. And then you have the emerging Chinese technology, which is growing year by year. And as we said for the 2.5D modules, we are very much engaged in these Chinese versions. So supposedly, the cost of ownership using our equipment is beneficial for local compared to local alternatives. Don't forget, we built all these machines in China. We have a wonderful facility in Leshan, which is expected this year to surpass the peak it achieved in '21. So although there's a lot of expectation that, that will become less, we don't see that at all. But we are expanding in Vietnam. As many of you know, we have set up a factory 3 years ago. We're expanding that significantly this year. By the end of this year, we're also able to build one of our die attach systems in Vietnam. And then as I said earlier, the expansion in Thailand, in Malaysia, the whole Pacific Rim, is preparing to have next-generation products produced in those countries rather than establishing more capacity in China. But the Chinese market itself is growing rapidly. Any next question? Operator: The next question comes from Daniel Schafei from Citi. Daniel Schafei: Basically, the first one would be on TCB NXT. You mentioned 5 players. I was just wondering, just to clarify, this is a testing or are some of them already high-volume manufacturing? And then if hybrid bonding will take longer for some customers, what is your expectation now going forward for TCB, especially given you are now gaining traction within TCB NXT? That would be helpful to understand. Richard Blickman: Well, number one, our system is designed for bond pad pitch below 20 micron. The world today is still above that, 25, 30. So the preparation with these five customers is to be ready once technology moves to smaller bond pad pitches and stretch the life of using a reflow process because the reflow has many advantages compared to hybrid bonding. One of them is simply cost. We have mentioned several times that our system has demonstrated even to be able to bond successfully at 10-micron bond pad pitches, and that comes very close to the crossover point with hybrid. So we cover the space between mass reflow Flip Chip and as mentioned earlier, very successful at this moment. And then the TC space where it becomes difficult for TC and then beyond that, the hybrid bonding. So gradually, always the industry moves to smaller geometries, and that is where exactly this TC NXT is aimed for. Your question, how much in high volume? Not yet. It's in the early stages in qualifications and in two areas. So in the logic space, so single die, but also one of the major memory producers is using TC NXT to prepare for the next generation. And that is what we mentioned last year when we received the order, 5 systems ready to go once that becomes the mainstream. Daniel Schafei: Perfect. And just as a follow-up, then you mentioned also earlier the adoption of hybrid bonding within '26 or '27. Just to understand what your expectations are right now, do you see hybrid bonding being adopted between all the HBM layers or only within certain layers? Yes, that would be just interesting to understand. Richard Blickman: Well, it can be a mix. There are different road maps showing a combination of a certain hybrid part of the stack and also a reflow part. So one has to go into a bit more detail to understand all of the road maps, but that is also why we have this 2-track development strategy that you have to cover both. Daniel Schafei: Okay. Is it then dependent on the HBM structure itself, where I would say the mix is more a hybrid bonding. Basically, the taller you go. My question... Richard Blickman: The reason -- sorry to interrupt you, is simply performance. If you connect direct copper-to-copper you have less heat in operating such as stack. And that allows you to get a higher power out of that stack and the higher the stack, the more, let's say, loss of power you have due to the heat. So a mix can already help in that performance. Operator: The next question comes from Nabeel Aziz from Rothschild & Co Redburn. Nabeel Aziz: So the first was just on hybrid bonding tool maturity. So I was just wondering if you could provide an update on the hybrid bonding tool maturity and progress that you're making on throughput and yield improvements? Richard Blickman: Well, we've come a long way that after 4 years, you certainly can see enormous progress. And where do you see that progress is, number one, the predictability of any application. So understanding the right preparation time required and the preparation processes, remember, cleaning, tracking, wet, clean plasma. And that is the most, yes, let's say, process technology, which sets us apart from many others. There are many bonders in the world which can place accurately. But exactly that bond process is where it's all about. Where are we right now? As I said in the beginning, we certainly have -- but there's still a long way to go. The process itself is, each time you could say every day, improved. One of the issues is always throughput, so the time required to place the die accurately. And the faster you can do that, you have more output of that machine and that influences the cost of ownership. So that [ battle ] is identical to what we have gone through with mass reflow Flip Chip for 25 years every year, either focus on accuracy improvement or focusing on throughput. And that combination is exactly the same challenge we have with now over 130 hybrid bonders operating in the field for larger die, smaller die, stacking dies and that's where we are. Nabeel Aziz: Very clear. And just a quick follow-up on that. A lot of your competitors are starting to develop hybrid bonding solutions of their own and in some cases, shipping R&D tools. So I just wondered how you see the competitive landscape in hybrid bonding evolving? And how competitive are your peers' tools with your own? Richard Blickman: Well, what we did share end of October was the simple fact that for the next round in Taiwan, that was based on the outcome of a complete landscape evaluation where -- because the orders were placed with us and are placed with us, the outcome is what it is today. But if you look at the whole landscape, everyone understands that hybrids sooner or later will become the mainstream technology for advanced packaging. So that's why every bonder company is focused on this market. How can you maintain your leadership? Because after 10 years nearly where we started this development with that big Taiwanese customer, it's all what I just said along the accuracy and speed. So today, the 100-nanometer is sufficient covering the logic and the memory requirements as it looks today. In the next year, we have to move down 250 because of the next-generation technology. And then the accuracy and speed combination is what sets us apart from others. Also, what is very important is the partnerships in this change of technology inflection from the assembly reflow space to hybrid bonding, hybrid bonding has to occur in front end. And front end requires complete different support structure than what we have in back end. Through the partnership with Applied Materials, now for 5 years, we have come at the levels that is supporting the highest end customers in the industry. And that combination is unique. So that support, so not only having a successful bonder, but also how to support customers 24/7 in a front-end environment is a complete different challenge than in the back end. So we see certainly competitors trying to participate in this market as well. But there is a very clear challenge for us to maintain in that lead. Operator: The following question comes from Ruben Devos. Ruben Devos: I just had one on your prepared comments where you talked about new hybrid bonding use cases that were identified for co-packaged optics. I was curious, is that mostly referencing sort of the material you presented at the Investor Day in June? I think you talked about sort of NVIDIA Spectrum X, which requiring 36 hybrid bonding tests per device. I think earlier in this call, you talked a bit about the factor difference between memory and logic, but how does that shape up for maybe co-packaged optics? And yes, I think the mid case was also somewhere around 50 cumulative units through 2030. But with the prepared comments around new use cases, might that really be contributing this year or next year? Richard Blickman: Well, that's a very, very big question. Number one, co-packaged optics is still in early days and a lot of development is going on with the use of hybrid bromine because the accuracy is required. So as shared in the Capital Markets Day or in the Investor Day, that is going on, that's continuous development. How many systems that entails? I can't tell you at this very moment. So that's -- you could qualify that as the next step in technology. So we first have the interconnect and co-packaged optics is a step beyond. Ruben Devos: Okay. And maybe something unrelated, talking about the mainstream market, basically, that's what I was thinking about. It's -- I think you also talked about green shoots, right, after a full year downturn. I think you mentioned smartphones in the mobile market, obviously, automotive and industrial are two other end-user markets. 50% of your business might already be computing. But so yes, a bit more color on maybe what you're seeing across the industry? What are maybe the die bonder utilization rates at this point? That would be very helpful. Richard Blickman: Well, we have seen, as we said, green shoots. We see some of our main customers for years in automotive and industrial after a long time showing signs and having new programs where equipment will be required, which gives a positive outlook for '26. That is referenced to Techinsights, which also expects the market to carefully improve in '26, more sizable in '27. So that's how our comment is also based on. What we have seen in these 4 years of very modest capacity increase only for new devices. We have seen development of many new devices ready for next-generation electronics, especially power devices for automotive, supposedly for hybrid application. So hybrid cars, I mean, not hybrid bonding. So in power, there's a lot happening. But still, the overall picture is not recovering to the extent which we are used to. But the growth in the other areas is so significant that, that offsets the -- yes, usually, our revenue, we've shared that forever. Automotive was between 15% and 20% of revenue. Now it's somewhere around 10% to 15%, depends on which quarter. It probably will drop in the next quarters or it has to turn. But that's about -- well, it is 10% to 15% of revenue. Operator: The following question comes from Marc Hesselink from ING. Marc Hesselink: Yes. Can we have a bit more view on the 2.5D photonics opportunity? I think that is sort of a momentum that's been building up throughout the year in '25. And I think with an extremely strong end with the order intake towards the end of the year, can you maybe see -- I would assume that in this business, maybe the -- because it's strategic investments, the visibility is a bit higher than in your usual mainstream product portfolio. So can you maybe see -- how do you see this ramping the capacity? Is it just a few quarters? Or is this a longer-term trend? Is this going to accelerate from where you are today? It would be very helpful if we get some extra detail there. Richard Blickman: Well, there are two growth drivers. Number one is simply the data center, let's say, capacity built in the world. So the connectors to connect those computers inside those, yes, data center units, that is what we have been involved in for the past -- over 10 years. But the second driver is that there is a technology step and that will require twice the amount of steps, the interconnect steps in these connectors than the current generation. So there is definitely more growth ahead of us for these two drivers. So not just the growth in data centers, but also in technology. I mentioned already, 10 years -- that started, well, over 10 years ago with Cisco modems. And these connectors, it's a set of 5 main customers, and they all produce for the very big end customer. And as long as that is growing as the world expects, we are directly linked to that. Does that answer your question? Marc Hesselink: Yes, it does. And maybe as a follow-up on that. Now that you're also seeing a lot of that volume coming from the OSAT. Is it then fair to assume that implies that it becomes even more mainstream and even more adoption beyond what you just mentioned? Richard Blickman: Yes, certainly. Certainly. And that's also publicly known that the IDMs, as usual, they offload more mature products to the subcontractor space and the more complex the technology, the more attractive that is for the subcontractor space. And we know the big two leaders, both starting with an A. But then there are many subcontractors who are also involved in this expansion into mainstream for data center computing applications. Any further questions? Operator: The following question comes from Martin Marandon-Carlhian from ODDO BHF. Martin Marandon-Carlhian: My first question is on the new fab of your Taiwanese customer, the AP7. Do you think the vast majority of the demand there will come from new customers adopting hybrid bonding? Or do you also expect AMD to be a big contributor since the announcement of its deal with OpenAI? That's the first one. Richard Blickman: Well, what we hear, and I was just there 2 weeks ago, there are several big companies, and we all know the names, either for high-end smartphones or for data center computing who are supposedly on the brink of changing from reflow process designs to hybrid bonded designs in whatever end products. And that is the driver for a factory, which is twice the size of what is currently the AP6. But then there is a next plan, AP7 is not the end. So there are major plans. So look at the model, which is shared by many of the front-end companies, what they expect in the next 3 years, the demand for AI translated into capacity that similar model you can use for the advanced packaging. So the next note plus an enormous expansion in end market demand. Whether that will -- as presented, we all know this industry but anyway, that's the picture driving the programs in Taiwan. Martin Marandon-Carlhian: Okay. Very clear. And the second one is a bit of a different one, is on high-bandwidth flash HBF, some expect HBF to be necessary to improve the memory capacity in future AI chip packaging. So my question is just what do you think about this? Do you think it's a driver for hybrid bonding or TCB? Is it part of the current discussion with your customer? Or is it not really relevant in the near future? Richard Blickman: Well, I can't answer that. Yes, simply, I have no, let's say -- if I would, I would answer it, of course, for you, but time will tell, and we are certainly following that closely. Operator: Ladies and gentlemen, we have arrived at the end of the presentation. I would now like to hand the word over to Mr. Richard Blickman for any closing remarks. Richard Blickman: Well, thank you all for joining us today. And in case you have any further questions, don't hesitate to contact us. Thank you. Bye-bye. Operator: Ladies and gentlemen, you may now disconnect.
Operator: At this time, I'd like to welcome everyone to the Talkspace Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] The press release and presentation of earnings results can be accessed on Talkspace's IR website. The presentation will be used to walk you through today's remarks. Leading today's call are CEO, Dr. Jon Cohen; and CFO, Ian Harris. Management will offer their prepared remarks and then take your questions. Certain measures that will be discussed on today's call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of one-off items. Reconciliations of these non-GAAP measures are included in the earnings release and on the website, talkspace.com. As a reminder, the company will be discussing forward-looking information today, which may include forecasts, targets and other statements regarding plans, goals, strategic priorities and anticipated financial results. While these statements represent the company's best current judgment about future results and performance as of today, actual results are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Important factors that may affect future results are described on Talkspace's most recent SEC reports and today's earnings press release. For more information, please review the safe harbor disclaimer on Slide 2. Now I will turn the call over to Dr. Jon Cohen. Jon Cohen: Good morning, and thank you for joining the call today to review our fourth quarter and full year 2025 results. When I joined Talkspace at the end of 2022, the strategic pivot had already begun shifting from our Consumer model to a Payor fee-for-service model. Today, I am proud to look back at the progress we've made financially, operationally and towards our mission to deliver comprehensive, personalized mental health care to all. Since 2022, we have grown revenue at a CAGR of 24%, driven by Payor Sessions annualized growth of about 56%. During this time, our operating expenses as a percentage of revenue continued to decline, helping to drive operating leverage and improved EBITDA margins. For the full year of 2025, we delivered revenue of approximately $229 million, an increase of 22% year-over-year, driven by payer growth of 38%. In addition, we more than doubled adjusted EBITDA, growing from about $7 million in 2024 to $15.8 million in 2025, which represents an adjusted EBITDA margin of 7%. Our growth in Payor, where we now cover well over 200 million lives through insurance and employer benefits is driven by 2 factors: one, strategic initiatives we have put in place to bring people to Talkspace, including targeted efforts to increase awareness and drive high-intent referrals as well as deepen partnerships with the Payors to improve the patient journey and make it easier to find care; and two, our expanding offerings within the Payor channel to cater to new populations and differing levels of acuity. Both of these initiatives are underpinned by our continuous improvements to the member journey and our clinical network. We continue to drive increased consumer awareness through our paid media strategies, search optimization, partnerships and scaling brand recognition. Our awareness campaigns have been very successful over the last 3 years as recognition of the Talkspace brand continues to go up, while our spending on marketing has significantly decreased over the same period. Our initiatives to drive high-intent referrals has been successful with increasing volumes month-over-month from Amazon, Zocdoc and our strategic partners. We're also seeing a strong and growing presence of Talkspace in large language models due to the work our team has done to optimize on and off our website for increased visibility and citations. In the fourth quarter, general purpose LLMs drove an increasing percentage of traffic and checkouts as we continue to expand this new and growing channel. Recognizing that we provide high-quality clinical care, the Payors have partnered with us on several new initiatives to further simplify the patient experience. This includes directory integrations with several of our Payor partners and some utilizing single sign-on so that patients can log into both platforms with ease. Others are embedding Talkspace scheduling into their directories so that patients can book sessions without leaving the Payor site. We are currently working with one partner to launch the capability for their care coordinators to schedule Talkspace appointments on behalf of patients, a tool we will expand with other partners and Payors. During the year, we also expanded our offerings within the Payor channel. We invested in our psychiatry business, grew both military and Medicare enrollment and acquired Wisdo, the lower acuity AI-powered social health platform specializing in peer-to-peer community and coaching. On military, our enrollment continues to grow month-over-month following our January 2025 launch as does patient engagement through our direct-to-enterprise contract with the Navy. Our Medicare enrollment also continues to grow. And with the acquisition of Wisdo, we've seen increased interest in Medicare Advantage plans given Wisdo's proven impacts on loneliness and social isolation. In addition, Wisdo's partnership with Novo Nordisk to provide group coaching for patients on GLP-1s opens a new door for us into a previously untapped category of pharma partnerships. Our youth programs, which we initially launched at the end of 2023 across major markets, including New York, Baltimore, Seattle and North Carolina continue to deliver strong measurable impact on scale. In New York City alone, more than 45,000 teens are enrolled in our Teenspace program. 66% of enrolled teens showed measurable clinical improvement with the most common presenting needs being anxiety, depression, relationship challenges and stress management. The program is reaching historically underserved communities with nearly 45% of participants living in areas with high health and income disparities and 82% identifying as BIPOC. Engagement remains very strong with over 90% of teams actively texting with their therapists and more than half choosing messaging as their exclusive modality. The results of these programs reinforce Teenspace as a scalable public-private partnership model and Talkspace's leadership in youth mental health solutions. Specifically, in psychiatry, we expanded our network of psychiatry providers to over 400 providers, and we made a number of improvements to the patient journey to streamline processes like simplifying medication management workflow to be able to send medications directly to the member's pharmacy of choice. In April, we launched our integration with Amazon Pharmacy, allowing members to seamlessly fill prescriptions from their Talkspace provider and get fast free home delivery, making for a more convenient patient experience. Further, we created an easy pathway for members using Talkspace for therapy to receive an internal referral to a Talkspace psychiatrist, an investment through which we are seeing strong traction. Turning to AI. We are continuing to utilize the technology to improve business operations and incorporate AI enhancements into the platform to further improve the patient journey and provider workflow. These enhancements have reduced friction in several areas, lowering the number of registration drop-offs and leading more patients to successfully begin their care journey. Once a member is onboarded, we have also made it easier to schedule their appointments, increasing the number of patients that continue care after a first session. These efforts have resulted in an increase in the number of checkouts and a 49% increase in the number of patients completing a third session in the first month of care. Another factor contributing to our increase in session growth has been the success of Talkcast, our individualized AI-generated podcast that I've talked about in the past. When members open a Talkcast episode between their first and second sessions, they are 20% more likely to complete a second and third session. To date, we have produced over 76,000 episodes, which have been overwhelmingly well received. 95% of provider reviews and 92% of client reviews have been positive. In addition, our network management strategy has brought continued focus on curating our network of clinicians to optimize for the specific utilization trends we are seeing, ensuring that we have clinicians available in the right space at the right times to align with patient demand. Now let me turn to the TalkAI agent that we have been developing over the last year. Although general purpose large language models are now being utilized by a huge number of the global population, they were never built to support mental health. While these models have democratized access for millions, which is a good thing, they have unfortunately led to a rash of reported harmful outcomes. Mental health support requires something far more specialized and nuanced, including challenging distorted thinking, recognizing delusions and identifying risk in real time. The TalkAI agent we have built is designed to be the first safe AI agent specifically developed for mental health support, utilizing clinically recognized standards of care with continuous human oversight and privacy HIPAA protection. The LLM is trained and fine-tuned on Talkspace's massive mental health data set, identifies 10 areas of risk in real time, supports appropriate decision-making and avoids the pitfalls already seen in general purpose LLMs. It keeps clinicians constantly in the loop with clear escalation pathways to connect users at risk to a licensed human clinician in real time. TalkAI does not replace clinicians, but rather extends their reach, adhering to strict clinical standards while identifying new users who may need human interaction. I believe that the need for human care by trained therapists will increase as millions more people will be identified that need professional help beyond what our agent will provide. We are currently beta testing this quarter with the expectation to be in the market late in Q2. In summary, as you can see, we have come a long way in 3 years. There remains a tremendous opportunity in front of us and one we are positioned to continue to aggressively pursue. In addition to the core business, we believe we have strategically positioned ourselves to be a leader in the application of AI to mental health services in this rapidly moving current environment. I am pleased with the Q4 results and our full year business performance. Looking ahead to 2026, I am very optimistic about our capability and opportunity to continue to grow the business, expand profitability, and I'm encouraged by the strong momentum we have seen thus far in 2026. And now I'll turn the call over to Ian. Ian Harris: Good morning, and thank you for joining us. I want to first echo Jon's sentiment that we ended the year with some really solid momentum, and we are well positioned for that to continue. Today, I'll review our fourth quarter financial results before walking you through our financial outlook for 2026. Turning to the fourth quarter results. Total revenue for the quarter was $63.0 million, representing a 29.3% year-over-year increase. Our Payor business continued to be the primary growth driver with revenue of $47.7 million, up 41% year-over-year. Growth was driven by increased session volume and expansion across existing clients. Specifically, the number of sessions for the quarter was 450,000, representing a 36.3% year-over-year increase. Furthermore, the number of unique active Payor members for the quarter was 124,000, representing a 29.7% year-over-year increase. Within direct-to-enterprise, revenue was $11.6 million, an increase of 21.8% year-over-year. As we noted on our third quarter call, several new launches shifted from the third quarter into the fourth, and DTE also benefited from the inclusion of the Wisdo acquisition, which closed on October 1 and benefited from revenue associated with implementation work for certain new accounts. Consumer revenue was $3.7 million year-on-year, consistent with our intentional prioritization of both Enterprise and Payor channels. Gross profit was $26.9 million, up 24.4% year-over-year, resulting in a gross margin of 42.7% in the quarter. This was down 169 basis points year-over-year, primarily reflecting revenue mix shift towards Payor. Operating expenses were $23.1 million, an increase of 9.6% year-over-year. Importantly, operating expenses as a percentage of revenue improved meaningfully to 36.7%, down 660 basis points compared to the fourth quarter in 2024. Adjusted EBITDA was $6.6 million, representing 147.1% year-on-year growth with an adjusted EBITDA margin of 10.4%, up nearly 500 basis points versus the prior year. Turning to the balance sheet. We ended the quarter with $92.6 million in cash, a decrease of $25.2 million year-on-year, driven primarily by our share repurchases, which totaled $17.2 million in 2025 for the full year as well as the acquisition of Wisdo. For the full year 2026, we are providing initial guidance as follows: we expect revenue to be in a range of $275 million to $290 million, representing 20% to 27% year-on-year growth. We expect adjusted EBITDA to be in the range of $30 million to $35 million, representing growth of 90% to 122%. Looking back at our 3-year outlook introduced in early 2024 and which extends through this year, we expect to deliver a 3-year revenue CAGR of approximately 23% using the midpoint of our 2026 guidance, which is consistent with the 3-year outlook stated target of 20% to 25%. From a profitability perspective, we anticipate exiting 2026 with EBITDA margins in the mid-teens towards the high end of our 12% to 15% target range from that outlook. I want to share a few points on the underlying assumptions behind our outlook. From a quarterly cadence perspective, we anticipate revenue growing over the course of the year and similar to last year with the first half representing a little less than 50% of annual revenue as active Payor members and sessions grow throughout the year. In terms of our revenue mix, we expect Payor revenue growth to be in line with the Payor growth rate we experienced in 2025, driven by the activation strategies Jon outlined earlier. As we've discussed in the past, the Payor business brings a high degree of visibility given the longer retention of a Payor member compared to someone paying out of pocket and a material portion of our 2026 Payor revenue will actually come from Payor members already on the platform as of year-end 2025. We expect D2E to grow in the low single-digit percentages again this year. As a reminder, the first quarter historically has the highest number of accounts up for renewal and therefore, sees the highest attrition of any quarter in the year. Q4 performance also benefited from certain implementation revenue. So we would expect D2E revenue in Q1 to be sequentially lower than Q4. And finally, Consumer revenue will continue to decline by design. However, it's a much smaller headwind overall given the less material starting point in 2026. While the midpoint of 2026 revenue guidance represents 23% growth year-over-year, our Q4 run rate revenue, which is over $250 million, implies 12% growth at the midpoint. This is thanks to the accelerating growth we drove over the course of 2025. These trends, along with the internal efficiency measures that we continue to implement will drive further operating leverage through the P&L. Specifically, for adjusted EBITDA margins, we anticipate starting the year in the high single-digit percentages and exiting 2026 in the mid-teens, which will result in a similar quarterly cadence of adjusted EBITDA as we saw in 2025. In summary, we believe Talkspace is well positioned for sustainable growth and continued margin expansion, supported by strong momentum in our Payor business, improving operating leverage and increasing visibility into future demand. With that, we'll open the call for questions. Operator? Operator: [Operator Instructions] And we'll take our first question from Steven Dechert. Steven Dechert: Congrats on a solid quarter. Just around your large language model that you're currently in beta testing, what do you see as the key challenges in getting people that are currently using the general purpose large language models using yours as you roll it out? Jon Cohen: Thanks, Steve. This is obviously very much work in progress. As we stated, we're in beta with people registering as we speak to go through that testing of what this thing looks like. Where this thing is positioned as a place to have a serious conversation where your information is protected and where you have both security and safety behind you, I can't tell you yet because it's such early days about what kind of movement we'll have, what kind of people will use this versus the other LLMs. That is just absolutely a work in progress. So my message right now is to stay tuned. We will have a lot more information once we finish the beta. We've seen a little bit early results. But right now, my answer really is to stay tuned and let's just see what happens. It is being -- it will be positioned as somewhat different than the general purpose LLMs. I'm not obviously trying to [indiscernible]. I'm just telling you it's just early days, and we have a lot of interesting information right now, but we're certainly going to talk about it more as the next several months evolve. Steven Dechert: Got it. Yes, totally understand. And Ian, you just mentioned on the '26 guide that most of the revenue is already from members in the platform. So I guess I'm wondering, does the high end of the guide that's from additional new members that aren't currently on the platform? Just maybe what gets us to the high end of the guide said more simply? Ian Harris: Yes. Steve, just to clarify, I think in my prepared remarks, I said a material amount of Payor revenues from existing members on the platform. I want to call that out just because people forget, right, under the Payor model, that sort of longer lifetime on the platform and that's sort of longer tail of revenue allows us from a visibility standpoint to have a much higher level of conviction in terms of modeling out the Payor revenue, right? So as we start Jan 1, it's not a majority, but think of it as 30% to 50% range of our Payor revenue is actually coming from folks we already have on the platform. But in addition to that, obviously, we're going to, to Jon's comments, keep driving both from paid marketing work, additional organic work we're doing on the marketing front, which there's a lot of really exciting LLM sort of optimization work we're doing. And then very importantly, the direct integrations we're doing with the Payors and getting sort of more embedded with the Payors to lower that friction for people that find us through their insurance portal. So that will all drive new users throughout the year as we've done sequentially throughout '25, which then obviously has that long tail of sessions pulling through as well. Operator: We'll take our next question from Ryan MacDonald with Needham. Ryan MacDonald: Congrats on a great quarter. Maybe just to sort of double down on the Directory integrations. Obviously, showing some great success with the first Payor partner that you've rolled that out with. Can you just remind us on sort of how many additional sort of deep integrations you'll have sort of with additional partners this year? And I guess, what have you learned from the first partner that can be replicable to sort of continue that strong utilization with you? Ian Harris: Yes, I can start, and then I'll hand it over to Jon. I mean on the first Payor, like you said, it's been extremely successful. They're happy in so far as they're bringing a much friendlier consumer experience to their members and making it easier and candidly less frustrating, right, that sort of finding your care journey. And we view it as, obviously, from a CAC perspective, very accretive, right, to get that incremental conversion and additional traffic coming from the Payor. So it's early in '26, Ryan. So we're obviously working hard to do more. I would say line of sight we have today, there's probably, depending on how you look at it, call it, 3 directory integrations we're doing in the early part of '26. So for sure, at least 3. I think in terms of what that represents materiality-wise versus one last year, it's probably about similar size all in all, population-wise, maybe a little bit bigger in the aggregate, the 3. So as big or bigger of an opportunity as we saw with the integration in '25. What we're learning is, it's interesting. Some of these directories, it's sort of the first time they're doing these integrations. So we are sort of in this beneficial position where we're working in tandem with them on the design of how the directory works, which obviously gives us a level of influence to sort of shape what that experience looks like from our own knowledge, having done this, right, for a decade as a marketplace business ourselves. So they really appreciate the sort of edification we're able to bring there, but also helps us candidly, in terms of the algorithm, what helps screen providers hire? Is it quality? Is it schedule and sort of how that sort of search algorithm is designed, we sort of have a seat at the table for that. Ryan MacDonald: Really helpful color there, Ian. And then obviously, a lot of the success that you've had in the Payor business to date has been on the commercial side and obviously, in the military. Curious to get your thoughts about sort of the potential opportunity within Medicare sort of in 2026, particularly with CMS rolling out this access program. Is this sort of a potential opportunity to sort of supercharge or sort of fuel deeper Medicare efforts or to drive better utilization there? And are you intending to participate in the program? Jon Cohen: Yes. Thanks for the program. So the answer to that is on the access program is yes. We are acutely aware of the access program. We talked about it. We are -- class, we are -- we have submitted. We want to be part of it. It is outcome-based. We're very comfortable with what an outcome-based model would look like. So the answer to that is yes. We -- also, as you heard me say, we're -- the Wisdo acquisition on Medicare and MA has been very positive and continues to grow. And as we said in the past, we increases. It's been no surprise as I've talked about in the past. It's a relatively difficult market to penetrate only because it's so ubiquitous and it's across all 50 states. But we are making -- let's say we are making progress. But between Wisdo, access program, the stuff we're doing on the ground, we continue to be confident in how it will grow. Operator: We'll move next to Richard Close with Canaccord Genuity. Richard Close: Congratulations on a strong year and outlook. Jon, at the end of your comments, you said something about momentum already here in '26. And I was just curious if you could go a little bit deeper in terms of what you're seeing already through almost 2 months, the basis of that comment? Jon Cohen: I would -- the comment is because at the beginning of the year, it really does somewhat change things because people coming back on, they're looking at the assurances, they're beginning to reengage at a bunch of different levels. But most of what we're gauging everything is people coming on to the platform and doing sessions. So my comment was purposeful that we're continuing as we exit 2025 to see the momentum continue early on in '26. Ian Harris: Yes. And Richard, as you know, we take January as an opportunity to do a bunch of sort of marketing campaigns, right, post holidays, post New Year's resolution season. So a lot of sort of wood behind the ball from a marketing effort standpoint. The momentum Jon is alluding to is just that, right? The checkouts we're seeing, the CAC environment we're seeing, getting in front of folks and all of that's contemplated in the guide, consistent with the guidance. Richard Close: Okay. Second question would be just like overall behavioral health care costs, I know we've talked about this in the past, but I mean, you look at some of the benefit brokers and they cite increased behavioral health as one of the top expenses. And obviously, some of that's inpatient, but outpatient playing a role as well. I'm just curious your conversations with Payors in terms of rising health care costs. And you just did mention with respect to Medicare, you're comfortable with outcomes-based and whatnot. Just curious how you're thinking about potential utilization management or reimbursement changes and just the overall marketplace with respect to behavioral health? Jon Cohen: Yes. I think it's consistent with some prior discussions. We know -- obviously watching what's going on in health care costs, people paying more for their premiums. But remember, the mental health, not just the TAM, the market, but the more people engage in mental health, it actually saves people. As you know, there's a huge amount of data out there already that a good mental health support program saves people on the medical side. So that's one. Number two is the majority of costs that people are looking at to reiterate is really on the in-hospital side and the in-hospital diagnosis. It's really not -- it's not on what we're doing on the outpatient side. The outpatient side of mental health is a very, very small piece of the pie right now for the health care spend nationally. And then we -- some of the other products, when the talk AI agent comes to fruition. It will be a lower cost option. The Payors already know that. So I think there's a lot of positives from what we're doing. But I think that -- I don't think the global or national issues relative to the health care cost should have any impact on us. I just continue to see this to grow because it's actually a win-win for everybody, more people get mental health. Richard Close: As a follow-up to that, do you think your ability to show outcomes and the data that you have is a differentiator where maybe Payors skinny down the number of providers that they're -- or vendors that they're actually utilizing for these services? Jon Cohen: Absolutely. So we already have a couple of early value-based contracts. They're relatively rudimentary, quite honestly. It's time to first appointment, time to second appointment, how many people show up. But -- so all of those things we have in place. So we're very comfortable with anybody almost that comes to us for a value-based arrangement because we already have that in place. And one of the reasons that we are so comfortable because of the network. So the curated network is a really big deal, meaning we monitor -- as you know, we monitor the quality, we look at what therapists are doing. That's really important on a value-based contract because you have to be able to measure outcomes. And to measure outcomes, you got to be able to control the network. You got to be able to look and see what the quality is that's being delivered. So having those -- having all of that in place is really, really important to be able to deliver on a value-based contract. So we're pretty comfortable with all that. Ian Harris: And that dynamic you alluded to, Richard, I think that is exactly what is playing out with the directory dynamics, right? It's no coincidence we're being tapped to do these initial embedded directories. It's a function of years and years of providing them that data exactly as you allude to, the clinical oversight, the QBRs we do with the Payors, the audits. So they're, in some ways, rewarding us in that sort of -- I don't know if you use this phrase, Richard, but narrowing the network a little bit. Clearly, by doing these directories with us, we would expect, as we saw with that one Payor last year to take sort of outsized portion of share of their Payor portal traffic. So it's sort of indirectly them doing exactly what you're hypothesizing. Operator: We'll take our next question from Charles Rhyee with TD Cowen. Charles Rhyee: Jon, I wanted to ask a question, right? You kind of made the comment earlier, right? A lot of people are now seeking out information, but they're not just going to a search engine anymore, right? They're going into ChatGPT or something and asking them. And so you've talked about how do you optimize to be picked up by these LLMs so that people can get directed to you. And it sounds like is this like the new SEO? Like is even search engine optimization as much of a thing? Is it really now how do you optimize to be picked up by LLMs? Because it's something that we've heard from other companies as well more recently. And then connected to that really is, how do you then connect from maybe that kind of initial outreach by patient who is -- a patient who is going through a chat like an LLM or a ChatGPT or something and get them to your AI bot, right, which would be more a protected environment for patients. How do we bridge those 2? Or how do we get them to search you first? Let me just start there. Jon Cohen: Right. So great question. So actually, just -- I don't know if you've seen it, there's an article in New York Times this morning all about search engine optimization through LLMs. And I have talked about this. We have put in place. Our marketing folks have been aware of this for quite some time. So we actually have people who just are working through LLM search strategies so that we do appear on whether it's Gemini or Claude or ChatGPT. So we have been optimizing -- there's another term for it. It's called generic -- I think it's called generative optimization as opposed to SEO. But however, saying that we are not only aware of it that what we put in place mechanisms to make sure that people do find us. And we track it also, by the way. So we have seen this go up month to month to month. People who are finding us on the other LLMs, the number of people, it continues to increase month-to-month. So one, that's what we're doing on the SEO, very comfortable about where we are relative to that strategy. In terms of people finding us is an interesting question because we have not gone to market yet. We do have a fairly fully baked initial marketing plan so that people will find us depending on what they're looking for. Now there's a lot of nuances to that. We don't have time here to probably talk about all that. But meaning are they really looking for therapists? Are they looking to have a serious conversation. There's a lot of different things that people look for. We -- so as I mentioned a couple of minutes ago, our view on this is that if you want to have a serious conversation that's confidential, particularly around relationships or other issues that may be bothering you and your information is protected, if you're protected, and we have significant clinical background, that people will then make a decision about where they will go depending on what they want. We don't -- the answer, of course, is we don't have the answer yet. But we are being positioned. We are -- we'll start off being positioned in a little bit different mode than the others. But the -- I can't even say the jury is out because we haven't gone yet. So we will know more, as I said, once we finish the beta in terms of why people are coming to it, how people are using it, which will be a significant bunch of data points about how we relatively -- how we go to market after that. Ian Harris: We'll have a separate marketing initiatives and budget just for the LLM product, right? So in the guide, there's little to no revenue associated with TalkAI revenue, which, as Jon alluded to, we'll launch this summer publicly. But there'll also be a separate marketing effort there. While we don't historically disclose traffic or conversion numbers on our core platform, suffice it to say, if you just look at even the best-in-breed e-com brands, you can imagine there's a ton of traffic coming to our site who never check out, right? So we actually view based on the research we've done, the TalkAI product is going to be absolutely TAM expansionary for us because there's a lot of people who are curious about therapy, they come, they search. But as you know, it's not sort of a fleeting decision somebody makes just to buy something, right, to enter therapy. So a lot of people actually come to -- and we actually think this is going to capture, I don't want to call it a lower intent, but maybe a group of people who are not quite ready to see a human-to-human therapy session, but are willing to take on sort of this more of a GPT type interface. So we'll have a separate marketing effort around that from a paid standpoint. But I also want to flag just from organic, we think there's a lot of folks coming to our site today who are not monetizing at all that we will retain once we have a TalkAI product. And that -- and this is completely separate from the GEO, the generative engine optimization work, which I would agree with your succinct take. It is sort of like the new frontier for SEO, which honestly, we're benefiting a lot from our historical strength in SEO. And so it's -- as Jon said, it's a small but growing very fast sort of channel for us on the core side. Charles Rhyee: Okay. That's really helpful. And that kind of clarifies some of my thoughts because I was just curious how do you transition people if they're searching through a ChatGPT, but it's -- what you're saying is that the low-hanging fruit is all the people that come to your website already that you want to monetize. So at least you have this initial base, and it seems like people are getting to you in some fashion. My second question, though, is maybe -- have you had any discussions with like a Humana? When we think about the MA opportunity, we've obviously seen now the advanced rate notice for 2027 is actually quite poor, and we're looking at potentially another round of benefit cuts from plans going into -- not this year, but going into next year. Where does behavioral health, do you think in your partners' minds sit in terms of benefits? Is that something that you think they might look to cut back on? Or is this something that you think is pretty safe? Jon Cohen: Yes. I mean if you're alluding to employers, I can't answer you. We have a -- most of that is through... Charles Rhyee: I was thinking about Medicare Advantage for '27 just because of the... Jon Cohen: Yes. Our view right now is that Payors continue to be very interested in what we're offering and MA continues to grow. But we'll continue to talk to whoever is out there. I think that Humana is another whole question about how they're going to approach the market now. But I can't tell you anything more except that we still continue to have interest on the MA side. Operator: We'll take our next question from Bobby Brooks with Northland Capital Markets. Robert Brooks: As we think about how you guys are mapping out driving higher utilization into 2026, what are the 3 or so most important levers you feel you have at your disposal to help drive that? Jon Cohen: Well, no particular order. We've talked at length already about the directory integration. I think you've heard me talk about the change that we made had a very, very significant impact on the number of people that are booking checkouts, booking for session, second and third. That's been a really big [ add ]. And so I think as I talked about before, that's a never-ending journey. There are literally -- you can't believe how many more things you could do to test and to change to make sure that you actually get more people through to the funnel and through the funnel. So that's the second. I would say, again, no particular order, the third is partnerships. You've heard us talk about the growth in both Amazon, Zocdoc and the 20-plus other partners that we've announced. We will continue to lean in on the partnership expansion because a lot of it -- it's beneficial for both the partners and for us to get the referrals. So I would say that those 3 levers, journey, partnership and certainly directories. And probably in a general sense, [ that number ] is just our ongoing relationship with the Payors. Robert Brooks: Got it. And then just curious to hear more on the beta testing of TalkAI. And obviously, it's still early, but wanted to know -- wanted to hear more what's the plan -- like what -- how are you thinking of early plans of commercializing it? Are you -- and maybe are you in any active conversations with kind of the larger LLMs of potentially licensing it? Just trying to get a sense on that. Jon Cohen: Yes. Our go-to-market is to be direct-to-consumer first, which is what we've talked about is the launch and then -- and test all the different models about who's coming, why they're coming, what sort of price point makes sense. So that whole direct-to-consumer is the #1 focus. We are in discussions with multiple -- to be honest, with several other entities about their interest in our LLM. And I would just say just TBD -- but there are other discussions going on with other people. Ian Harris: On the early learnings of the beta, which, call it, a little bit shy of 1,000 users at the moment, we've been -- I don't want to say pleasantly surprised, but it's been really interesting to see just how engaged folks are with the product. And this has been well covered in sort of general reporting on LLMs, but the willingness of people to share with the AI therapy product -- therapeutic product as opposed to a human has been quite astonishing. So very, very, I'd say, promising sort of engagement and retention thus far. And then as Jon said, the intention would be like any sort of product-led growth strategy, start with D2C right, sort of an out-of-pocket revenue model, take the learnings from that and that initial data from those initial cohorts, which will then inform how we would approach it more on the enterprise side, talking to whether that's employers, other large groups. Robert Brooks: That's super helpful. And then just last one for me. Jon, when we were on the road in December, I thought you made a really interesting remark that I think would be good to hear on the call about, obviously, you've had a long career in the medical field and have seen -- have been in kind of a couple of different spaces of it. And you mentioned how another -- in your past slides, you've never seen -- people -- insurance companies are always coming to ask for lower prices, but that's not what you've seen. Could you maybe reiterate that comment? Jon Cohen: Sure. So -- yes, we talked about we expect single-digit increases -- increases in our Payor reimbursements on our fee-for-service. So we are negotiating. We are going back with them. There are several coming up where we'll look for small increased rates. What you're alluding to is, yes, the prior industries where I've been, whether it's physician networks, hospital, ERGs, laboratories, it's usually the reverse. They're usually looking for how much less they're going to pay you. It just turns out that the mental health space is something that the Payors really, really continue to be interested in promoting and supporting relative to their relationship with the employers and their employees. So because we are, as I said, not just available, accessible, but an affordable option for them and significantly scalable, we remain very attractive to the Payors, so -- which, as Ian alluded to, which is why the partnerships and everything else are really, really important to us. So the long-winded answer to, yes, I'm very happy that we get increased rates. It's a bit of a surprise to me. Operator: We'll move next to Steven Valiquette with Mizuho Securities. Steven Valiquette: A couple of questions here. First on the '26 revenue guidance, obviously coming in pretty strong versus the high end of the range that you targeted 3 years ago. I guess, are you able to provide any color or just remind us roughly how much revenue you're expecting from Wisdo in '26? I'm just trying to get a sense for just rough approximation for like the organic versus the inorganic growth this year. I'll let you answer that one first, and I'll ask the follow-up after that. Ian Harris: Steve, yes, we haven't broken out Wisdo separately. It will show up depending on the type of contract, most likely in D2E or the Payor lines of business and to a lesser extent, a little bit of the consumer there. So it's embedded in the 3 business lines we report out. I would think of it if you're -- I understand the question sort of inorganic benefit from them. It's fairly modest, so single-digit millions contribution for '26. Steven Valiquette: Okay. Got it. Okay. And then yes, the next question here. I guess with the industry environment rapidly moving right now, which you kind of alluded to, not just in relation to AI, but other factors as well. Does this increase your appetite and/or need to look at additional external assets or possibly do additional tuck-in acquisitions this year? I know it's always hard to answer those questions, but I guess the question would be, are you well positioned the way you think you are right now with your own enhancements on the internally developed TalkAI agent and recent Wisdo addition. But I just wanted to get your sense for that. Ian Harris: Yes. No, we appreciate the question. I mean, certainly, we have the wherewithal to do more tuck-ins, right? We ended the year with almost $93 million of cash and equivalents on the balance sheet. I would say, given we just did the Wisdo acquisition, we want to make sure that's a successful outcome. It's the first tuck-in we've done in a number of years and for this management team, our first. So our main priority is to make sure that one is successful. I would say the excitement and resources and attention that we're dedicating to the TalkAI project is very substantive. And so the sort of de novo organic internal developed growth opportunities is probably where I would -- if I had to bet, we'll spend most of the time. So nothing immediate in terms of our portfolio that feels like a gaping hole that we need to address inorganically. I would say we feel very good about the hand we have today sort of already under our roof. And then as you know, just on that cash point, we bought back $17 million of stock in 2025, still have a very good amount of capacity under our existing buyback program. So in terms of uses of cash, that's another one. We obviously have that sort of arrow in our quiver for '26. Jon Cohen: Yes. I would add that on the -- it's an interesting question you have there on the TalkAI and even all of our other AI initiatives to improve the business and patient journey. Just as a reminder that Talkspace has been around 14 years and it's always been an innovative company quite honestly. I mean, it was -- they did most of the original work for texting and messaging and then got approval for that. So when we made the decision to further invest in AI initiatives, again, just to remind you, the company reported out AI risk algorithms back in 2018 and 2019. So this -- the reason I bring that up is we have a fair degree of significant expertise on the inside relative to our ability to do this kind of work. Obviously, you don't have everything and you go outside and you get other people to help on a consulting basis, whatever you need. But the core Talkspace technology capability is very, very high. Operator: We'll take our next question from Peter Warendorf with Barclays. Peter Warendorf: Just curious, given the anticipated growth this year, if you guys are comfortable with the size of the provider network as it is right now? And if there are any specific pockets that you feel like you might need to address? Ian Harris: Peter, the short answer is yes. We feel very good about it. We actually -- Jon had some notes in his prepared remarks about what we call the curated network. So we're actively pruning, engaging, trying to activate. And I think it was, maybe Bobby's question, sort of the rank ordering of how we're activating folks. One of the indirect components of that, which I think is not as obvious because really on the supply side is making sure we're engaging the network to have adequate availability such that when someone comes in and they want a certain day at a certain time, a certain type of therapists, we have that, right? And there's a lot of creative ways we're working on the product to make sure we're capturing that sort of consumer intent in real time. So short answer is we feel very good about where it is. It will grow here and there. It's very specific state by state. If we add a big partner with a certain type of population, do we need to ramp up hiring there? We've had numerous examples where our recruiting team has proven again and again, they're very effective and very nimble in ramping up supply when and if needed. But as sort of a run rate basis, we feel very good about where we are. The one area I would flag which we grew quite a bit in 2025 was on the psych side. So Jon talked about it as one of the more exciting sort of newer service offerings for us, psych. And what we mean by that is really medication management has been a very small-ish, but very fast-growing component of our Payor business. And so you'll see, I think in our 10-K, we ramped up our provider network on the psych side quite a bit in '25. Peter Warendorf: Got it. Okay. And then one quick one on the consumer side. The DTC revenue obviously is becoming a smaller headwind every year. But just curious how much of that you guys think you're capturing elsewhere on the Payor side of the business as that revenue kind of continues to fade away? Ian Harris: Yes. I would say most of it we capture. I mean, as you go through the registration flow, we make it pretty unavoidable for a prospective consumer -- prospective member, I should say, to not share with us your insurance info. So we very much lead with that intent to capture you on the Payor side. Now that said, there's always for whatever reason, the long -- small tail folks we don't cover or they just rather pay out of pocket for whatever reason. There is always that option. But we surmise we're capturing most of that consumer attrition. And then, yes, to your point, it will be less of a headwind on a dollar basis in '26, just given the smaller starting point in the year. So quickly becoming sort of more and more immaterial. Operator: And that does conclude the Q&A portion of today's call. And this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Goodbye.
Jonathan Paterson: Okay. Good afternoon, and welcome, everyone, to VSBLTY's earnings call. This call is being recorded. [Operator Instructions] However, we may not be able to answer every question and suggest that you reach out to Investor Relations via our website. Our call today will be led by VSBLTY's President and Chief Executive Officer, Jay Hutton. Before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested and any forward-looking statements due to a variety of factors, which are discussed in detail in our regulatory filings. A recording of today's presentation will be available in the Investor Relations section of our website, www.vsblty.net. I will now turn the call to President and CEO, Jay Hutton. Go ahead, Jay. James Hutton: Thank you, Jonathan. Good afternoon, everyone. And for those of you that are on the West Coast like me, good morning, and thank you all for joining us. Today's call covers our audited 2024 financial results and our performance through the end of 2025 third quarter. I want to begin by acknowledging that the timing of our filings has been challenging. The audit is now complete, and we are focused on restoring full regulatory compliance and advancing the business with discipline and transparency. Before turning to the numbers, I also wanted to address our audit relationship directly and out of the gate. The Board has made the decision to move forward with a new external audit firm, and we are in the final stages of that transition. The decision was not taken lightly, while with respect to the capabilities of our current auditors, we do not feel the level of urgency and responsiveness aligned with the needs of our growing public company operating in dynamic markets. The Board concluded that a change was necessary to ensure that our reporting time lines were met and our strategic objectives were supported going forward. This is about alignment and forward momentum. Now turning to fiscal 2024. A reminder that we report exclusively in U.S. dollars and all numbers cited will be expressed in that currency. For the year ended December 31, 2024, revenue increased to approximately $1.51 million compared to 869 in 2023 -- $869,000 in 2023. That growth was driven primarily by media management and professional services. More importantly, gross performance improved materially. In 2024, we reported a positive gross profit of $61,000 compared to a gross loss in 2023. That shift reflects improved deployment efficiency, better cost alignment and stronger execution discipline. Operating loss was reduced significantly year-over-year from approximately $8.95 million in 2023 to $5.45 million in 2024. That is a reduction of more than $3.5 million. While we are not yet profitable, the direction of travel is clear. And once we've sorted out the cost side of our business, the ability to get to profitability now is a much easier or at least well-understood task. Turning now to 2025. For the 9 months ended September 30, 2025, revenue reached approximately $1.86 million for the first 9 months of 2025 compared to $968,000 in a similar period in 2024, effectively doubling year-over-year for the comparable period. Gross profit for that 9-month period improved to approximately $414,000, up from $236,000 in the prior year. Net loss for the 9 months ended September 30, 2025, is approximately $4.96 million, reflecting continued investment in product development and deployment capacity while maintaining tighter cost controls than in earlier periods. Stepping back for a moment, I would summarize our financial progress in 3 ways: first, revenue momentum is improving; second, gross margins have stabilized and turned positive; third, operating discipline has materially strengthened. Now I would like to address near-term revenue visibility. We are currently in advanced stages of closing 2 or 3 contracts across both retail media and security verticals. These opportunities are at various stages of final documentation and commercial negotiation, while we remain disciplined in not recognizing revenue until contracts are executed and deployments begin, the level of activity gives us increasing confidence in near-term revenue growth. Assuming successful execution, we expect these engagements to begin contributing in the short term to the company's numbers. Turning now to a more strategic update. In separate disclosures, we have updated shareholders on Winkel Media, our joint venture with Anheuser-Busch. The Winkel network has recently added approximately 5,400 locations, further scaling its in-store retail media footprint across Latin America. As with any network expansion, there is a natural lag between install, activation, advertising onboarding and full revenue ramp. However, we believe this recent expansion will have meaningful revenue impact in 2026, both at the joint venture level and indirectly for VSBLTY as the technology platform powering that network. This scale reinforces the long-term value of our retail media strategy and demonstrates that patient deployment can lead to substantial network expansion. Now I'd like to speak separately about our strategic evolution within the company. Over the past year, we've been engaging with key channel partners who bring established enterprise and government relationships in regions, including India and the Middle East. These engagements have introduced us to large-scale opportunities requiring deep integration across multiple systems. As a result, we have formally expanded our platform capabilities into the category of data fusion. Computer vision remains foundational to our business. We interpret live video, detect objects, analyze behavior and generate contextual intelligence in real time. Data fusion elegantly builds on that foundation. It integrates multiple data streams, video analytics, access control systems, IoT sensors, license plate recognition, environmental inputs, satellite connection and third-party data feeds into unified operational intelligence environment, particularly valuable to militaries and to smart cities. Instead of asking what is happening in this camera, we ask what is happening across the entire environment. This capability is particularly relevant in smart cities, command centers, integrating traffic, safety and event analytics, critical infrastructure environments such as airports, port utilities and transportation hubs, multisite enterprise security operations, integrated traffic management systems, cross-system anomaly detection and alert prioritization. The value proposition is contextualized intelligence, reducing noise, prioritizing actionable events and enabling faster operational decision-making. You can see the value that this would have for militaries, for example, that are overloaded with inbound data in silos in different databases. The ability to merge them and make meaning of them with artificial intelligence is the opportunity. From a commercial standpoint, data fusion deployments tend to be broader in scope, longer in duration than single site and longer in duration than single-site analytics projects. They embed our platform deeper into mission-critical workflows and expand our addressable market, making us stickier. To be clear, this is not a pivot away from our core business, it is a natural progression of it. Our computer vision engine remains central. Data fusion expands the intelligence layer around it. In closing, the last year tested this organization financially and operationally. What matters now is execution. We are seeing improving revenue trends. We are entering late-stage commercial discussions that support long-term growth and near-term revenue. Our Retail Media joint venture continues to scale meaningfully. And we are expanding our platform into higher-level applications through data fusion, both in civilian and military markets. I remain confident in the relevance of our technology, the markets we serve and the discipline with which we are operating. VSBLTY has a remarkably committed assembly of management developers and strategic partners. We are highly resilient and are convinced that our true value of -- the true value of this company will begin to be expressed in the near future. With that, Jonathan, I'll open the call for questions. Jonathan Paterson: Thanks, Jay. First question, will Winkel Media revenue be recognized in VSBLTY's earnings soon? Also, what is the status with that relationship? James Hutton: Revenue recognition for a software company is always challenging because it always leads to some level of disagreement and point of view between the auditors and the company. The rules are the rules. Of course, we've got to follow them. With respect to revenue recognition, since day 1 with Winkel Media, we have recognized not a single dollar from those contract, which means we have an embedded bank of dollars that the moment we're able to recognize it under the rules for IFRS, we will be able to recognize it. That is projected to be this calendar year. The mechanism or the mechanics of recognition of revenue have to do with when that entity, the joint venture in this case, is reliably, predictably and repeatedly making payments against those debts. Now we have 2 engagements at Winkel that are meaningful to this discussion and a third that is relevant with respect to the balance sheet. We have a large working capital loan to them in several million dollars. That's one. Number two, we have a SaaS trailing revenue for Software as a Service, and that has gone into deferred revenue from the very beginning. Not $1 of that has been recognized under the IFRS revenue recognition rules. And we have a third piece that's a managed services agreement that was transferred to us in February of '25. That is being recognized. It's the only element of the 3 that is -- of the 2 that is being recognized. Both on the debt service and on the SaaS recognition, we expect it to impact our balance sheet Q3, Q4 of this year. Jonathan Paterson: Great. Thank you, Jay. A follow-up question regarding other partnerships. Are there any other previously announced partnerships that are starting to show fruit or potential revenue growth going forward? James Hutton: Well, the answer is yes, but I'm not going to disclose them at the moment because we're at various stages of contract agreements, deployments. And under the rules, we don't announce the revenue until that revenue is real. In fact, there is a specific prohibition for public companies to talk about what a contract could be. We are governed very aggressively with the kind of language that we're allowed to use. And at this moment, because the company is emerging from a very difficult time, I'm going to play by all the rules and not be creative in any regard. Jonathan Paterson: Understood. Can you give an update on the number of projects that you've mentioned in the past, specifically like the cooler doors? James Hutton: Sure. I mean, every company has to prioritize projects against the resources that we have. And that particular category, if you're asking me specifically to speak about cooler doors, there are 3 or 4 large customers that are evaluating in some cases or at least in one case, engineering that board engineering that product into their current product category, adding our product to their product. None of those are at the point where I'm prepared to talk about either predictive revenue or current revenue, they remain in the development modality. Jonathan Paterson: Great. Thank you. A relevant one for today. When do we resume trading? Since you're not profitable, would there be a capital raise on the horizon? And could you talk about the current cash burn and how much you need until profitability? So there's a few questions in there. So maybe when do we resume trading? And then if you could talk about any potential capital raise, and what does it look like for us to become profitable? James Hutton: Well, if you look at the numbers, we're around $6.5 million on an annual basis, plus or minus, to turn net profit. So that would mean that you -- that our -- if we make more than $500,000 to $550,000 in a single month, we are, by definition, profitable. I mean these are -- it's spiky. Some months are higher than others. But on an annualized basis, our target is between $6 million and $7 million. And we have multiple projects in the pipeline at this moment. Some of them sitting at a very high probability, almost completed kind of thing that would satisfy that requirement by themselves. That's the kind of contract we are pursuing, which is the reason why it takes -- one thing I've learned after almost 25 years, the bigger they are, the longer they take to get done. So it is our expectation that at least a portion of and potentially all of our burn will be managed by or addressed by revenue. If, however, an occasion arises that in order to deliver the contracts flawlessly, we may need to get additional capital, we will do that. But we have a couple of hidden secrets in VSBLTY. One of them is that between $0.09 a share and I believe $0.75 a share, we have more than $15 million in warrants. And it is my hope that the stock price will create an environment where it makes sense for those to come in. I'm not Pollyanna about it. I don't believe that 100% of the dollars are going to come in just based upon the movement of the stock price. But the mechanics are clear. And once we get announcements out and we've got a few that we are expecting soon, we believe that the marketplace will respond because the announcements, none of them are modest. They're all pretty significant. And should we be able to land them in the time frame that I expect we should and they're of the size that they appear to be at the moment, then we will have the benefit of being able to fund the company by way of revenue. And if we have to tap the public markets, it would be by way of warrants. I'm not dismissing the idea of a small capital raise. We could do that, but we would only do that should we be seeking execution capital. It's to enable the contracts that we have. Jonathan Paterson: And then could you touch upon just -- obviously, there's a little bit of confusion on the back of the CSE's announcement earlier today about the resumption of trading for VSBLTY? James Hutton: Yes. I think it was clumsy, quite honest with you. They said that the company has satisfied all the requirements to resume trading, leaving the inference that we are resuming trading. Well, we're not. They don't get to make that call. We are currently in the hands of an analysis or review that occurs with BCSC as the lead, but also involves other regulatory authorities. But BCSE is the lead. We know who our analyst is. She's working the file. And if she gets done quickly, we'll be trading quickly. If they take their time, it will be a little bit longer. I think the reasonable expectation is between 2 to 6 weeks. I'm on the front end of that from an expectation point of view because the company went through a continuous disclosure review, which happens once every several years for public companies in Canada, just standard fair. We went through one in January of '25. So that would suggest we're pretty fresh on the items that they're going to review. What they're reviewing is that the company has adequately and completely disclosed all the major events that the insiders have behaved themselves. So they'll review the insider filings that we've got update background checks. All of that we knew was coming in terms of the various things they would ask for. And when we submitted our application to resume trading, we submitted it with all those things with the expectation that they were going to ask us for them anyway. So we're doing everything we can to shorten the process. But ultimately, it is the decision of the regulator, which does not respond to our persuasion influence or anything. So it is -- it runs at their speed. Jonathan Paterson: Great. So we have a question. Is it safe to say that VSBLTY has ongoing deals and discussions in progress now regarding military and data fusion deals and partnerships? James Hutton: Yes. Jonathan Paterson: Okay. Staying with Data Fusion, Data Fusion does seem like a very organic expansion of VSBLTY's mission. Is it possible for you to talk about a few concrete examples of the integration of services? James Hutton: Yes. Yes. But in my example, I am not specifying a current use case, I am specifying a sample use case. Borders and perimeters have always been important to VSBLTY. A lot of what computer vision does and can be is the ability to protect borders for insurgent activity, illegal crossings, this sort of thing, both for vehicles, people, weapons, all of that. This is partly what computer vision is very good at doing and doing so in a way that is not necessarily attended by an operator, it is autonomous. It can do that and then inform an operator as to something that needs to be addressed. But you would imagine in a border application, maybe it's a conflict zone, maybe it's just a standard nonconflicted border, there are other things going on, right? There's a satellite above, maybe there's drones flying above. All of those entities or capabilities are producing data, and they're pushing that data down to the ground. Radars are picking up signatures that are pushing that into a database. There may be voice traffic. There may be mobile detection of devices, mobile devices. All these are data pods or data streams. Data Fusion is the idea of taking those streams into a single ingestion layer and providing a visualization of what's happening. So you see multimodalities of what's happening in a specific threat area or border area or conflict area. That's the opportunity. I don't like to say this with too much authority, but what VSBLTY is doing in the area of signals intelligence, computer vision intelligence, satellite intelligence and of course, streaming intelligence coming from drones and other things is like a little Palantir really because the primary value proposition of Palantir is taking structured and unstructured data, congesting it into an environment where it can be viewed and made sense of. AI has made that whole domain far more reachable. And in terms of the use cases, you can imagine if you're sitting at a border location and all this data is coming into you, today, just understanding that data is overwhelming, like just too much. But the idea of creating a Data Fusion layer and then running AI on top of that layer to provide for natural language query and all the things that we can do in AI databases now, that is compelling. And it's close proximity to our current marketplace. I wouldn't view this to be a new direction for the company. I would say it's a natural extension of where we are today because we're one of those very many data sets, data streams. Jonathan Paterson: Thanks, Jay. And then just the final question for today. Is the Data Fusion being done with Blaze? James Hutton: We've spent a long time. Our CTO, Gary Gibson, has poured a lot of energy along with the computer vision team and others to certify our platform on top of multiple silicon sets. And at this moment, we are certified -- we have certified ourselves on Intel, Qualcomm, Blaze, and we're about to be certified on NVIDIA. What that means is that we get to ride the shirttails of the innovation and development in the silicon space. Because the moment somebody comes up with something new, fascinating, exciting, either low power or high capacity, we are able to utilize that in a deployment that is relevant to us. And the conversation we just had about Data Fusion is very relevant because Data Fusion, when properly implemented, occurs at the edge of the network, right? So we're -- we have now 3, 3.5, almost 4 options to do that, which means we can go to a systems integrator who is our likely go-to-market partner. And say, well, we've got lots of options with respect to silicon and let's together find out which is the best one for us from a price performance point of view, and we have that capability. Our relationship with Blaze is strong. Our legacy relationship with Intel is very strong, has been for 10 years, and we're building new relationships now. Qualcomm, 2 years old, 3 years old relationship now doing well, and there's more coming with Qualcomm as we're working on specific projects and initiatives together with Qualcomm. But both Qualcomm and Blaze have invested in this company. So I would say that we're -- now is time for us to yield some of the benefit of that. Jonathan Paterson: Great. Thank you, Jay. That ends the Q&A session. I'll hand it back to you just to finish off the call. James Hutton: Well, it would be wrong of me to have this call without clearly recognizing that it's been a tough 8 months. Ironically, within those 8 months, the progress of the business has been material. And you'll see what I mean. I mean, I can't disclose that until it's disclosable, but I'm here because I continue to believe. And what's very interesting about this is despite the fact that we've got a company that is facing significant challenges with respect to an external event, we don't -- we haven't lost a lot of people. We've got a bunch of people that are incredibly believing in the mission, incredibly -- they have incredible belief in the mission. And because they're exposed to some of the momentum that I've been now referring to at a distance here, we all believe that we're going to get there. So my job in the next several months is to continue to be transparent about the company's progress to make it clear what we're doing specifically and with as much reference to revenue as possible and continue to broaden the appeal of the company. I know we've got to rebuild our shareholder base, and I'm at that job in the moment we get back trading and possibly before. Jonathan Paterson: Fantastic. Thank you, Jake. Thank you for everyone that participated in the call today. Thank you. James Hutton: Thank you, everybody.
Paul Flynn: Good morning all. Thanks very much for taking the time to join us for the Half Year Results for FY '26 for Whitehaven. I'm joined here, as usual, by our CFO, Kevin Ball; and our COO, Ian Humphris, and we'll work our way through the presentation highlights as usual and then get ourselves to across for the Q&A section of today's format. Over the page, I should bring your attention to our disclaimer as usual. We do have forward-looking statements in these presentations as a matter of course. So I'll bring that to your attention for the obvious reasons. I'll move over to the highlights, and I'll start by saying, look, the company, as you know, for those who have been following the quarters, we've had a good first half year. We've laid out a pretty solid foundation for our first half of the year and sets us well up for the second half. Now I'll start with a couple of these important highlights, which we always do with safety and our compliance. Safety has been very good at TRIFR 2.9. Now we all know that moves around month-to-month a little bit here. And we finished the year at 4.6, but at 2.9 that is an excellent result. So all kudos to the team for looking after our people and making sure we're on this pathway to minimizing instances and injuries in our business. Now we all know also that it's been a wet 6 months in various states. And so despite that, our compliance has been very good. So we had no enforcement action events at all during the last 6 months, which has been very positive for us also. So again, kudos to the team for keeping that up despite some weather variation, particularly in Queensland, which we'll talk to a little bit later. Over to the highlights. The operational performance has been good. As you know, 20 million tonnes has been a very nice way to set a platform for the second half of the year. Queensland at 10.3, New South Wales at 9.7, both very good results. Equity sales of 12.8 million tonnes has been strong. So that's very positive, lower than first half last year, but of course, Blackwater is now 70% of our numbers on an equity basis rather than 100%. At a group level, we've averaged a price of AUD 189 per tonne, which includes AUD 212 for Queensland and AUD 168 for New South Wales. Our cost base has done very well. So $135 per tonne as we alluded to obviously in the quarter. That is now a confirmed number, as you would expect. So we can talk a little bit about that and the fact that we feel that there's upside in that also. Revenue of AUD 2.5 billion, 54% metallurgical coal, 46% thermal. Thermal being a strong component of the sales mix in the first half, and we can talk a little bit further about that in a moment. The underlying EBITDA for the half $446 million was actually a pretty good result. We have recorded an underlying net loss for the period of $19 million, and the statutory net profit after tax is actually $69 million, and Kevin will go through a bridge that helps you walk your way from one to the other shortly. We are in a good position. The balance sheet is in good shape, and the market has actually improved since Q1 and Q2 and have come to a conclusion. So the board has seen fit to declare a dividend, an interim dividend of $0.04 fully franked per share. And we're also going to commit up to $32 million of a buyback of equal value over the next 6 months. And now, of course, those who are doing the math will work out that, that when you consider on a whole year basis, which we do when we calculate the payout ratio, given that we're seeing better market conditions in the second half, we're likely, based on where things are pointing, to be at the top, if not slightly over the payout ratio, just given the fact that we are clearing the dividend at a point when technically, the policy says, we don't have NPAT and therefore, we don't pay a dividend, but we're doing that based on our confidence in the balance sheet strength and also obviously, the underlying market improvement that we're seeing. Now just to go over that market, those market conditions, if I could, for a little bit. As I said, Queensland average revenue of $212 has softened. New South Wales softened also an average of AUD 168 for our revenues out of New South Wales. The average for PLV across the period, $192. So that certainly started lower and has improved. So we did finish $212 for the end of the half, which is a positive side to see. The new price also did a similar sort of thing with average $108, but it vary between $104 and $112 for the period. And we have seen since the half year end an improvement on both sides of things. Now It's not streaking ahead. We saw some -- perhaps some frothiness as a result of weather-related activities in Queensland. So the PLV spiked up to 250 and has eased since then, but these numbers are both much better than what we've seen over the last 6 months. So that is very positive for us. Supply/demand feels pretty good. Our customers are wanting the coal, and so there's no concerns on our side at all in terms of moving our valuable product. So it's nice to see customers taking option tonnes as well. I'll look over on to the next page and look at the benefits of the enlarged group and the diversification of our markets and our products. It looks pretty good. 93% of our revenues is actually in Asia, which is no surprise, I'm sure to everybody, but you'll see a concentration of markets there in Japan, India, South Korea and Malaysia around out the top 4 of our revenue, but more generally, it's the right place to be from a growth of coal consumption perspective. And so we're well positioned to take advantage of that. As I said there, the metallurgical coal and thermal coal mix being 54%, 46%, respectively, a little bit lower on the met coal side in the 6 months just because we did have some very good coal production at Narrabri, as you know. And so that put a bit more coal into the first half for the thermal side of the equation. And that will balance out in the second half. So -- but it's certainly very positive and feel like we've laid a strong platform for the second half. Speaking of recurring slides, this slide, I want to move over to the underlying supply-demand outlook for both the thermal and the met with the high CV thermal and met. No change in our position there. This gives us confidence that we should continue to push forward and grow and invest, acknowledging that we do have structural shortfalls on both sides of our business. So that's a very positive, but nothing that we can see points to any change in that dynamic at all. Moving over to operational results. These numbers, I know you've all seen by virtue of the quarters that have gone before. But for those who haven't been watching this closely, as I say, we've rounded out a very good result for the year. So ROM 20 million tonnes, 10.3 million tonnes, 10.4 million tonnes, if you look at the slide with the rounding, for Queensland, 9.7 million tonnes for New South Wales. The sales actually, as I say, we had a change in our mix there just in this half because of strong New South Wales sales. So sales in New South Wales, 8.5 million tonnes versus Queensland 7.8 million tonnes. So that does change the mix a little bit for you, but that explains the 54% of met coal revenues just in the 6 months, as I say, the second half we'll see that turnaround. But overall, managed sales of 6.2 million tonnes is a good start to the year. Queensland, as I mentioned, excuse the rounding, it's 10.3 million tonnes as opposed to sum of those 2, which is 10.4 million tonnes, but we're very pleased with the results there. Blackwater at 7.3 million tonnes, good result and Daunia at 3.1 million tonnes. And these are all in the context of what's been a wet start to the year. So I think looking at those numbers, that's a solid beginning for this financial year. That's not to say New South Wales didn't have some weather either, it did. So I think that's very, very interesting given that Narrabri has had a very good contribution to the total numbers of 9.74 million tonnes in New South Wales, kind of their open cuts are doing what they need to do. Maules. Maules has a higher proportion back end to the second half of the year than we have in the first half. We're making great efforts to try and smooth that out month-to-month, but we do have a little bit more tonnes coming in the second half than we do in the first. And as a result, we've got a little bit of a skewing there. Otherwise, we're happy with the cost reductions, we'll speak to as well, but we're well on track to deliver our $60 million to $80 million out of the business by the year-end. And overall, we feel pretty confident about where we've been and how we set ourselves up for the second half of the year. So with that, I'll hand over to Kevin, who will deal with the financial side of things. Kevin Ball: Thanks, Paul. So I'm over on Slide 15, and it's the EBITDA bridge from half 1 FY '25 to half 1 FY '26. And not surprisingly, this tells me what happened, which is really prices were soft. So a $35 margin or a $35 reduction in price, together with the volumes that we saw when we sold the 30% of Blackwater out of the quarter contributes to the $505 million or $552 million decrease in sales volume and price. Costs, $2 a tonne, $2.50, I think it rounded down to $2, better. So we had a few headwinds in the costs in the first half, mainly from queuing at all the ports. So we had a strong build of low-cost production in December. So that should come out in the second half. And they've masked the underlying improved cost performance and held the cost improvement to that couple of dollars a tonne. So in half 1 '26, we reported an underlying EBITDA of $446 million. And I think what I see out of this is that calendar year '25 was the cyclical low that we've seen in the market, and that's, as Paul alluded to, an improving price scenario in the second half of FY '26. If I take you over the page, you can see the segment result between New South Wales and Queensland and reconciling to the group. On a revenue basis, met coal prices were a bit softer in the half than thermal coal. So Queensland contributed $1.3 billion in the half, which was 52% of overall revenues. New South Wales and thermal coal prices recovered a little earlier than the met coal prices. And so New South Wales had 48% of revenue or 1.15%. The half year EBITDA contribution from Queensland of $248 million showed the effect of those lower coal prices, while New South Wales delivered $215 million in EBITDA. In Queensland, with acquisition accounting, attributing a large proportion of the acquisition value of the property, plant and equipment, the depreciation charge in Queensland was $147 million, while there's also $36 million of amortization. Those -- the fixed depreciation costs at this low part in the coal price cycle have an outsized impact on NPAT at this point. So better prices and that impact will be lower. Underlying net finance expense of $135 million, it largely reflects the interest on the $1.1 billion term loan that we used to complete the acquisition of Blackwater and Daunia. But as we say, we're planning on refinancing that debt in this half. And then there's a small income tax benefit of about $6 million, which you'd expect of the $25 million underlying loss before tax. If I take over the page on costs, I'm going to say I'm pleased with the costs in the first half given the headwinds that we had in terms of weather and ports. I'm pleased, and I think Paul is going to talk about the $60 million to $80 million that's coming in cost outs, and we're across that. But at a group level, we realized an average price of $189 a tonne for our sales. And those tonnes that we sold cost us $135 to produce. We paid both governments an average of $20. It was a bit more in Queensland, a bit less in New South Wales. But in Queensland, the low point in the cycle, that average royalty rate was about 10.6%, while in New South Wales, it's around the 10% level. If I look at where we're up to in the first half, we're tracking at the bottom end of guidance. So that's a good thing. That $135 is the bottom end of guidance between $130 and $145. And as I said before, costs in the half unfavorably impacted by higher vessel queues in all ports for a portion of the half year and strong production levels in Q2 meant that low-cost production was held in coal stocks at 31 December. We also have a little impact here by the higher percentage of sales from New South Wales on previously and impact marginally because we had less blackwater tonnes in the sales mix this quarter because of the 30% sell-down. So margins in the half to December were 34%, which is about half the margin we earned in half 1 FY '25, but it's just consistent with the coal price environment. Moving forward, we have a new above rail haulage contract kicking in, in July. So we expect to save $3 a tonne around that. And we're continuing to accelerate the amortization of additional charges at NCIB to accelerate the amortization of debt, and we should see that fix itself late in this decade. Turn the page, and I'm sure everyone wants to understand how we get from an underlying net loss after tax of $19 million to a statutory net profit after tax of $66 million -- or $69 million rather. So we reported $446 million of underlying EBITDA in the half, which is an improvement on half 2 FY '25, which you would have seen in the previous slide. Group D&A, $336 million, outsized relative to EBITDA, but that's to be expected given the coal price period we've come through. And an underlying finance expense, we've talked about $135 million, and we can give you the breakup of that in some slides in the back -- in the appendix to this pack, which you've got. The nonrecurring items totaled $88 million. The largest portion of that was when we reset the deferred contingent expectation of what we're going to pay BMA as a result of the price movement. And I think in there as well, there's a $34 million technical tax accounting around derecognition of deferred tax liabilities relating to exploration as part of the sell-down. Sure, if you want to ask me questions about that outside of time, that would be lovely. Net debt. I got to say I'm really pleased with this. We came through this half really well, I think. The capital allocation framework really helps us in this process. If you look at us, we've spent $157 million on CapEx. So we're sustaining the business. So we maintain the productive capacity of the business through the bottom of the cycle. We returned $93 million to shareholders in the form of buyback and dividends, and we spent $39 million on other investing, which is really a little bit around the rare earth side of the world. And we finished the net debt balance at 31 December '25 at $710 million. On any view, when we turn the next page, you'll see that Whitehaven's balance sheet is particularly strong. So we have strong balance sheet, low levels of gearing, about 11%, a low level of leverage on a trailing basis about 0.8 at the bottom of the cycle, which is really good. And we kept $1.5 billion of liquidity to ensure that there was no doubt that we could comfortably meet our obligations. We've been saying this for a while. Since we sold down Blackwater, we've kept the cash reserve to meet that second payment to BMA. So the $500 million that's going to be paid on the 2nd of April is sitting on deposit. And the coal price contingent payment structure associated with that acquisition has been working as intended. We paid $9 million to BMA in July. And we're -- at the current moment, I'd say the number that we owe calculated is about USD 20 million, but it's lifting in this quarter with rising prices. But thanks. We're working to refinance our $1.1 billion acquisition facility, and we're just looking to lower costs. When you look at how the company is positioned, it's a really strong credit, probably one of the best coal credits around. But the finance acquisition was a piece that we put in place. Now we want to put that in with a piece of debt that fits the quality that we have. So let me hand back to Paul for the remaining of the slides. Paul Flynn: Thanks, Kevin. Just back to the cost side of things again, as Kevin was saying, and we said earlier, we feel confident we're going to be able to deliver our $60 million to $80 million in savings by year-end. This just gives you a little bit of color in terms of where we're finding the opportunities within the business. Being split state to state, we think there's going to be about 60-40 more or less if I divide it between the 2 states, and that slides back a little bit because all parts of the business have to contribute, not just the sites, but obviously the offices as well. And so we are finding opportunities across all areas there. Just to give you a bit of color, obviously, the organizational structures of the business continue to be aligned to a Whitehaven model. So we're seeing changes there in the operating model as we drive consistency across the business between the various operations. We're seeing upside in terms of maintenance strategies across our larger assets in particular, with obviously there is a big level of mechanical intensity there. And obviously, there's a lot of money being spent on maintenance. So there is that is fertile ground in terms of optimizing that. In New South Wales, we have been moving equipment around to make sure that the implement is best deployed in the space where it can be best utilized, tire lines and things like that, we're certainly seeing the opportunities for improvements there. Some sites, there's good transfer of knowledge between sites in terms of how we're doing well with tires on some sites and benefiting others. And of course, there's a major contracting arrangements are being reset and adjusted as a result of the opportunity, not just with scale, but also just the parts that we've inherited, we're changing those as we go along. And so we feel that we're in good shape to be able to deliver on our commitment here for $60 million to $80 million by the financial year-end. Now I'll turn over to slide, which is entitled the Queensland 5-year FOB cost test, that's adjusted for inflation. And this is really a commitment we made to you that we would go back. As you would imagine, we should in any event, which we have been doing, which is an acquisition of this size or post-implementation review should be done, and this has been part of that. So we knew all along that the estimates we put out at the time of the acquisition, obviously, were based on the work we were capable of doing during the due diligence phase, which generally has worked well and little surprises have come out of it. So quality work was done. But inflation has done its ugly work for the business. So we've called that out. And we said that we were going to adjust it at this half year and reset these numbers, which we are now doing. So definitely, when we've gone back and looked at purchase price indices and obviously, wage inflation indices, there's about $10 in that. So coming off the $120 average base, if you like, for what we gave you as the 5-year averages at the time of the acquisition. You should add $10 in there in terms of inflation. And the learnings and observations that we've made since, as I say, in that post-acquisition review, there are a number of observations that we can see that have changed the cost base. And I'll divide them, if I can, into temporary and then permanent matters. So I'll go through the bullet points that we've got there, but I'll firstly deal with the temporary ones. As you all know, we are definitely working hard to reinstate a comfortable level of stripped inventory that we feel like we should have in order to run at a higher degree of operation. Now we've been producing higher than what the mine has historically been doing in more recent years. So we are consuming the stripped overburden in advance at a higher rate. So this is going to take us a little bit longer than expected to do that. This is a high-quality problem, I have to say. But until we get to that point where we're satisfied that we have an inventory of strip ground enabling the efficient deployment of draglines and obviously, the elimination of downtime where it's been parked up because the bench is not ready, we will continue to have this effect in our business. And relatedly, with that, there's a higher degree of rehandle that goes with the dragline fleet whilst we're in that situation. So that is a feature which we'll have for a little while yet to go. Look, the other thing we've observed, and that is just part of experience now, we certainly observed the backlog of maintenance that's needed to be done. And so the major shutdowns for the big influence, so the draglines and shovels in particular at Blackwater have certainly featured, and it's important work and obviously not work you can do with any great detail. You can review the records and so on shutdowns and things in the DD phase, but we found that we we've needed to put some more money into that. And there are other examples of that. The crest wall say, for instance, we had to do quite a bit of work on them to ensure that utilization has improved. It has improved dramatically, which is very good, but that has required some work to get that fleet into the right shape and fit for purpose. The AHS isn't -- we had assumed a better level of productivity from AHS at the time of the acquisition. It's not there yet. And so we are working with CAT on that, and we are pushing hard to ensure that we can get to a level of satisfaction with the productivity across the autonomous fleet that we think it should be. Now those -- the summary of those ones, those 4 features I've just mentioned, they are the temporary ones. A couple of which are permanent more in nature. The same job, same pay, that is definitely an adjustment. That was obviously occurring at the time of the acquisition. And so we weren't able to size that. Now we have embedded that in our business now. Sadly, the cost of labor is going up as a result of all that, as everybody well knows. So that is influential in our cost base as is the higher level of demurrage, in particular, out of Daunia, but certainly Blackwater as well. The Queensland logistics chain does not work with the efficiency that we're accustomed to in New South Wales. I'm sure no one likes me here say that if you're a Queenslander, but that is a fact. And so the assumptions on demurrage have been adjusted accordingly. Now the cost base, $135 that we've talked about, very happy with that. Even given, as Kevin mentioned, the delays in ports and shipping and logistics in Queensland, in particular, that $135 does include a couple of extra bucks there just for those influences, which should unwind -- that part of it should unwind. But the reality is demurrage is going to be higher than we budgeted for in Queensland. So those are the 2 permanent ones I want to call out, the preceding were temporary in nature and will be alleviated as we continue to drive. So as a result of all of that, we're now giving you a range. I reset that range, '24 to '28. Obviously, there's only a few more years left in this of $140 to $145. Now we've been doing well on cost outs, as everybody understands with the business since we've acquired it, and we're only 6 or 7 weeks away from crossing the second anniversary. So I feel like we're making really good progress there, and we get ourselves down to $140 million in this period, I think that would be an excellent, an excellent outcome. That's not to say we stop trying because, as I say, the first 4 aspects of that I've mentioned are temporary. We consider those to be temporary in nature. And so we'll continue to push and drive greater productivity and lower costs as a result. Now over to capital allocation framework. Nothing new there for you in encompassed in this. So this has served us well. And we feel confident that even in this instance, so again, if you were to apply this framework sluggishly, then we wouldn't be paying a dividend because we have an underlying net loss, minor as it is, it is one. However, reflecting the balance sheet strength that we have and the improving market environment that we're experiencing, we feel confident that to recommend to our Board that we pay a modest dividend, and the Board has accepted that proposition and declared the $0.04, as we mentioned earlier. So $0.04 fully franked is a modest dividend, reflective of the fact that we come through the bottom of the cycle, but paying a dividend through a period that represents the outcomes from the bottom of the cycle, I think, is a very good outcome. And of course, we're aligning that with an equal sum of our buyback over the next 6 months, up to $32 million with a total of $64 million in dividends and buybacks out of the first 6 months, which, again, I think is a solid result. And over to guidance. Look, you can see we're tracking well in our guidance. Certainly, ROM targets to do 20 million tonnes in the first half. The upper end of our group guidance there, obviously, at the managed level is 41 million tonne. We would dearly like to make sure we can get close to that, if not surpass it. So we feel like we're in good shape. The challenge there, of course, is, of course, weather, and that's the major caveat. But otherwise, we feel we're in decent shape. The last quarter, you saw a run rate of 11 million tonnes in the quarter. We're carrying that momentum into the new quarter. So it's nice to see things moving along, which is very positive. The costs, as I mentioned earlier, and as Kevin spoke about, we've seen good progress on the cost side of things. And $135 out of the half that was weather affected and had some extra costs in it, I think, is really good. And we can see when -- month-to-month when we're doing the sales volumes that we -- and production volumes that we expect, we can see the upside associated with that. And so we feel positive that we can drive our costs down to the lower end of the range if we hit that top end of the ROM production. And so we feel pretty good about that. CapEx, as is our way, we're spending a little bit less than we -- the range we've given you. So at $157 million for the 6 months. I'm sure there will be a little bit of extra capital will come out in the second 6 months as people want to finish up projects and so on. But we're tracking obviously to the bottom of that range. And so again, that is reflecting a bit of history, I suppose. But the conservatism that we brought into our guidance will continue to apply. But overall, no change to our guidance. And moreover, we're tracking to the right end of the top end, and we're tracking to the lower end of costs, which is very positive. So overall, good solid 6 months, and we're looking forward to the second half. So I think we're in decent shape. So with that, I might hand back to the operator, and we can get some questions going. Operator: [Operator Instructions] Your first question comes from Dan Roden with Jefferies. Daniel Roden: Just wanted to probably kick it off with the potential refi of the $1.1 billion term loan. Can you remind us what the time line is with the non-call approaching? And I guess, do you have any revised expectations around the 10.5% in the current period? What cost do you think is -- or what rate do you think is realistic kind of when you are looking at refining that and what gating items for lenders would you expect, I guess, the considered important factors? Kevin Ball: Paul just pointed to me, Dan, so I'm the guy, I guess, to answer that one. We're well down this path, and we've been working on this for probably 6 or 8 months, to be honest with you, in anticipation of the first call period that's about the 12th of March. Expectations are we'll refinance this out before 30 June. And I think I said on the last call that if we had a 7 handle in front of it, I'd probably be okay. If I had a 6 handle in front of it, I'd be delighted. And I don't think my expectations have changed. Markets are improving. The ESG -- the benefit in Whitehaven Coal of having half the business in met coal or over half the business in met coal is really helpful when it comes to this financing and the structure of the financing lends itself to using those assets for that security and providing those funding. So Dan, my expectation is said, if it starts with a 6, I'll be delighted. If it has a 7, I'll probably be disappointed, but it's still 300 basis points cheaper than what we're currently paying on 1.1, which is USD 30 million to USD 40 million in savings. So that's the program. Daniel Roden: Yes, definitely. And maybe a quick follow-up, like if -- I guess if you -- are you seeing the market are supportive around those rates at the moment? Like you're obviously confident you can get something close to that. But if you aren't getting something close to that, how do you think about, I guess, paying down debt in terms of the capital management framework? Do you pay down debt more aggressively I guess, rates higher or if you don't aren't able to refi the debt like in half 2 when you are restructuring? Kevin Ball: I think I'd answer that question by saying this. I mean, in the back of the capital allocation framework, you'll see that we're talking about a BB+ rating. We're an organization that's had conservative credit metrics. In fact, the credit metrics we run are typically -- you classify them as investment grade. So we really are at the top end. We're at the top end of the high-yield piece or we're at the bottom end of the investment-grade piece. And if you talk to your debt guys, they'll tell you what that rate should be even with a coal premium attached to it. I wouldn't -- I'm not really in the conversation at the moment about entertaining a discussion around not being successful in that because I don't think that's helpful. And I don't think it's realistic either to be honest with you. We've had a number, several many inbound inquiries about helping out financing. And it feels like that ESG overlay that existed maybe 4 or 5 years ago is abating. It hasn't disappeared, but it's less than it previously was. Daniel Roden: And I might just ask on, I guess, the unit cost guidance as well, and I'm sure there'll be a lot of follow-ups on this. So I might just keep to my 2 questions and hand it over. But just with kind of outlines the '24 to '28 cost guidance at 10 to 15 on top of that. That's the new expectation. But just trying to unpack like you mentioned the kind of rate that we've had at the moment in the Queensland assets is around $140. Some of the historical costs there kind of become a bit obfuscated just in terms of the reporting structure. So I just wanted to very clearly articulate like what the expectation is on those Queensland assets over like, I guess, into half 2, '26 and then '27, '28, like what cost rate are you expecting in the Queensland assets? Paul Flynn: Yes. Thanks, Dan. Yes, look, what we are obviously highlighting today is the resetting of those 5-year averages based on what we can see the inflation. So what we are seeing for those Queensland assets is an average of $140 to $145. That is what we explicitly are saying. And so that obviously -- and you can do the math in terms of how our numbers have been looking for the first -- almost the first 2 years of our operations. Obviously, there's no surprise you can get our segment name, you can pull that apart. And so you can see that there's still cost upside in this business. And based on the things that we've highlighted that we feel are temporary that are keeping a little higher than where it should be, we think we can continue to pressure this down. So say, for instance, you get to the bottom end of that range at $140, I think that's a very good outcome in this context given the inflationary impacts that we've seen. And so the problem with this is that inflationary impacts can abate. They don't -- you never get that cost out of your business from the labor perspective in the first instance. So you can -- you do see inflation rise and fall on services for sure. But once baked into your cost base from the labor side of things and in addition to same job, same pay, you're never going to get rid of that. And so that is a problem and something that we need to work on from a productivity perspective. But yes, explicitly, that's what we're saying, $140 to $145 for Queensland. I think that is just reflective of the reality that we've inherited. As I say, I've tried to divide that up into temporary impacts versus ones that are baked in. And hopefully, that's useful for you all in terms of your calculations for Queensland assets. Daniel Roden: Yes. And then I was more trying to get a trajectory on that. You obviously talked about the strip ratio and impacts were transitory. I guess kind of coming out, maybe asking in a different way, when you come out of that guidance range, would you be expecting the costs are higher or lower than that $140, $145 range? Paul Flynn: Yes. Dan, you're going to have to hand this over to someone. But just to answer your question here, we're not giving guidance past that point. And so we'll deal with that on an annual basis once we're outside this acquisition, the remnants of this acquisition data that we gave you 2 years ago. Operator: Your next question is from Chen Jiang with Bank of America. Chen Jiang: Maybe first question to Kevin about your buyback. So your original buyback program of $72 million, you only have $4 million buyback left from that original program announced. And today, you announced $32 million buyback to match with the interim dividend. So is that fair to say actually, you added incremental buyback of $28 million in addition to your original $72 million? Paul Flynn: Chen, this has been a pain for a number of years. It's just the way in which the legislation comes. So what we've done now is we've said each half, we will tell you what the buyback is up to what that amount is going to be, and then we will close the buyback from the previous. So you should think that $72 million is dead, never to come back alive again and the $48 million is never to come back alive again, and then the $32 million will be the buyback for the next 6 months up to that number. And we're just trying to make this a lot easier for people to work their way -- work it in their models. Chen Jiang: Okay. So every 6 months, you will have some sort of number... Paul Flynn: Yes, that's right. The problem is the regulator gets a bit confused about this. And so that's why we've had to close a buyback, the previous chapter of buyback and open a new one. And so that's what we're going to have to do in order to assist people in avoiding confusion as to is there some tail that was unexpended during that period? Is that going to be added to this? Unfortunately, just the way the regulation works, it's needed to just close it off and then announce the next one. And then at the end of that period, then you have to say whether we did or didn't extend it all, but you'll close that one and then open a new one. Chen Jiang: Sure. That's very clear. I mean your previous buyback of that $72 million is almost completed. So anyway, -- and then just -- yes, yes, 94% completed. Yes. And then if I can have a follow-up on the cost, please. I understand it's an average of the 5 years. But looking at FY '24, FY '25, even FY '26, I guess, those Queensland costs much higher, right? So it's like $147 million or $145 million. So take an average, how should we think about this? I mean, is that like FY '27, FY '28 should be averaged down to get that $140 million, $145 million? Or the way to think is FY '27, FY '28 should be the range of $140 million to $145 million? Paul Flynn: Yes. Look, I think, Chen, as you would have expected with the first range we gave you and now with the reset, the higher cost period is the early years as we're getting our hands around things. And then you would expect us to continue to improve through that 5-year period. And so obviously, we're a couple of years in now. So we've got essentially 3 more to get within this range. And we feel like we feel confident we can do that. But yes, I would imagine the end, so the FY '28 period is going to be the cheaper, if I can say, the lower cost period. And obviously, first year of our operation being the higher. So the same philosophy applies to this new range that we've given you. Chen Jiang: Right. So averaging kind of averaging down in the 5-year... Paul Flynn: Yes, more expensive in the early years, cheaper in the later years, for sure. Operator: Our next question is from Paul Young with Goldman Sachs. Paul Young: First question again on these Queensland medium-term costs. There's really no real surprise here, I guess, from an inflation standpoint. And also, the operations are doing well, but not as well as you expected at the time of acquisition. But one thing you haven't mentioned here is actually it's all about moving dirt and coal and actually what the production assumptions are. So if you go back to the time of acquisition, I think you were forecasting that Blackwater would get to around 15 million tonnes of ROM on a 100% basis, and I think Daunia at 6 million. Are you still -- do you still think that's achievable? Or -- I mean, by the way, the Street doesn't have those numbers, Paul. So the Street is shy of that. So just curious around the volumes because ultimately, the unit costs are just a function of obviously, production. Paul Flynn: Yes, yes. It's a good point, Paul. Thank you. Yes. The reason why we didn't change it because we actually feel good about the physical side of things, and we've been saying that along the way. We're making good progress. The numbers you just recounted, we feel good about those numbers. So we've got a couple of years to get to it. Daunia has been doing well and is approaching those numbers, as you can see already. So that's very nice. Blackwater, obviously, is a bigger ship and requires a little bit more time to allow the benefits of the initiatives we put in place to turn around. But the physical side of things, we actually haven't been concerned about. It's just once we bought it, of course, we were able to lift the hood, look in a more detailed fashion. We can see the temporary things that we've got to deal with. So we feel positive about that. We're not disappointed about it. Obviously, the revenue assumptions that we used to justify the acquisition were obviously much less than the prices even you've seen today. And so from a valuation perspective, we feel very good about the acquisition and what it's been able to do for our shareholders. But overall, the physical, we feel good about, and we're just going to continue to drive these costs down. Paul Young: Yes. Understood. No, that makes sense. And then moving to New South Wales. And can I ask about Vickery again? I mean you talk about structural deficits from thermal coal. Vickery has been, I guess, shovel already or I know you guys are still working through the capital estimates. And so if you can remind me where you're at with that. But also just on the formal process, have you -- is there a formal process? I know you've had open and it's closed previously, but where you at with that? And then also with the new rail contract, does it make room for the larger Vickery project? Paul Flynn: Yes. Okay. Look, Vickery -- first, Vickery is fully approved, just to remind everybody, fully approved. The only official parts that are remaining of that is obviously FID. And so that's obviously manageable internally completely. So the Board is -- given that we've just come through the bottom of the cycle, we're not minded to address that in the next 6 to 12 months. But we are doing lots of work in the background on funding for Vickery. So that's important to us because lots of people have expressed interest in us bringing that forward. And we said to them, fine, we're not going to take all the risk. You've got to help us with it if you want the coal, which I think is the right thing posture for us to take. So we've had interesting inbound inquiries on the sales side. We've had interesting inbound inquiries on the infrastructure side. People want to help us build and operate that. So I think that's really -- that will be -- an extra 6 to 12 months is actually really interesting to see how we can bottom all that and obviously minimize the funding ask from the cash flows of the business. So that all looks pretty good. The rail contract is a really interesting reset. I mean that obviously was a product of a 10-year contract, and you only get that opportunity once to come along every 10 years. So we've taken it. The $3 we've mentioned to you per tonne is actually on the New South Wales business. So on a group basis, that's $1.50 of the cost base from 1 July onwards, just to be clear. So that's very, very positive. And in fact, we've actually started the process in Queensland as well because there is a renewal up there in another 18 months' time, more or less. So interested to see where that goes. But the question on Vickery, it does cater for. We've got upside potential for the tonnes. Now we haven't contracted those tonnes. So just to be clear, we've gone from being long above rail to matched, if not slightly short, with surge capacity attached to it. So we flipped this on its head nicely. So we're not carrying any extra cost in the business for above rail. And so -- but we have upside opportunity with both the haulage providers that are in place there to be able to add the Vickery tonnes as required. Operator: Your next question is from Rob Stein with Macquarie. Robert Stein: First 1 on the dividend. The $0.04 per share, does that obviously heavily borrows from what you're expecting to pay in next half. How should we think about the decision around the next half in terms of your capital allocation framework and sticking to that payout ratio? Are we still to expect that payout ratio to apply, i.e., we can deduct the next half's dividend, our expectations versus this half? Paul Flynn: Yes. Rob, look, we don't feel like we're borrowing from the next half. The balance sheet is in really good shape. So we feel like the capacity exists already from what we've been able to do. Now the fact if we're just purely following the calculation basis in our framework, because we're paying a dividend at a period when we record a loss, then reasonable expectations would say based on even pricing today that you're going to generate significantly more cash today than -- and through this next 6 months than we have in the first half. So all things being equal, there will be obviously this discussion in 6 months' time about the divi and there will be a reasonable divi. And most permutations that we've looked at says that you're probably going to be over the 60% of NPAT level simply by the fact you paid a divi in the first half when there was no NPAT. That's just a calculation outcome. But we're not taking now from what we think should be we're expecting to derive from operations in the second half. Prices obviously stay even if they -- even as if we were seeing them soften a little bit off the [ $250 ] down to the [ $220 ]. So March is about [ $220, $225 ]. I think in terms of looking at the outlook. Those numbers are much better than what we've experienced over the first 6 months. So cash generation has been good. We've seen good production in December. We've seen that good production following the momentum into January. Cash generation has been solid. So it's very good to see, and we feel like we'll be able to continue to make a second half decision around dividends when the time comes. Robert Stein: Okay. So consider it more as for want of a better word, a special allocation rather than a shifting in time period allocation, you're going to take an independent decision in the second half. Paul Flynn: No, we don't consider special -- that's not a characterization we would give it either. Obviously, the framework we set up, we want to be paying dividends through the cycle. The fact that we actually can after we just experienced the bottom of the cycle, I think is excellent. So I don't consider it's special, but the payout ratio is calculated on a whole year basis, just to be clear. Robert Stein: Cool. Okay. And then just on the -- probably the key topic of today, the Queensland cost guidance. Just to try to get a bit of a feeling for FX impacts on that cost guidance if FX were to hang at current levels or potentially even strengthen, what -- how should we think about the cost sensitivity of this number to that? Paul Flynn: Yes. Look, not much, I'll have to say because by and large, there are a couple of exceptions, as you can imagine. By and large, we're an Aussie dollar cost base business. And so currency affects the revenue line, affects our interest costs. To a degree, it affects the coal price itself and oil, but that's it. The rest of it is Aussie dollar based. Operator: Your next question is from Lyndon Fagan with JPMorgan. Lyndon Fagan: Paul, obviously, a lot of focus on the Queensland cost, but wondering if you're willing to share a medium-term outlook for the New South Wales business. I mean there is a number in the mid-120s around the ballpark. Paul Flynn: Thanks, Lyndon. Someone was bound to ask that wasn't. It was always going to happen. But look, I think we all understand the history why we have these 5-year averages for the acquisition. It's just because you've never seen these assets before because they're obviously consolidated within the broader BMA unit and no one got to see them. So we needed to give you something, so you could -- something that you could use. So we did that. Once we're outside of this 5-year period in those averages, we plan to go back to the normal guidance setting ratios that we have, which New South Wales is indicative of. And so no, we won't be doing that. But New South Wales has done very well. I thought you're going to go and point to another area, so you didn't, so I'll do it myself. The cost in New South Wales has been good. And production -- when you have Narrabri spinning out lots of tonnes, everybody knows Narrabri are our cheapest tonnes. And so when Narrabri production is good, the average costs do well. And so we feel pretty good about that and production continues to go well there. And we are reviewing our costs in New South Wales as we have been in Queensland. And we are finding savings there as well. And that's outside the resetting of the above rail haulage contract we just referred to. So that is positive. Kevin Ball: And if you don't mind, I'll step in and say, I think if you look at the New South Wales business, you've got a pretty strong contribution from Narrabri. You've got an underweighted contribution from Maules Creek relative to the year, and you've got a pretty strong contribution from the Gunnedah open cuts who are performing well, but they're probably our highest cost operations. So there's a few moving parts in how you assemble the New South Wales costs. And if you look forward over time, to that earlier question about Vickery, Vickery in its bigger form will help drive cost down in the business. So it's a bit difficult to give you that conversation. I think you need to almost deconstruct it and then reconstruct it based on volumes to contribute. Lyndon Fagan: No worries. I suspected I wasn't really going to get an answer. But I just thought I'd ask about the met coal outlook. We've obviously lost a little bit on the hard coking coal price. I'm just wondering whether -- how you're feeling about the sort of current market tightness and near-term outlook? Paul Flynn: Yes. Look, the market -- the underlying market has been pretty good. And when I say underlying, our interactions with customers, the demand has been good and people chasing our coal, which is nice. Obviously, prices took a bit of a leap there based on concerns around weather and so on and supply side constraints. We understand in the Bowen Basin there's still people dealing with a lot of water in their pits. And so whilst we have water too, we did manage ourselves very well through that rain. And so we're not seeing any of the impact -- negative impacts as a result of that, that are material to our guidance for the year. So we're in good shape. But there is some supply side constraint in Queensland. Now there have been a few -- there's been obviously with a few more tonnes coming on to the market as a result of a couple of mines, underground mines, Centurion has just restarted. So I think a little bit of excitement around that has tempered the price outlook for March and April. So for instance, if we're going to see some tonnes start to emerge from these restarted operations. So I think that sort of weighed on that a little bit. So I think the spot is down to what, 2 40 or somewhere around there. March is around 2 20, 2 25, somewhere in that region. So -- but these sort of much better numbers than where we've obviously been for the last 6 months. So we welcome all of it. But the underlying conversation with our customers, they want more tonnes. So we're keen to try and satisfy those needs. Operator: Your next question is from Lachlan Shah with... Lachlan Shaw: Two questions. First one, just on the Queensland costs. We've covered it at length. I wanted to just unpack a little bit though. So you have used language extended period of higher dragline rehandle. Is that to the end of FY '28? And I suppose part of that then is from FY '28, is there more do you think that you can kind of pull out of these assets here? Or is the FY '28 baseline to get your 5-year average to $145, is that FY '28 endpoint then the appropriate sort of jump-off point beyond that? And I'll come back with my second. Paul Flynn: Yes. Good. Thanks. The challenge there for us is that we -- as you know, we put more capacity into the pre-strip fleet to try and make up this ground, and that's been going well. But now you've got the draglines chasing down the pre-strip fleet. So that is -- that's, again, a good quality problem, but it is going to take longer to get ourselves. And as we increase production, which we have been, the inventory also needs to increase. And so that's just the slightly circular dynamic we find ourselves in. So yes, I think for another couple of years, we're going to be doing that. And so that brings us into the end of this outlook period. But that's taken into account... Lachlan Shaw: Okay. Yes. Yes. Okay. And so the inference is then FY '28 is sort of the appropriate jumping off point beyond that? Or is there more do you think that you sort of look at that far and think, okay, what more can we do? Paul Flynn: No, I think that you should take that as a jumping off point because if we want to expand materially further post them, we'll tell you. It's really just about volume. We obviously want -- as I said earlier, we feel good about the physical volumes in terms of the 5-year outlook. So if we want to go bigger than that, that will require some capital. And that will be a different conversation we'll have with you at the time. Lachlan Shaw: Great. That's helpful. And then my second question, so I just wanted to talk to met coal pricing and realizations, I guess, just interested in your perspectives at the moment. We're seeing a bit of disruption in the U.S. met coal market in terms of high-vol A, high-vol B widening to mid-vol hard coking coal. And then obviously, there's been sort of, I suppose, slightly soft recent mid-vol prices out of Queensland, too. What are you seeing in terms of the different markets across the met coal quality fraction? And how do you sort of anticipate that to impact realizations for you guys going forward? Paul Flynn: Yes. What we're seeing at the moment -- look, we all observe the ups and downs of the market. We see what you've just described. Obviously, we're generally playing in the low to mid-vol space, if I can use the U.S. vernacular. But generally, our products are all low vol other than the ones out of New South Wales if we're talking about semi-soft out of Maules or Tarra. The annoying part for us really is just trying to drag up realizations for the lower 2 products, if I can call them secondary products, the semi-soft and the PCI. The relativities of PLV to low vol, I think that's okay, but we would like to see improvements, and we're pushing our negotiations hard to improve the realizations for our semisoft, say, for instance, that's really important to Blackwater. And so pushing that hard in a market where steelmakers are struggling a bit. That's not an easy conversation. But the fact that we've got a couple of important steelmakers in our tent now, that helps them understand, obviously, the economics of the project itself. But then again, they got the tricky balance of the external market that they face for their product. So of all the things, I'd like to see a bit more of improvement in those realizations. That would be my question. Operator: comes from Glyn Lawcock with Barrenjoey. Glyn Lawcock: Paul, I'm going to try and ask Queensland costs in another way. So if I heard you correctly, you want to jump off in '28 at $140, and that is a real number in December '25. So you've given us today $10 inflation over the last 2.5 years, your jump-off point is 2.5 years from now. Do you think we should be thinking about another $10 inflation adjustment over the next 2.5 years? Just what's your sense inflation? So do we actually jump off in June '28 at $150 adjusted for inflation? Paul Flynn: Yes, that's a really good question, Glyn. We haven't assumed in our calculations that we would go through a similar period of inflation. Now obviously, that's a very topical question on a macroeconomic sort of level or political level in this country at the moment. We're not seeing inflation. I don't think we should assume the same is my bottom line here. The labor inflation that we've seen over the last 2 years has been quite extraordinary. Now I don't expect that's going to continue at the same way. Our EA negotiations that we -- that we're undertaking at the moment are reflective of a more realistic market where the industry is struggling a little bit and some players are really struggling. And so job losses have occurred. And so that's -- that inflation, at least at the EA level is better. Now having said that, our own personal or company-specific experience during that period was also affected by the fact that we've just grown -- we've just doubled and people's jobs had grown as well. So the amount of out-of-cycle remuneration changes that we saw during that period isn't indicative of where we're going to go going forward. And so that's settled down. But -- and generally on the supplier side, so on the PPI side of things, Jeff, that has moderated slightly. So I don't think we should be assuming the same -- a replication of the same period over the last 2.5 years. I don't think we should. Glyn Lawcock: Yes. And I saw the federal government just mean now health cover is going up 4-plus percent. So I don't think that matches inflation, but that's another discussion. But if I even take 2.5% inflation, right, I mean that's $3.50 a year. I mean that's 2.5 years, that means I'm up for about $8 a tonne increase just at an average 2.5% inflation rate. Paul Flynn: Yes. If you -- I understand the math. If you did nothing else, then that would -- that's that math... Glyn Lawcock: I guess I'm just trying to understand, can you fight inflation on top of everything else you're fighting just to get down to the 1 40, the nonpermanent issues you're dealing with. I think that gets you down to 1 40. But now I was just wondering if you've got other levers to combat inflation. I guess... Paul Flynn: That's why I called out the temporary components of it because those are the areas where we really can work, same job, same pay, labor cost. The only way to deal with labor costs have less labor, right? And so that's a challenge. We need a certain amount of people to man all the equipment we've got. And of course, we need to use it more productively, and we're striving to do that. But those -- the 4 areas we mentioned are ones we're working on because we certainly believe that we can alleviate some of the pressure we've seen on that in recent times. But it's a constant battle with inflation, as you know. Glyn Lawcock: Yes, sure. And then just on the balance sheet, I mean, you call out net debt $700 million, but that's going to double on the 2nd of April when you pay your next installment to BMA. Are you still comfortable with like a $1.4 billion in net debt, which you will jump up to next time you report? Paul Flynn: I don't expect it will jump to $1.4 billion at the next time we report. I think what you're missing in that conversation is what's the cash that gets generated between now and 30 June. So by the time -- no, let me finish. By the time you do that, I think where you get to is probably of an EBITDA number that I think Visible Alpha has about 1.3 or 1.4, Kylie, around there, then I think you're probably, again, 0.8-ish sort of leverage would be sort of where I expect it's going to fall. And those metrics, Glyn, as I said, what I want to draw out is really when we talk about our capital allocation framework, it's a business that has -- operates on investment-grade credit metrics, perhaps not yet at the scale needed to be investment grade, but has those metrics in it and is firmly in the high end of the subinvestment-grade debt. So from a business, we don't want to run a business that's completely unlevered. That's not the intention. And so we think we've got a pretty -- a capital allocation framework that drives a pretty prudent, conservative level of leverage and level of gearing in the business and -- yes. Glyn Lawcock: Yes. Sorry, I should have said pro forma as you pay it today. But no, you're right, you will generate a fair bit of cash if prices stay where they are by 30 June. So noes, but happy to hear you explain how you're happy to run with a bit of leverage. Operator: Your next question is from Chris Creech with Morgans. Christopher Creech: Just 2 quick questions for you, if you wouldn't mind. Paul, you spoke before about potential expansion of Blackwater sort of into the future. But I see that the sort of Blackwater North extension project was withdrawn in November last year. I know that sort of BMA submitted that. So is it more about you sort of wanting to optimize how you proceed with Blackwater? Or was there something else that sort of drove that withdrawal of that sort of project? Paul Flynn: I'll try and answer that as best I can. Chris. Look, we've got -- that site can grow substantially. We are in the approvals process for the expansion of the northern area of Blackwater. So -- but don't forget there wasn't -- there was actually an approval request put in place for a broader expansion to the South. And that obviously covered what we call Blackwater South. And there's obviously a significant area there, which has anywhere between 50 and 100 years of coal still in that southern region. So we have 2 areas, if you like, in terms of what we can do for incremental expansion over and above the improvement in the existing footprint of operational pits. So the northern area, as I say, that's currently on foot with our approvals processes. The southern area, BHP did lodge an application there, and we're looking at that very closely in terms of what we think is the Whitehaven version of that same future. The expansion I was referring to isn't actually about either of those. It's just actually about us thinking we can get more tonnes out of the existing footprint. that's operational today. And so there's plenty of ground, which is open at Blackwater, which has been left at different times in history when prices were low. Now those prices, obviously there is no resemblance to even the low prices today. And so a lot of those areas are capable of going back in relatively quickly to get back in and get extra tonnes. And so our view is we can get more out of what we've got even before we consider that northern approvals process opportunity or obviously, a whole approval -- whole process approval submission for the southern areas of Blackwater South. Christopher Creech: Yes. Got you. And just a second one and not to sort of flog a horse, so to speak, but I did ask you after sort of the first quarter results about Daunia AHS performance. And you say there's still obviously that performance sort of difference between where you want -- where sort of manned would otherwise be. Is it still tracking sort of where you want? Or does there sort of come a time where you sort of -- like what you guys did at Maules where you sort of move back to a fully manned operation to sort of achieve that sort of cost guidance that you guys have set? Paul Flynn: Ian has been waiting very patiently for a question to come his way. So look, it's not where we want it to be. We assumed it would go better. It's not bad. I don't give you that. I'm not saying that. It's just that we think it should do better. And we obviously had that experience you just described at Maules Creek. So we know what the benefit is of going back to man with the system. Now in fairness to Hitachi, that wasn't a commercial system. This one is. And so that was still a development project at Maules Creek. This one is, by all accounts, a commercialized system. And -- but we can -- we've -- because of our history, we're able to very quickly benchmark what the difference is between humans and not. And we can see that this is not there yet. And so the key question is how quickly can we get to where we're satisfied that we're doing the right thing for our shareholders, which is obviously the lowest cost, most productive iteration of Daunia we could possibly imagine. Ian? Ian Humphris: Yes. I love it when my boss covers everything in hands over. But look -- over and above that, look, we're engaged with Caterpillar at all levels through our organizations to improve it. I mean, as Paul said, we have seen improvement, but there is more to go there. So we're working on them. And I think we've got to be careful to differentiate Maules Creek and the CAT system at Daunia here. I mean, even if we went 100% at Maules Creek, the whole site was not an autonomous site. And I guess that interface and the difficulties around that. And then for those that are familiar with Maules Creek, it's an extremely highly intensive mine with a whole lot of interaction. So I guess our decision, I guess, the maturity of that system, the fact it was never going to be 100% AH mine site, even if we sort of ramped up to what we called 100% AH and that interaction is why we made the call that we never thought it would work at Maules Creek and be as efficient as a manned operation. Operator: Your next question is a follow-up from Rob Stein with Macquarie. Robert Stein: Just to try to extract Glyn's question a bit further. So there's inflation, which we can forecast macroeconomic driven, U.S., et cetera. And then there's escalation, which is industry-specific, regionally specific labor costs, construction costs, et cetera. Does the $140 to $145 target have inflation -- is it inflation adjusted, but not escalation adjusted out past '26, '27, '28? Paul Flynn: Yes. It's inflation adjusted, but we're not passed on escalations, no. We're not changing any escalation, just standard inflation. Operator: We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Flynn for closing remarks. Paul Flynn: Thanks, everyone, for taking the time to listen in today and the questions that you've asked. If there's any further questions, you know where to find us. We look forward to seeing many of you, obviously, in the follow-up post this presentation. And thanks very much for your attendance once again.
Operator: Good morning, and thank you for joining us today. This morning, Donegal Group Inc. issued its fourth quarter and full year 2025 earnings release, outlining its results. The release and a supplemental investor presentation are available in the Investor Relations section of Donegal Group Inc.’s website at www.donegalgroup.com. Please be advised that today's conference was prerecorded and all participants are in listen-only mode. Speaking today will be President and Chief Executive Officer Kevin Burke, Chief Financial Officer Jeffrey D. Miller, Chief Underwriting Officer Jeffrey T. Hay, Chief Operating Officer W. Dan DeLamater, and Chief Investment Officer V. Anthony Viozzi. Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risks and uncertainties that could cause actual results to vary materially. These factors can be found in Donegal Group Inc.’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q. The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. With that, it is my pleasure to turn it over to Mr. Kevin Burke. Kevin? Kevin Burke: Thank you, and welcome, everyone, to our fourth quarter earnings webcast. We are pleased to provide an update today on our quarterly and full year operating results, along with key accomplishments in 2025, and areas of focus for 2026. We ended 2025 with a solid fourth quarter. The combined ratio of 96.3% reflected excellent underwriting profitability despite the impact of lower net premiums earned and a few large claims that prevented us from matching the record quarterly net income we achieved in 2024. We enjoyed a continuation of relatively favorable weather in our operating regions for the fourth quarter, resulting in a weather loss ratio that was lower than the fourth quarter average for the past five years. Similar to the first nine months of 2025, our core loss ratio for the fourth quarter remained below our target level, driven by excellent underlying results within our personal lines segment. For the full year of 2025, net income of $79,300,000 represents the highest amount we have achieved. While we celebrate these results, we also recognize the need for quality premium growth in order to achieve economies of scale, and sustain excellent financial performance over the long term. Jeffrey T. Hay and W. Dan DeLamater will provide further details about our plans to increase levels of premium growth. Our 2026 business plan includes strategies for engagement with our independent agents, and several initiatives that we expect will generate higher levels of new business submissions, particularly in commercial lines where we are actively pursuing quality mid-market and small business accounts that meet our underwriting criteria. As we shared last quarter, we completed all of the development for the multiyear systems transformation project that we started back in 2018 to replace our legacy systems. We are continuing to follow a phased schedule for the automated conversion of all remaining legacy policies that will be fully completed by mid-2027. That process is on track and progressing well, with minimal disruption to our customers, or the impact to policy retention levels to date. The next step in our technology transformation is the migration of our Guidewire claims, billing, policy administration applications from on-premises systems to cloud-based versions of those applications. We performed a detailed assessment that identified numerous benefits of migrating these applications to the cloud, and we have developed a very comprehensive plan to migrate our claims and billing in early 2027. Migrating to Guidewire Cloud will allow us to leverage the substantial investments of Guidewire and other vendors in the development and seamless deployment of GenAI tools and applications within our core business applications. Upon completion of this initiative, the technology modernization journey that we have been on since 2018 will be fully complete and we will have access to the evolving operating platform that will support our current and future needs. We are excited to move forward and thank all of the Donegal team members and our vendor partners who have labored tirelessly for many years to put us in this very favorable position. At this point, I will turn the call over to Jeffrey D. Miller for a review of our financial results for the quarter. Jeffrey D. Miller: Thanks, Kevin. I will begin my comments with a discussion of the fourth quarter results compared to 2024, and then provide highlights of the results for the full year compared to 2024. For the 2025 quarter, net premiums earned of $226,900,000 decreased 4.1%. Net premiums written decreased by 3.4% following similar trend lines we described throughout 2025, as lower new business volume was offset partially by premium rate increases and solid retention levels. A 12.7% decrease in personal lines net premiums written was offset partially by 3.2% growth in commercial lines. Rate increases achieved during 2025 averaged 5.9% in total and 6.6% excluding workers’ compensation. The combined ratio was 96.3% for the 2025 quarter compared to 92.9% for the prior-year quarter. The increase reflected a 1.3 percentage point increase in the loss ratio and a 2.1 percentage point increase in the expense ratio. We monitor the loss ratio impact of several components. Starting with the core loss ratio, which excludes the impact of weather-related losses, large fire losses, and net development of reserves for losses incurred in prior accident years, we experienced a two percentage point improvement in the core loss ratio. There was a 2.7 percentage point decrease in the commercial lines core loss ratio and a 1.6 percentage point decrease in the personal lines core loss ratio. Weather-related losses totaled $8,200,000 or 3.6 percentage points of the loss ratio for the 2025 quarter, increasing modestly from $7,700,000 or 3.3 percentage points for the prior-year quarter. The quarterly weather claim impact was lower than the previous five-year average for the fourth quarter of 5.2 percentage points. Our insurance subsidiaries did not incur losses from any catastrophic weather events in the 2025 or 2024 quarters. In terms of weather impact by segment, commercial property losses from severe weather totaled $2,400,000 and contributed 4.4 percentage points to the quarterly loss ratio for the commercial multiperil line of business. For personal lines, the weather impact to the homeowners line was $4,600,000 or 14.6 percentage points of the homeowners’ loss ratio. Large fire losses, which we define as over $50,000 in damages, contributed 6.2 percentage points to the loss ratio for the 2025 quarter compared to 4.0 percentage points for the prior-year quarter. We experienced increases in the severity of both commercial and homeowners fire losses during the quarter. Our insurance subsidiaries experienced $2,200,000 of net development of reserves for losses incurred in prior accident years, adding one percentage point to the loss ratio for the 2025 quarter compared to virtually no impact in the prior-year quarter. Line-of-business detail for the 2025 quarter primarily included unfavorable development of $3,900,000 for other commercial, which is primarily umbrella liability, and $2,300,000 for commercial auto, primarily in accident years 2022 and 2024. That was largely offset by favorable development of $1,600,000 for personal auto, $1,400,000 for commercial multiperil, and $1,200,000 for workers’ compensation. The expense ratio of 34.9% for the 2025 quarter increased compared to 32.8% for the prior-year quarter. The increase was primarily related to the direction of year-end adjustments to our estimates for underwriting-based agency incentive costs, as well as the impact of the decline in net premiums earned upon which the expense ratio is based. W. Dan DeLamater will provide more details about our ongoing focus on expense management later in the call. Net investment income increased 17.5% to $14,200,000 for the 2025 quarter due primarily to higher average invested assets and an increase in average investment yield. V. Anthony Viozzi will provide further details about our favorable investment performance later in the call. We achieved net income of $17,200,000 for the 2025 quarter, compared to $24,000,000 for the 2024 quarter. The decrease was primarily due to lower net premiums earned and higher expenses incurred. Turning to the full year of 2025 results. The loss ratio of 61.3% compared favorably to 64.5% for 2024, with a 2.6 percentage point improvement in the core loss ratio. That improvement primarily reflected a 7.2 percentage point decrease in the personal lines core loss ratio as the commercial lines core loss ratio for 2025 was in line with 2024. Weather-related losses for the full year of 2025 were $56,900,000 or 6.2 percentage points of the loss ratio, comparing favorably to $67,700,000 or 7.2 percentage points of the loss ratio for the full year of 2024. Weather impact for 2025 was one percentage point lower than the previous five-year average of 7.2 percentage points of the full-year loss ratio. Large fire losses contributed 4.8 percentage points to the 2025 loss ratio in line with 4.9 percentage points for 2024. Net favorable development of reserves for losses incurred in prior accident years reduced the 2025 loss ratio by 1.1 percentage points, slightly lower than the 1.6 percentage point reduction in 2024. Details by line of business include favorable development of $7,900,000 in commercial multiperil, $4,300,000 in personal auto, $2,200,000 for commercial auto, $1,500,000 for homeowners, $1,200,000 for personal umbrella, and $1,000,000 for workers’ comp. That favorable development was partially offset by $7,900,000 of unfavorable development in commercial umbrella, netting to a favorable development in total of $10,300,000. The favorable development related primarily to accident years 2021, 2023, and 2024 with unfavorable development for reserves in accident years 2020 and 2022 that resulted from higher than expected severity for a relatively small number of casualty claims. The expense ratio was 33.8% for the full year of 2025, nearly unchanged from 33.7% for the full year of 2024. The combined ratio was 95.4% for 2025, comparing favorably to 98.6% for 2024. As Kevin highlighted earlier, the favorable underwriting results coupled with a 17.2% increase in net investment income contributed to a record $79,300,000 in net income for 2025, increasing 56% compared to net income of $50,900,000 for 2024. Before I close, I will provide a brief summary of the renewal of our reinsurance program for 2026. We made no changes to the coverage limits or retention levels in place for 2025 under our third-party reinsurance program, or the intercompany reinsurance agreements between our insurance subsidiaries and Donegal Mutual due primarily to a decrease in property exposures during 2025 and lower property reinsurance rates. We project a $3,000,000 decrease in reinsurance cost for 2026 compared to 2025. With that, I will now turn the call over to Jeffrey T. Hay to provide more details about our commercial and personal lines segment results. Thank you, Jeff. We are pleased to report favorable bottom-line Jeffrey T. Hay: results this quarter and for the full year of 2025. And I continue to be confident that this improvement is not the product of random volatility in our results, but a direct outcome of the strategies and diligent action plans we have put in place over several years to transform our underwriting discipline. Within our commercial lines of business, net premiums written increased modestly by 3.2 percentage points for the 2025 quarter, and by 2.9 percentage points for the full year as the market has selectively softened for new business we continue to stand firm, maintaining underwriting and pricing discipline and executing on targeted geographic and class strategies. With that, I am pleased to report that in the fourth quarter, we experienced continued success in new business writings and strong retention on desired business. The commercial lines new business aligns with our targeted geographic and class strategies that I have mentioned in previous calls, with the majority of new business written in our highly targeted classes with higher expected profitability. Our overall commercial rate and exposure increase excluding workers’ compensation remained steady at 9.7% for the fourth quarter and at 10.6% for the full year. We are generally rate adequate across our lines of business. As we strive to retain quality accounts, we also continue to emphasize driving rate in areas where the intersections of class, line of business, and geography continue to present challenges. Now shifting to commercial lines loss trends in the fourth quarter, we continue to experience upward pressure on liability severity for both commercial auto liability and general liability coverages within our commercial multiperil line of business. Overall, property severity and frequency trend lines across all coverages remain relatively favorable. Fourth quarter 2025 impact from large fires increased nearly six percentage points on the commercial multiperil loss ratio when compared to the same quarter in 2024. This increase was driven by a large increase in the severity of large fires partially offset by a slight decrease in frequency. For the full year of 2025, large commercial fire losses decreased by $3,500,000 for a 2.5 percentage point decrease in the commercial multiperil loss ratio. We experienced relative consistency in the impact of weather-related losses, with the change representing less than a percentage point of the commercial lines loss ratio in the fourth quarter and full year compared to the respective periods in 2024. Commercial lines prior-year reserve development was modestly adverse overall, increasing the loss ratio by 2.6 percentage points for the fourth quarter, driven by umbrella liability claim development in accident years 2022 through 2024. Reserve development was modestly favorable overall for the full year of 2025, reducing the commercial lines loss ratio by 0.6 percentage points. We are pleased to report that our commercial lines core loss ratio, which excludes the impact of large fires, weather, and prior-year reserve development, decreased by 2.7 percentage points in the 2025 quarter compared to the same quarter in 2024. Now turning to our personal lines segment, for the fourth quarter, the decline in personal lines net premiums written improved slightly to minus 12.7% from minus 15.9% in the third quarter of 2025 and minus 13.6% for the full year of 2025. New business written in the fourth quarter totaled $1,300,000, an increase of 10.2 percentage points over the third quarter. New business written for the month of December was up 11.3 percentage points from December 2024. We continue to remove new business restrictions to stabilize premiums in the segment, exercising caution to maintain the rate adequacy we have generally achieved across our footprint. I am pleased to report that our real retention rate for fourth quarter 2025 increased to a very healthy 88.7%. With the intentional nonrenewal of less profitable business I have mentioned in prior calls now essentially complete. Rate and exposure slowed to plus 2.9% in the fourth quarter, driven by the achievement of rate adequacy across all lines, and came in at plus 3.6% for the full year of 2025. Moving to personal lines loss trends, within the personal auto line of business, the loss ratio decreased in the fourth quarter by 7.6 percentage points from the 2024 quarter. This decrease was driven by a point improvement in the core loss ratio coupled with 3.1 percentage points of favorable prior-year development in the quarter, compared to 2.7 points of unfavorable prior-year development in the 2024 quarter. Frequency trends in personal auto remained in check, and physical damage severity continued to show signs of improvement, while bodily injury severity continued to trend moderately upward. The homeowners loss ratio saw a deterioration of 12.1 percentage points for the 2025 quarter compared to fourth quarter 2024. This increase was attributable to 4.1 percentage points higher weather loss impact and 5.3 points of higher large fire experience, with relatively consistent core loss ratio experience. Overall, homeowners frequency trends in the fourth quarter were favorable in property with some pressure on nonweather severity driven by large fire experience. For the personal lines segment in total, we are pleased with the excellent profitability we achieved in 2025, as reflected by the statutory combined ratio of 88.5% for the fourth quarter and 89.3% for the full year. In summary, we have made significant progress during 2025 in the execution of our state-specific strategies and we are pleased with the substantial improvement in our underwriting results. I will now turn the call over to W. Dan DeLamater for an update on our operational strategies and developments and more details about our positive outlook for 2026. Kevin Burke: Thank you, Jeff. W. Dan DeLamater: I will start my discussion of our operational performance for 2025 by providing an update on the expense management initiatives we have discussed in previous calls. I will then touch briefly on the high-level results of our business planning process for 2026 and our alignment on several tangible focus areas for the year ahead. We operated at an expense ratio of 34.9% for the 2025 quarter. Compared to our expense ratio of 32.8% for the 2024 quarter, the increase was a break from the downward trajectory we achieved over the past five quarters. This increase in expense ratio was not related to spending beyond our budget. In fact, our team achieved targeted spending reductions for 2025. One of the primary factors that elevated our expense ratio for the fourth quarter was a $3,100,000 increase in performance-based incentives for our agents, mostly related to higher amounts incurred for agency profit sharing. While this might seem counterintuitive considering that our loss ratio was less favorable for the 2025 quarter compared to the prior-year period, agency profit-sharing compensation is determined by individual agency experience, which resulted in a disproportionate comparative outcome for the quarter. Another primary driver of the increase in our fourth quarter expense ratio was lower premium volume that resulted from writing less new business and needing lower overall rate increases to rate adequacy than originally planned for the year. Despite that top-line miss versus plan, we remain pleased with our organizational focus on budget discipline and our ongoing commitment to realizing efficiencies from our recent systems and process modernization efforts. For the full year of 2025, we performed at a 33.8% expense ratio, compared to 33.7% for the full year of 2024, with the reduction in net earned premiums representing the overriding factor behind the slight uptick in that annual expense metric. As we look forward to 2026, we are operating from a position of strength, in that the efforts of our team have generated outstanding results through rate achievement, underwriting focus, expense discipline, and investment portfolio optimization. We are pleased to report six consecutive quarters of underwriting profitability combined with investment strategies to increase our returns that were opportunistic yet consistent with our conservative philosophy. These results will allow us to be selectively aggressive in our pursuit of profitable growth in the year ahead while being careful not to undermine the hard work of our team that led us to this favorable position. We have entered 2026 intentionally focused on our strategic plan and priorities. Our regional teams have worked closely with independent agents across the country to build tangible and actionable new business and policy retention plans for 2026. This focus on product mix, rate strategy, marketing strategy, and growth objectives in every state and line of business has our teams aligned and ready to achieve our bottom-line and top-line objectives in the year ahead. We have excellent insight into our performance versus plan at a granular level thanks to our technical data and enterprise analytics teams. These teams distill and disseminate vast amounts of data to our business units, keeping them informed and positioning them to efficiently analyze results and take responsive action when required. These data-driven insights empower us to deepen our relationship and engagement with our independent agency partners. As a reminder, we distribute our products exclusively through the Independent Agency Channel, and we consider the relationship with our 2,000 independents across our 21-state footprint to be a core strength. As I close my remarks, I will reiterate we are proud to operate from a position of bottom-line strength. Jeff shared that we are pleased to achieve rate adequacy in 2025. Ongoing rate achievement remains vitally important to ensure that we maintain pace with loss cost trends. We continue to engage our marketing teams, our independent agents, and our analytics and underwriting teams to emphasize pricing discipline as we seek to identify profitable new business opportunities in states and classes that match our objectives. With that, I will turn it over to V. Anthony Viozzi for an investment update. Tony? Jeffrey D. Miller: Thanks, Dan. Throughout 2025, our investing approach focused on V. Anthony Viozzi: strategically increasing our bond portfolio yield and optimizing our portfolio mix. We were able to take advantage of higher market rates and move into more favorable asset classes that we expect will continue to perform well in the future. We had a strong 2025 as net investment income was up 17.5% resulting in $14,200,000 versus $12,100,000 for the 2024 quarter. The strong quarterly performance coupled with actions taken in the prior quarters of 2025 allowed us to achieve a 17.2% increase to full year 2025 net investment income of $52,600,000 compared to $44,900,000 for 2024. The average tax-equivalent yield for the 2025 quarter increased to 3.95%, compared to 3.58% for the 2024 quarter. In addition to actively managing the bond portfolio during the first nine months of 2025, we accelerated yield enhancement through strategic bond swaps in the fourth quarter. Proceeds from bonds that matured, were called, or were sold as part of swap strategies during the quarter totaled $155,000,000, yielding an average of 3.74%. Those funds were reinvested at an average yield of 5.17%, with the 140 basis point improvement projected to boost annual investment income by $2,200,000 going forward. We intentionally extended duration to 5.5 years to lock in what we viewed to be attractive yields for a longer term horizon. We are now investing new money at yields north of 5% and we anticipate the ongoing favorable market environment will provide modest additional bond swap opportunities in the near term. The net investment loss of $1,700,000 for the 2025 quarter reflected the losses we intentionally realized on bond sales, offset partially by a gain in the market value of our equity portfolio during the quarter. For the full year of 2025, we realized a net investment gain of $600,000 compared to $5,000,000 for the full year of 2024. We attribute the year-over-year change to the losses we realized on strategic bond sales in 2025 in order to boost investment income in future periods by amounts that will far exceed the one-time realized losses. At 12/31/2025, our book value increased to $17.33, which was a 12.8% improvement over $15.36 as of 12/31/2024. The increase was driven primarily by net income and an increase in the market value of our available-for-sale bond portfolio, partially offset by cash dividends declared during the year. In closing, we are projecting about $100,000,000 in portfolio cash flow over the next twelve months with a current average yield of 4.4%. Our current reinvestment rate is around 5.25%, providing opportunity for further enhancement in investment income. We continue to optimize our portfolio mix as market opportunities arise. To that end, we are currently emphasizing tax-exempt bonds, mortgage-backed securities, and non-agency structured notes where we find rates most attractive. With that, I will now turn it back to Kevin for closing remarks. Kevin Burke: Thank you, Tony. As we reflect on our accomplishments in 2025 and consider the challenges ahead in 2026, I want to express my appreciation for the devoted team of Donegal professionals who are fully engaged in executing our strategies and fulfilling our mission. I also want to recognize the dedication of our independent agency partners, who reciprocate our loyal commitment to them by submitting quality new business to us and entrusting us to serve the insurance needs of their customers. We look forward to continuing to enhance those relationships through increased engagement in the year ahead. And finally, I am grateful for the ongoing support of our stockholders, and we look forward to providing further updates to you in future calls. Thank you. Operator: Thank you, Kevin. While we requested and received questions in advance of today's call, we have worked answers to these questions into our prepared remarks. We will now open for questions. If there are any additional questions, please feel free to reach out to us. This now concludes the Donegal Group Inc. fourth quarter 2025 earnings webcast. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Dropbox Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Peter Stabler, Head of Investor Relations. Please go ahead, sir. Peter Stabler: Good afternoon, and welcome to Dropbox's Fourth Quarter 2025 Earnings Call. As a reminder, we will discuss non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.dropbox.com. We will also make forward-looking statements on this call, including statements about our future outlook for our first quarter and fiscal year 2026 as well as our expectations regarding our business, assets, strategies and the macroeconomic environment. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent and forthcoming reports on Form 10-K. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. I will now turn the call over to Dropbox's CEO and Co-Founder, Drew Houston. Andrew Houston: Thanks, Peter, and good afternoon, everyone. Welcome to our Q4 2025 earnings call. Joining me today is Ross Tennenbaum, our Chief Financial Officer, who joined Dropbox in December. I'll start with a recap of the quarter and how we closed out 2025, and then I'll talk about how we're thinking about the business and our priorities going forward. Ross will then walk through our financial results and outlook. We closed out 2025 on a strong note. Fourth quarter revenue came in above the high end of our guidance and excluding the impact of our FormSwift wind down, constant currency revenue was flat for the quarter and the full year, which is a better-than-expected outcome. We also made meaningful progress on efficiency. Margin performance in Q4 exceeded our expectations, and we generated over $1 billion of unlevered free cash flow. At the same time, through our share repurchase program, we reduced diluted share count by more than 50 million shares in 2025. Taken together, Q4 was a good reflection of what we're working to do consistently, which is execute well, deliver against our plans and steadily improve the underlying trajectory of the business. And in 2025, our priorities were focused on strengthening our core business and scaling Dash in pursuit of returning to revenue growth. We're still executing on these objectives but now have proof points that these changes are starting to work. Coming into last year, our Core FSS business had strong fundamentals and scale, but execution velocity, product experience and our go-to-market motion had not kept pace with customer expectations. So in late 2024 and early '25, we did a leadership reset in Core FSS, bringing in a new general manager and rebuilding key leadership across product, engineering and go-to-market. Since then, we've made significant improvements in how decisions get made, how we prioritize customers and how we deliver value. And we're beginning to see positive signals. The team first focused on improving funnel quality, pricing and packaging, product fundamentals and retention drivers. And as a result, the individuals business saw steady growth across 2025. That matters because it demonstrates that the core product can still respond to focused innovation and better retention and growth are achievable with the right execution. And so our objective for 2026 is to maintain our momentum with the individuals business and return teams to positive net license growth. Work already underway includes simplified pricing and packaging, higher intent trials, reduced onboarding and admin friction and a sharper focus on retention. Some early tests in Q4 showed some promising signs, including improved teams trial conversion rates and higher first week engagement, and we began rolling these changes out more broadly in Q1. But in short, we're not simply maintaining our Core FSS business. Our goal is to bend the curve. In 2025, we delivered proof points and 2026 is about scaling that momentum. Our next focus area is what we call Dash and Dropbox, which represents the most important evolution of the Core FSS experience in years. Dash and Dropbox provides an AI intelligence layer directly inside our customers' everyday workflows with minimal setup and immediate relevance. In Q4, we launched embedded Dash capabilities inside our Teams plans, including semantic search, chat and stacks organization and sharing, and we're rolling it out in phases to eligible Dropbox Teams customers. We're seeing solid early engagement among the initial Dash and Dropbox cohorts. In Q4, over half of these active users returned multiple days per week, which is evidence that Dash is providing value and becoming a part of user workflows. And based on these results, we've begun scaling up our rollout to additional customer cohorts. Dash and Dropbox increases the value of Core FSS. It should further improve retention economics and serves as a natural on-ramp to broader Dash adoption. This is the most credible and immediate way that AI creates value for Dropbox FSS customers today. Now turning to our plans to scale the Dash stand-alone opportunity. And while it's true that we've introduced different iterations of Dash experience over the last 2 years, the sequencing of our rollout was intentional to ensure we build and scale the business and products thoughtfully. First, we focused our investment on building a best-in-class Dash product experience, including investments in its underlying infrastructure and performance. Then we focused on launching 2 growth motions for Dash, the sales-led motion that launched in late '24 and the self-serve version that launched in Q4 of last year. Now we're focused on engagement and adoption before we focus on monetization. The good news is we're seeing positive early signals of demand. At the same time, we're clear eyed that onboarding friction, time to value and the experience around connecting your apps need to improve. So in the first half of '26, we're focused on improving the new user experience to demonstrate connector value from first touch. We're investing in stacks as a sharing-driven growth engine, and we're compressing the time between sign-up and first value in your Dash experience. Next, historically, Dropbox has been primarily a product-led growth company. We have a sales-led motion today, but it needs meaningful improvement given our broader product portfolio. In December, we hired Eric Webster as our new Chief Business Officer. His mandate is to evolve and improve our existing sales-led motion into one capable of selling multiple products with the right funnel, process and enablement. That includes Core FSS, Dash, both stand-alone and bundled, Protect and Control, DocSend and other emerging products. Protect and Control is showing particular promise. As every company works to roll out AI tools safely, admins are confronting critical security challenges with overshared content and improper use of consumer AI tools. We're in a unique position to help these customers. By complementing our Dash offering with Protect and Control, we can both index customer data and use the underlying context engine to power capabilities that prevent authorized sharing and access beyond our secure perimeter. Capitalizing on this emerging demand, we closed a 6-figure international deal for Dash's protect and control features in Q4, and we expect Protect and Control to play an important role across our portfolio in years to come as AI data security emerges as both a stand-alone opportunity and an AI adoption enabler. Stepping back, here's how all this comes together. Our Core FSS business is stabilizing and showing credible paths back to growth. Dash is both a force multiplier for core and a stand-alone AI opportunity, while sales-led growth and AI data security expand our addressable market. Together, these vectors give us multiple paths to drive modest but meaningful growth and enough to shift the narrative to durability and progress. So in closing, 2025 laid the foundation. Now 2026 is about execution, scaling what's working, improving consistency. We're realistic about the work ahead, but confident in the direction, the team and the opportunity in front of us. Lastly, I'd like to acknowledge the many contributions of Tim Regan, our departing CFO, and thank him for making Ross' transition a smooth one. So with that, I'll turn over the call to Ross to walk through our fourth quarter results and our outlook. Ross Tennenbaum: Thanks, Drew, and good afternoon, everyone. As many of you know, this is my first earnings call as CFO of Dropbox. Before I walk through our financial results and outlook, I wanted to share a brief perspective on how I think about the business and the opportunity ahead. What I'm about to share reflects my observations from my first couple of months in the role. It's not a new operating framework, and it doesn't represent a change in how we guide the business. But I believe it's useful context as you assess Dropbox's long-term value creation potential. What initially attracted me to Dropbox was the strength of the foundation. This is a company with a strong global brand and a large and loyal customer base of roughly 18 million paying users and 575,000 paying business teams and products that are deeply embedded in everyday workflows for both individuals and teams. That foundation is clearly reflected in the financial profile, a $2.5 billion revenue business with operating margins around 40%, approximately $1 billion of annual unlevered free cash flow and a 21% 3-year CAGR for unlevered free cash flow per share. That combination of scale, profitability and cash generation has proven to be durable and resilient over time. Our North Star is to grow free cash flow per share over time through a judicious capital allocation strategy. As CFO, my goal is to prioritize investments in the business where we see attractive returns, initiatives that drive sustainable revenue growth and margin. At this time, restoring revenue growth is our top priority. When our shares trade at compelling valuations, repurchasing stock remains a disciplined and efficient use of capital. Reducing share count under those conditions increases free cash flow per share and enhances long-term shareholder returns. What ultimately drew me to Dropbox was the opportunity to grow free cash flow itself, not just optimize the denominator by growing revenue and improving margins. Let me start with our current investment priority, growth. Naturally, since onboarding, I have been most focused on our initiatives to restore growth. While many discussions regard Dash, our opportunities to restore growth in our Core FSS business are also exciting. We recognize FSS operates in a mature and competitive market, and we're realistic about that backdrop. At the same time, over the past year, we've taken meaningful steps to strengthen the organization and evolve the product. In late 2024, we brought in new leadership to lead the core business who are experienced operators from large-scale tech companies. I've been genuinely impressed by both the caliber of talent we've been able to attract and the pace at which they're working to evolve the business across product, pricing, packaging and go-to-market motions. Last year, we focused on simplifying and strengthening our core business, which drove improvements in monetization and retention. That work continues. At the same time, the team has been integrating Dash AI capabilities into FSS, allowing customers to derive more value from the content they already store in Dropbox. From my perspective, this represents the most significant innovation to the Core FSS offering in a long time. Looking at the top of the funnel, one of the biggest surprises to me early on was the magnitude of gross new ARR that Core FSS still generates each year. Today, much of that is offset by churn. But by delivering more value through innovation like Dash and Dropbox, improved pricing and packaging and better end-to-end customer life cycle workflows, I believe there is a real opportunity to improve retention and grow net new ARR over time. Now turning to Dash. I see Dash as a genuinely valuable product and use it regularly in my day-to-day work. More importantly, nearly all Dropbox employees are weekly active users, and we're seeing strong engagement from active users in our early customer trials. We have an impressive engineering team rapidly innovating on an ambitious road map. At a minimum, I see Dash as a highly impactful evolution of our Core FSS offering and believe in addition to all our other efforts, it will help attract new customers, drive upsell and reduce churn. More optimistically, we will also drive adoption and later monetization of Dash as a stand-alone product. Regardless, anywhere along the spectrum, I see meaningful value creation potential for Dash and our AI product strategy. The third growth lever I'll touch on briefly is M&A. I don't view M&A as a silver bullet, and I know firsthand that not every transaction delivers as expected. But I also know that disciplined strategic acquisitions can meaningfully expand a product portfolio and contribute incremental ARR over time. Any acquisition we consider must meet a high bar for strategic fit and financial return. Over time, I see M&A as a lever that can accelerate product road maps, deepen our relevance with customers and complement the organic growth initiatives already underway. Taken together, Core FSS, Dash and M&A, these were the growth vectors I evaluated when deciding to join Dropbox. And after a couple of months inside the company, I see opportunity for each. Let me turn now to margins. The second driver of free cash flow growth is margin expansion. Should we someday decide to curtail our growth pursuits, I believe this business has the capacity to operate at margins meaningfully above current levels. That said, given the growth opportunities in front of us, we believe it's prudent to maintain our current investment levels to pursue growth. At the same time, I do believe that over time, we can be more aggressive on cost discipline. We see the potential for additional margin upside driven by scale, continued cost discipline and productivity improvements. AI, in particular, offers great potential to automate many manual people-intensive processes across all functions, not just engineering or customer support. We believe that when employed, these initiatives will drive significant productivity gains. In addition, we continue to look for opportunities to operate more efficiently through better tooling and geographic mix, shifting more work to lower-cost regions. Taken together, we believe these efforts can generate savings, which we can elect to drive margin or reinvest in growth initiatives. To be clear, these are observations for my first couple of months. There's real work ahead to translate them into execution. So stepping back, this is how I see Dropbox today, a strong brand with a durable financial profile, significant free cash flow generation and multiple avenues for long-term value creation. And as I look at how the business is trending, we're making progress toward returning to growth while optimizing for efficiency. In that context, I see meaningful optionality in the business that I believe is underappreciated by the market, reinforcing share repurchases as an important part of our strategy. With that, let me turn to our fourth quarter financial results and our outlook going forward. In Q4, revenue declined 110 basis points year-over-year to $636 million, but increased 40 basis points year-over-year when excluding FormSwift, which acted as a 150 basis point headwind to revenue. Constant currency revenue declined 160 basis points year-over-year to $633 million, but was roughly flat year-over-year, excluding the 150 basis point headwind from FormSwift. Relative to our guidance, revenue outperformance was driven primarily by retention improvements across our self-serve SKUs. Total ARR was $2.526 billion, down 190 basis points year-over-year and excluding the impact of FormSwift, which was a 160 basis point headwind, ARR was down 30 basis points year-over-year. Total ARR declined 170 basis points on a constant currency basis. We exited the quarter with 18.08 million paying users, a sequential increase of approximately 10,000 paying users. The quarter's paying user growth was primarily driven by momentum in our Simple plan. Average revenue per paying user is $139.68 as compared to $139.07 in the prior quarter. ARPU increased sequentially primarily due to FX tailwinds as well as an overall mix shift from annual to monthly plans. Before we continue with further discussion of our P&L, I would like to note that unless otherwise indicated, all income statement figures mentioned are non-GAAP and exclude stock-based compensation, amortization of purchased intangibles, certain acquisition-related expenses, net gains and losses on real estate assets, workforce reduction expenses and net losses on equity investments. Our non-GAAP income also includes the income tax effect of the aforementioned adjustments. Gross margin was 80.8% for the quarter, down 230 basis points from the year ago period, reflecting higher depreciation associated with our hardware refresh and ongoing data center build-outs as well as increased infrastructure costs associated with the expansion of Dash trials. Operating margin was 38.2%, ahead of our guidance of 37% and up roughly 130 basis points from the year ago period. Operating margin increased year-over-year largely due to lower headcount following our risk in 2024 and elimination of marketing support for FormSwift. Compared to our guidance, operating margin benefited primarily from revenue outperformance as well as lower outside services and marketing spend. Net income for the fourth quarter was $174 million. Diluted EPS for the fourth quarter was $0.68 based on 254 million diluted weighted average shares outstanding compared to $0.73 in the year ago quarter. The decrease was largely due to higher interest expense. Moving on to our cash flow and balance sheet. Cash flow from operations was $235 million, an increase of 10% versus the year ago period, primarily due to payments related to our reduction in force in Q4 '24. Q4 '25 also included $26 million of interest payments, net of the associated tax benefit related to amounts drawn under our term loan facility. Unlevered free cash flow was $251 million or $0.99 per share, up 44% year-over-year. Capital expenditures were $11 million in the quarter, primarily related to data center build-outs. In the quarter, we also added $34 million to our finance leases for data center equipment, marking the end of elevated spend for our hardware refresh cycle. And now I'll provide a brief update on our real estate strategy as we continue to actively pursue subleases across our real estate portfolio. Last month, we executed a sublease of all remaining available square footage in our current San Francisco headquarters, including the portion of the space we were occupying over a 3-year term. We also executed an extension and expansion of an existing sublease. As a result of these 2 subleases, we expect to generate approximately $97 million in total future cash payments over the remaining term of our lease through 2033, net of the cost to lease a smaller San Francisco headquarters, given we will vacate our current headquarters. From a cash perspective, the 2026 impact is immaterial due to lease structure and investments we plan to make later this year in our new San Francisco headquarters. From a P&L standpoint, we expect a modest benefit in 2026. The impact of both of these new agreements has been factored into the guidance we'll provide today. As we move beyond 2026, both the cash flow and earnings benefits become more meaningful as the sublease income builds. Turning to the balance sheet. We ended the quarter with cash and short-term investments of $1.04 billion. In the fourth quarter, we repurchased approximately 14 million shares, spending approximately $415 million. As of the end of the fourth quarter, we had approximately $1.17 billion remaining under our existing share repurchase authorization and $1.2 billion of additional term loan liquidity with $700 million allocated to retire our March 2026 convertible notes. I'll now offer our outlook for Q1 and the full year 2026. For the first quarter of 2026, we expect revenue to be in the range of $618 million to $621 million. Excluding FormSwift, this implies 0.4% growth year-over-year at the midpoint. We are expecting a currency tailwind of approximately $8 million. On a constant currency revenue basis, we expect revenue to be in the range of $610 million to $613 million. We expect our non-GAAP operating margin to be approximately 38% Finally, we expect diluted weighted average shares outstanding to be in the range of 241 million to 246 million shares based on our 30-day trailing average share price. For the full year 2026, we expect revenue to be in the range of $2.485 billion to $2.5 billion. Excluding FormSwift, this implies roughly flat growth year-over-year at the midpoint. We are expecting a currency tailwind of approximately $27 million. On a constant currency revenue basis, we expect revenue to be in the range of $2.458 billion to $2.473 billion. Gross margin to be in the range of 81.5% to 82%, non-GAAP operating margin in the range of 39% to 39.5%. We expect unlevered free cash flow to be at or above $1.040 billion. We expect cash interest expense net of tax benefits of approximately $190 million. We expect CapEx to be in the range of $20 million to $25 million and additions to finance lease lines to be approximately 4% of revenue. Finally, we expect diluted weighted average shares outstanding to be in the range of 227 million to 232 million shares. I'll now share some additional perspective on this guidance for 2026. Excluding FormSwift, we are guiding to a flat revenue year in 2026 while continuing to invest. That reflects a disciplined approach as we validate execution, refine go-to-market motions and ensure that improvements translate into measurable results. Our guidance reflects that balance. We see long-term opportunity, but we are pairing that conviction with near-term prudence. Regarding revenue, following the elimination of marketing support for FormSwift at the beginning of last year, the business has experienced gradual user decline each quarter and will continue to be a modest headwind this year. Further, we have made the decision to sunset FormSwift by the end of the year. For paying users, last year, we offered directional commentary because of strategic decisions we made, including the wind down of the FormSwift business. Looking ahead to 2026, we expect modestly negative net new paying users in Q1, largely due to seasonality and FormSwift headwinds with roughly flat paying user growth for the remainder of the year. On gross margin, we expect modest pressure this year as we scale Dash trials, partially offset by ongoing structural infrastructure improvements. For operating margins, as we mentioned last quarter, we do not expect this to be a year of margin expansion. We remain confident in our ability to execute and believe it is prudent to invest in near-term growth opportunities. Our margin outlook reflects material investment in Dash as we expand trials across both new customers and a larger segment of our FSS user base. We expect these investments to be partially offset by ongoing cost discipline and efficiency initiatives. Regarding finance leases, this quarter marks the end of elevated spend for our latest hardware refresh cycle. And as a result, we expect materially lower infrastructure investment this year with finance lease activity more heavily weighted towards the second half. As a reminder, we typically refresh our infrastructure every 5 years. Regarding CapEx, we expect a slight increase in CapEx as a result of a onetime incremental investment related to the build-out of our new San Francisco headquarters. Excluding that investment, CapEx will be down year-over-year as we have completed our hardware refresh cycle. Our unlevered free cash flow guidance reflects a benefit this year from lower cash taxes related to the One Big Beautiful Bill Act, along with the absence of onetime cash outflows we had in 2025 related to the San Francisco lease buyout and reduction in force. Our interest expense outlook assumes we draw the remaining balance on our term loans. Once drawn, total outstanding term loan debt will equal $2.7 billion. Lastly, we expect our weighted average shares outstanding to decrease to approximately 227 million to 232 million shares, which assumes we exhaust the remaining balance on our share repurchase authorization. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Mark Murphy from JPMorgan. Jaiden Patel: This is Jaiden Patel on for Mark Murphy. It was great working with you, Tim, and welcome, Ross. You've talked about Dash for a few quarters now, goal and pipeline building. Can you give us any quantitative framework around Dash seats, attach rates or ARR contribution at this point? And then looking forward to the guide, again, we've heard some of these strong proof points and very much understand that the focus is first on adoption, but would love to hear any assumptions you're baking into the guide? Andrew Houston: Sure. I can start. And well, I'll start with just like the conceptual framework. I mean we start by focusing on product quality and building the capabilities, the infrastructure to index the known universe of SaaS apps and build a private search index and all the other things that go into building a product like Dash. But then we focus on engagement and make sure onboarding is good and that there's repeat use, then we scale it up to our user base and focus on driving adoption and then monetization. So we'll be able to share more specific metrics and targets and so on as we continue on that progression. I'd say where we are right now, as I shared in my remarks earlier, is that we spent a lot of last year really building that experience and focusing on product quality and building those integrations, the Dash AI integrations natively into the Dropbox experience and also building the self-serve version of Dash, which we need to reach our self-serve Dropbox FSS customers and beyond. And then now we're focused on -- and we've seen a good early signal there. So good repeat use of the integrations within Dropbox. Lots of -- we're focusing on tuning up the onboarding experience. And then now we're turning towards driving adoption in the first half by scaling up the integrations to more of our Dropbox Business customers for the Dash integrations and then rolling out the Dash stand-alone products more broadly in the first half. And then the second half will start to phase in more around monetization. So probably second half will be a better time to share more of the specifics around attach rates and ARR contribution and things like that. Ross Tennenbaum: Jaiden, this is Ross. Thanks for the question. I just wanted to add, I agree with everything Drew said. We are excited for what we're doing around the core business and our ability to do things that drive us to a growth posture as well as for what we can do with Dash. And we are focused very much on engagement adoption this year. And to your guidance question, we leverage all information we have in front of us and just given the size of the core business, you can assume that, that has the most weighting and influence on how we think about our guidance for the year. Operator: And our next question comes from the line of Rishi Jaluria from RBC. Rishi Jaluria: Maybe to start with, I want to continue pulling on the thread of Dash. Look, I'm in total agreement that you have to drive utilization and ultimately, customer value before we can really worry about monetization in a big way. And you've given us bits and pieces over the years. But maybe what sort of metrics can you give us around engagement with Dash, whether that's anything like people spending more time in Dash, percentage of paying business users using it, even like what impact does this have on gross retention? Any sort of metrics you can give us around like engagement and adoption and feedback around Dash would be helpful. And I've got a quick follow-up. Ross Tennenbaum: Rishi, it's Ross. I'll start here. I just -- I know coming on, I'm looking at how all this has played out, and I know we've been talking about Dash for a while, and we've been very focused on investing in building the product, which I think is a great product that gives me a lot of value. I think that what we're focused on now is like, just remember, we launched this in Q4 to the Dash and Dropbox solution into our core. We think that, that is a tremendous evolution of our core product set. It drives a lot of value for our users. We launched it to a small number of users, and we've seen some really good results from that in terms of those core users adopting and using Dash and returning to continue to use Dash week-over-week. And those results exceeded our expectations and has given us the confidence to go forward and accelerate our rollout of Dash to more of our users in this year. So I think we're seeing some nice results on that side. And again, I think that Dash is a significant enhancement of our Core FSS product line and something that we can use to drive value for our users. And then on the self-serve side, and Drew talked about this in his prepared remarks, we've seen some good results in top of funnel in our Q4 launch. There is work that we need to do to just showcase time to value faster for these customers, and we're working on that. But overall, I think we're pleased with where we are with adoption. It's allowing us to accelerate that rollout to our core business. And as we see more adoption and get into the monetization phase, we will talk about it more, and we'll introduce metrics as appropriate to help you track it better. Rishi Jaluria: All right. No, that's really helpful. And then maybe just continuing on Dash, but I want to think about a broader kind of more medium-term strategy. Drew, I know the idea of having kind of this connectivity of knowledge and content has been a thing you've been focused on for a very long time and Dash totally fits in with that. Maybe what's the longer-term opportunity for you to not only leverage kind of this idea of universal search and knowledge attainment, but even get that a little bit more workflow integrated and turn Dash into maybe being more of a platform where your more power users have the ability to actually build content-specific agents on top of Dropbox that can automate a lot of that workflow and actually get a lot of work done given kind of the content you have system of record. Maybe how are you thinking about your opportunity and investments there? Andrew Houston: Sure. I think it's a great question and something we're very focused on. So we talk a lot about building Dash itself, but I think in a lot of ways, what we've really been building and why this investment has been over many years instead of a couple of quarters is because we're building or we've built a completely new generation of technical infrastructure that we internally call our context engine. And so what that is, is shifting the value we're providing at the platform level from basically like really scaled and cost-effective storage to building this context layer for AI that indexes the known universe of SaaS applications, builds kind of a private search engine and then connects -- basically formats all of that content in a way that a language model or an agent can work with it. And we've -- and to your question of like, well, are we going to shift from sort of informational use cases like search or chat to helping people get the work done, you're starting to see us do that across the portfolio beyond Dash. And we'll do it within Dash too. But just to give a couple of examples, part of what really resonates with customers with the Dash integrations in the Dropbox is for the first time, they can talk to their Dropbox in natural language, and it kind of blows their mind. So if they want to find a photo of a red sunset, it doesn't have to be called red sunset.GPG anymore. If someone says red sunset in a video, that search can find it. And increasingly, we'll be shifting on all of our surfaces from kind of informational queries like that to actually automating workflows and helping you get stuff done. Security is another example that I talked about. So every company is trying to figure out how do we roll out AI safely and confront a lot of new issues. The first is overshared content. So to some extent, every company has documents floating around with a broader permission set than it should. And while that's -- and customers have been talking to us about that problem for a few years. And in response, we -- that's one of the reasons why we bought a company called Nira last year and have been building on that since with what we now call Protect and Control. But we find that customers are really struggling how do we deal with this overshared content. And that might have been a theoretical problem a few years ago, but with enterprise search, with these AI tools, suddenly employees can literally just ask for sensitive or bad stuff and find all of it, making it a lot more dangerous. Second, as companies have -- as CEOs or companies have encouraged AI adoption, and tried to hurry that up. What they're also seeing is that something like 30% or 40% of queries that first employees are using consumer AI tools like ChatGPT to answer these questions or at work and like 30% to 40% of those queries have people pacing PDFs or of really sensitive customer or company IP or just sensitive material that they shouldn't be sharing and customers have no way of dealing with that. And then to your point about agents, on the one hand, this whole coding revolution, agent coding revolution that we saw last year is really not only itself kicking into overdrive, but when you look at things like OpenClaw or Cowork or others. Now there's a lot of excitement about, all right, can we bring this paradigm to knowledge work in general. But what you see there is that opens up a whole new -- that kicks these security concerns and overdrive at an even bigger level. And so these are all big opportunities for us beyond just the basics of AI search and chat, and we're trying to strike the right balance because on the one hand, we're as excited as everybody else about all the transformative things you can do with AI as you give it more agency. At the same time, the median -- when I talk to sort of the median Dropbox customer, their biggest pain points are like are still more basic where it's like I have 10 search boxes when I really want one or like, yes, I'm using AI, but when I use ChatGPT, it doesn't know anything about me or my company or my work. And so there's still a lot of low-hanging fruit and just providing these kind of more basic levels of value in addition to the more workflow-oriented and like workflow automation pieces on top. But this and a bit of a longer answer to sort of address the spirit of some of the prior questions, too, is that like we've really been building a new generation of infrastructure that builds on top of 10-plus years of infrastructure before that, which is really tuned for storage. But as a result, when you look at our price points for Dash or other things, we're able to provide a product that really no one else has been able to provide, where it's unlike some enterprise search competitors or similar folks in the space. If a typical Dropbox customer wants to adopt one of those things, they usually are facing a $50,000 setup fee. They have to provision their own custom cloud infrastructure to run it. It's like a 3-month pilot. There's a lot of friction. And so both the opportunity and the challenge we've had to date is like how do we box all that up and put it in a package that anyone can just download with an app and be up and running in a few minutes. And it's really exciting that we're really close to the finish line there. And this half is when we'll really start scaling that up. So really building a next generation of technical infrastructure, lots of manifestations at the application level from better FSS to Dash to security, but I think it's an important kind of framework for how to think about these investments. Operator: And our next question comes from the line of George Kurosawa from Citi. George Michael Kurosawa: I'm on for Steve Enders. It was good to see paid users return to sequential growth. I think you alluded to some improvements in retention. I'd just like to double-click on what do you feel like drove some of those improvements and how we should think about kind of sustainability and maybe further improvements you can make going into this year? Andrew Houston: Sure. Well, as I said in my prepared remarks, I mean, the first thing that has really driven these improvements in a more fundamental way is bringing in a new generation of skilled leadership and who have in turn really elevated each of their functions and leadership teams as well. And I think that what you saw in Q4 is a reflection of a lot of that work starting to pay dividends. So the improvements have been across the funnel. I think last year, you've seen us really continue to drive steady improvements in retention and just improvements across the funnel. The individual business has done well, and you've seen steady growth across 2025. And I think what you -- but the bigger picture of what you see there in addition to the specific gains of different funnel metrics is really that we -- with the right execution and the right leadership, we can demonstrably drive sustained improvements in retention and growth. And then turning to '26, a lot of our focus is on the Teams business, where we faced various downsell pressure over the last couple of years since we launched a price increase a few years ago. But there's a lot of improvements we've been making there, too. So everything from basic stuff like improving churn and downsell directly by redesign and cancellation flows and better communicating the value we're providing, sort of no regrets, things like that, improvements to conversion. So a lot of the pricing -- we're investing a lot in simplifying our plans and tuning pricing and packaging, improving our trial flow. And so we've seen that paired with improving conversion rates on the way in. On the onboarding experience of setting up a new team, reducing just a lot of, again, common sense stuff like just taking -- sanding down all the rough edges and reducing staffs and friction and getting your team up and running, that's been paying dividends. But as you'd imagine, one of the things we're most excited about is just building a better product experience and taking the FSS product, a new generation ahead with the integration of all these capabilities from Dash and being able to talk to your Dropbox and being able to automate a lot of the work that you're already doing there. So we see a lot of room to continue improving across the funnel and across the portfolio. And it's been good to see some of those proof points become stronger in Q4. George Michael Kurosawa: Great. That's helpful color. I also wanted to ask about ARR. The last few quarters, we've seen revenue show good signs of stabilization. It seems like ARR seems to be diverting a little bit weaker, a little bit of a divergence there. Can you just talk us through the mechanics of why we might be seeing that and how we should think about those -- the delta between those 2 metrics this year? Ross Tennenbaum: Yes. Sure, George. This is Ross. I'll take it. I think it's an astute observation. We had some Q4 positives around paying users and ARPU and revenue and ARR was a little bit lighter. I think that they should be moving in the same direction, but I would just let everybody realize that we're talking about like a slight divergence around a neutral middle line. So it's not very far off in either direction around 0. So I think ultimately, those things -- the ARR should move in the same direction. I think in any given quarter, there's some discrepancies. In particular, in Q4, your ARPU and your ARPU metric has FX positives embedded where ARR is on a constant currency basis. And there's also some timing-related differences that impacts those metrics definitely. So ultimately, we're optimistic about the business and return to a growth posture and would expect that those start to move together in the future. Operator: And our next question comes from the line of Matt Bullock from Bank of America. Matthew Bullock: I wanted to ask about the paying user growth assumptions embedded into the guide this year. it's encouraging to hear that we're targeting Teams license growth this year. But maybe help us think about what's embedded in terms of the full year paying user guidance, how we should expect that to evolve throughout the year across individuals and Teams plans and with the sunsetting of FormSwift as well, that would be helpful. Ross Tennenbaum: Yes. Thanks, Matt. I mean -- and just to reiterate for everyone, what we said is Q4, we are very pleased with the result of having positive net new paying users. And I think that, that's because it's the net number is driven by both the improvements we put into place around retention, which we hope will continue this year. And also, we're also targeting the whole customer journey and improvements for gross adds as well as upsell in addition to retention. So we're very pleased with the result in Q4. And as we look forward into 2026, I said earlier that we should expect some seasonality in Q1 such that net new paying users will decline in Q1. That's our expectation. And then for the full year, we expect it to be flat year-over-year in net new paying users, which I think compared to the last several quarters and years, is a positive result. And I think, again, that is a reflection of what Drew talked about, really, what I'm most excited about is like we've got a great team in Core, and they're rapidly iterating on some really cool initiatives that are intended to drive better retention and improvements across the customer journey to return the Core FSS business into a growth posture. And we're excited about Dash. And so I think that's reflected in the guidance around net new paying users. In terms of how it goes by quarter, I would just focus on -- we expect to be negative in Q1 and then make it up for the rest of the year to be flat for the year. I don't want to get too specific on each quarter thereafter. Matthew Bullock: Understood. And then one quick follow-up, if I could. I wanted to ask about potential M&A strategy. Which key areas would you potentially be evaluating opportunities to expand the product portfolio? Just trying to think through potential bolt-ons here going forward. Andrew Houston: Sure. I can start. So I mean M&A has been a really valuable tool in our kit for scaling the company since the beginning and ranging from bringing in talent to bringing in early-stage products like things like Nira that I mentioned earlier and scaling them up to bringing in established businesses like HelloSign or DocSend. So we've had success across all 3, and we have -- and we continue to be very active in looking for opportunity -- M&A opportunities. And I think Nira is a good recent example. There have been others on the talent front where we've been able to bring in some really great AI talent, folks like Mobius Labs who have really deep capabilities in multimodal understanding. So like processing -- they're using AI to process large quantities of images and video and audio. I imagine, is very relevant for us. And then looking ahead, it kind of dovetails with what I said before, we've got this really powerful -- we see the big bottleneck in AI generally as this gap between AI tooling and your company's context. We've been building that missing context layer for AI. We built a whole new generation of technical infrastructure to facilitate that. As the world starts turning towards more agentic capabilities or people having their own agents, then there's a lot of new opportunities for that context engine to help make those agents actually able to connect to your work context, like to connect to your Gmail and your Salesforce and your Dropbox and everything else, not just the local files and your computer, which is the current limitation for a lot of these things. And then security, like securing and building a secure perimeter around your company for rolling out AI safely and agent safely, particularly in areas around content. So across both the infrastructure and the application layer, there's a lot of interesting opportunities, and we'll have more to share as the year progresses. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Peter Stabler for any further remarks. Peter Stabler: Thanks, everyone, for joining us today. We look forward to speaking with you next quarter. Have a great afternoon. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good morning everybody. Welcome to Vector Limited Conference Call and Webcast to discuss the company's financial and operational results for the half year ended 31st December 2025. [Operator Instructions] I must advise you that this conference call is being recorded. I would now like to turn -- hand over to you Vector's Chair Douglas McKay who will take you through the call. Douglas McKay: [Foreign Language] Hello everyone, and welcome to this presentation. I'm Doug McKay, Vector's Chair. Today, we're going through Vector's results briefing for the half year ended 31 December 2025. Joining me on the call for the first time as our group Chief Executive is Chris Blenkiron. Pleased to have you here, Chris. And we have Chief Financial Officer, Jason Hollingworth. We'll start the presentation with comments from Chris on overall financial performance. Then Jason will look at the detail. Chris will then talk about the outlook for the next 6 months, and then I will come back to talk about the dividend. After that, we'll be happy to take your questions. And I'll now hand over to Chris to start the presentation. Chris Blenkiron: Thank you, Doug. Hello, everyone, and thank you for joining the call. It's great to be speaking with you for my first market update since joining Vector in December. I'll start off by setting the context for these results. The new regulatory period, known as DPP4, began on the 1st of April 2025. At this time, the Commerce Commission increased allowable revenue for all electricity distribution businesses in New Zealand. The changes support the investment that's needed for the country's energy transition. Also, keep in mind that the gray bars on the slides show the impact of businesses that have now been sold and continuing operations are shown in blue. This is to allow for easy year-on-year comparison. With that background in mind, I'll talk through some of the top line results. Vector's group financial performance for this half year has been strong and in line with our expectations. Revenue for Vector Group is up 14%, driven by higher electricity revenue. Higher revenue has flowed through to an increase in adjusted EBITDA to $240 million. This is up 19% over the same period in 2024. Adjusted EBITDA excludes capital contributions, which are paid by new customers for their connections to the network and is how we currently ensure that growth pays for growth rather than cost of growth being spread across all Auckland electricity consumers. Net profit after tax was $113 million, down 4% with the higher adjusted EBITDA offset by lower capital contributions. Gross capital expenditure was $223 million, down 15% on the prior period. However, we do expect capital expenditure to be higher in the second half of the year than it was in the first. In terms of regulatory quality measures, we include SAIDI minutes in our quarterly operating statistics, which were released last month. SAIDI is how electricity distribution businesses are measured by the Commerce Commission for the duration of power outages on their networks over a year. At this stage in the regulatory year, which finishes at the end of March, we are within the regulatory limit. Our focus is on making sure every dollar we spend produces the best value possible and keeping our charges, which are around 1/4 of the total power bill as affordable as we can. I'll now hand over to Jason to go over the detail behind these top line results. Jason Hollingworth: Thank you, Chris. This slide shows the segment contributions towards the adjusted EBITDA figure. Adjusted EBITDA from the Electricity segment was up $48 million, reflecting that HY '26 was under DPP4 and HY '25 was under DPP3. Earnings for Gas were flat on the prior period. Other includes VTS, Vector Fibre, Equalise, which offers cyber services to other lines companies and our group eliminations. It also includes a $9.3 million loss on sale from HRV effective on 1st of August '25. Next slide. Net profit after tax was down $5 million or 4%. This is down on the prior period with the higher adjusted EBITDA being offset by the factors shown on the slide, including lower capital contributions, fair value movements on financial instruments and tax. Gross capital expenditure has decreased from a comparable 2024 period to $223 million, and you can see here some of the detail. Net CapEx after deducting capital contributions was down at $126 million. Capital contributions were down at $97 million. The slide on group debt shows that our debt levels have remained flat with gearing at 37%. The next slide, we'll now look at the segment performance, starting with electricity. Adjusted EBITDA for electricity was higher, as previously mentioned. The higher impact from pass-through costs is the transmission charges we collect on behalf of Transpower. These have increased because of Transpower's own revenue reset that reprice transmission at the same time as distribution. We passed transmission costs on and recover them via our revenues. There are also higher OpEx costs in the period linked to increased maintenance activity and also higher digital costs. Total electricity connection numbers grew by 1.3%. Looking at gas. Adjusted EBITDA for gas distribution was flat at $24 million, with slightly higher revenue in the period, offset by slightly higher costs. Gas distribution volume was down 4.5% compared to the prior period due to lower demand from the residential, industrial and commercial sectors. There has been a 0.4% in total gas connections over the period. These results are consistent with our most recent forecast for the Gas network, which were published last year in our gas asset management plan. We have recently submitted on the Commerce Commission's DPP4 draft Gas decision. This is the 5-year reset for gas distribution networks with the commission's final decision due in May 2026. We welcome the commission's intention to continue to accelerate depreciation given the heightened uncertainty over the long-term nature of gas in New Zealand. And given the difficulty in accurately forecasting gas volumes for the next 5 years, which is fundamental -- which is a fundamental input into setting a price cap, our submission advocates for a move away from a price cap for approach that would share volume forecast risk between both the network owners and consumers. The Commerce Commission is still considering its final decision, so we don't yet know what this will mean for consumer prices. Pipeline costs are just one component of the gas bill; however, most forecasts show that over the long term, these will rise. That's why we're advocating for a managed transition and making sure we recover costs fairly now. This also means keeping the gas network safe and reliable while it's still in use and planning for decommissioning when these pipes reach the end of their life. Next slide looks at Bluecurrent. Our investment in Bluecurrent continues to perform in line with our expectations. Year-on-year, Bluecurrent has increased its revenue, resulting in higher EBITDA, and this is flowing through to higher distributions. In this period, we received $26.6 million of distributions in relation to our 50% shareholding. And I'll now hand back to Chris. Chris Blenkiron: Thanks, Jason. For the 2026 full year results, we are forecasting adjusted EBITDA to be within our guidance range of $470 million to $490 million. We are now forecasting gross capital expenditure within the range of $500 million to $540 million. This forecast represents an increase over our full year 2025 capital investment and at around $0.5 billion shows our commitment to significant investment in Auckland's critical energy infrastructure. We're forecasting capital contributions within the range of $180 million to $215 million for the full year. We've tightened the ranges for gross capital expenditure and capital contributions because we now have greater visibility of project time lines through to the end of the reporting period. Thank you to all of the Vector people, our field partners and suppliers who work incredibly hard for our customers and who delivered these results. We know that for our energy system to be at its best and most affordable, the whole sector needs to coordinate well and work in concert with each other. We're committed to doing this to support the region's role in our national economy and to help our country meet our energy aspirations. I'll now hand back to Doug. Douglas McKay: Thank you, Chris and Jason. The board has determined an interim dividend of $0.125 per share with no imputation. Now that brings us to the end of our presentation. But just before we move to questions, I'd like to thank Chris and his executive team and everyone else at Vector, plus our field service providers and call center for their hard work over the period to deliver for Vector customers and shareholders. Chris, Jason and I are now happy to take any questions. Operator: [Operator Instructions] Your first question comes from Grant Lowe with Jarden. Grant Lowe: Tim, can you hear me okay? Unknown Executive: We can. Grant, Yes. Grant Lowe: Thanks for the presentation. And welcome, Chris. Just around a few for me. The electricity business was a beat on my numbers at both revenue and EBITDA. So I think the revenue was up circa 28%, which is a touch higher than my uplift that I was expecting. Were there any sort of one-offs in that result in terms of inflation catch-up and the like that we've seen in the past? Jason Hollingworth: Yes, Grant, there is still a wash-up balance that we were able to recover in this period. So that is in there as well. That's coming to an end because it has a 2-year lag. Grant Lowe: Yes. Okay. And do you have that number to hand as to roughly how much that was? Jason Hollingworth: I don't have it to hand that I can look it up and get it to you, yes. Grant Lowe: Okay. Yes, great. Thank you. Okay. No, that's good. And then just the -- so the guidance has been held, and we've also got that $9.3 million loss in there. With guidance being held, was that guidance already factoring in the $9.3 million loss and the washup balance that going into that number when you set the guidance at the full year? Jason Hollingworth: I think, to be honest, probably not Grant. So I think we're at the probably higher end of that number. That loss turned up after we set that guidance. So yes. Grant Lowe: Yes. So the washup balance was probably $9 million, that's calculable. But -- so effectively, is this effectively a $9.3 million upgrade to the guidance range. Jason Hollingworth: I think it puts us at the top end of that guidance. We're now saying it would have been at the top end of the guidance. We've held the range. But I think if we haven't had the HRV situation, we would have probably been guiding to the top end of the range rather than sort of leaving the range as it is. Grant Lowe: Yes. Okay. I guess, that's useful. And then just around the dividend payout, it was a touch lower than I had in my forecast, I was forecasting 13% versus your 12.5%. I appreciate it's a free cash flow measure. But obviously, the -- if we just think about the EBITDA for a second, that's up quite materially. How did the Board go about -- think about setting the 1H dividend? And then what are the sort of swing factors around for the full year dividend, what we might expect to see there? Douglas McKay: Yes, it's a good question. To be honest, we didn't pay any attention to -- and we haven't with the interim in terms of its percentage relative to the 70% of the policy. And I understand from Jason this morning, it's lower than that. Jason Hollingworth: For the half result. Douglas McKay: For the half year results. Yes. We don't look at the half in that respect. It's the full year that we will pay consideration to the 70% minimum. So we don't have any reason to think we won't be well within the range at the year-end. Look, part of the decision-making was what was it last year in the interim and what should it be this year, given EBITDA is strong, as you say. And so we uplifted it by 0.5%, and we sort of thought, well, that's a good indication of how confident we feel about the way things are tracking. But if you looked at it strictly versus the policy, but we don't think about the half year in that respect, we could have gone a bit higher. But no, we haven't. Grant Lowe: Okay. So I guess -- I mean, my full year is $27 million versus the $25 million last year based on the free cash flow calculation. I guess what I'm hearing is that there was a touch low on the free cash flow side of things. If everything sort of plays out with respect to guidance and everything else, would it be reasonable to assume that there is a slightly stronger uplift in the second half if everything plays out according to plan? Douglas McKay: If everything plays out, yes, it will, Yes. I wouldn't necessarily agree with the $27 million, but you're at the top end of what I'm thinking of as Chairman anyway. I'm not speaking for the Board at the moment, but we'll see. Grant Lowe: Okay. Yes, indeed. And then last one for me. Just I think last year, you provided guidance on Bluecurrent distributions. Do you have any thoughts on that? I see we've got the half year figure of $26.6 million. Do you have a full year figure in mind? Jason Hollingworth: We do have a number. I don't have it to hand, but you can see the year-on-year sort of increase for Bluecurrent period-on-period. So I think that we expect that to continue into the second half. So I think last period, we got $23.4 million. This period, we're getting $26.6 million, so an uplift. So I expect that to continue as they continue to deploy meters. Operator: Your next question comes from Andrew Harvey-Green with Forsyth Barr. Andrew Harvey-Green: Doug, Chris and Jason. Just a couple of questions from me. First one, just looking at the electricity OpEx line, there was a reasonable increase, I guess, relative to first half last year, but even relative to the second half last year. Is that -- should we be thinking as that the sort of the normal half year run rate for OpEx on electricity going forward? Or are there some sort of one-offs in there that might pull it back for the second half and other periods? Jason Hollingworth: I think there are some one-offs in that, Andrew. I don't think it's actually coming down, but I don't think it's going to keep lifting at that rate. There has been, I guess, an increase in our maintenance spend in this half that's probably going to continue with some change in standards and just some extra activity that we've been doing. We also have a couple of large projects underway that are -- have to be under these new accounting rules now have to actually be expensed rather than capitalized. So our digital costs are sort of running at a higher rate, which I think is probably going to continue while these projects are occurring. So yes, it's mainly those 2 areas that are causing that increase, maintenance spend, which is going to continue and this lumpy digital spend around a couple of key projects that are cloud-based and therefore, have to be expensed. Andrew Harvey-Green: Just a follow-on question around the metering. I noticed, I think that it's been refinanced. So you've got -- expecting lower interest costs going forward. All other things being equal, we should expect that to help increase distributions back to Vector from the metering? Jason Hollingworth: They've refinanced at lower interest rates. Their NPAT number is lower because they've had to write off their arrangement fees from the original facility, but sort of that's noncash, if you like. So the actual underlying cash flow is better because they've got lower interest rates, I think, by circa 30 basis points from memory. So it's a reasonable reduction. Andrew Harvey-Green: Yes. Okay. Cool. And last question for me was just whether we've got a little bit of an update on the strategic review of the fiber business. Chris Blenkiron: Yes, Andrew. No real update, that process continues. And just a reminder that there's no guarantee that the outcome of that strategic review would result in a sale, but the process does continue. Operator: Your next question comes from Phil Campbell with UBS. Philip Campbell: Just a couple from me as well. I just noticed in the half year cash flow statement, it looked as though there was some kind of positive working capital movement. So that was one of the reasons why if you did do a dividend payout ratio calculation, it was a little bit lower. I'm assuming there's just timing issues around that, Jason, and that will probably reverse in the second half? Jason Hollingworth: Yes, that's right. There's nothing there that I'm aware of -- yes that's structural. I think it's timing, yes. Philip Campbell: And then just on the dividend coming back to this kind of $0.27, I think we've got that in our model as well, and we're assuming that the payout ratio declines from last year. I think from last year, from memory, it was 85%. So we've got that coming down. I just wanted to see if that was still the thinking. I think the rationale at the last result was just some uncertainty around what EA is doing in terms of those capital contributions. I just wanted to check if that was still the thinking from the Board? Douglas McKay: 0Yes, it will be lower than 85% this time around. Jason Hollingworth: I think last year,, don't lock that in because that was a sort of one-off to do with sort of transitioning from DPP3 to DPP4 and the fact we only had a quarter in our results. So I think we said, look, we're paying up at this level, but it's not a -- don't bake that into your future numbers. Philip Campbell: And maybe just a question on CapEx. Obviously, like it was a bit weaker in the first half. And obviously, you've tightened the range up in the full year, still a large number. What's the kind of reason for the CapEx number kind of coming down? Chris Blenkiron: Yes, Phil, there's a couple of reasons. I mean 1 is some customer projects were sort of pushed out. It's always difficult with these lumpy capital projects, as you know, to get the timing right. So a few of those have been pushed further out. And that's probably the primary reason. So we do have some confidence going in the second half that, that run rate will certainly pick up. Philip Campbell: Is that data centers or you can't really comment? Chris Blenkiron: We can't comment on the specific projects, but there's a number of them. Philip Campbell: And then maybe just last question for me on metering. I noticed that Neil Williams has left a CEO. I'm just wondering if there's any reason for that and whether you've recruited a new CEO for Bluecurrent? Chris Blenkiron: Not yet. We haven't recruited yet. The Bluecurrent Board is managing that process, and we have 2 representatives on that Board, looking after our interests, Dame Paula Rebstock and Simon MacKenzie. And they're in the process of working with the headhunter now to find the right replacement. Philip Campbell: Great. Awesome. And I just noticed you may not know the answer to this question, but I just noticed in the AFR, there was, obviously, one of the Bluecurrent competitors, I think, potentially a transaction happening there. Just wondering if there's any valuation read-through that you might want to comment on? Douglas McKay: Are you talking plus ES? Philip Campbell: Yes. Yes. Douglas McKay: Well, look, I can't quote the numbers, but I did remember thinking the expectations on value looked very, very high. But I didn't do an earnings multiple or anything. It just -- I think it was $3 billion or something. It was a massive number. So obviously, we're trying to be involved in that process. We are interested strategically in increasing our participation in that market, increasing our number of meters but we'll just have to see how that plays out. If people are at that sort of number, that's a very big number. Philip Campbell: Right. And then maybe just very last one, just on the fiber process. Is there any kind of timetable there? When you say we're no guarantee of sales. Is there any time when bids are due or where about are we in that process? Jason Hollingworth: There is a timetable, Phil. And yes, I think we'll know by year-end, whether we've got a transaction or not. And I guess we won't quite know when it completes. It will depend on what the terms and conditions are. But we'll certainly, I think, have landed a decision by 30 June, one way or the other. Operator: Your next question comes from Stephen Hudson with Macquarie Equities. Stephen Hudson: Morning, everybody, and welcome, Chris. All of my questions have actually been posed, but perhaps just a general one for you, Chris. I know it's early days, but I guess I just -- and I know we'll be meeting with you, I believe, the 1st of March as a community. But any sort of initial observations on the state of Vector in terms of assets, people and strategic direction and where you may, I suppose, differ from sort of the prior thinking, I guess? Chris Blenkiron: Yes, sure. I mean, Simon's left a very strong and good business operating here, Stephen. We've got some very strong people in the right roles, doing some really good work. In fact, I think some of the credit that we will get to keeping the lights on and the infrastructure going in Auckland is probably something that we should get. It's in a strong state. In terms of the strategic direction, I've not contemplated any change in strategic direction. The Symphony strategy remains as focused as it has. I think what we'll continue to do is an ongoing test against the external environment, whether that's the customer side, the regulatory settings, decarbonization pace, technical, we'll continue to test those settings. But my focus at the moment is absolutely on sort of disciplined execution on the work that we're doing as we go into the second half. But it's great to join a great business in really strong shape. Stephen Hudson: Very good. Thanks, Chris. And I look forward to catching up. Chris Blenkiron: Yes, Looking forward to it. Thanks Stephen. Operator: Your next question comes from the line of Grant Lowe with Jarden. Grant Lowe: Another one from me. Just around the meters rollout in Australia. Obviously, the regulatory bodies over there have -- I'm not sure exactly what the terminology is, but effectively mandated 100% penetration by 2030. Is there any sort of commentary you can give around Bluecurrent in terms of either contracts signed or thoughts around the level of participation in that rollout at this stage? Douglas McKay: I don't have any updates, Grant, other than we had a Board meeting here yesterday, and Paul was telling me that things are tracking as they had indicated they would be the Bluecurrent Board. So there's no surprises there. There's incremental increases in our metering network. We don't -- we haven't had any acquisitions of packages of meters or anything like that in this period. So it's all organic at this point in time, and it's steady. Grant Lowe: Yes. Okay. How do you -- just generally, like for the market as a whole, how do you see that rollout playing out? Like obviously, there was a big contract signed here for the rollout in New Zealand. Is it a similar sort of a process? Is that what you're expecting over the next well and you're sort of actively participating in those discussions? Douglas McKay: Those contracts tend to be quite long term. So once you settle into them, you've got a good tenure there mostly. You're not sort of every year or 2 into another process on those same contracts. They require a lot of capital investment. They require a lot of systems and process changes and interactions. So it doesn't move around a lot. Once you land them, it's a reasonably settled market. Grant Lowe: Yes. I guess the question I'm sort of asking is, I think rough guess there were sort of 5 million meters to go or something, you might tell me that's wrong. But are we -- do you expect to see sort of like 1 million meters contract or a rollout of 1 million meters signed in big chunks like that? Is that kind of how you expect this to play out? Jason Hollingworth: The retailers typically bundle them up into reasonably large blocks, Grant, and then sort of tender them out. And we have contracts in place with the existing retailers, and there are still some contracts being let, but we have a number already under contract. It's competitive though, as you imagine, [ Telehub, Plus ES ] are the other 2 big players. And these retailers are sort of good at getting the sharp price out of the market. And yes, so that's it. So we've got a number of already under contract that we're executing on. New Zealand is deployed, so there's not so much going on here. It's really an Australian growth sort of situation. And once you've won those contracts, you still have to execute on them, right? So there's always a risk that if you don't deliver because there's a lot of competition for field service people to install all these meters. So it's not -- one thing to win the contract, you actually got to execute on it. And we're very sort of mindful of that because the opportunity potentially to pick up some extra work if you're the party that's executing well. And we're seeing a bit of that going on at the moment as well over there where some others potentially aren't quite performing. Douglas McKay: And these contract package sizes are often in the order of 200,000 to 300,000 meters. Grant Lowe: Yes. That is useful. Operator: There are no further questions. I would now like to hand it over back to Doug for closing remarks. Douglas McKay: Okay. Thank you. If there aren't any further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, please feel free to contact Jason. For the media, please contact Matt Britton or call our usual media phone number. Thank you, everyone, for joining us.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler Group Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Elena Mariani, Group Strategic Planning and Investor Relations Director. Please go ahead, madam. Elena Mariani: Good evening, everyone, and thank you for joining our call today on Moncler's Full Year 2025 Financial Results. Let me introduce you to the speakers of today's call, Mr. Remo Ruffini, Moncler Group's Chairman and CEO; Luciano Santel, Chief Corporate and Supply Officer; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Chief Brand Officer; and Robert Triefus, Stone Island's CEO. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. I also remind you that the press has been invited to participate to this conference in a listen only mode. Finally, I kindly ask you during the Q&A session to speak to a maximum of 2 questions per person to give all participants the opportunity to ask questions. Let me now hand it over to our Chairman and CEO, Mr. Remo Ruffini. Mr. Ruffini, over to you. Remo Ruffini: Good evening, everyone. In 2025, even in a difficult environment, our group delivered a solid performance, EUR 3.13 billion of revenues, a strong acceleration in Q4 at both brands with Moncler DTC up 7%, Stone Island DTC up 16%, an EBIT margin of 29.2%. Net cash, EUR 1.5 billion, and our sustainability effort valued by key ranking globally. Strong results that demonstrate the quality of our operating execution and the resilience of our business model. But as usual, as always, what I'm mostly proud of is how we reached this result, investing in creativity, preserving our identity and moving forward with clarity in our long-term strategic direction. At Moncler, we are working to make the brand stronger across all seasons and all geographies, focusing on where we have room to improve our brand awareness. We also continue to build unique brand experiences and moments. After the strong success of Warmer Together, which become way more than a simple campaign, we opened 2026 with an emotional Grenoble event in Aspen. And we are back to Winter Olympics by sponsored the team Brazil and its athlete, as Lucas Pinheiro Braathen, in a relevant, unique and meaningful way. This moment are only the beginning of a year of full initiative. As Stone Island, we keep moving with focus and discipline. We are working hard to reinforce the brand in the areas that matter most, improving our collections, elevating the customer experience and making operation more solid and relevant, growing with intention rather than just scale. As we grow, we decide to make our organization even stronger. The arrival of Leo Rongone as the Group CEO in April is a natural next step in our evolution, which will bring new energy to our already solid structure. Something my leadership team and I have been considering for a while. But let me be clear, I'm not stepping down. And I'm stepping back. I will be Executive Chairman, continue to lead our creative direction and set the strategic direction of the group. I will be fully involved every day with the same passion and the same commitment. Let me close with something that feels very important to me. We grow only when we stay true to who we are, to our curiosity, to our uniqueness and to our courage to evolve because I believe that only companies that understand when and how to embrace change are able to succeed. Thank you. I leave the floor to Gino. Gino Fisanotti: Okay. Hello to everyone. Good afternoon. I hope everyone is having a good day. I just want to take the opportunity on the back of the message of Mr. Ruffini to share how happy we are with the strength of the Moncler brand right now. I think we are not just happy because of the good and the great results we've seen and the opportunities we have, but equally excited and happy about the opportunities and the potential of this brand towards the future. I think 2025 was not only a special year, was a year where we've seen our biggest year yet in terms of -- not only in terms of brand awareness and reach, but especially in terms of the brand engagement we have seen all around the globe, proving again that we are just way more than just big events and sometimes the seasonality or just a specific product. If we go to the next page, when we talk about Warmer Together, I think this was -- I want to start here. This was a quarter of records. A lot of records have been broken and we are happy to share some of them. I think the first one is Warmer Together, Mr. Ruffini just mentioned that it was more than just a campaign. In that sense, became the biggest campaign in the history of Moncler. This campaign wasn't just about product or wasn't just about celebrities, was about sharing the values about who we are and where we stand for. And I think nobody better than representing that than Al?Pacino and De?Niro, who are, for the very first time doing something together as a marketing campaign. I just want to say that this is the first time we even have issues to count the amount of coverage we're having and the amount of reactions we're having around the globe for this campaign, including markets like in Asia, like in China, where not necessarily the 2 celebrities were as known as the rest of the globe. Again, last but not least, on this campaign and the incredible results we were able to get, I think, as Mr. Ruffini said when we started this campaign, Moncler never been just about buffers and winter. We've always been about want and love since the very beginning. If we go to the next page, we will talk about Grenoble. And again, in December, we were able to launch the campaign on the back of the collection we presented at the beginning of 2025 in Courchevel with a pretty spectacular event. And again, another record breaking. This has been our biggest campaign in terms of Grenoble ever and especially since that we said that we started 3 years ago. This was a special campaign that was featuring our incredible Lucas Pinheiro Braathen, Vincent Cassel, model Amber Valletta, and of course, the most awarded snowboarder Chloe Kim. So again, incredible results there. And then on the back of that, I think we just mentioned, I think, was an opportunity for us to go back and celebrate our roots. We were not back into the Winter Olympics season since 1968. And in December, we announced the partnership with the Brazilian Federation, something that I'm sure we will cover in the next call, but I'm sure you've seen already regarding the opening ceremony and the incredible trajectory of Lucas during this Winter Olympics just a few days ago. So again, another great season not only for the brand, but specifically for this very important dimension of the brand, Moncler Grenoble. Last but not least, as we always talk about our 3 brand dimensions, Moncler Collection covered by Warmer Together, Moncler Grenoble with this campaign and the work done around the announcement for the Olympics. We have Moncler Genius, 3 very important drops during Q4 for us. The first one was an anticipated drop of Moncler Genius and Jil Sander. The second one was the reissue of a product that came a few years ago with JW Anderson, a very small capsule collection that we reissued with drop and was immediately sold out. And then last but not least, our partnership with ASAP Rocky, something that went way beyond the product collection we launched it. We were part of the partnership of his anticipated new music track after multiple years. And at the same time, we launched a very special Maya 70 jacket in December just for few destinations around the globe in DTC, and we were happy to see that product perform extremely well despite the limited units and the high price on that. So with that, I want to pass to Robert to share some of the great news from the Stone Island side as well. Robert Triefus: Thank you, Gino. Good day to everyone. I'm pleased to give you some highlights for this quarter. It's been a quarter, as Mr. Ruffini said, that we can be pleased about. It is a quarter that demonstrates the commitment we're making to focus on the values of Stone Island, the principles of Stone Island. And the campaign on the left featuring [indiscernible] is a continuation of a campaign that we've been investing in now globally for 2 years. It's a campaign that brings members of the Stone Island community to life to underline our commitment to product, the lab, the commitment to research, innovation and materiality, but also the life of our community. And this campaign, I think now, as I say, in its second year, is showing the consistency and the coherence of our brand positioning strategy. In the second column, you see Dave, a musician from the United Kingdom, who has also appeared in our lab and life campaign. We celebrated an album that he released. Dave reaches a very active part of our community. We call them the explorers, those customers who are accessing the brand for the first time, and he is a great representation. In the third column, you see a collaboration with Porter, the Japanese brand well known for accessories. We have a long-standing relationship with Porter. Accessories is not a large category for Stone Island, but it is a category of future potential. And both Porter and Stone Island stand for a commitment to research in our respective categories. And last but not least, Stone Island has a long association with soccer. Of course, this year with the World Cup, soccer will come under a particular spotlight. And in the fourth quarter, we continued our important strategic collaboration with New Balance, celebrating the sport of soccer. Thank you. Roberto Eggs: Thank you, Robert. Roberto speaking. Happy to share the positive results of both Moncler and Stone Island for Q4. As anticipated by Mr. Ruffini, we closed the quarter very positively for our business in Moncler with a plus 6%. The growth was on both channels regarding the Americas, both for wholesale and our D2C business. In Europe, the result of the third quarter was slightly negative, but locals were positive. So we were impacted by negative trend on tourism, especially with American, Korean and Japanese. Regarding Asia, all the regions grew positively during the last quarter of the year with a total result at plus 11%. I will be able to illustrate more in details in case you will be interested later on. If you move to the next chart with the results per channel, we were -- we have positive results or reverting trend on the wholesale. This was mainly due with this plus 2% on reorders for the fall/winter, strong reorders. So we're happy about the end of the year results. And regarding the D2C business, it was a strong growth at plus 7%, especially thinking that, as you know, Q4 has always been a strong role for Moncler. So we had a base of comparison over the past 3 years that was very strong. So the plus 7% is even more meaningful in that sense. If we move to Stone Island, there are also positive double-digit results in all the regions, Q4 at plus 16%. We had the Americas growing at plus 26%, also growing on both channels. The results on Europe were strong with a plus 12%. Both channels were positive. And similarly, also, we grew plus 22% with Asia. So strong performance also in all the regions in Asia. Regarding the results by channel, we had a plus 17% on wholesale. This was also due to the fact that there were some shipments that were due to be sent in Q3 that were postponed into Q4. So this was why we had a negative result in Q3, but we recovered in Q4 with this plus 17%. And you see the positive results with a strong retail KPIs that we had with this plus 16% for Q4 in our D2C channels. Regarding the opening, as you know, we tried with Moncler to open most of our stores with the start of the fall/winter season. So usually during Q3, we still had one opening in Korea in Galleria, Gwanggyo. We had for Stone Island, 3 openings. One was a conversion in Paris with [indiscernible] and we have 2 openings in the U.S. with Costa Mesa and Yorkdale. If we want to go quickly and swap through the picture, you see the opening of Gwanggyo that we illustrated here in Seoul. We put also a picture of our most important store on the Hainan Island that was where we doubled the surface at the end of the year. The opening took place in December and with very positive results for the year-end and for the Chinese New Year. And you see also one of the latest openings that we have had with Stone Island with South Coast Plaza with our OMA concept that we are now deploying in all the network. Pass the word to Luciano. Luciano Santel: Thank you, Roberto. Hello, everybody, and thank you again for attending our call today. We are now at Page 23, where we report our profit and loss for the fiscal year 2025 with an operating profitability of 29.2%, slightly, slightly, behind last year, but substantially in line with last year when we reported 29.5% with selling expenses slightly higher than last year due to the negative minus 1% comp as Roberto mentioned before, with a good control of G&A and with the usual 7% in marketing expenses as last year. So quite a good EBIT margin. Let me make one comment below EBIT on financial expenses that show an increase from EUR 6.5 million to EUR 26.2 million due to higher interest expenses on lease liabilities by the IFRS and the lower level of interest income this year as compared with last year. Let's move now to Page 24, where we report CapEx. CapEx totally in line with our plan with what we anticipated to the market in July of last year, 6.9% higher than the 6% we reported the year before due to a couple of important projects. One is about the new corporate headquarter and the other one on the distribution network, the big, very important new project in New York Fifth Avenue store. For the 2026, just to let you know, we expect to go back to a 6% incidence of CapEx on revenue. Page 25, net working capital, 9.7% against the 8.2% we reported last year, higher due to a higher level of inventory. But let me say, a healthy inventory, a result of a strategic decision we made about 7, 8 months ago to invest in one of our most important strategic raw material, which is down due to the volatility we faced last year in that sector. And so in order to be safe, we decided to buy more down than what we normally do. So everything still totally under control as well as credit and of course, payable. Page 26 now net financial position, close to EUR 1.5 billion against the EUR 1.3 billion we reported last year after a distribution of dividends last year for about EUR 350 million. Important to remind you as we report in the notes on this page, we expect actually the Board will propose to the shareholder meeting a distribution of EUR 1.4 per share in May of this year on the earnings of fiscal year 2025 with a payout ratio of over 60%. Page 27 balance sheet, nothing important to comment. Page 28, cash flow statement that reports a free cash flow of EUR 529 million behind the EUR 587 million last year. But of course, there is an FX translation impact of about EUR 20 million. And on the top of that, important to reiterate the higher change in net working capital due to the inventory level I mentioned before and higher -- significantly higher CapEx than last year with a total financial position again of EUR 1.5 billion and the cash generation of about EUR 150 million. Page 29, we report, as usual, our strong commitment on sustainability. And let me say, the strong results we have achieved this year. Okay. We are done with the presentation and ready now for your questions. Thank you. Elena Mariani: Thank you, Luciano. We will hold for a few seconds to gather questions from the audience. [Operator Instructions]. Operator over to you. Operator: [Operator Instructions] So the first question is from Melania Grippo, BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got two questions. The first one is on the current trends. If you could comment on what are you seeing year-to-date in retail compared to what you delivered in Q4? And my second question is on product diversification. I would like to understand if you're happy on how this is proceeding. And if you could please give any granularity on some of the categories, for example, shoes, knitwear and also on spring/summer. Roberto Eggs: Melania, thank you for your question. Happy to answer it. I will give some highlights on Q4 first before answering to the question regarding the current trading. We had, as it was presented, a strong Q4 with an acceleration towards the very end of December. We had a good month of October, November, a month of December that started a little bit more flattish, but then an acceleration from mid of December that we have continued to see in January and also in February. To be more specific on the different regions, they are all going positively with a strong performance on our Asian countries, but also on the U.S. for both channels, both retail and wholesale. I must say that Korea, especially had a very good rebound after Q3 that was a little bit less good, and we continue to see this growing trend, also thanks to the return of the Chinese on the Korean market. Chinese that have been missing a little bit on the Japanese market, but we have seen them back both in APAC and in China, and they are consuming both in China Mainland and outside in other region in Asia. So very happy about the start of the year with an acceleration that we have seen in these last few weeks. Gino Fisanotti: Melania, Gino here. Thank you for the second question. So a few things here. I think we already discussed this probably for the last 12 months. I think -- regarding product classification, I think there's a few things just to highlight. The first one is, of course, beyond outerwear, something I will come back later, we have been doing specific efforts regarding everything that is knitwear and cut and sound, something that we are really happy to see the progression of this business, especially on the knitwear side, we're seeing a really strong consumer reaction for the past 12 to 18 months. And then, of course, we're seeing good positive as well results regarding the efforts that we're starting to put around footwear, specifically in the last quarter with the new launch of the new Altive Mid boot as well as some of the work that we are doing on soft accessories. I think as we always mentioned, of course, we -- I think the other aspect that is important to keep in mind is when we talk about outerwear, we're talking about the evolution of a business that now has a strong impact, especially in everything that is more about lightweight and something that we call seasonless. It's more like lightweight solutions and lighter versions of our product as well, which is performing very well as well. So I will say we will continue on the diversification of the weight of outerwear as have been growing over the past 2, 3 years, and we will see that continue as we go into the next seasons. Regarding spring/summer, I think if you ask us, we are happy with the results of Spring/Summer '25 despite all the, I would say, the macro environment of the industry as a whole. That said, I think what you will see as we discuss is spring/summer specifically more on the back of spring and summer per se. We always said over the past probably 2 years that we were working relently in terms of improving the product offering before we were moving to do any type of a specific even bolder communication. The only thing I will just probably slightly anticipate before we discuss not to share much is that you will see an evolution in terms of the efforts that we'll be putting specifically from 2026 onwards. We are very proud of the effort that the team have been doing over the past 2 years, especially from design and product development, and we believe that we are ready to go to the next level when we talk about spring/summer. So more to come in the next probably few months, but this is an important aspect as well that we wanted to highlight to your question. Roberto Eggs: Melania, just maybe one last point on my side regarding the current trend and the current trading. I've commented on Moncler, but just to confirm that we are seeing a continuous momentum as the one we have seen on Stone Island in Q4, also at the start of Q1. Operator: The next question is from Ed Aubin, Morgan Stanley. Edouard Aubin: Okay. So I will stick to two questions from [indiscernible]. But before I do so, ask my question, if you can allow me to wish good luck to Roberto in his new adventures. So Roberto, it was very enjoyable to hear and you share your views on Moncler. So you're living on a high. Congratulations, and I'm sure we are going to hear from you soon. So moving on to the questions. I guess the first one is for Gino, and apology because it's a bit of a big picture question, so it might be difficult to answer in a short time frame. But Gino, what makes you confident that the brand desirability will continue to increase? I guess it's multidimensional in terms of advertising campaign events, shows, collaboration and retail excellence and all of that. So I know you don't have much time, but if you could comment on that, I'd be curious to have your views. So that would be question number one. And then question number two on to Luciano, I guess, is on the margin sensitivity. So I guess Moncler retail was up 4% for the full year at constant FX, and you had a 30 basis point kind of EBIT margin dilution. Is that a good rule of thumb to keep in mind for the future? And then what would make you translate to kind of a neutral margin trajectory going forward? And just related to that the Luciano, if you could update us on the FX impact you have in mind, assuming, obviously, FX would not change up until the end of the year for 2026. Gino Fisanotti: Ed, thank you so much for the question. I think, again, as you mentioned, probably, it's a longer answer that we can potentially, hopefully, we see each other and take it. But I think there's a lot of aspects for us to think why we believe that we have almost -- we always say this about this idea that this is a brand that has unlimited potential with always as every company specific resources. So we are always trying to be very focused on the few things we really want to be really good at as next steps. If we think about this, I think the things that make us super confident is not only seeing the results we're getting -- we are sharing with you today and more importantly, the reaction from customers around the brand is, first of all, is we have opportunities when we think about Grenoble. I think we strongly believe that there is a big opportunity for the brand to go further and deeper on that. We believe that there is -- as we always discuss and I just mentioned the answer before, an incredible opportunity for us awaiting us to become a more all year-round brand with spring/summer. We believe, as you know, and you start seeing the efforts in '25, and Luciano mentioned some of the investments we're doing in the U.S., specifically as we go into this mid-to long-term approach into this market. And that make us believe on all this. On the back of that, again, I think the opportunity regarding product is real, right? I think when we talk about there's 2 aspects on product that is working in a way for us, which is in one way, we keep elevating the proposition we have in terms of product offering, while we are protecting the core as well. And I think these two things make us relevant at the very mid-high-end part of the luxury industry while we are able to connect with the aspirational customer as well. So again, and this allow us what I believe is the other big part for us is we still have a lot of opportunity for acquisition, for customer acquisition that they are at the very end, the ones who allow us to keep investing and keep growing as a brand. So of course, we can elaborate a way more, but hopefully give you 5 to 6 answers to that question. And some of those, especially the ones I mentioned around renewables, Spring/Summer, the U.S. and the opportunity to keep better on Park and the way we connect emotionally with customers are the things that we are obsessing every single day as we keep moving forward and allowing us to showcase today the results that we're showcasing with you. Luciano Santel: Ed, thank you for your question. About the margins, in 2025, we reported, let me say, better than what our rule of thumb, as you said, would expect of 29.2%. This was because Q4 after Q2 and Q3 that was -- were both quite disappointing. Q4 was very good for both brands, as Roberto said. And also because in the mid of last year, when the business trend was not particularly strong, as you may remember, we decided, of course, we needed to react to that business trend, implementing some cost saving initiatives that allowed us to control and to report quite good G&A and also selling expenses without touching, of course, marketing that is, let me say, the blood for our brand and for our business. Talking about FX for this year, for 2026 based on what we know today that may be different from what may happen tomorrow based on the current FX, we expect a 4% impact on the top line, a decline of the top line due to FX. Talking about the margins, of course, we try to do whatever we can to protect our margins, reacting to the FX trend, negative trend right now with a pricing policy that is expected to offset the FX trend. So for margin-wise, the impact of FX on margin is expected to be, let me say, negligible. And this is what I can tell you right now. Of course, there are many other impacts, but your question was about FX. Elena Mariani: And Ed, let me allow you to add one small thing. When he talks about the impact of FX on top line, he said 4 percentage points for the full year. Keep in mind that for the first quarter, it will be bigger than that. It will be around 6 percentage points of impact on the top line. So it will be bigger in the first half of the year and a little bit less starting from Q2. Operator: The next question is from Erwan Rambourg, HSBC. Erwan Rambourg: I hope you can hear me. Congratulations on a very impressive 2025. And yes, specifically for Roberto, congrats on a great track record over the past 11 years and all the best for what's next. So the two questions. First of all, on China, I think you're one of the first companies to report during this Chinese New Year. So I was wondering if you had any initial faith on this Chinese New Year and possibly if you can share the split of sales to Chinese citizens onshore versus offshore and how you see this evolve this year and in the future? And then secondly, just wondering if you could give us a few metrics. I'm thinking about the average selling space, sales per square meter, UPT, anything worth looking at in terms of '25 versus '24? Roberto Eggs: Erwan, thank you for your comments. It was a pleasure working with you over the past 11 years. Regarding your question on China and Chinese New Year, I think we are still in the middle of the Chinese New Year. So we'd rather prefer to comment on the general trend with Chinese inside and outside China. And what I can comment is that we have been growing double digit, both inside and outside China. Maybe, you usually don't report data on -- and I see our team getting a little bit nervous now. But on the like-for-like, we usually don't comment per quarter, but I wanted to restate that Q4 was positive for us. So we start seeing again like-for-like growth towards the end of the year, and this is confirmed for the time being for the start of Q1. So Chinese positive inside and outside double digit. The rate of -- the share of consumption of Chinese inside and outside China is roughly the same that what we have seen in the second half of 2025. So a 70% internal consumption and 30% outside of China. I think that this trend, it could vary. It could become 1/3, 2/3, but we are not going to get back, as you can imagine to the 50-50 that we had pre-COVID because for a very simple reason, there is a repatriation of consumption in China. And on top of that, a lot of brands, Moncler included and Stone Island included, have been doing dramatic efforts to increase the footprint on the China market, even if we see still potential to have better-looking location, larger stores, and we are working already for this year on some relocation and expansion on the market. But there is this willingness also of the Chinese government to repatriate part of the consumption. So we have been working on both. We take advantage of the Chinese traveling. Japan is probably the country that has been suffering the most, but this is more linked to political tension than anything else. We have seen Hainan performing well. We have seen Korea performing extremely well. Hong Kong has been performing well also. And we have seen positive results in Europe, even if we are not at all at the same level of Chinese consumption in Europe compared to the pre-COVID. So this is something that has been confirmed. Regarding the metrics and also what we have in the plan for 2026, we have a similar number of openings than back in 2025. So you can expect similar impact this what we usually say mid-single-digit impact in terms of additional square meters that are going to drive additional sales on the market. And the other metrics on, let's say, retail excellence, they have been positive. So we have seen some traffic back in the stores, good conversion. UPT is not the name of the game usually towards the end of the year because we tend to push more on the high price value item, especially with Grenoble and UPT is more the battle that we are having in Q2 and Q3, especially for men, but the metrics have been good at the start of the year. Operator: The next question is from Chung Huang, UBS. Chris Huang: Congratulations on the results. The first one, maybe just a clarification on the cluster. So I think, Roberto, you commented that European locals in the quarter were positive. I'm just wondering if you can give a little bit more color in terms of is it more low single digit, mid-single digit and also other nationalities. I think you said that American tourism is a bit softer in Europe. But if we take the whole American cluster, how is the performance in Q4? And on Chinese, I think last quarter, you already had a very positive trend with the Chinese consumer. So just looking at the quarterly trends in Asia, it does seem like Chinese is growing around mid-teens, if you can confirm my calculation. Secondly, on the moving parts of 2026, I mean, if you can give us an update on the pricing plan for both brands. I think space already commented, but also if you can provide a refreshed wholesale guidance. I know there's some timing impact for Stone Island, for example, but just wanted to hear your latest thoughts on those metrics. Roberto Eggs: Okay. Let me clarify on Europe, and thank you for your question, Chris. Regarding the European nationalities, they have been flattish. We have had a positive impact of Chinese tourism, but on the low single-digit part for Europe. And we have been negatively impacted in Europe by Americans that were down, by Korean that were down and Japanese that were down. So this is for the global context, then we have seen also positive growth with -- even if it's not as important as from some other brands, but we have the Middle East that has been growing. So our client in Middle East and our business is developing well there and also when they are traveling to Europe. Regarding the other nationalities, you were asking regarding the Americans, they have been in the high single-digit positive cluster overall, but their performance has been mainly a local performance. So the result that we have seen in, let's say, in Q4, they are confirmed also at the start of the year, so positive performance locally, less when they are traveling outside. And regarding the other nationalities, we have seen at the end of the year, Korean going back to positive single-digit result after a negative Q3. So this was something that was very positive for us. And Japanese locally have been positive also. So the performance that we see on Japan is mostly driven by the good performance of the locals to a lesser extent on the Chinese because we have seen a decrease in the Chinese. What we have seen is, if I may say, the Chinese that are coming to Japan are there. They're spending more than before, but they are much less than before. So you have seen probably the trends that have been published also by duty-free data that are showing a minus 40% on flights, but we see an impact on the business that is much lower than that because the ones that are coming are really wanting to spend. So it has been, in a way, counterbalanced. Maybe something on the wholesale, you were asking on some of the trends that we are seeing for the wholesale. I think most of the cleaning for both brands have been done in the past couple of years. So we see a business for Moncler that is going to stay flattish for 2026. And we see an improvement on the results for the wholesale with Stone Island. I'm not saying positive, but clearly an improvement compared to what we have had in 2025. Chris Huang: Sorry, I just wanted to come back to the Chinese comment in Q4, if that's possible. Roberto Eggs: No, the performance on the Chinese, as I mentioned, was positive double digits, both in China and outside of China. So this is, generally speaking, the way we have seen the results. The cluster has been growing double digit, both in and outside China. Luciano Santel: Chris, about your last question on pricing for 2026, we expect a price increase for both brands in the region of low single digit, let me say, 3% more or less for both brands, Moncler and Stone Island. Operator: The next question is from Daria Nasledysheva from Bank of America. Daria Nasledysheva: Congratulations on very strong results. This is Daria from Bank of America. I have two. Can I please ask about your thinking on the cost base into next year? You exhibited very careful cost control in the second half, as you already elaborated on. But how are you thinking about your marketing spend next year as a percentage of sales? And if you can share with us the pipeline of activations for the coming year, that would be very helpful. And the second one is on Stone Island. Really a nice progressive improvement has continued that started realistically in Q3. How are you thinking about growth opportunities from here, given it feels like efforts on product and communication are really having an impact? What is the focus for you at the brand now? Luciano Santel: Okay. Daria, let me start and then I will let Gino to elaborate better. The answer about overall our cost base. Of course, we try and we tend as much as we can to be more and more efficient year after year. And this has allowed us, and I hope we will allow us to be flexible, reactive and to develop a lean organization, of course, with the head of the technology, automation, artificial intelligence and whatever. Talking about marketing, of course, our effort on marketing budget is totally unchanged. You saw that in 2025, we spent exactly what we have spent in the past and what is, let me say, our golden rule, that is 7%. And so for this year, for sure, we don't expect to spend less, no more, but not less than the 7%. And which -- I'll let Gino to elaborate better how we will spend this money. Gino Fisanotti: A little bit -- no less from Luciano. Daria, thank you for the question. Again, I think if we follow history of the past, 3,4 years, I think we have been evolving very much the way we're approaching. I would say our marketing team and our brand organization in terms of not only depending on big moments once or twice a year, but being the continued orchestration of a calendar that allow us to have real impact on both the brand and the business, right? And I think within that, of course, we are the ones who became extremely famous, not only for the creativity we bring to the market, but even for these big experiences or events, as you call them. I think 2025 for us was a very important year to prove ourselves that we are not only dependent on that, but sometimes like think about this. I just mentioned the incredible results we got this year in terms of reach engagement, et cetera. And we were coming from comping a year where we were doing 2 big events that we did in San Moisè and in China with Genius. Therefore, I think the campaign we did with Warmer Together was as big or more impactful than some of those moments. So in a nutshell without giving much of the details because I can't right now, I think, trust us that we will keep evolving the way we work, that we are focusing on incredible orchestration that allow us to, not only have big moments, but have the in-between moments powerful as well to make sure that we keep building this brand. And I think now I can say that we are a lead testament that we are able to do that and to push things forward as we did in the past few years and especially in 2025 as well. Robert Triefus: Daria, this is Robert Triefus. Thank you for the question. As you correctly highlighted, the momentum that we're beginning to see for Stone Island first emerged in Q3 has obviously picked up more steam in Q4. But this is really the result of a long-term strategy. A couple of years ago this month, I presented the key pillars of the Stone Island strategy, which are focused on product, the architecture of our collection to make sure not only that Stone Island is recognized for what it has always been recognized for product innovation, material research, particularly in the categories of outerwear and knitwear, and I'm very happy to say that, that is being recognized by our customers as we see in our retail KPIs. In addition, we want to make sure that, that product architecture is reaching a broad community. Stone Island has always been known for a broad community, both in terms of generations, but also geographies. So again, I'm very happy to see that we're seeing dynamism across customer segments and across geographies which showed that Stone Island continues to have this broad appeal. In terms of the second pillar, which is distribution, we said that we would focus on DTC, not in terms of a dramatic expansion of our footprint, but instead a focus on the organic growth of the existing footprint. I'm happy to say that the results are beginning to be seen. That focus has been manifested in relocations of key stores in what we consider to be our lighthouse cities, for example, in New York, in Paris, but also in improving the way that we've seen in wholesale. We've done this through the selective distribution approach that Roberto referred to that obviously Moncler has followed. And in terms of that selective distribution approach, I'm happy to say that we have developed very strong partnerships with key wholesale partners. Of course, it goes without saying that wholesale has played a very important part in the history of Stone Island, particularly in European markets, but it is through those partnerships that we're now able to show up also with the OMA store concept that we're rolling out in our own stores, but also strategically in partner stores. You made a reference to marketing having an impact. I'm a great believer in building brands over time. Rome wasn't built in a day and great brands weren't built in a day either. What we're beginning to see are the fruits of all the efforts that have been made in terms of building greater awareness of Stone Island, but awareness that is also built on deepening the engagement with our customers. That comes from an implementation of retail excellence where our client advisers are doing a better job, a storytelling around the brand. And again, that is being seen to have impact across regions. And of course, the metrics you might ask, how do we measure the impact of our marketing activities. We are seeing greater traction in terms of search. We're seeing greater traction in terms of engagement on social media. We have just been recognized in the last 2 quarters within the Lyst Index, which I think underlines how that traction is building momentum. Of course, we are very pragmatic. These are the early signs of brand momentum, business momentum, gaining traction, and we are very committed to carry that forward into 2026 and beyond. Operator: The next question is from Luca Solca, Bernstein. Luca Solca: One question about your strategic vision on retail. If we look back, we see that the retail development of Moncler and now Moncler and Stone Island, has changed quite significantly in the early days. You had relatively small stores. The size of the average store has continued to go up, you will probably reach a peak with your new store in New York. I wonder -- and at the same time, the retail network has been continuing to expand. I wonder how productivity has been playing out on a per square meter sense? And how do you see the future of this retail growth driver? If you feel that from a number of stores you point, you're more or less where you should be and if the average size can continue to go up productively. A similar question, which is on dynamics of how you see volume, price and mix going forward, we've seen quite a significant improvement in mix and like-for-like pricing, we've seen the wonders of Grenoble. But I wonder, going forward, if you feel that there's going to be a continuing push on mix and price? Or if you believe instead, that there's a need and focus to recapture some of the volume and grow through volume as well as the other 2 elements and how you see the interplay of these 3? Roberto Eggs: Luca, thank you for the first question on the strategic vision on the retail side. I think Robert just clearly mentioned the current focus on Stone Island that is very much on improving the productivity and fixing the model. And we have seen that this has been starting to really play positively on our results. Regarding Moncler, we are clearly compared to Stone Island in a phase that is a different one. When we see our project, the one we are managing, we have something that is very much balanced today between relocation, expansion and new openings. We have, this year, a focus on the U.S. We start this focus on U.S. already a couple of years ago. We have seen events in Aspen. There will be the big event of the opening of Fifth Avenue. You mentioned this would be the peak in terms of size, most probably, yes, our intention has never been to start building big stores everywhere. I think there are a few capital cities in the world where having a larger space allows you to show and showcase the brand and the experience we want to convey in our store in a much richer way. So I'm thinking about cities like Paris, like London, Milano, Beijing, Shanghai, Hong Kong, I think those cities, they deserve -- Tokyo, they deserve to have this type of flagship. But the, let's say, the format that is fitting the best the performance and the retail KPIs of Moncler, they are more around 300 square meter, which is not huge compared to what you see with the other player on the market. And I believe that with this type of format, and we don't have yet all our stores on that format, because our average size worldwide is roughly around a little bit more than 200 square meters. So we still have some stores that are smaller, but we would like to, let's say, elevate in terms of in-store experience for our clients, in terms of retention and so on. And we have seen that this format around 300 square meter is working well. So the ambition that we mentioned a few years ago on where we want to drive the sales density is still there. We said at the time that we would like to see due to the importance of Europe, China is back at the same level of 2019 so pre-COVID, which is not yet the case. So we are balancing out, but the metrics that we are currently seeing, they are there and they are improving. This year, we are going to have a similar number of projects that in the past. Clearly, in the future, we'll have much more relocation and expansion rather than new openings. But this is going to be seen year after year. Luciano Santel: Luca, this is Luciano. About your question, volume price -- volume price mix in 2025 and needless to say, volume somewhere down. But let me say that in Q4, they been getting closer and closer to flattish, so quite encouraging quarter also from the volume point of view, talking about the future price mix. I mean our strategy will still be what we said in the past, and I am sure you know very well, I mean, to keep elevating the brand, increasing our collection, increasing the high end of the collection, exploring higher prices. Right now let me say that our top prices are in the region of EUR 2,500. We see opportunities with our current customer base to increase the offer over that level. But we also believe that we can generate more volume by expanding the base of our collection, introducing a larger offer in the enterprise. Of course, enterprise for our outerwear category is expected to be in the region of EUR 1,200 more or less. So of course, it's a rich price, consistent with our pricing position. But this is the strategy. Of course, for 2026, it's still too early to anticipate what the volumes may be even at the beginning of the year, as Roberto said before, was quite -- and it is still quite encouraging. Luca Solca: Roberto, I look forward to seeing you here in Switzerland and learn about your next step in the meantime. Congratulations on a great chapter at Moncler. Operator: The next question is from Oriana Cardani, Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 2 questions. The first one is on the evolution of the gross margin. Do you expect it to stabilize at the level of last year? Or do you see room for expansion? And my second question is on the price gap level between Europe, America and China, if you can give us an update? Luciano Santel: Thank you, Oriana. About your first question, talking about gross margin expansion. I hope there will be an expansion. But seriously, I mean our gross margin and our gross margin expansion has been driven since the beginning, mostly by the channel mix. Of course, right now, I mean, our DTC business is way higher than they were saying. So any expansion of the DTC business is not expected to be so important as it was in the past. But since we expect for 2026, let me say, solid wholesale business, but not in expansion and an expansion of our DTC business, for sure, from the space point of view, but hopefully also from an organic point of view, we do expect, based on this mathematics, the gross margin to expand a little bit. Please consider that we are now over 78%. And let me say that the maximum gross margin, I can expect right now, not for this year, but should we go 100% DTC, is about 80%. So at this level of development of our gross margin is becoming, let me say, more difficult to keep expanding the gross margin as much as we did in the past. Roberto Eggs: Regarding the price gap between the region, as you know, we are working on a bi-monthly basis to channel on our pricing committee, and we have been working together for the past 11 years to reduce the price gap between Europe and the other region. I must say that currently, it's probably the lowest price gap we have ever had between the region, not completely where we would like to be, but getting very close to that. So we have our American the price gap with the Americas that is below 30%. We have China around 30%, depending on the fluctuation of the currency between 28% and 30%. And we have today, China, Korea, that are more around 26%, 27%. So there is a small price gap between China and Korea to favor also the travelers inside of Asia also regarding Hong Kong, it's the same. We try to favor this 5%, 6% price gap between China and the neighboring countries, so just to favor and push sales for travelers, Chinese travelers. Operator: The next question is from Thomas Chauvet, Citi. Thomas Chauvet: I have 2 questions. The first one on categories. Could you comment on the performance of Moncler brand down jacket business relative to other category last year? What was its share of total business now. And maybe could you take this opportunity to give your thoughts on the broader down jacket market dynamics. We've seen a fair amount of competition at the entry level, at the high end, great progress on technology, sustainability-led products. Any color on that would be useful. And secondly, on inventories, and the 15% increase or EUR 70 million, if I understand correctly, that's largely due to advanced purchase of raw material of down. Are you seeing any kind of unusual inflation in the sourcing of top quality down and what is down typically as a percentage of cost of goods? And just finally congrats to Roberto for a great career for a decade at Moncler and all the best in your future projects in Switzerland or abroad. Gino Fisanotti: I will take it. I think Normally, we don't share again, the performance of the different segments. I think I will go back and repeat a few things we shared before. I think, of course, outerwear is part, of course, of the core of our offering in our business. I think what you will see specifically there, just to give a bit more context is the diversification we have been doing, especially in the past 3 years in terms of the offering, right? It's like not just the traditional outerwear, but all the different segments between seasonless, lightweight versions for travel retail, et cetera, and the demand we're seeing, especially on over shirts and that kind of style. So -- the outerwear business is way larger than it was before. And I think we are seeing specific traction in certain markets. We always talk about the Sunbelt of the U.S. where average temperature is around 18 to 22 degrees. We're seeing some markets in Asia where these performed extremely well. So I would say when we think about outerwear and the size of it, despite that we're growing other segments and other classifications within the business, this -- there was an expansion over the past few years. I think the other aspect that you are discussing is on one hand, outerwear as the same of the different product proposition is going through this process of elevation on one side in terms of how much value we can put in design and in the fabrics we use for certain products. On the other side, there is an innovation place that, of course, we know will take central place for this. I think I don't know, but we can look at what just happened in Aspen literally 15 days ago. In the latest collection we presented for winter 2026 or we can go into for winter '25 or the now 2-year spring/summer evolution of Grenoble, and you will see a lot of different innovation apply to ski work, to no work, to upper ski and even to some of our summer propositions regarding shirts or 3 layering systems. So I think there is a real evolution, I would say, especially on materials, applications on Grenoble, but we will keep fostering this idea of high style and high performance as we keep doing this segment of the business. But again, just to round this answer, outerwear is bigger as a classification than just a traditional view on a winter jacket only, and this is something that have been helping us to not only grow that part of the business at the same time as we keep growing other classifications within. Luciano Santel: Okay, Thomas. About your question about inventory, first of all, let me say it again because it's very important and nothing unusual on our inventory level. Nothing unusual means that our inventory is all good inventory, current season inventory and everything that is to be considered also it has already been written off. So what you see in our net working capital is only good inventory. It is higher this year because we decided to invest more than usual in down last year due to the volatility of the price in that moment. And of course, I mean, when we perceive price increase trend in the market, we decided to anticipate and to buy more down than what was needed normally. Of course, let me say something obvious, and I'm sure that is very clear for you. But we only buy top quality down, we never may decide to buy lower quality down in order to save money, so just to make it clear for everyone. And so the top quality down last year saw a peak in price opportunity. We bought down when the prices were still lower. But of course, this was not at all for speculative reasons, but simply because down is the essence of our DNA. So we needed and we wanted to be safe and to have even more down than needed then to run the risk to have a shortage of down. About the contribution of down, I don't have a number. Honestly, it's not meaningful in quantity, not meaningful in percent of our cost of goods sold. But again, is the essence of our DNA. Gino Fisanotti: Thomas, I forgot -- I think one thing, Thomas, I forgot to -- I think you mentioned about competition. I just want to give one second of an answer because I realize I didn't answer about that. Again, regarding competition, I think we always -- every year or every 2, 3 years, we talk about different aspects of competitors and things like that. We are, of course, in a segment where there's different players. I think the only thing I will tell you is, of course, we always remain very humble enough to look at what competition is there, what competition is doing, what the customers are doing and what's working, what's not working. I think at the same time, we do that. And we see, of course, when you talk about outerwear and you talk about different innovation solutions, there's a lot of different players, even a lot of luxury brands trying to play there. We always observe and try to learn, but more importantly, become better. I think on the other side, we always -- and I think Mr. Ruffini mentioned this at the opening speech, remaining true to who we are and our DNA and more importantly, to deliver strong product solutions for customers that look for a very authentic and meaningful brand. I think Grenoble, again, is a perfect example on top of what we can say about Moncler collection, about a segment of the brand that is delivering incredible product. And we strongly believe that despite competition as well, there's no other luxury brand as authentic as we are in terms of coming from the outdoors and delivering incredible innovative solutions for customers. Operator: The next question is from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the U.S., where you are still relatively underpenetrated. Have the Warmer Together campaign and the Aspen event increased your confidence in the brand's growth potential in the U.S.? And today, Moncler generate EUR 1.5 billion in APAC, nearly EUR 1 billion in EMEA. Do you see a similar EUR 1 billion revenue opportunity in the U.S. over time? Second question, could you please comment on the recent trends in the e-commerce channel and remind us your exposure to online across both brands? And some of your peers have pointed to an improvement recently, suggesting for them a gradual return of the aspirational customers. Do you see similar trends in your business? Gino Fisanotti: Thank you for the question. I think regarding the first one in terms of the U.S., I mentioned this before. This is one of the areas where we strongly believe we have an opportunity to do better. I think -- I will -- of course, I will mention in a second about Warmer Together or Aspen, but this is just singular aspects of a bigger plan, right? I think we strongly believe in this idea of an end-to-end approach towards the market. I think Moncler proven case from Europe to China in the past few years about -- it's not about just retail, it's not about just marketing, it's not about just CRM. It's about everything we are trying to do together and the orchestration of those efforts. I think what you started to see in 2025 between some specific launches we did with Genius, with Mercedes-Benz and legal campaigns regarding Moncler Collection with Penn Badgley, U.S. ambassadors in Grenoble campaign, going to the Met Gala for the first time, Aspen, Warmer Together, all these things are the beginning of something that we believe is a journey, right? I think this will not -- I think Robert just talked about building brands, right? And this is not about something that will have a silver bullet that will work overnight. We believe that, that journey already started in 2025. '26 is a major year for us to keep building towards that potential we have in the U.S. We not only have just did Aspen. I think we are going to open Fifth Avenue later in the year and many other things that will come that will help us to start bringing that potential we see. I think you mentioned something regarding revenues. I will not comment on the size of our revenue. The only thing I will always comment is on the philosophy we have where we always say that revenue is a consequence of what we do. So we strongly believe that we're able to do the efforts that we believe we're putting in place for the U.S. and we drive this end-to-end offense. We strongly believe that the revenue as a consequence will come and we will build long-lasting growth in that market as we are able to do in other geographies as well. Roberto Eggs: Just to complement the answer of Gino on the U.S., we never set targets that are -- we are never driven by purely on turnover and additional business. We always believe that if we do the right things for the brand, results will be a consequence of it. So clearly, now in terms of attention, we are fully focused on the U.S. I think the elements that we just mentioned that were mentioned by Gino, the Fifth Avenue is going to be one of the key elements, the campaign Warner Together has. The fact that we had an event on Aspen. Also, we opened also a very successful -- already very successful store in -- second store in Aspen dedicated to Moncler Grenoble. We had a fantastic receive with clients before -- just before and after the show. So we believe that we are currently doing the right things. We need to elevate also the level of operational excellence and the Fifth Avenue will be a catalyst of this new energy we want to bring also in our team locally. So I think you need to give us a little bit of time. It's going to be a journey that already started, but we are confident. Remo Ruffini: Charles, I think your second question was regarding the online business. Again, I think here, again, regarding online, I strongly -- we believe in this idea that the online experience have been evolving, at least for us in the past 2 years. And this is why one of the reasons that we set our .com in terms of the experience and the look and feel on the second half of 2025. I think we are leveraging more and more .com to attract customers and to more importantly, educate as a more product-centric experience. This is something that took us a bit of time to evolve, but we are happy to see that evolution and see how we can engage product to that front. I think clearly, the online channel have been underperforming through the physical part of the DTC in Q4. I will say within that, EMEA was the one that we were struggling a bit the most compared to the rest of the markets. But again, we believe that there is a kind of an evolution, not to use the word revolution in terms of how customers today are searching, how the searching engines that they're using and how they interact and they leverage platforms not only to just to purchase but to interact with brands, and this is something that we will keep evolving as we just did in September this year. Robert Triefus: Just a couple of words in answer to the e-commerce question for Stone Island. You may recall that around 18 months ago, we internalized the site from YNAP. We took advantage of that moment to launch a new front end and equally to be able to launch omnichannel services through localized warehouses. All in all, these actions have been very productive for the brand in terms of visibility, storytelling, product, narration. And we've seen and we are seeing a very strong trend in organic traffic to the website. So the e-commerce channel is a channel that we see with great potential. Operator: The next question is from Andrea Randone, Intermonte. Andrea Randone: The first one is about the recent interview held by Mr. Ruffini. He talked about the increasing attention of Chinese people towards outdoor activities as a possible tailwind for Moncler. Can you elaborate on the level of maturity of this trend? And the second question is about the internal production. I mean, what is the contribution of internal production on your current business? Is this a possible driver to make your products even more unique in the future or it is not? Gino Fisanotti: Andrea, Gino here. Thank you for the first question. I will take that one. Again, regarding the attention specifically from the Chinese people, as you said, on market regarding other activities, I think we have been saying over the past probably 2 years that we are seeing kind of a momentum towards outdoor activities, especially in Asia after COVID, especially '22, '23 and especially the buildup of first resorts for the outdoors, both summer and winter. This is something that is always happening in the U.S. but got reinforced, especially in the past 3 years as well. Reality is that what we are seeing is definitely the opportunity. We believe that opportunity is being started to being captured by Moncler Grenoble. Moncler Grenoble is performing pretty well across markets, but I would say has a really strong reception in the Asian markets or in China, but not only just in Fall/Winter, especially with the Spring/Summer collection. So this is something that is a testament a bit of what you were saying, and I think what you were alluding when Mr. Ruffini was mentioning about the more avid potential participation or activities of Asian markets, specifically in China regarding the outdoor. So this is something, as you can imagine, that we are monitoring as we go. We are looking forward not only in terms of the winter results, but the activities that are happening to our customer during summer. And we are trying to, of course, make sure that Grenoble is at the center of this conversation. Remo Ruffini: Yes, Andrea, about your second question on our internal production. Internal production for this year is expected to be in the region of 30%, 3-0 percent of our total production. Of course, most of this production is made in Romania, in our big industrial hub in Bacau, where we have 2 big buildings to produce outerwear. But we also produce outerwear ourselves in Italy in 2 different buildings in the region of Trebaseleghe where we have our headquarter. Furthermore, as you probably know, I'm sure you do, last year, actually end of the year before, we opened a brand new building for the production of knit only, quite a big building that allows us to make the weaving of all our knit production or more than 50% of our knit. And why we did that? Why? In 2015, we made a decision to open our own production in Romania because we realized and of course, it was extremely important that we needed to own our technology. And by owning our technology is the most important and essential way to develop and improve the quality of our product and not only improving the quality of the existing product because in Romania as much as in Italy, in Trebaseleghe. But I didn't mention Milan, but also here in Milan, we have a small industrial laboratory, not for production, but to develop prototypes, thanks to the proximity with our design team. This is the only way to improve, not only the quality, but to keep developing and researching new technologies for our product. So again, this is strategically very important. It was strategic in the past, and it is becoming more and more important also as a way to emerge in the market. Operator: The next question is from Chris Gao, CLSA. Chris Gao: Congrats on the great results. This is Chris Gao from CLSA. I have 2. So the first question is regarding Chinese consumers, especially the aspirational consumer spending trends. So basically, in the past few quarters, we're very happy to see queues coming back for Moncler and also for some other luxury peers, though we reckon that the general middle class may still take some time to recover, right? We are also very happy to see that you are both exploring higher price segmentation and also introducing more entry-level products at the same time together. So my question is, in the past few quarters, from a number perspective, do you see aspirational customers of Chinese have been sequentially contributing more to your growth than before? And how would you see the outlook of Chinese aspirational customer spending to Moncler brand? Do you expect it to gradually come back a little bit more as a growth driver? The second question from me is a follow-up on e-commerce. So basically, right now, we see some luxury peers introduce the AI-empowered e-commerce platform. And just wondering how would AI impact your omnichannel consumer experience in the future? Do you have any plans on that front? Roberto Eggs: Thank you for the question. We'll answer on the first one regarding our Chinese consumer. We haven't seen big differences between -- in terms of recruitment and percentage of younger, more aspirational customer or the top end of the pyramid for Moncler. Basically, in China, we have been growing with both and I believe that this is very much linked to the strong momentum that the brand is experiencing on the market since a lot of quarters or a lot of years because it's 3 years in a row that we have been performing well. You remember, we had also a Genius event a couple of years ago in Shanghai, and this was back in 2024, and we were afraid that the year after not having these events, we will see a slowdown in the momentum in China, which has not at all been the case. And I know it's a little bit abnormal because some of the peers are suffering on the market, but we haven't seen a slowdown, both on the aspiration and the top of the pyramid. Clearly, Grenoble is helping us also to grow on that part and what we call the Edit collection. So the more -- the one with less logo. So we are both growing on the very technical part of Grenoble, but at the same time, also with products that are less logo-driven and that are more, let's say, sophisticated. At the same time, our bestsellers, the one that we usually don't have on display, the Maya and so on continue to perform extremely well. And the difference transitional -- seasonal product like the knitwear, it's also a category that has been driving a lot of new customers into the brand. And as you know, those clients that are entering through this category, they usually upgrade themselves into outerwear later on. Remo Ruffini: Chris, thank you. Again, just last comment on what Roberto was saying. I think you mentioned this. I think it's important, and we said it before. I think for us, it's important that as we keep elevating our product proposition, we keep protecting the core. So while we acquire new customers on the more high end, we keep protecting and providing access to our customers. So this is a very important part of our product strategy. Regarding -- you mentioned about online and AI, I will give you a short answer there because this is something we communicated when we launched the new .com in early September. When we launched the new .com we announced our partnership with Google that we have been used as a partner that using the Veo AI platform with them. And what we are trying to leverage there is on the .com experience on part of the recommendation we do with customers based on their journey, we have been leveraging, of course, part of content. And then the last part is we're leveraging that as part of the service in terms of leveraging product as a system address. So there are certain areas today that if you go, for example, into Moncler Grenoble part of .com you can see and understand how the different parts of the product connect to each other for a better performance from mid-layers to under layers to top layers. So again, all the things are trying to be more effective and more efficient in the usage of our partnership with Google and their AI platform. Operator: [Operator Instructions] Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Elena Mariani: Thank you very much for participating in this call. Let me just give you a quick reminder of the next release. Our Q1 2025 interim management statement will be released on April 21, post market close, and our quiet period will start on March 23. Thank you again. For any follow-ups, feel free to contact me or the IR team any time. And of course, I will see many of you on Monday. Thank you again. Have a great evening. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Thank you for standing by, and welcome to the Qube Holdings Limited FY '26 Half Year Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Digney, Managing Director. Please go ahead. Paul Digney: Hi, all. Thank you for joining this morning's call. I'm joined in the room by Qube's CFO, Mark Wratten; and Head of Investor Relations, Paul Lewis. As usual, I'll kick off the call with a summary of our highlights for the half, followed by some comments on the divisional performance. Then I'll hand over to Mark to discuss some key financial items. And then back to me for -- to go through the full year outlook before taking your questions. Starting on Slide 6, results overview. Qube has once again delivered a solid half year result. The financial performance reflects the strength of our business, reflects a combination of organic growth and the contribution from acquisitions recently completed. Activity levels remain mostly favorable across our core markets. And as you've heard before, the diversity of our operations supported growth and helped offset any challenges. Both Mark and I will talk more about the financial results as we get through this presentation. On to Slide 7. We provide an update of the scheme of arrangements here. As you know, on Monday, we announced that the MAM led consortium have confirmed their offer at $5.20 per share per Qube. We have now entered into a scheme implementation deals with the consortium. This is an exciting milestone in the evolution of our business. And MAM's offer underscores the value of our strategy and the quality of our business and our people, most importantly. I'm confident that this transaction will provide a platform for the business to grow and continue to grow while maintaining a strong track record of enhancing supply chains in the regions that we operate. Obviously, the timing is contingent now on regulatory and other approvals, and we're aiming to have a scheme booklet out to shareholders in May so that shareholders will then have the opportunity to vote on the scheme. Returning to our performance for the half and safety performance on Slide 8. Our positive safety performance was sadly marked by the death of a tire fitting contractor at our Narromine Agri facility in October. Qube and the management team has continued to support investigations into this tragic event. During the period with our ongoing focus on safety, our TRIFR continued to improve, decreasing by 21% compared to last year's result. Our LTIFR and our CIFR also improved during the half. The rollout of our BeSafe program also continued. There are some great safety videos worth checking out on our social media networks. Turning to our key markets, Slide 9. Once again, it's clear that strong performance in some areas helped balance out some challenges in others. In Containers, the Australian logistics operations performed in line. New Zealand container logistics impressively performed better than expected and so did Patrick's, performing better than expected also. In Agri, Agri again made a good contribution, which underscores the value of our trading strategy, and an agile integrated service offering to our customers. More automotive benefit from a full period contribution from the AAT Webb Dock West, which is also known as MIRRAT, but was offset by lower than anticipated storage and quarantine services across all AAT terminals. Forestry was relatively stable despite some softer wood chip volumes in Australia, while in New Zealand, we saw a modest uplift in earnings. The resources business was better than we expected due to better volumes and also with better cost controls, which helped offset a major contract ceasing in the period. Energy once again delivered ahead of expectations, except for some delays in renewable projects. And in general, Stevedoring and the other sections on the slide, this was slightly impacted mainly due to unfavorable volume mix across our port operations in Australia. Now turning to divisional performance on to Slide 11. For the operating division, I won't spend much time on this slide as I'll dive into each BU shortly. As you can see from the slide, logistics and infrastructure was responsible for the lion's share of the growth in the half. Turning to Slide 12, logistics and infrastructure. EBITDA profits jumped around 22%. The addition of Web Dock West helped the performance in the period. However, the AAT terminals performed weaker overall due to a decline in high margins and ancillary services, which I mentioned before. Container and logistics volumes were broadly stable across Australia and provided another solid result. The New Zealand performance was better than expected in the half. And with the Nexus acquisition completed in December, we are expecting further New Zealand upside in the second half. The IMEX continued to deliver improved results and volumes as volumes ramped up. And Agri performed well in the period with grain up almost 50% through our bulk channels in the half. Turning to Slide 13, Ports and Bulk. In the Ports and Bulk business unit, it's fair to say it had some mixed performance across its end markets. The Energy business delivered another strong earnings contribution from the oil and gas activities, including the commencement of decommissioning work getting underway during the period. However, in the energy space, we had profit impacts from our renewable sector due to setup costs in Western Australia and some project delays in Queensland. We saw reasonable volume at Stevedoring across most commodities in our ports operation. However, unfavorable product mix in the half did impact earnings and margins. Overall, forestry was relatively stable with a modest uptick in earnings in New Zealand. The bulk activities in resources sectors was better than we expected. This helped offset the impacts of some major projects ceasing and the delays in some new projects coming on stream. And also, the bulk business did benefit from a full period contribution from the Coleman's acquisition, and the initial contribution from the Albany Bulk Handling acquisition. Now on to Slide 14, briefly looking at Patrick. Patrick was better than we originally forecasted, which is pleasing. Market share was relatively stable at 41%, and the EBITDA improved, thanks to a number of things, higher volumes, favorable volume mix and increasing ancillary revenues. And pleasingly, during the period, the business also extended several key customer contracts. I will now hand over to Mark to take you through some of the key financial information, and then I'll get to the outlook after that. Mark Wratten: Thank you, Paul, and thank you to everyone on today's call for listening in. As Paul has already highlighted, Qube delivered a very pleasing first half set of results. I'll now take you through a few financial slides. Starting with Slide 16, Qube's underlying results. Paul has already covered our Logistics and Infrastructure and Ports and Bulk business units as well as Patrick. A few other points to note include: strong result in our operating division contributed to an increase in group underlying EBITDA of 9.8% over the prior period. Pleasingly, Qube's EBITDA margins, excluding the high revenue, low-margin grain trading business, improved from 10% to 10.6%. As we had guided to earlier in the financial year, this EBITDA improvement was partly offset by an increase in net finance costs which increased by $9 million against the prior period due to higher average debt balances and no interest income on the now fully paid repaid shareholder loans to Patrick. The NPAT share from associates increased by $7.5 million, which was mainly attributable to the great first half result from the Patrick business. At the underlying NPATA line, we delivered $157.5 million, which was an increase of 10.1% over the first half FY '25. On the back of these results, the Board has declared an interim dividend of $0.0535 per share fully franked, which will be payable on the 9th of April. This dividend is at the top end of the Board approved dividend payout ratio, which is 60%. Before leaving this slide, I'll make some short comments on the 2 material nonunderlying adjustments that we reported in our H1 statutory results. The first item is $101.5 million pretax profit on the divestment of our interest in the beverage property, which we announced was sold in December 2025. The second material item of $37.3 million was a reversal of an onerous contract provision relating to Qube's obligations at the time of exiting the Minto Properties, which we divested in January '25. This obligation was successfully resolved during the period, allowing us to now reverse this provision. The original provision was also treated as a nonunderlying item in our FY '25 accounts. Moving to Slide 17, capital expenditure. In first half FY '26, Qube's gross CapEx was $216 million. This is broken down into the 4 major categories on this slide. Qube spent $35 million on 2 small but strategic acquisitions in the first half, being the Albany Bulk Handling business in Western Australia in July and the Nexus Logistics business in New Zealand in early December. The Albany Bulk Handling business has been fully integrated into the Qube, while the Nexus integration is progressing to plan. We also spent $88 million on organic growth-related assets in the category set out in the table below. The major spend was on new bulk storage facilities in Queensland and Western Australia and mobile assets and specialized containers to support new or expanded contracts. The $22 million investment in specialized containers predominantly relates to new contracts with Iluka for the Balranald project and WA Oil for a decommissioning project. In the period, we also spent $88 million of replacement CapEx, mostly on mobile fleet assets and material handling equipment. Finally, we spent $5 million on the 2 Moorebank rail terminals. During the first half, Qube also received proceeds of $163 million from the divestment of assets with a significant amount being for the beverage property, which I mentioned earlier, and some rail rolling stock assets in excess of our business requirements. After all of the above, net CapEx in the first half was $53 million. Taking you now to Slide 18, cash flow. During the first half 2016, Qube's net debt decreased by circa $51 million with the key cash flow items detailed on this bridge. The first half cash conversion, excluding grain trading working capital was 71%, which is a relatively typical result for Qube given the material first half outflows that don't repeat in the second half. Working capital movements for our grain trading business was a positive $29 million for the period to total $117 million at the end of the first half. The first half FY '26 cash flows also included the $53 million of net CapEx that I just spoke to as well as $81 million in distributions received from our associates, mainly from Patrick. Finally, if I can now take you to Slide 19, balance sheet and funding. You will remember that in FY '25 Qube completed a number of capital management initiatives, which together continue to place the business in a strong balance sheet position. During the first half of FY '26, we haven't been required to revisit our debt facility as we have significant available liquidity, which at the end of December '25 was over $1.1 billion. Our average debt maturity is 4.4 years, and we have no facilities maturing in the second half or in FY '27. Qube's gearing ratio reduced to 31.6%, which is at the lower end of the Board's current approved range. overall ore, we retain significant headroom against our bank covenants. Qube maintains investment grade credit ratings from both Fitch Ratings and S&P. That's all for me. Now I'll hand you back to Paul. Paul Digney: Thanks, Mark. And now Slide 21, the full year '26 outlook by key markets. Across our -- the outlook across our key markets for the full year is generally favorable. In containers, we expect Patrick to perform slightly better as well as New Zealand. The outlook for Agri year-to-date has been good, although the remainder of the year could moderate due to global conditions and farmers currently holding on to inventory, which is reflected in the revised outlook for Agri. In automotive, there are some early signs of improvement in the demand for ancillary service in the second half, which is positive. In forestry, we expect that to stay the same as the first half of the year. And while in our resources businesses, we anticipate some improvements, thanks to more favorable product mix and better volumes. This should partly offset that misalignment I spoke about before between contracts ending and new one starting. Finally, in Energy, as I mentioned before, the outlook remains positive for the oil and gas activities However, the new renewable projects will be delayed into next year and will be a benefit to next year's revenue. Now to the final slide, Slide 22, before I take questions. Full year 2026 underlying earnings outlook. The underlying earnings outlook remains positive for the full year, with solid EBITDA growth for the operating division. The outlook for associates also looks positive, largely thanks to the higher contribution from Patrick's. And at a group level, we expect to deliver a solid NPATA and EPSA growth of between 6% and 10% for the year. To summarize, while it's been a very busy half particularly with the Macquarie transaction and the due diligence bubbling along in the background, our half year performance saw us deliver another record result. Revenue improved, margins improved again. Return on average capital employed improved above 10% for the first time and now on its way to our new target plus above 12%. And our earnings per share improved and the outlook remains positive for the full year. Thank you for your time. I now would be happy to take your questions. Operator: [Operator Instructions] Your first question comes from Justin Barratt from CLSA. Justin Barratt: My first question, I just wanted to ask about if you could talk a little bit more about your grain trading business. It looks to be doing a pretty good job of materially improving throughput through your operations? Paul Digney: Yes. Justin, I mean, yes, our strategy has been very successful. A lot of the grain that's moving through our assets is I think more than 50% is our trading arm, pushing that inventory through our terminals and our up-country facilities. So yes, we've been -- we've built a pretty good strategy there. We've kept our product to our customers and through our trading arm fully agile and fully flexible. So Yes. I mean the current conditions, pricing is a bit lower. FX is not working as good as possible for trading, but we're pushing through some good volumes. Justin Barratt: Okay. Great. And then on Ports and Bulk, your guidance for FY '26 now a little bit softer than your previous guidance. And just noting your comment around the timing between cessation of some contracts and ramp-up of new contracts. I was wondering if you could expand on that comment a little bit for us, please? Paul Digney: Yes. I mean some areas -- I mean, we've had. Probably in the wind farm sector, we felt that we probably -- from a profit point of view, we do a bit better. There's probably -- setup costs have been a bit more, but we're setting up for the future in Western Australia. Some of the tail of some of the wind farms that we're finishing off at the moment, before other ones start in 12 months' time or so. It's probably been probably not as financially benefit for us. So there's been some impacts there. General Stevedoring turnaround after the industrial. The IR issues last year have improved, but we felt that they probably might improve a bit better. So we're looking for that improvement in the second half a bit. So we're just being a bit cautious there. Iluka Balranald is delayed probably 3 months into next half. So yes, it sort of swings around about. But yes, we are sort of broadly flat outlook for Ports and Bulk. Operator: Your next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: Paul, Mark, just 2 for me, if I could, please. Can you just talk to the drivers of the CapEx guidance change, please, for FY '26. So just interested in your considerations as you've put that together for us today, please? Paul Digney: I'll hand over to Mark. Obviously, there's quite a reduction there. Mark Wratten: Jakob, yes. No, so we spent less CapEx in the first half than we had anticipated and there's an element of that flowing through into the second half. I think we had -- in the initial guidance that we gave in August, we had included sort of what we call, referred to as a CapEx pool. So for acquisitions and we've completed a couple, as I mentioned, $35 million in the first half. We've got a couple that we sort of anticipate may drop in the second half. But overall, we think across the year, it's less than what we sort of had, sort of set as a sort of an amount aside back in August. And then there's just an element of the guide just being very careful around other maintenance CapEx, and we've been not -- I guess, to make sure that we're sweating our assets as much as we could. So I think it's just been a -- it's just maybe an element of first half being a bit too ambitious around when we could spend it. But we've got some really good -- I think some of it goes to what Paul was mentioning earlier around timing. So we've got some project -- really good projects coming up where the CapEx is now more likely to be spent in '27 than it is in '26. Jakob Cakarnis: Understand that maybe you'll be in a different environment as that goes ahead. Just one final question. I appreciate that there's still a bit of water under the bridge. But for those on the call, how do we think about a distribution of any surplus capital if that exists in the business? And how do we think that around timing with your other announcements and maybe the implementation deed, please? Mark Wratten: Yes. So if -- per the announcement on Monday morning and you'll see it in the scheme implementation deed as well. Obviously, the cash price is $5.20 but reduced by any dividends that we pay between now and completion, and that's inclusive of the interim dividend that we announced today, $0.0535. So we can -- for the scheme implementation, we can pay a maximum of $0.40 of dividends overall. And the whole idea around that, Jakob, is to say to try and optimize our franking credits. We've got quite a large franking credit balance and we're trying to get a lot of that to the benefit of shareholders between now and completion. So you'll see that we've got the ability to pay a special dividend within this -- agreed with Macquarie. And we'll seek, per the note -- in the announcement, we'll seek ATO class ruling to make sure that, that's all dot the I's, cross the T's, so to speak, in regards to those franking credits for any special dividend being available to shareholders. Jakob Cakarnis: Mark. So am I right in thinking that, that occurs, sorry, in terms of timing as the deal is closing? Or is there an interim milestone that we need to keep in mind? Mark Wratten: No. So obviously, if the deal dragged into the second half of this calendar year, Jakob, and we do our full year results, you could expect a final dividend, right, if it's sort of -- if not completed before October, say. Otherwise, a special dividend is likely to be paid immediately prior to the actual completion of the deal. So very -- a few days probably before the actual cash component would get paid. So it would be almost simultaneous. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Maybe just staying on the scheme topic. Wondering if you could give any sense of what are the main regulatory approvals that are going to require you to work on? And what kind of time line you would expect around that? Paul Digney: Yes. So obviously, ACCC and Feb are the key approvals. And so I mean, I think we're working a time frame between up to 4 to 6 months, potentially that. So yes. Andre Fromyhr: Are there any particular parts of the portfolio that you've already identified as sort of more in focus from an ACCC approval? Paul Digney: I mean from our perspective, we don't think there should be any issues. I mean other than actuals around this process. I mean, again, this is not a merger. It's a change of ownership transaction. So there may be a look-through on Port of Newcastle, but the actuals will go through that process. But once they start that process and go through it, they'll understand. The ownership structure and the management structure is totally different. So there's no alignment there. And again, this is just an ownership change. It's not a merger of operations. So from my view, there shouldn't be any issues, but obviously, there's a process we need to run through, and we'll respect that process and so will Macquarie. Andre Fromyhr: Okay. Then back on the operations. I was just wondering if you could talk a bit more about the drivers of the margin in Ports and Bulk? I understand it's a diverse segment. But I guess that margin has been depressed for a few years now and has come down year-on-year again this period. Wondering if you can talk through the role that demand or utilization side has played there? Or is there cost inflation? Or is it a mix issue? Just curious to understand a bit more detail around that. Paul Digney: I think for the period, it's just been, I mean, we did call out that bulk would sort of go into a little bit of a decline because of contracts ceasing and that sort of stuff. That we did call out. Actually, it was better than we expected and the way the guys have managed that process. We haven't really seen much wind farm activity which sits in that sector, which is -- which goes through a lot of fixed costs, and it's reasonably high margin. So we didn't get that. The general Stevedoring business, we had products, we had reasonable volumes, but certain volumes, certain commodities and certain ports make more money than other things, in just the way that mix fell out. Probably it wasn't -- hopefully, the second half better with how that product mix goes. There's some stuff that we're working through in that area. I just think it's the period, it's just sort of a combination of some areas of where we would have impacted margins, and hopefully, we can get that improving in the second half. Andre Fromyhr: Okay. And last one for me is MIRRAT, Wondering if you're able to share what the EBITDA contribution was in the period or even better, like a sense of what a normal annualized run rate is for MIRRAT's EBITDA under Qube's ownership and sort of what your plans are for growing that business? Or is it more just the bolt-on to your existing AAT terminals? Paul Digney: I haven't got a number in front of me, so I can't provide that. I think we provided maybe a number at acquisition. So we were tracking a little bit lower than that this period because of less quarantine and storage services. So -- but we look at MIRRAT as a long-term asset. And so we're very confident where we're at with MIRRAT. Mark Wratten: Yes. Andre, when we -- I think the normalized or sort of what we sort of coming into the year is around $30 million to $33 million of EBITDA. And as Paul said, the first half, which is sort of a little bit -- sort of below what we expected, then that $30 million to $33 million is sort of on a full year basis. And that's sort of at a very I guess, at a sort of very normalized run rate without sort of heavy volumes of ancillary services. Operator: Your next question comes from Samantha Edie from Morgan Stanley. Samantha Edie: Congratulations on the result and the takeover. I just have 2 questions today, please. So just with the first question. So I can see that the resources outlook has improved, which was guided to be a bit of a headwind in FY '26. And you did have a strong first half overall. But I guess, if we're just thinking about the second half earnings in each of the key markets you provided on Page 21 of the preso, are there any key market earnings there that are expected to go backwards half and half? Paul Digney: I think I'll probably called out a little bit cautious around -- just around the Agri volumes. I mean, we've done very well to date in regards to the strategy. And there's a lot of wheat on storage and upcountry and that sort of stuff. So we look to continue to push that through. So we've been a bit more cautious on that. Renewable projects is that's not going to change too much. We're not going to see much of that work, so which we expect it to be better. So there are probably 2 areas. But on the flip side of that, I think as I called out, the auto the storage and quarantine services that we have through AAT terminals looks to be more demand for that coming in the second half. It was very light in the first half. Patrick, New Zealand has been really good for us and looks promising in what we've done there, putting those businesses together. So that's been a good sign in oil and gas. There's probably potential slight upside there to offset any of those other things that might be maybe a bit lighter than we would have expected probably a couple of months ago. Samantha Edie: Okay. That's great. Mark Wratten: Sam, sorry, I mean it just goes about diversity again, right? That's just -- yes, it's sort of self-protect ourselves through the strategy. Samantha Edie: Yes. Great. And then just the second question is around Patrick's Fremantle lease. So I think that lease is meant to expire around 2031 unless that's changed. So is this like still the case? And then is it likely that this will be extended? And then can you also talk through what an extension will look like. So yes, just any color around that, please? Paul Digney: Yes. I think, Sam. The unknown on that is really what happens at Westport and the relocation from Fremantle down to Westport. It's still unclear of time frames on that sort of stuff. So you would assume an extension at Fremont or will occur when that occurs, I'm not too sure. But yes, it will go beyond the current position at this point in time. So I mean, we'll work with the Fremantle Port and the other stakeholders around that and potentially transitioning in the long term, which is a long way away still. There's plenty -- there's still plenty of capacity at Fremantle to operate for decades. So yes, it's -- I think to answer your question, very likely of an extension. I can't give the time frame of when the port would get relocated and when it does and if it does. Operator: Your next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: One follow-up on grain and the comment that you've moved 57% of New South Wales bulk volume. Could you comment on whether there's it clear change in market share you're seeing or whether the volume remains a function of crop volumes, high and solid crop volumes? And secondly, if you could comment on in addition to farmers holding on to grain that you already mentioned. Are you seeing any other structural changes in farmer selling behavior? Paul Digney: I think just what I called out. I mean, yes, I mean, we've increased our market share, I guess, in the New South Wales market. I'm not to comment about what our competitors do and what we do, but we have done that. I think our strategy has been quite good and quite agile with our customers and what we've built out over the last 2 years. Fundamental changes, I think as I called out earlier, the price of wheat at the moment is a point where -- and I think farmers are holding on for this point in time, but there is abundance of week there. So how it pushes through the system. We'll see how that plays out over the next 6 months. But we're just a little bit -- I guess, we've been able to push grain through. We've been able to source grain, put it through our network, but we're just a little bit cautious with how that's sort of playing out at the moment. So I don't think anything has really changed. I think farmers have decided to not sell as much as they want at this point in time. At some point in time, it's got to push through the system. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just one first question with regards to that special dividend potential. In your slides, you say you have the potential to pay $0.40 per share dividend with franking credits worth up to approximately $0.17 per share. Can I just confirm that, that $0.17 per share is the level of franking credit balance you have at the moment? And if not, where is your franking credit balance. Mark Wratten: That would be -- we have a franking credit balance is subject to some further work that we're doing, but we believe that at this point in time that we'll be able to fully frank up to the $0.40 that we have agreement with. So yes, we're pretty confident about that. But as I said, we're making sure that -- and you'll see in the little footnote on the bottom of that page that we're going to seek ATO-class ruling, make sure that we pass all of their relevant franking credit integrity rules to make sure that it's fully available to our shareholders or particularly obviously those ones that can benefit from a franking credit. Owen Birrell: Okay. Perfect. I understand that. And just secondly on the -- again, on the ag business. Obviously, it's been a very good success story for you. I just wanted to get a sense of where your export terminals are relative to potential capacity? A 49% increase to the 1.8 million tonnes exported through your terminals. It sounds like a big increase. But if the -- if FX wasn't a headwind, if pricing wasn't a headwind, where do you think you would have been able to get to with that volume? Paul Digney: Good question. I mean we still have got extra capacity to push through our network. So the first half is pretty good numbers. I mean, if you double that and plus another 10% or 20%, that would be getting towards maybe capacity in those terminals, but we're still pushing the limits and we still have the ability to expand a bit of that capacity if needed to. So we're in a pretty good spot there. Owen Birrell: I guess, the origin of my question is that your grain trading activity is effectively running at 0 margin. Actually, it's even less margin than you were doing last year. So you're clearly leaving something on the table. Obviously, you're making it back through your utilization of your physical assets. But at some point, those physical assets get full. I guess the question is, do you then start to take margin through grain trading? Paul Digney: Potentially. It will just matter to the circumstances of the world grain prices, right? So at this point in time, it's quite low. So if prices are higher, yes, there's probably more margin going forward. Operator: There are no further questions at this time. I'll now hand back to Mr. Digney for closing remarks. Paul Digney: Thanks, everyone, for joining the call. I'll be speaking to some of you guys and lady soon. Yes, thanks again for your support, and have a good day. Cheers. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, and thank you for standing by. Welcome to QBE Fiscal Year 2025 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Andrew Horton, Group Chief Financial Officer (sic) [ Chief Executive Officer]. Sir, you may begin. Andrew Horton: Good morning, everyone, and let's begin. I'm here with Chris Killourhy, our new group CFO. Hopefully, you've had a chance to take a look at our release this morning. We've had a great year with an ROE just shy of 20%. And we're very proud of these results. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters and culture. I pay my respects to the elders past and present, and I extend this respect to any First Nations people joining us today. Moving to Slide 4 with a snapshot of our results. This is a great summary of our performance. We exceeded all our key guidance and targets this year. Headline GWP growth picked up to 7% and tracked ahead of our guidance for mid-single-digit growth. We beat our combined ratio guidance again this year with an excellent result of 91.9%. Our catastrophe experience and an improvement in our crop business drove the majority of the upside relative to the 92.5% we reiterated in November. Profitability is attractive across the majority of portfolios, and we're confident of sustaining strong underwriting performance. We had an exceptional investment result this year. Our high-quality investment portfolio returned 4.9%, driving another record year of income. Collectively, both post-tax profit of USD 2.1 billion and earnings per share were up around 25% for the year. And our return on equity at around 20% is excellent. Capital improved to 1.87x and remains comfortably above our targets. This leaves us with valuable flexibility to support growth alongside active capital management. In November, we announced our first buyback in several years and we wasted no time in getting started through late December. The final dividend of $0.78 takes a full year dividend to $1.09, which is a 50% payout. It's clear the business is in fantastic health with strength across the board from growth to underwriting investments to capital. Moving on to Slide 5. This is a simple summary of our progress in recent years. It's been roughly 4 years since we refreshed our strategy in late 2021. Since then, we've executed well, driving steady improvement in both financial performance and also the key metrics we track around people, culture and customer. This year, we've extended a strong and consistent track record of growth. Underlying organic volume growth continued at 7%, and we have a business that can confidently sustain this trend. We have strong messages on catastrophe costs and reserving. This year, catastrophe costs were $400 million below budget, marking the third consecutive year below allowance. These have not been light cat years by any means, with '23 and '24 amongst the costliest years on record for the industry. And the $130 billion of insured losses in 2025 was only modestly below last year. I'd also remind you that these aggregate figures mask the fact that the insurance industry is picking up a greater share of industry losses as reinsurers have moved further away from the action. We had a favorable reserve development this year, and we've spoken about our confidence in more stable and predictable reserving outcomes. Piecing these elements together, the end outcome is a simple picture. Our combined operating ratio steadily improved, volatility is down and ROE is up. This is driving strong returns for shareholders. Our TSR is roughly double the local market since we launched our strategy, and we see great opportunity ahead. Before passing to Chris to unpack the results in more detail, for the next few moments, I want to take a step back and share how we're thinking about performance over the medium term. So turning to Slide 6. This is a summary of how we think about the industry outlook and the 5 medium-term aspirations since we have for QBE. The audience -- this audience will appreciate the increasing complexity in the world, which is resulting in a risk landscape for our customers, which is highly complex. Risk awareness is elevated and the role commercial P&C has to play has never been more important. With this complexity, the industry is needed to become more mature and sophisticated, but ultimately, those in the industry, you truly understand risk, plus of scale, diversified operations are going to be in the driver's seat over coming years. We have great breadth and diversification in the business with capacity to deploy across all our key markets, spanning insurance and reinsurance. I do think this point is underappreciated, but is going to become more obvious and valued asset for QBE as we continue to execute around these aspirations. Delivering durable growth while sustaining strong margins and returns. So turning to Slide 7 on growth. The great breadth in our portfolio means there will always be classes we can grow. Looking out over the medium term, there are 3 overarching pillars to how we think about growth. Firstly, we remain in supportive market conditions. While rates are softening in parts of the portfolio, this is coming from a starting point of very strong rate adequacy. As we look to 2026, over 90% of our portfolio is expected to be at or above rate adequacy, defined by the pricing we need to achieve target returns. This foundation of strong and broadly distributed profitability is an excellent starting point as we look to grow the business. This picture may not be present every year, though with a diversified business, we'll always have flexibility to navigate various product cycles. Touching on some of the structural opportunities over the coming decade. Many of the global investment megatrends on this graphic will give rise to new risks and in some cases, rapid growth in insurance value pools. We have broad expertise across most specialty and commercial lines with leading underwriters and strong relationships. It's hard for many in the market to match our capacity to deploy collaboratively across 3 divisions, multiple classes of business covering both insurance and reinsurance. We'll continue to work with our major trading partners to provide innovative solutions and position into these fastest-growing economic megatrends. I'll leave you with a handful of data points. We have a leading energy and renewables presence who truly shine when brokers are looking for innovation. Investment in clean energy will be substantial, resulting in insurance premiums in the tens of billions of dollars. We're finding our strong position in these segments dovetail nicely into the growing energy requirements supporting artificial intelligence. Alongside this, the construction of data centers will drive significant growth in premium across multiple classes over the next few years. And as the world continues to digitize, cybersecurity moves higher as a risk for companies of all sizes, while AI liability will be of increasing focus. Cyber premiums around $15 billion today are expected to increase towards $30 billion at the end of this decade. Growing mobility demands will result in more boats, planes and trucks, while infrastructure investments support growing and urbanizing populations will be substantial. So plenty of areas where premium growth will substantially outpace the general economy, and we're well placed to capture a sensible share in the context of a well-balanced portfolio. The final pillar speaks to some topical trends in the industry. Firstly, surrounding the structural increase in market facilitization. We have a leading portfolio solutions franchise, which has been around for roughly 2 decades. We've seen and participated in the complete journey of this burgeoning market and learned a lot along the way. Today, our Portfolio Solutions team manage about 20 different facilities, and we lead two of the world's largest. Facilitization is only going to increase as it represents a more efficient option for the customer and broker and if structured correctly, strong performance for the carrier. In and around each of the investment megatrends just touched on, there are facilities already being developed. And as a market leader, we'll get the first look. As more business gets facilitized, it will come at the expense of those without a strong market proposition or genuine underwriting expertise. This will ultimately consolidate capacity toward market leaders. Finally, on AI, we continue to build, deploy and partner to enhance many aspects of our business. AI will allow us to boost underwriter productivity, unlock sharper risk insights and become a more efficient and effective business. We have a significant amount of proprietary data and market insights, which have been built through market-leading franchises in operation for many decades. AI can help us to better unlock and leverage these data assets and further enhance our market position. So let's turn to Slide 8. This slide brings many of these points together, detailing our new medium-term outlook. Our financial outlook has been primarily based around a single year ahead with both premium growth and the combined ratio. With where we stand today, having restored performance and pivoted the business as an organization, our strategic focus is much longer dated. The quality of our earnings is substantially improved with better breadth, stability and visibility. Our planning is more medium term, and we organize ourselves around a much clearer view of value creation for the enterprise. So we want to start sharing some of that with you and begin translating our medium-term plans into our guidance. To get ahead of the obvious question, medium term for us here means the next 3 years. So starting with growth, we see a continuation of mid-single-digit GWP growth over the medium term. Where we can do better and deploy capital at strong returns, we'll always hold a preference to grow the business. Over the medium term, we see our Group ROE trending in the 15% plus range. This assumes an effective tax rate of around 25% and an investment return sustain in the 3% plus range, which is essentially what futures predict today. Underpinning the outlook is a view that combined ratios are fairly sustainable around current levels. We spoke in August about the breadth in our business with 50-plus sales, which aggregate up to around 14 underwriting pools. Each have different P&L characteristics, different claims drivers, different capital requirements and different dimensions across combined ratio and investment income. How effective we are as capital allocators will be a key driver of our performance as we look to deploy our capital to optimize risk-adjusted returns and drive value. With 2025 marking QBE's fourth consecutive double-digit ROE, on the right-hand side, you can see the extent to which we've driven compelling value for our shareholders. As we continue to execute over the medium term, we should be able to extend this picture where a 15% plus ROE profile will continue to deliver great value for shareholders. Before moving on, I want to emphasize that this is not signaling any relaxation of our focus on combined ratio. It will always be a key metric for QBE. Now ultimately, we manage the business to a view of return on equity, and the combined ratio is really an output of our portfolio mix. So moving to Slide 9. Having discussed growth and returns, this slide gives some color on how capital fits into the picture. We shared our capital allocation framework last year. It's relatively straightforward. We have an aspiration to grow the business, provided we can achieve adequate returns. All our pricing models and view of rate adequacy is calibrated to an ROE hurdle, which works out to roughly 1.5x our Weighted Average Cost of Capital. This is a hurdle, not a ceiling, which many parts of the portfolio are comfortably clearing. We just delivered an ROE of almost 20% and see returns holding over the hurdle over the medium term. We have a 40% to 60% dividend payout ratio, which should be highly dependable through market and economic cycles. And finally, we have additional levers to distribute surplus capital beyond the dividend as needed, as we recently highlighted with the buyback announcement. Had a small window in December to start buying before the close period and completed around $90 million of the total. I want to build a track record of following through on these announcements and moving through them with some pace. So looking ahead, the simple outlook of mid-single-digit growth alongside returns of 15% plus ROE suggests a very healthy picture for capital. We have ample flexibility to support growth and likely see ongoing surplus capital generation on top. To ensure we optimize returns, we'll look to return any surplus. This will be an annual assessment as we exit the year where we have full visibility of our current period profits and growth plans for the year ahead. The final message on this slide relates to alternative capital. We've historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost of capital and capital efficiency perspective. This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships. I'm going to stop here and pass to Chris to take you through the financials and should take a moment to welcome him this morning. As you know, we placed a great deal of emphasis on consistency and stability of management in recent years. We've been focused on building greater talent depth and genuine succession pathways. I'm proud that we've been able to announce Chris into his new role in such a quick time. He's a highly experienced and talented executive and having operated through a number of key roles for QBE in the past decade, will no doubt settle him well and become a great asset for us. So over to you, Chris. Christopher Killourhy: Thank you, Andrew, and good morning, everyone. It really is a privilege for me to be speaking for the first time today as Group CFO. As Andrew mentioned, I've been lucky enough to be with QBE for around 12 years now across actuarial leadership, divisional CFO roles and most recently leading QBE Re. Across those roles, 2 things have consistently stood out, the depth of our talent and the strength of our culture. And it's that foundation that I believe that underpins the performance we're sharing with you today. Turning first to Slide 11. 2025 was an excellent year. We exceeded plans and delivered QBE's strongest Return on Equity in many years. Gross written premium grew 7% to $24 billion, around 8% if we exclude crop and exit. The combined ratio improved to 91.9%. That's more than a better -- that's more than 1 point better than last year and comfortably ahead of our outlook of 92.5%. This result is underpinned by both prudent reserving and a continued focus on portfolio optimization. Investment income was around $1.6 billion, delivering a return of 4.9%. The net impact from ALM activities was again broadly neutral, and our tax rate for the year was 24%, modestly better than an actual tax rate of around 25%, and that's driven by the mix of our earnings tilting towards our North American tax group. Profit for the year was a record $2.1 billion. Earnings per share grew around 25% and our ROE has increased to 19.8%. Our capital position also remains very strong with a PCA multiple of 1.87. Our final dividend of AUD 0.78 takes the full-year dividend to AUD 1.09, up 25%. The payout ratio remains at 50%, a level we see as sustainable. Above this level, it's likely that we will continue to use buybacks to distribute surplus capital. We've also increased the franking rate of the final dividend to 30%, which we expect to maintain going forward. Turning now to Slide 12. Headline GWP growth of 7% exceeds our mid-single-digit outlook with underlying growth close to 8% if we exclude exits. This is a full 4 points higher than headline growth in 2024 and highlights the impressive momentum we continue to see across the business. Growth continues to be skewed to the Northern Hemisphere led by reinsurance, Accident and Health, portfolio solutions and targeted adjacencies in North America. Australia Pacific was broadly stable, but the story here is momentum, which improved through the second half with a return to ex-rate growth that we expect to continue into 2026. We entered 2025 with a clear set of initiatives to restore growth in ASPAC, including new partnerships, distribution improvements and a more dynamic approach to pricing. It's been great to see the outcome of execution as these actions gain traction. A brief comment on our crop business and its impact on Net Insurance Revenue. Crop GWP increased 11% to $4.3 billion. However, given our focus on portfolio optimization, Net Insurance Revenue actually declined by 6% over the period. This is because we've increased sessions to the federal reinsurance pool, materially reducing exposure to those states we regard as underperforming, including California and Texas. This does, however, weigh on Group Net Insurance Revenue growth in 2025. But in 2026, I'm pleased to say that Group GWP growth and Net Insurance Revenue growth should be much more closely aligned. Before moving on, it's worth remembering that our ex-rate growth here includes both volume and exposure adjustments. And these exposure adjustments play an important role in managing inflation. Our underwriters generally adjust on sums insured for property lines on wage rolls or turnover for workers' compensation and liability lines. And in the case of energy and marine lines, premiums often adjust off commodity prices. Turning to Slide 13 for a little more on the group's underwriting performance. Underwriting performance was excellent with a combined ratio of 91.9%. Catastrophe costs were around $750 million, which is well below allowance, but this is a pleasing outcome in a year where industry losses have been pegged at $130 billion, including a challenging year here in Australia and the devastating California wildfires. We shared catastrophe costs at our November update and losses have increased only modestly from this level. I do think that highlights the quality of the portfolio given the challenges observed here through the Australian summer. I'd also remind you that if we cast the mind back to the first half, we were comfortable with our catastrophe budget then in what was actually the most expensive first half on record for the insurance industry. Turning now [Audio Gap] to reserving. I do believe we're now starting to see the impact of our more prudent reserving strategy that Andrew and Inder have outlined over recent years. During 2025, we recognized a modest central estimate release of $40 million, and that's our first full year [Audio Gap] in several years driven by short-tail lines plus LMI and CTP [Audio Gap] while retaining prudence against more uncertain longer-tail lines. Our reserve strength and resilience has steadily improved over recent years, and I'm confident we're exiting 2025 with group reserves in the strongest position we've held for many years [Audio Gap] needed. Importantly, these charts also highlight the extent to which we're managing to multiple pricing cycles. This diversification provides a meaningful lever through which QBE can manage the overall underwriting cycle. This picture results in an overall rate increase of around 1% for the year. If we exclude Property business and Lloyd's, the rate increase is actually closer to 4%, which have been fairly steady throughout the year. Premium rate adequacy remains comfortably in excess of targets across the group, and as Andrew touched on, is broadly distributed across the business as we look to 2026. The expense ratio was 12.4%, while absorbing an elevated investment envelope of around $300 million. These investments are supporting modernization, including the migration of Australia Pacific portfolios onto our new cloud-based Guidewire platform. Importantly, expense growth has moderated meaningfully now at 5% from closer to 10% over the past few periods as we're starting to drive greater efficiencies. Highlighted another way, in 2025, headline GWP growth was 7%, which contrasts favorably with a headcount reduction of 1% over the same period. Efficiency, along with capital allocation is going to be a major focus for me, and we've got a meaningful opportunity as we drive greater benefits from recent investments embed the deployment of AI and work ruthlessly to eradicate process inefficiency. Looking ahead, we expect an expense ratio of around 12% in 2026 and for that to guide lower over the medium term. Turning now to Slide 14 with some more information on the performance of each of our divisions. Pleasingly, all 3 divisions have delivered margin expansion. Under Julie's leadership, North America improved by over 1 point despite pressure in Accident & Health and Aviation. Starting with our crop business, this business delivered a result of 88%. That's our strongest performance in 7 years. The positive performance reflects in part the early benefits of the strategic overhaul we've highlighted throughout the year. We reset our leadership team, recalibrated our utilization of the federal fund and repositioned our private products portfolio. Further benefit from these actions is anticipated in 2026. Alongside the benefits from internal actions, the portfolio was supported by better-than-average yields in a number of our key Midwest states, including the Dakotas, Iowa, Illinois, and Nebraska. Our Commercial Lines business in North America has also performed well. However, as flagged earlier, our specialty business has been impacted by claims activity in A&H and Aviation, resulting in a combined operating ratio of over 100% for our U.S. specialty business. I'd like to say some more on Accident & Health. This is an excellent business in a growing sector of the economy with strong market position, good track record and a highly attractive through-cycle return on capital. We write close to $1 billion in premium. And this year, we did see a lift in claims severity on account of rising treatment costs, medical advancements and the demand for new drugs. The team has responded quickly through rate, policy terms, and attachment points. Around 70% of the book renews at 1 January, and we achieved a rate increase north of 20% in addition to tightening terms. We'll continue to monitor loss trend, and we'll take whatever action necessary to return this book to profitability. Moving now to International. It's been another year of impressive performance for Jason's business with growth across all segments and a combined ratio of 88.5%. We did benefit from cat running below allowance, which offset some reserve strengthening in certain liability and marine portfolios as called out at the half. Given 2 of our more cycle-exposed segments, namely Lloyd's and Reinsurance, reside in International, it's sensible to say a little more on rate here. Rate for International was fairly flat for the year, where our U.K., Europe and reinsurance businesses saw rates in the low to mid-single digits, this was partly offset by some softening in our Lloyd's portfolio. Putting this in some context, however, since 2018, our Lloyd's business has benefited from cumulative rate change to 2025 of around 60%. This contrasts with the rate reduction of around 3% at the 1/1 renewals last month. Similarly, for QBE Re, rates were down 1% at 1/1, where we renew over half the book, but that contrasts with cumulative rate increases of around 65% since 2017. We do see it as a positive that competition is largely restricted to rate, while discipline remains around terms and conditions. For both QBE Re and Lloyd's, terms and conditions, attachment points, how we selectively deploy capital year-on-year and how we leverage facultative reinsurance are frequently more important than rate when it comes to delivering performance. Finally, on Australia Pacific, SES business had an excellent year with the combined ratio improving significantly, supported by favorable reserve development across 15 of our 20 sales, along with easing inflation. The impressive performance is despite catastrophe costs running modestly over budget in what we know was an active catastrophe year. Overall, rate increases tracked in the low single digits, fairly stable on what we reported at the half year. And looking ahead, we'll benefit from substantial CTP rate increases put through in recent months, including around 15% in New South Wales. Turning now to our investment results on Slide 15. Our investment portfolio delivered another record result with income of around $1.63 billion, representing a return of around 4.9%. Risk assets returned almost 10%, while fixed income yields exited the year at approximately 3.7%. And for reference, futures markets currently imply the fixed income yield will exit 2026 at around 3.8%. Investment FUM increased by 17% this year, with roughly 1/3 of that attributable to the weakening U.S. dollar. Our assets and liabilities are, however, well insulated from FX. And while funds under management have increased, so too have our claims reserves. Similarly, the increased prescribed capital amount associated with higher FUM and reserves is absorbed by an increase in available capital, resulting in negligible impact on the PCA multiple. There remains a modest FX gain of $24 million in the group P&L, and that's reported within the expenses and other line shown here in this table. Investment mix shifted slightly with risk assets of 15% of the portfolio. The OCI fixed income book now stands at around $3.5 billion or 12% of our overall core fixed income portfolio. Moving now to Slide 16 and an update on reinsurance. We achieved another strong and importantly, sustainable reinsurance outcome. Our diversification by region and class of business means we have a highly sought-after proposition in the market. Given the support of our strong reinsurer relationships, we were again able to reduce the attachment point of our CAP program now to $250 million. That's a reduction of almost 40% in just 2 years. And this is at a time where in the market more generally, attachment points and terms and conditions are rarely moving. Ultimately, we see this as strong external validation of our approach to portfolio management and the initiatives we've executed to reduce problematic exposures. The lower cat retentions have allowed us to modestly reduce the cat budget to $1.13 billion, whilst maintaining sufficiency around the 80th percentile. Whilst the allowance has been trending lower, group property premiums have been fairly stable. And the chart here summarizes catastrophe experience for our North American division and helps illustrate the improvements in our catastrophe portfolio. You may recall that historically, this division had driven much of our cat volatility. It's a simple picture, highlighting the impact of portfolio remediation led by Peter and Julie, including the exit of multiple programs, the middle market business and our consumer portfolios. Despite these exits, our share of regional property premium is down only modestly in contrast to a much more significant fall in our share of property losses. Finally, on reinsurance, I did want to expand on Andrew's earlier comments about alternative capital. Following the launch of QB Re's first Cat Bonds in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity whilst also reducing our overall cost of capital. We also launched the casualty sidecar on the QB Re casualty portfolio. As you know, you can think of the mechanics of the sidecar is similar to that of a quota share. And we've effectively quota shared around 1/3 of the casualty reinsurance portfolio for the 2025 underwriting year. In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk and ultimately support more capital-efficient growth. These are early transactions as we build our profile in these markets, but I do see this space as important as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns. Turning now to my final slide, Slide 17. I'm fortunate to be inheriting a balance sheet in excellent health. We received credit rating upgrades from both S&P and Fitch moving to AA- for the first time. The year-end PCA multiple has increased to 1.87. And following payment of the final dividend and adjusting for the buyback, the pro forma PCA reduces to 1.73. Alongside our 50% payout ratio, the buyback brings our total shareholder distributions to around 65% of this year's profits. And turning finally to funding. We retired our Tier 1 notes effectively replacing this funding with Tier 2 issuance. This reduces our cost of capital and leaves us with significant flexibility to engage these markets opportunistically if we need to in the future. This does mean that our debt to capital increased by around 4 points to 24%, but we expect gearing will glide back toward the middle of our target range over the medium term. It's been a pleasure to have the opportunity to present what I believe are a very positive set of results today. But before passing back to Andrew, I wanted to briefly touch on a small transaction we announced earlier in the day. We've agreed terms to sell and exit our global trade credit and surety business, chiefly composed of our Australian and U.K. trade credit operations. While this business has performed well over an extended period underpinned by an excellent team, we recognize its leverage to macroeconomic settings. The exit will allow us to recycle capital into our core focus areas where we see a greater opportunity for long-term growth. Total premiums under consideration around $200 million, and we're planning to close later in the year. The modest upfront proceeds and capital release will add to today's messages around capital strength. I'll pause here and hand back to Andrew. Andrew Horton: Thanks, Chris. We gave our 2026 outlook back in November, and there's no change today. We see growth continuing in the mid-single digits and a combined ratio of around 92.5%. We expect the pace of growth will sustain over the medium term and see a solid 15% plus outlook for ROE. We've included a quick bridge here of our 2025 underwriting result to this year's guidance of 92.5%. I appreciate many will adjust our reported result of 91.9% for the favorable catastrophe experience and this leaves you in the early 94% range. Consistent with what we flagged in November, there were 3 categories driving the bridge to our outlook. Firstly, reinsurance spend and our cat budget. We achieved quite significant savings on the new program and our cat budget will be a touch lower year-over-year. Secondly, on expenses, we had an expense ratio of around 12.4% this year and should be able to land at 12% or better in 2026. And finally, on ex-cat claims. We see support from pricing initiatives. Chris spoke to the substantive 20-plus increase at 1/1 in A&H. While small, our U.S. Aviation portfolio recently saw rate increases of over 40% for the large airline segment. And closer to home, we've now put through mid-teen increases in New South Wales CTP. Where there's claims activity the industry is showing discipline and pushing for rate. Our performance management agenda has plenty of remaining upside, particularly as we work through remaining underperforming cells. And finally, we've spoken about the elevated level of large claim costs where we expect some normalization. Through the recent reinsurance renewal, we're also able to lower the retention for our risk excess of loss cover. The coverage were generally attached for non-cat large claims of $50 million previously and in many instances, that is now just $25 million. This will help manage large claim volatility. So I hope that gives you a bit more clarity on how we're seeing things into 2026. We'll hold our usual first quarter update alongside our AGM on May 8. Before wrapping up, I do want to thank our 13,000 people for their contribution to these outstanding results, which we can all be proud of. With that, I want to thank you for joining us. And before passing to the operator, I want to remind you, we'll be taking just 2 questions per analyst. Thank you once again. Operator: [Operator Instructions] Our first question comes from the line of Andrew Buncombe with Macquarie. Andrew Buncombe: Congratulations on a great result. Just the first one for me. In previous years, there's been some surprise around how you pay out the first half dividend, just to set us off on the right track for next year. Can you just remind everybody how you think about the payout in the first half results for dividends? Andrew Horton: Yes, exactly. I think we're paying it, Andrew, on a 1/3, 2/3 basis. I was just getting confirmation before I made that comment. So we're just seeing 1/3, 2/3 rather than 50% of the first half profit. And that sort of takes out the volatility. So we look at 1/3 of where we're forecasting to be at the end of the year rather than 50% of where we are at the half year. Andrew Buncombe: Excellent. And then the other one from me was just can you remind us whether there's any benefit to the FY '26 combined ratio from the tail of any of the roll-off of the North American portfolio, the noncore portfolios? Andrew Horton: No. So we're expecting not to talk about the roll-off of the North American book anymore. It's just an all-inclusive number. So no expected benefit, no expected negativity from it. It's relatively small at this point in time, so we can absorb it within the North American numbers. Andrew Buncombe: My congratulations again. Andrew Horton: Thanks, Andrew. Operator: Our next question comes from the line of Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the casualty sidecar? I think you mentioned reinsuring about 1/3 of the risk. But can you remind us the dollar figures involved? Because I thought this sounded relatively meaningful. Andrew Horton: Yes. Chris, can I hand to you as you were running that business when we did it. Christopher Killourhy: Sure. I mean the size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get. It's roughly -- the ratio is roughly sort of 1:3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up and we bring more years in? Andrei Stadnik: For my second question, you've spoken a lot about all facilities and how you've been growing that. Can you talk a little bit more maybe about some of the efficiency benefits? Are you seeing anything on the cost there, particularly in the context where there's some really heavy criticism about the cost of operating in the Lloyd's market and how long they're taking to replatform. So the way you run a facility, is that a way to maybe help with that? Andrew Horton: Yes. So I mean, the great beauty about them is the facilities are both Lloyd's and some that are non-Lloyd's. From our point of view, we write about $1.5 billion of premium with a group of around 20 people. So our own costs of doing it are low. For brokers, it's very efficient for them because they have a preplaced amount, so they don't need to open broke that amount within the facility. So the brokers costs go down, and they pass some of that on to the clients or some cost to the clients. So the clients benefit from a lower price. The brokers have lower costs, and we have relatively low cost to actually write it. So generally, it works out well for the buyer of insurance, the intermediary and ourselves. And that's why I believe these are things that are going to stay. The market did have a facilitization 25, 30 years ago. And I don't think there was that balance of dividing up the economic benefit, particularly well. And therefore, they generally collapsed in the late 90s. These are much larger, much more structural and the client and buyer benefits quite a lot. Operator: Our next question comes from the line of Kieren Chidgey with UBS. Kieren Chidgey: Andrew and Chris, just first question on the North American combined ratio detail. you've provided today on Slide 14, just sort of 97.7% at a divisional level, obviously, including crop. And I think you're flagging a profit in noncore this period. So it does imply the core business, excluding crop and that noncore is well into the 100% level. And I appreciate Accident & Health, you've already flagged as an issue in aviation, but just keen if you can give us an idea around how the rest of the U.S. business was tracking last year ex those 2 areas, particularly given it was a benign [ cat year ] and it looks like you had a bit of PYD support there as well. Andrew Horton: Yes. So I have a go at starting on that. So as it breaks down into crop, commercial and specialty, the crop business obviously had a very good year as we've talked about. The commercial also had a good year. That's broken down between the property programs, which not surprisingly performed well. You made the comment about having a few [ cat ] percentage of losses also dropped. So the activity we've taken to rebound that portfolio has worked well. A commercial casualty within that business was also good, a bit of stress in workers' comp in that division. But overall, the commercial performed well. So the challenge, I think, as Chris just mentioned, was almost all in the specialty and had a combination of factors. It has the A&H book, does have aviation, which had 1 or 2 large losses. We did pick up some prior year negative in transaction liability, which the market has recognized in the U.S., and we've seen rate increase quite considerably in transaction liability, particularly in the U.S. on the back of it. And 1 or 2 of the financial lines programs did not perform well. So you're right. I think the overall combined ratio, excluding crop, is close to 100% year-on-year, but we see the potential improvement in the A&H. We think we're on top of the transaction liability in the market moving. Financial lines programs have either dropped or changed. So we see that as a positive, although it's negative in 2025, positive for the potential performance of the business in 2026. Kieren Chidgey: Andrew, the ex rate growth in the U.S. in the year ahead, sort of outside obviously, the repricing in A&H and aviation, are you actually growing in those specialty areas have been quite weak in the past year? Andrew Horton: So I think that's a great question. I don't think there'll be any ex rate growth, particularly in A&H. We'll probably be looking at the rate and ensuring we've got the right clients and the right portfolio. I think there will be some extra growth in aviation. We've been working on that team for a number of years now. It's a great team. So we do want to build on that. And then within the U.S., most other lines will be looking for ex rate growth in 2026. Kieren Chidgey: My second question is just on reinsurance you flagging significant reinsurance savings in the year ahead, I guess, not out of line with sort of double-digit renewal reductions we've heard sort of globally at 1 January, but there's quite a bit that goes on in your reinsurance line with the crop quota share and the like. Can you give us a better feel for how much cat reinsurance spend is and roughly how meaningful this rate reduction on the cat cover is into 2026. I know it's complicated as well with some of the reinsurance transactions, Chris has probably talked about earlier. Andrew Horton: Yes, it's not going to be an easy one to answer on this call. We may have to come back to it. And as you say, we saw the reductions in the property cat reinsurance, which is in line with what people have been talking about. And it seems to vary between 10% and 20% depending on who you talk to and whether you've changed your retention or not. So we're definitely in the mid-teens in terms of price savings on the cat reinsurance. I think we'll have to come back to you on the mix because you're right, there's some in our reinsurance spend. There's always going to be some complexity of how much we reinsure in the crop world, and we're looking at how do we balance what we retain and what we reinsure. And we do this reinsurance to the federal funds in the U.S., but we also buy some external reinsurance. And if we're comfortable about the crop performance, we may lower our external reinsurance. It's not a simple one to work out exactly what percentage of our gross premiums we're going to reinsure out. Chris, I don't know if you have a better answer than that, but we may need to come back to you and give you a bit more depth on that outside this call. Christopher Killourhy: Yes. I think on the breakdown, we can come back with more detail. I think to Andrew's point that we hugely value the relationships we have with our reinsurers. So we don't want to go into too much of exactly where we got to on the final negotiation. But to Andrew's point, we see the -- you'd have seen ranges between 15% to 20%, and we'd like to think we came out towards the better side of that. But I think most meaningfully for us is the fact that we're able to secure the reduction in attachment point and also the cat bond we placed this year has just helped us a little bit with bringing down the overall cost of the program. Kieren Chidgey: Okay. You can't sort of give us a rough feel for that combined cat budget reinsurance building block on your core waterfall, how you're viewing that from a materiality point of view next year? You've been quite clear on the expense ratio improvement. Andrew Horton: Yes. Well, on the waterfall, it's obviously not coming from crop. It's coming from the cat mainly because that is the one where we're seeing rate reductions. I don't know, we obviously give it in size on the waterfall. So let's come back to you and we can come up something on that. Christopher Killourhy: It's approaching a point improvement, maybe in the region of 80 basis points for both the cat, the combined benefit of the reduction in the cat allowance and also the reduction in the cost of the program. So in the aggregate, it's around about 80 basis points. Operator: Our next question comes from the line of Julian Braganza with Goldman Sachs. Julian Braganza: Just the first one, just looking at your initial estimate of ultimate claims for 2025. You sort of alluded to that. It's looking very strong and improved materially just over the last few years, particularly from 2024. Just want to understand, one, how much of that improvement is due to mix versus resilience? What are your expectations here for leases over the medium term? And also just what's baked in your ROE guidance for reserve releases as well over the medium term? That's the first question. Andrew Horton: So I mean part of it is what we've been talking about in a number of years of ensuring we are reserving well for claims, especially medium and long-term claims, and we do think that's building up, which is a positive sign for us. I don't know whether you've got anything else to add to. Christopher Killourhy: Yes. I mean I think in terms of as we look forward, we're not sort of factoring anything in specifically for reserve releases in the -- in our guidance. But if you -- exactly to Andrew's point, if we just think of the math that we're holding on to long tail -- on our long tail portfolio, we're holding on to the loss ratios for a period of 3 years. So by definition, you would expect that to all things being equal to translate into some releases, but we haven't factored that explicitly into the guidance we've given today. Julian Braganza: Okay. And just to clarify as well, your ROE guidance assumes 80% POA on the cat budget similar to what you've structured this year and last year? Just the clarification. Andrew Horton: No, definitely Yes. Julian Braganza: Awesome. Okay. And then just a second question. In terms of just your cat loading, 5% to 6% of NEP, is there an opportunity to bring that down further as you think about derisking your business from a cat perspective, look at some of your global peers, they're around the low single-digit mark. We've seen your MERs come off. We've seen noncore losses run off as well. So just wondering how you're thinking about that over the medium term? Andrew Horton: Yes, I don't think we necessarily think about lowering it. What we've spent a reasonable amount of time over the past few years was taking out the cat losses, which were too large. In other words, it wasn't in good balance. So I think writing property business in catastrophe zones is fine as long as you're in control of the balance of it, you don't have too much of it, you're comfortable with the reinsurance program you have, and you keep back testing that against various catastrophic losses that you haven't got an outsized share. So we haven't really thought in bringing it down to a lower level. And while it delivers a good ROE and we can cope with that volatility within the rest of the book. We have not set ourselves a target of getting the 5% to 6% down to 4% to 5% to 3% to 4%. So we actually quite like it at the pricing it is, complements everything else we do. It makes us important to brokers and clients when we can do both. So no, we're not thinking of lowering it. Operator: Our next question comes from the line of Nigel Pittaway with Citi. Nigel Pittaway: First of all, a question on growth. I mean, Andrew, you mentioned that, obviously, at the moment, you're still seeing supportive market conditions with competition confined to rates and where necessary, people are disciplined in pushing for rate. I mean do you see any risk to that? And then in that context, do you expect your sort of GWP growth in '26 to be in similar areas to '25, obviously, taking into account the fact you've said there'll be no unit growth in A&H and a bit of pickup in growth in Australia. Andrew Horton: So I think it's a great point. So I feel comfortable in the medium term of looking at the growth. So 2026, definitely, with the breadth of the book and the support we're getting in pricing and the areas we're focusing on, feel pretty comfortable about that. We do believe QBE Re and the portfolio solutions and cyber will continue to grow into 2026, and those were 3 good growth areas for us in 2025. We're trying to think of other areas. There are new areas, and we touched on earlier on about as renewables going to grow or the energy world going to grow and data centers, a lot of talk about insurance and data centers, and I'm sure we'll get a share of that. So I feel pretty comfortable about the 2026 growth. We're also trying to balance it of not putting too much stress into the system, and I've talked about this before, it growing mid-single digit is not trying to overstress us. We're not forced into growth in any way, shape or form because fundamentally, margin is by far the most important thing. And we're trying to get this margin under as much control as possible and manage the volatility around that margin. So yes, I feel pretty good about 2026 where the rating environment is. Just as a touch point, rates on Jan 1, where we write a reasonable amount of the international business virtually in line -- almost exactly in line with where we thought they were going to be. So we haven't seen anything in the first 1.5 months that takes us away from this potential growth for 2026. Nigel Pittaway: And then I mean in terms of the rate rises and terms and condition changes you've put through in A&H, I mean at 3Q, you sounded pretty confident competitors were going to follow suit. I mean the latest intelligence is that that's what you've done is pretty much in line with the market? Or have you been sort of stricter than the rest of the market in your reaction to the losses that occurred this year? Andrew Horton: I think, Nigel, we're in line with the market. As you say, there's been a lot of talk about this. So that's a good thing because it means the market needs to resolve it and it's obviously nothing unique to us, and it's much easier to resolve when the market is accepting the issue rather than we're the only ones who think we need a rate of x and the market is happy with half x or 75% of x. So it's definitely a market-wide issue and numbers are similar. I'm sure we're going to find some people who are further ahead of it, and some people aren't as up speed in it, and the portfolio is going to vary a bit. But fundamentally, I feel good that it's a market-wide issue and rate is holding. Operator: [Operator Instructions] Our next question comes from the line of Siddharth with JPMorgan. Siddharth Parameswaran: Couple of questions. Just firstly, on the ex-cat claims ratio bridge that you've flagged the improvement that you're flagging from '25 into '26. I was just hoping you could help us understand what's happening on the inflation versus rate side. In terms of what I saw in the fourth quarter, it seemed like rates were slightly negative, and I know you're flagging some rate increases since 1 Jan, but just wanted to get a perspective, one would think that six months ago, you flagged that rate was behind inflation and rate has got lower. So just keen to make sure that we understand where that improvement is coming from? Andrew Horton: Yes. I mean if we just do it at a completely macro level, I think the rate increase across the whole portfolio in '26 is going to be a low number. And what we're planning for is inflation being 2 or 3 points higher than that. So we definitely have that. And that means if we did nothing and just renewed everything and nothing actually changed, margin would potentially shrink. But that's not what we'll be doing. And some of the rate increases built into the exposure you charge anyway. So the rate is always a bit of a -- this is a headline premium adjustment as opposed to that inflation being built into the exposure on which you charge the same rate. So it's a very simple number. We're changing the portfolio on the back of it. You try and focus not surprising on core clients that have a better, better rating and you drop the ones that are worse in an environment where you potentially are being squeezed. That could be property or A&H and therefore, you can end up with a similar outturn despite apparently having this difference between inflation and rate. The other thing I'd say is inflation is always an estimate, and generally, you don't really know what it's going to be like until a few years down the track while rate is what it is, and it's just purely based on a premium number. Christopher Killourhy: I think another point I'd add. I mean, Andrew mentioned earlier about we see circa 90% of our portfolio as being above adequate. And actually, it's interesting when we look at rate movements that the 10% of the portfolio that, therefore, is inadequate is where we're still seeing rate strengthening come through. So I think it again goes to evidence that the market is still behaving pretty rationally. Siddharth Parameswaran: I guess the question was just around the 2 components. What is your view on rate and what is your view on inflation? Andrew Horton: Yes. So I'd say in total, the view on the rate is, it's going to net to a small single digit, but the spread is obviously large because we talked about A&H getting 20% plus, and they are going to be 1 or 2 that go negative. And then the inflation assumptions are going to average to 3%, but some of them are going to have inflation of 10% to 20%, and some are going to have none. And overall, net-net-net, those are the 2 numbers. But there's so much more to the group than those 2 numbers. So I'm not sure what to do with them because I don't see 1:3 meaning margins should go down by 2 because that just assumes we don't do anything, and we will be. And that's what Chris was trying to pick up on. When you got it well rated, you're relatively comfortable to continue with it. And when you -- it's not well rated, you're not. Operator: Our next question comes from the line of Simon Fitzgerald with Jefferies. Simon Fitzgerald: Just quickly, Andrew, you talked about rate adequacy. I just wanted to explore that a little bit more in the context of property. I recall that you said, I think, at the half that property could fall by 25% in terms of rate adequacy before you would lose interest in that segment. In some pockets of property, property core, for example, we are getting a little bit close to that. And I noticed in terms of the graph on Page 21, property forms 33% of GWP. I was just hoping you could maybe break that down a little bit more in terms of the ones that are exposed to that sort of 10% to 15% as you described or more and ones that aren't. Maybe you could just sort of describe that property portfolio in a little bit more detail. Andrew Horton: Yes. I haven't necessarily got the quantum of it all, but I'll have a go at it. So we write catastrophically exposed property and non-cat exposed property. So what we're finding is the specifically U.S. cat exposed property is taking the largest decrease. So that's starting with the largest decrease or planned was in 2025, probably will be in 2026. And that's often what's driven the reinsurance, the cat reinsurance. It's been the reduction in the U.S. property cat reinsurance going down. Elsewhere in the world, it is less than that. Going to -- if your non-cat European property, of which we write a reasonable amount, we're probably seeing no rate decrease, rates holding and it's fine. So you've got that big spread. So within the 30-odd percent, there is a big spread between the U.S. cat and, let's say, European non-cat. And everything else is plotted in between on that. So of course, when we're looking at rate adequacy, we're trying to break it down by portfolio, by country, by type and determining what is rate adequate and what isn't. So I'd expect this year, potentially the most stress could be the U.S. cat. That said, of course, it was the one that went up the most in the 4 years prior to it. So its rate adequacy went up over shot. I mean this is what the insurance industry can do with a volatile classes. We find myself inadequate, we overshoot and then we start coming back to where we could have been the whole time if we've known exactly what everything was going to happen. So that's why we tried to show these cumulative rate change charts, just to remind people where we've actually come from in each of the lines business. I'm not sure I've answered it as precisely as you would like. What I'm trying to flag is we've got a lot of different types of property geographically cat, non-cat within the portfolio and trying to manage those to deliver the best risk-adjusted return. Again... Simon Fitzgerald: Maybe a question -- just in regards to the change in the reinsurance structures and so forth, can you just give us a little bit of guidance in terms of '26 about how we should be thinking about that reinsurance expenses line and will it be broadly similar to '25 or what sort of decrease should we expect given the new change? Andrew Horton: Yes. I mean the property cat reinsurance is definitely coming down. And we just -- I think we were saying earlier on, we probably need to do some analysis of that and share that with you because it's quite hard to determine what the net position of that reinsurance line is going to be based on it having property and casualty and some quota share and crop in it. And so we need to do that rather than me try and estimate it now. So let's come back to you on that. Operator: Our next question comes from the line of Freya Kong with Bank of America. Freya Kong: Providing the bridge to 92.5% for this year. Just as a follow-up to Sid's question about 1% rate versus 3% inflation. Are there any business mix shifts that are being assumed in getting us to 92.5%, i.e., shift towards lower combined ratio lines next year? Andrew Horton: Yes. I mean, obviously, when we were talking earlier on about trying to grow the QBE Re and QBS and cyber, potentially those at this point in time have good margin, and therefore, we're trying to push those. So that's it -- I mean, that's a really important point that we're forever rebalancing the portfolio, and therefore, it's not stable. So the math just doesn't work that we just take these 2 numbers and assume everything is going to come down on that basis because we're not at all sitting in a consistent position year-on-year. So we're doing exactly what you're suggesting of -- and it's pretty obvious, isn't it, remediate the ones which are under pressure and really grow the ones where the margins are good. And that's what I think we're getting better at and why the results are improving as we've done more and more of that. And what we've done is let go some of the businesses that historically gave us combined ratios greater than 100% and also drove quite a lot of the volatility around it. So that's why we feel comfortable. So in that ex cat element, there is a reasonable amount of rebalancing and is also looking at some of the portfolios that truly need to change and how do we change those and that can be re-underwriting, going back to our core shrinking, there could be a number of things in it. That's why we feel comfortable about it. Sorry, Chris. Christopher Killourhy: I think it's a great question because I think one of the things we do want to be really respected for is how we move capital between portfolios across cycles. And we just see that as good underwriting, good sort of running an insurance company. So absolutely, there will be sort of change in the portfolio in terms of rebalancing the business we see as being more adequate or performing better. What I would say, however, is there is sort of a fundamental mix shift in terms of, for example, increasing our weighting to property cat because it runs at a lower combined ratio, that would then bring in some additional volatility. So we are -- the mix will change as we just look to keep rebalancing towards the business we see is more adequate, but we're certainly not relying on a shift to sort of more volatile business to bring the combined ratio down. Freya Kong: Okay. Great. That's really helpful. And can I just ask on Accident & Health, what's the impact been on retention in the book, given you push through 20-plus percent price increases? And is this still an area for growth in the medium term, assuming remediation this year go as well? Andrew Horton: So the latter part, definitely. I mean we've been involved in this group or the team since 2001, and I think we acquired the company in the late -- around 2010. So it's been with us a long time. They've got a lot of tenure. They manage all sorts of different types of events that have taken place. So definitely want to grow it. I think in the short term, we've don't really want to grow too much this year. We've been able to retain almost everything we wanted to retain. I think that just shows stress in the market, the fact that people are shopping around and struggling to get a move and have come back to us on the back of trying to do that. It's generally a relatively low retention business. So these companies do move on a regular basis. So I think the average retention normally is around 70%, which is considerably lower than our average, which is in the 80s on average. So generally, it is a shopping around business, and I think more has taken place this year. And therefore, we've been able to retain everything we wanted to retain. Christopher Killourhy: Yes. And I think we do see, as Andrew says, this is a portfolio that, I guess, does have lower in general retention rates than we'd see elsewhere. And one of the things we do all see generally over time is that the renewed business tends to perform better than the new business because it does sort of take that one cycle just to sort of harvest the business. And so there is an element of while it was growing, you will just get a little bit of strain in there. So that's part of what we're just managing going forward as well. Operator: Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Andrew for closing remarks. Andrew Horton: I'd just like to thank everyone for joining us today, and I'm sure we're going to be seeing a number of you over the next week or two. Thank you very much.
Marcin Jablczynski: Good afternoon, ladies and gentlemen. Welcome at our conference with the presentation of our financial results for the fourth quarter and the entire 2025 of Pekao S.A.. We have Cezary Stypulkowski, CEO; Dagmara Wojnar, Vice President, responsible for Finance Division; Marcin Gadomski, responsible for Risk Management Division; Lukasz Januszewski, Vice President responsible for Corporate Banking Division; and Ernest Pytlarczyk, Chief Economist of the bank. Over to the CEO. Cezary Stypulkowski: We've already had the rehearsal of this conference with the media. So probably things will go smoothly, and we might speed up a little bit. I would say that what characterized the entire 2025 and actually we treat it as such an achievement of the bank that's acceleration of credit action and strengthening of the importance of commissions profit. I have already said repeatedly, we used the opportunity that we had built up until 2024 when other banks were under strong pressure. But our market shares were flat. Now they budged a little bit, not sold, but budged a little bit. The second thing is the result on commissions with all the caveats that we need to clarify, probably you will have some questions regarding these, and we will do our best to answer them. But that result is significantly higher corresponding to the declarations that we announced here in this room back in April. Its structure is already encouraging, although it's not so that we have resolved all problems. Nevertheless, we have steadily retained all the necessary ratios. The most important thing is probably the proportions of the entire aggregate. The result is plus PLN 7 billion return on equity more than decent and covering the cost of capital, probably one of not too numerous years where the banking sector was able to cover the cost of capital. And it seems to me that the public awareness is not yet widespread regarding the need for the banks to rebuild the capital. And the demand seems to be disappearing rather than growing. There were some issues related to cost of risks. So probably you will have questions on that. NPL, where we stumbled a little bit on those 5%. And consequently, we restricted dividend flexibility. Now it's under full control. Here, you can see the key areas with our strong dynamics. And this is exactly in those segments in which we wanted to achieve high growth because these are products with higher margins. We've always been a strong bank among large corpo segment, also closely linked to the public segment in Poland. We are now rebuilding our position and the numbers are very attractive. Now you can see a slide with a greater granulation of our profit and the key drivers that had a positive impact, particularly the sale of cash loans grew. It's not so that we had a revolution of our market share, but the bank historically wants to be a deposit-oriented bank rather than loan-based one. But I must say that things are relatively well. We are very happy about the rebound in micro. It was a certain surprise to me when I joined the bank that the micro segment was relatively weak given the 500 branches of the bank across the country. It's not so simple because micro is strongly determined by digitization where we lagged behind. Actually, we do lag behind still. But things are on track, and we are happy about the growth -- relatively happy about the growth. The gap, digital mobile gap that the bank had as the lack of investments during the years is now being made up for. We have Lukasz with us who can give some credibility to our entry and ambitions in the corporate segment because he's responsible for that. And in corporate banking, as I said, the bank had always been a major leader and both the ambitions to be the premier bond house in Poland consolidated in trusteeship services, our services are also developing and ForEx is just bread and butter following the general line of business development. And with regard to the strategy, we can say that all the elements are on track. We are above the targets. However, we should keep our detachment because we formulated our strategy under specific conditions in the first quarter last year with certain assumptions regarding the development of interest rates. The decrease is deeper than we had expected. But it is quite an achievement of the bank that we had managed to maintain interest margin. This is something that cannot be repeated, just to make things clear. But also from the perspective of the structure of our balance sheet and its components, that achievement has to be appreciated, both from the perspective of our treasury and business lines. I could say we have managed to manage that. That will probably be the good description. As I repeatedly stressed, cost-to-income ratio -- maybe if you follow my statements from my previous incarnations, I have always been obsessive about that. And Pekao, we have more leeway in this. But I believe we need to make up for the backlog resulting from the lack of investments in the past. We -- with decreasing interest rates, the figure can be at risk. But we assume that the process of technological revitalization of the bank will take some 3 years. Therefore, the flexibility at that stage will be greater. Current costs and also deferred depreciation. As for dividend, for years, the bank has been the postman delivering pensions regularly when others were unable to do so because they were bound by the rules of the supervisory authority. However, we paid out the dividend, and we don't want to change this more. We will do everything in our power to be able to pay the dividend in the range of 50%, 70%. There are a lot of elements that are structurally linked to our functioning within conglomerate structure. But we keep this track. Over to Marcin. Marcin Jablczynski: Maybe I will briefly announce something that we call decarbonization plan in line with the directive on sustainable reporting, that is transformation plan. It might be misleading. That's why we changed the name to decarbonization plan. For the years 2025 to 2027, we defined our assumptions for ESG. And environment, of course, is a major component, all environment-related issues. Now with -- in accordance with requirements, we published our plan, and we defined 2 major branches or 2 major components of our credit portfolio. That is the funding of energy sector and mortgage loans that are under this plan in terms of targets by 2030. We want to reduce intensity of emissions in those 2 portfolios by about 40%. We are talking about major growth in our plan. And the growth focus on renewable energies, gas-powered power plants. And also in this time horizon, we assume that some portion of funding of nuclear power plant will be there with a decreasing proportion of funding of fuel -- fossil fuel powered plants. This is also in line with energy efficiency of buildings. Here, our portfolio will be funding buildings that are energy efficient to a greater extent. We will also fund renovations aimed at reducing the consumption of energy. The entire document is published on our website. I really want to vent here. I already did that at the previous conference, but I want to stress very clearly our determination to make sure that the goals related to the broadly understood environmental aspects and social aspects. So here, the bank is determined to organize itself around those issues. The doubts that emerged not a long time ago, I talked with a representative of a foreign bank where a single e-mail was enough to cancel the whole problem. We are not in this camp. We will uphold our determination in this regard. But I would also like to share something I have already talked about, a certain excess of discussions about CSRD. I also asked our report to be divided into 2 parts. One is financial, including ESG. And the other part is only focused on ESG. And this is overdone. Of course, there is some thought behind it Omnibus addresses the matter to some extent. But I believe this is the best proof how much intellectual effort is being made to produce pages from 111 to almost 350 versus report on activities, which also includes certain ESG activities, which comprises 100 pages. I would like to see analysts willing to read that. That is the most advanced professional group. Have you read that on Page 207, there is a table with very few numbers. So my point is I'm just bearing my soul. That's my deep need to signal that there is too much form compared to the content. We can achieve a lot without getting engaged, involving people intellect of highly sophisticated individuals that produce material that only Andre is able to read. So I have this urge to express my view here. Now regarding how we organize ourselves, Well, it is with great humility that I have to admit, well, the bank has a lot to -- of catch-up to do in many areas, but there is some success. It has something to do with PZU and the ability to calibrate in a friendly matter these products means that, for example, with reference to mortgages on properties, we have quite a good product, which is quite well received on the market. And we are able to offer it in those 5 outlets that we have. And also binding our mortgage with the PZU product should, in fact, result in better sales. But it is not due to insurance that people go for mortgage, right? There will be perhaps some questions that already were answered in the previous conference. Now the CyberRescue, I could be biased here because this is a structure that was created in my other incarnation, if I can take the liberty to use that term. But the banking sector actually owes its customers some extra effort in terms of CyberRescue. Now in the past, I took part in many initiatives to sensitize customers. They were campaign awareness campaigns, social campaigns to that end. And in the structure of accelerator, the CyberRescue solutions have been developed and it's not just the issue of securities against cyber attacks on banks, but it's also a service that we have implemented and we are proliferating in our bank for individual customers whose goal is to arm our customers whenever they are faced with the cyber threat, not necessarily banking cyber threat to have a contact point. I'm not going to tell you stories. I remember when I, myself, was a victim of such an attack. I realized just how lonesome people are when they are undergoing this situation, CEO of the bank copes because they have people that can call, but an average customer finds it more difficult. That's why I decided to devote more time to it during our first conferences and customers due to GDPR or all the other wonders in the world have legible access to such solutions. And this is what banks can do and CyberRescue serves that purpose, and it's a hub that has competent people that can give some advice 24/7. It might not have to be perfect. It needs more investment perhaps, but the openness to this is meaningful. So it's not a question of 300,000 people giving consent vis-a-vis 5 million who haven't, right? We will have to reinforce the efforts here. We know that bank is behind in the area of digitalization and the self-service zone is something that will be spoken about again. Lukasz will speak about it mainly, but we have some progress here, systematic and inevitable. Most likely, it will be more visible towards the end of this year and next year. And we have an increase in customers in many aspects. Perhaps a few words about our 30% share in creating an infrastructure for family foundations. But what's most joyful to us is that an increasing number of our customers that have a slightly higher profile than those to our competitors are using our mobile banking app. And we have an increasing share in the products that should be sold digitally. Perhaps it's not yet up to our ambition, but it's growing. We might not be showing this, but for example, the idea of selling insurance products, which are perfect fit for this type of sales. So on the right-hand side, you will have a whole list of the solutions available. And, Lukasz, over to you. Lukasz Januszewski: Hello. A warm welcome. I had the pleasure to join the Management Board on the 1st of September. So over the next few slides, some information that I'm going to share with you. We will intertwine these facts with the corporate banking division that I'm responsible for. And then also with the division of Robert Sochacki, we cooperate very closely our areas intertwined to make sure that we are client-centric because the way we establish, report and build relationship varies between the 2 sectors, but the banking platform and the synergies that can be achieved, especially from the point of view of technology and product are really worth having a joint outlook on these issues. In 2 years' time, the bank will be 100 years old. So we know about banking. We know about products. But what we believe in and what we were betting on in 2025 is the knowledge of industries because in the corporate business and what customers are facing in a transformative economy, a growing economy like ours are a number of challenges. And in order to be able to find the right solutions, you just need to know your business. And that's where we're investing. We are going to ensure further on to make sure that our people other than main bankers also do understand the corporate businesses they deal with. And the enterprises, the sectoral specialization expertise is important. We can deliver this knowledge, this expertise and this discussion in various manners. We are talking sometimes about hundreds of millions of financing, but we will be having a different conversation when we're talking about several hundred thousands PLN or a few million PLN. But the problems remain the same. And the answer to those is digitization, webinars, making sure we can use the technology to be able to share and multiply the know-how and democratize this knowledge, we have made some investments to that end already. On the other hand, our local presence matters. We might not be the biggest country, but we are quite vast in terms of geography. So hence, our specialists are located in 74 corporate centers, which shows the scale of our operations. Thanks to that, we remain close to our customers. Now relationships will remain the foundation of our growth. And this is a strong pillar, I must say. We have achieved a significant increase in terms of customer acquisitions, both in SME and the mid-market sector. Now for the mid-market sector, we have customers with a turnover over PLN 50 million. And we have acquired 1,013 customers. That's the data from last year, which illustrates really well the fact that, well, customers like banking with Pekao SA, and they do want to cooperate with us. So the financial leg is very important in the growing economy. But on the other hand, what Cezary has spoken about room for improvement is digitization. And this has a few dimensions. First of all, our ambition is to grow faster than the market, and we have a 2-digit growth on the market. So we need to renew quite a lot of our portfolio in corporations every year and then new acquisitions are added on top of that. So the simplification of processes will be focusing on processes that have to do with financing. On the other hand, we need to be cautious in terms of cost generation. We don't want this to be head-in-head parallel to the growth of our employees. It's not just a question of cost, but it's also a question of quality. If we want to be the leader of understanding industry, we need to invest in our employees. It's very important. In 2025, we used AI, especially for the purpose of preparing meetings for our customers. And we have prepared advisers to face our customers during meetings. And we can see that this application of AI technologies is doing really well. On the other hand, we are also using quite important events. We take our logo, Bison logo, to the stock exchange, and we bring this idea closer to our entrepreneurs who are thinking, considering expansion, and we're bringing them closer to various methods of getting capital equity or getting financing. So there's a whole area of advisory services that we have spoken about. So the digitization that I wanted to refer to, it has this leading motto. Cezary speaks about this often, and that's the technological debt that we have in Pekao. We want to return it in the currency of time. We want to provide these constructive conversations about challenges. And we want to give it back to our customers to make sure that the relationship they have with the bank is convergent whenever we talk about important things such as development, expansion, diversifying exports, structuring their financing, et cetera. These are issues that entrepreneurs really want the bank to be able to talk to them about, not necessarily issues that you can deal with yourself via electronic banking or something else. So these are issues that we are going to be investing in strongly. Now economic transformation and enterprise transformation is also happening in the public sector, especially municipalities, communes, cities, agglomerations. And here, Pekao SA happens to be the leader in terms of this cooperation. So both the energy transformation and all the aspects that we have touched upon in the area of environment is something that we strongly support. So my speech has been a little bit generic so far. But on the other hand, well, 2025 kind of illustrates all that in the current growth of credit volumes, customers are responding really well to our proposals. We increased our market share, both in corporate and enterprise sector. Our market share has exceeded 15% also for large corporations. We have reached almost 14%. Like I said before, we have -- we acquired customers both in SME and mid sector. And what we wanted to share with you is something that you might have noted already is that our factoring company has reclaimed its leadership in the rank, thanks to PLN 100 billion turnover and the year-by-year growth is 21%. I wanted to stress that because it's not just a question of implementing the strategy that we perceived as comprehensive for our group because we put the factoring offer and the leasing offer under one umbrella, but this also has another dimension, and that is of addressing potential bottlenecks or challenges in the flow of payments or receivables. And we are really, really proud of reclaiming this #1 position here. On the other hand, our leasing has noted some growth as well. We are #5 still, but it had a 2-digit growth in volumes, which is good news to us. Volumes have also grown in the more granulated sectors and that is financing micro entrepreneurs, an area where we were undervalued before. And some selected transactions here in which our bank has had a significant role to play. This is a selection, and you will find us, I'm sure, in a majority of significant transactions from last year. Something that has had significant media coverage lately was the launch of a first since decades, Polish ferry on the seawaters, we've had quite a contribution to this. So from the point of view of enterprise banking, it's very important to stand on 2 legs, right, to have the large strategic players in your portfolio. But on the other hand, some of the SMEs. And we can see quite clearly that this allows us to see the flows in the economy. And at the end of the day, it also allows us to better assess the risk. Dagmara will be talking about our financial results more clearly. Other than the growth in assets, we are happy to see that our outcome also has 2-digit dynamic in terms of commissions. So the growth in acquisitions plus the focus on customer relationships translates to higher product rates, better transaction rates, and we are looking to see further growth in our results in this trend. So I would end here and give the floor over to Ernest. Ernest Pytlarczyk: So a quick macro update. For sure, already in 2025, which is the subject of this presentation, a lot of trends were outlined already in the last quarter. We had an increase in GDP. This year, it's likely to be 4% up. The structure of investments, the growth of investments may reach even 10%. 2026 and '27 we'll see accumulation of the absorption of funds from the resilience and recovery program. Those investments will regard mainly large companies and large exposures. But will also have an impact on consumption and labor market. This is probably one of the aspects that differs us from the consensus. We see that the labor market is loose. It's not going to exert an inflationary pressure or an excessive pressure on pay rise. We had 6.1% remuneration dynamics, which is much below the consensus. We think we will go below 5%. This sheet is a summary. We could see 5% for pay rise, then there was an inflation and 2 with double minus is, again, inflation. Inflation is going to be very low, below the target. It consists of salaries, which slow down and cheap exports from China and the extension of the energy shock. There is an oversupply of many energy resources. And also regarding GDP, there is a lot of investments. In consumption, the dynamics is much lower than in previous years and the labor market is kind of loose. We do not expect a significant increase in unemployment rate. No, definitely not. But in certain respects, it is a major variable regarding the general sentiment, social mood. And as for dynamics of interest rate, something that is very important for the banking sector, we expect 2 or 3 cuts. It's hard to say yet how many exactly. But probably the growth in volumes is likely to compensate any loss resulting from lower interest rates. The volumes are going to grow aggressively, in particular, in corporate segment. Dagmara Wojnar: Good afternoon, ladies and gentlemen. My colleagues have given you a business overview, and I will tell you in greater detail how we embedded that in numbers and what our results for 2025 are. Starting with loans. These grow in general 8%; retail 5%; corporate 11% up. In retail, it is worth noting that we had a growth in cash loans, which was up 13%. It is also important that we are going to transform. The cash loan is sold through electronic channels. Almost 90% of agreements regarding this loan are sold through electronic channels. As for corporate loans, mid and SME are growing, corporations are growing, micro is growing. And here, we see 2-digit growth. Lukasz has already mentioned the clients. The acquisition of new clients is important to us. And if we look at 2025, the acquisition was good, about 1,100 new clients in mid segment were acquired. To sum up the credit loan side, we said in our strategy that we wanted to grow in key areas. And those key areas were defined as cash loans, micro, SME and mid. These were the areas where Pekao historically had not been properly balanced because in corporate segment, it had historically and continues to have a good position. In 2025, we consolidated our position, our shares, market shares in those segments that are important to us. Loan credit side, 4% growth in deposits, both in retail and in corporations. It is worth noting here the role of TFI investment funds. We have 20% year-on-year growth on assets under management. Apart from deposits, we are opening new accounts, almost 500,000 new accounts were opened. And a large portion of those new accounts, about 35% of these were accounts for young people up to the age of 26. When we talk about liabilities, it is worth talking about issues. We had 2 issuances for MREL, one Tier 2. It is worth saying that we had a significant almost threefold oversubscription and the issuance offered excellent conditions. The conditions bring us close to major players from Western Europe. And if we look at 2025, we see that in our portfolio, we had over 100 new foreign investors in debt issuances. Foreign investments now. 2025 saw intense decrease of interest rates. 3-month WIBOR dropped year-on-year 7%. And our interest margin remained, as you can see in the slide, on the same level. It is worth detailing how we did that. On the one hand, as you have already heard, one driver was the growth of volumes. The growth of volumes in segments that generate higher margins. Therefore, the structure of the balance sheet and the structure of loans changed somewhat in 2025. Then on the side of liabilities, we reacted very soon to the fall of interest rates, decrease of interest rates and the policy of managing deposits helped us to stabilize this margin. There was also a change in the profitability of our portfolio of securities. In 2025, we repriced old COVID papers with lower profitability to new debt papers with higher profitability. We also have hedging that is growing in 2025. If we look at our sensitivity, 15 basis points versus 100 basis points decrease in interest rates. As you can see in the fourth quarter, our NIM dropped to 4.7%. And if we look at how we start 2026 and if we keep in mind the upcoming interest rate cuts, keeping this for at the front will be a challenge. If we move on, a few words about our result on commissions. This is something we are happy about. That is another quarter in a row where we have a 2-digit growth. Year-on-year, the growth is almost 11%. This is also something that we communicated in our strategy. Historically, in the commissions, we grew at 1%, 2%. And we said we wanted to change this. But this actually happened in 2025. We treat this profit on commissions as a stabilizer of our income. Taking into account the decrease in interest rates, this is an element that does stabilize results a little. If we look at 2025 as a whole, each component of the result on commissions contributed to this overall growth. There was a growth in commissions on loans, cards, brokerage services. This element was quite significant there. Let's remember that in 2024 and in 2025, the profit on managing brokerage assets and services contained an element of success fee that takes into account the results of our investment funds. So that is a major element of our success here. If we move on to costs, we also declared that on the one hand, we would try to keep personnel costs under control. And on the other, we needed some space to increase depreciation and fixed costs. Personnel costs decreased year-on-year. Let's remember that in 2024, at the end of the year, we announced a program of voluntary retirement or voluntary leaving of the company. We had 5 people who took advantage of this program of voluntarily leaving the company. On depreciation, we have 17% growth. We had an increase in IT, telecommunications, a little marketing and advertising depreciation and amortization also growth because projects that we started contribute to it as well as activities, investments we announced in our strategy like modernization of our branches, modernization of the call center. These are the elements that we started implementing in 2025, and we will continue over the space of the strategy. Now the cost of risk, over to Marcin. Marcin Gadomski: Thank you, Dagmara. The cost of risk, as you can see, is at a low level, 39 basis points, which is significantly lower than the strategy assumptions at 65, 70 basis points. In the fourth quarter, the cost of risk in the retail segment was even negative. And throughout 2025, it was close to 0. That resulted from an excellent situation in the labor market. There were no signs of excessive loan rate among our clients or in post society at large. We have a good loan repayment rate. And also in the second quarter, we reassessed, reevaluated risk parameters that we use to make write-offs for impaired value. Also, the result on nonworking loans, non-repaid loans throughout the year. As for costs in corporations here, these are more normalized. In 2024, we had a situation where some companies that a lot of energy intensive experienced problems resulting from energy prices. Now the situation is stabilized. So there are no systemic factors that contribute to losses in this portfolio. It is more about individual problems of individual companies that they have some issues regarding their operations, then they are more exposed to possible perturbations. As for systemic factors, for sure, in some segments, we have competition from Asia, also related to customs and shifts in customs. However, these are not elements that would have a major impact on the overall situation in corporations. Low cost of risks, combined with restructuring allow us to stabilize NPL. It is even decreasing slightly. In the corporate part, it is higher because, unfortunately, on the major issues if there is something like several dozen million worth, such cases continue for years. And this ratio has a major inertia. But in retail, as you can see, it is at a much lower level. This is a ratio that allows us to pay the dividend in line with our dividend policy. Also, there is also the ratio of sensitivity of interest result that is something that we meet. This is imposed by the regulator, Financial Supervision Authority, but we are on track here. And back to Dagmar. Dagmara Wojnar: Capital position. As Marcin has said, from a regulatory perspective, we meet the criteria for dividend payment. We assume the strategy payment at the level of 50% to 75% of net profit. Talks are underway on this now. CET at 15%. This CET does not contain profit for the second half of 2025, only 25% from the first 6 months of the year. If we move on MREL, we meet the MREL requirements with a surplus. In 2025, we had 2 MREL issuances, one in Tier 2. And it should be said that these were broad spectrum, green senior preferred senior. And the only thing that is still missing in our range of instruments for capital management is an instrument for AT1 management, and we will want to have an issue like that. To sum up, we end 2025 with the highest to date profit achieved by Bank Pekao. I could say that we are accelerating both in volumes as most of our volumes grow at a 2-digit rate, we're also gaining market shares. Our result is stabilized by the component of the profit on commissions. And in spite of the issues that I have mentioned, costs are kept under control. We have a safe risk level. This was not discussed broadly, but we are -- we continue to be bank #1 in stress tests by EBA. And all that translates into building value for our shareholders. Thank you very much, and over to Cezary. Cezary Stypulkowski: Well, I will not be boasting too much about the awards if you want, you will read about this, but we have been given a few. And one thing that Marcin has whispered into my ear is that I made a Freudian slip actually. I confused the 2 names. So it's either a confusion or contamination of names, one of our friendly banks, which still means that we have some problems with calling things by their names. So it looks as though this is so deeply rooted in our conscious, where it happens on such a level. So we have a structural problem, which we will be trying to address. One more to add, not much is there really. Okay. Let's give our audience a chance and take questions. Thank you for visiting us. Our conference is always a hybrid event, so -- but you can still show up if you like. Cezary Stypulkowski: Question from the audience. Unknown Analyst: To make sure that I'm seen in the audience, I'm from [indiscernible]. I wanted to ask you about the mortgage market. I understand that it is not your core market and that this strategy really allows for growth in other segments. But you are an important player on this market anyhow. What is happening there? Because we do -- we are guessing that there is a significant share of refinancing, but we don't have a lot of data here. We are mostly based on feel. The scale of prepayments or overpayments could be something to think about given the interest rates, which perhaps is not very encouraging to do so. But also, does the -- the big proportion of mortgages doesn't really translate into a growth in the purchase of real estate, which doesn't seem to be so big. So what's really happening in the mortgage market? Lukasz Januszewski: Okay. A few points. Definitely, the reported sales is higher than what is actually new money on the market of -- on the real estate market. Now in our case, the early repayment would account for about 1/5 of new products. But from what we can see on the market, it's probably a little bit more than that. Talk about estimations. But you need to also take into account the phenomenon which is getting more and more visible now is that some of that production is not seen because if a bank reacts to what's happening in the market and then annexes the contracts, thereby lowering the interest rates, you don't see it as new products, but the outcome is similar. So that means somebody has lowered their interest rates. And this is a phenomenon that is not yet visible on a mass scale as it is on mature markets, but the market is picking up on that. So -- as a result, I think it is good for thought in terms of how this mortgage product presents itself here. Other than the legal issues, we are looking at a product where the fee for early repayment is very much limited, which creates the situation where the interest rates are dropping, they are variable. But when they are growing, it's fixed. We are -- we have been learning that. We have been forecasting that. And in our hedging policy, we have been trying to address it. Still, the standard of coping with this challenge will perhaps get a better shape after this decrease in interest rates because it's not yet been harmonized. Cezary Stypulkowski: Yes. Well, I am reticent regarding mortgage product, not because I believe it's unimportant. It is very important, especially from the point of view of customer relationship, depending, of course, on the customer groups. This is mostly a trend driven by demographics. But it is a product where the Polish banking sector has been losing money systematically as a result of lack of regulatory security and the public noise that has been part of this deal. And we are subject to some regulations and some disciplining measures. We are accountable for the deposit part of it. And I would be cautious. We don't know what can happen to us in this area. But every year, there is a surprise. Well, if we were to continue the account for mortgages, I think it's worth doing an exercise, right, with the fixed rates, et cetera. Well, most -- the most reasonable conclusion is that the banking sector has been losing money on mortgages recently. So we live in a world where this product from the point -- from the professional point of view is very difficult to defend. So well, you need to find your way forward in it. My mantra would be that it's a product that essentially you should sell to your own customers that are loyal and they have a specific age profile. However, the market has gone a different way. There are some intermediaries on the market who make money on that. And they don't take any risk upon themselves, but they take a fee. So my impression is that there is no holistic look on this market regardless of the narrative that's visible here, which means that some more loosening of the market dynamics. Some believe that the long-term mortgage is a very valuable project in the long term. I generally agree. But well, the only thing that's certain in the long term is the fact that we will die. The same economist also said that people would be working 3 days a week in 2000, and that never came through. But the fact that we will all die is definitely correct, and he was right about that. Unknown Analyst: You mentioned that your strategy was created in a different environment. Investments are speeding up. You are repaying the technological debt from what I've heard with some outcome towards the end of this year and the beginning of next year. Have you thought about updating your strategy before the 100th anniversary? Cezary Stypulkowski: Our strategy was written up to 2027. It was a short-term strategy. There have been banks that announced a 10-year strategy. So we were pretty much in kindergarten. We assumed we had a short-term assumption, and we updated it to test what the bank could do if it was -- if it had slightly more discipline and it was better managed. And some goals were set. The volume development and that has been a success. It remains to be seen how lasting the success will be. Fast growth often leads to a fast fall. So we've seen that happen. So we're on a trajectory, but we need to still consolidate our path. And the other one is a question of commissions. How do we manage that to make sure that the growth has a reasonable pace here. And these 2 components have been successful. 2027 was included as the end of the strategy. 2029 is our 100th anniversary. So the effort is going to be to make sure that we route our strategy slightly deeper. And that's going to happen 2027 onwards, right, seeing 2029 and after as a perspective. Marcin Jablczynski: Right. Some of the questions were probably already answered during the speeches, but over to Kamil, please, who always finds something. Kamil Stolarski: Santander. Let me just ask about dividends. Is it going to be closer to 50%? Or are you comfortable with 75%? Dagmara Wojnar: The comfort is within the scope. Kamil Stolarski: From the point of view of the results, everything seems to be clear. There will be some detailed questions about the reorganization of PZU. Please, can we have a status update? Cezary Stypulkowski: Well, we believe that we managed to develop over a few months a potential scenario for this transaction, what it could look like, assuming that there is a willingness from the side of shareholders to go forward with it. And indeed, this is also linked to how the PZU Group itself and its insurance section should transform so that such a transaction can take place. And after many months of work, we have developed a market scenario, which is not quite so complicated, which links us to the developed scenario. So PZU is working on splitting its structure into holding and operations and work is underway as far as I know, to keep it going. And I'm appealing to my colleagues in PZU to give a more precise answer. Now furthermore, we have some aspects here that go beyond our competence, professional or technical that are linked with what we all know, some political background, which is quite sharp at the moment. It could be perhaps -- it could perhaps be linked to some discussions that could go beyond what I can predict in my professional capacity as far as the market conditions for this transaction are concerned and it goes beyond my capacity to interpret that. But as has been said many times before, the prerequisite of that is that the laws are adopted also from the point of view of PZU's capacity to divide and to isolate its holding inside the structure regardless of the transaction of the deal. And this will probably materialize in the form of some argumentation. But in the near future, it will probably gain more shape. Marcin Jablczynski: Any further questions? If not, thank you very much. 30th of April, first quarter report. Thank you so much for your presence and see you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]