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Operator: Welcome to BioArctic Q4 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Gunilla Osswald; and CFO, Anders Martin-Lof. Please go ahead. Gunilla Osswald: Good morning, and welcome to BioArctic's presentation for the fourth quarter and for the full year of 2025. It has been a fantastic year for BioArctic. In 2025, we entered into a new era that we call the growth era. And we can conclude that we have a transformative year behind us with record financial results. We are making our science accessible to more and more patients than ever before. And I think it's great and reassuring to see that more and more patients are getting access to Leqembi. We are accelerating our innovations. Our portfolio is progressing really well and has been further expanded, and our BrainTransporter technology is further evolving with new innovations. We have increased focus on business development. We are broadening our collaborations and utilizing our BrainTransporter technology, and we'll talk more about all this in today's presentation. Next slide, please. BioArctic is listed at Nasdaq Stockholm Large Cap, and this is our disclaimer. Next slide, please. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Anders Martin-Lof; and our Chief R&D Officer, Johanna Falting; and our Chief Commercial Officer, Anna-Kaija Gronblad. Next slide, please. I'll start our presentation by giving some key highlights. Next slide, please. I'm proud to state that BioArctic is among the world's leading innovators in precision neurology. We have 2 key platforms, where the first one is innovation and generation development of highly selective antibodies that are targeting aggregated misfolded forms of toxic proteins like lecanemab. And we also have then projects targeting alpha-synuclein, TDP-43 and Huntingtin. The second area is the BrainTransporter platform, where we have an innovative way to deliver antibodies. And I want to highlight that we are broadening the platform to enable more efficient transportation of other modalities into the brain with new innovative approaches. We'll talk more about that in today's presentation. Next slide, please. Last year, we held our first Capital Markets Day, where we presented our ambitions for 2030. And I'm so happy to see that we are already clearly delivering on our ambitions. If we start with the first one, LEQEMBI to be established treatment in Alzheimer's disease. LEQEMBI demand continues to grow to more and more patients, and we are now having global sales above USD 500 million. I think it looks bright with the blood-based biomarkers and the subcutaneous administration coming. The second aspect is balanced and broader pipeline with projects in all stages of development. And the pipeline is already broader with new projects added last year for both Parkinson-related diseases as well as Huntington's disease. The third one is additional successful global partnerships, and we are very pleased with Eisai and our 2 new collaborations since last year, Bristol Myers Squibb and Novartis. We are also really happy with the further discussions that are ongoing. The fourth one is about our finances and our aim is to be profitable and have recurring dividends in the future. And we were highly profitable 2025, and our strong financial position allows us to continue to invest heavily in our business and at the same time, give something back to our shareholders. And there is a proposal by the Board of dividends of SEK 2 per share. Next slide, please. So I just want to comment on some of the latest highlights towards delivering on our ambitions. So we start with Leqembi, and I would like to start by thanking -- thanks to our partner, Eisai's great work, Leqembi is now approved in 53 countries around the world. The subcutaneous auto-injector that is called Iqlik in the U.S. has been launched for maintenance dosing in the U.S. The next important step is approvals of subcutaneous initiation dosing. And it was great to see that both the authorities in the U.S. and in China has granted priority review. And I think this points to how important the subcutaneous opportunity is for the patients. And we are very much looking forward to the PDUFA date that FDA has set by the 24th of May this year. It's also reassuring to notice that all data being presented at congresses, including long-term data and real-world evidence data are very encouraging for Leqembi. If we then turn to the pipeline, it's progressing really well, and we are growing the pipeline and they are advancing. If we look at our alpha-synuclein portfolio and start with exidavnemab, which is our antibody, which currently is in Phase IIa. The second part of the study with both Parkinson's disease and multiple systemic atrophy patients will be finalized this year, and we are actively preparing for Phase IIb. We can also communicate that we have nominated 2 new candidate drugs, and we are preparing for INDs. And we have also further expanded our portfolio. And as you know, I'm very excited about our BrainTransporter technology platform, where we have further innovations for different modalities, including our BrainTransporter -- utilizing our BrainTransporter technology, and Johanna will talk more about this and show some nice new data. The third one is about our partnerships. And as I've said, I'm really happy with all 3 partners: Eisai, Bristol Myers Squibb and Novartis. All 3 programs looks great. And it's also happy to notice that we were very busy during JPMorgan in January this year. And it's great to see that we have continued strong interest for our projects and for our BrainTransporter technology, both for antibodies as well as other modalities. The fourth aspect is about our financials, and they are strong, and we were highly profitable in 2025 with record full year results of SEK 1.2 billion. The royalties for Leqembi are steadily increasing. And during 2025, we received several milestones also, both from Eisai and upfront payments from Bristol Myers Squibb and Novartis, and that led to that we have a strong cash position of SEK 2.2 billion, and Anders will talk more about this. Next slide, please. So by that, I will now hand over to our Chief R&D Officer, Johanna Falting, for an update on R&D. Johanna Fälting: Thank you so much, Gunilla. Next slide, please. So this slide provides an overview of our R&D portfolio, featuring the 2 main platforms that Gunilla talked about, the antibodies and the BrainTransporter platform and also the highlighted cross-program synergies. So the portfolio includes fully funded projects, partnered with major global pharmaceutical companies such as Eisai, Bristol Myers Squibb and Novartis. And we also have several in-house projects and technology platforms with substantial market and out-licensing opportunities. All collaborations involving the BrainTransporter platform are advancing well and as planned. And since the last quarterly update, we have also achieved important milestones within the portfolio, including the nomination of 2 candidate drugs, BAN2238 for alpha-synuclein disease and BAN3014 for TDP-related proteinopathies such as ALS. Additionally, you will notice a new project in the BrainTransporter portfolio, the PD-BT2278, and this is targeting the alpha-synuclein disease. So next slide, please. So both BAN2238 and BAN3014 were recently nominated as candidate drugs and have now advanced from research into preclinical development. BAN2238 is targeting toxic aggregated alpha-synuclein such as oligomers, protofibrils and aggregates, and this is combined with the BrainTransporter technology. And it offers opportunities in several different synucleinopathies such as Parkinson's disease, MSA and dementia with Lewy body. And for BAN3014, this antibody targets toxic aggregated TDP-43 proteins, such as oligomers, protofibrils and aggregates, and it offers opportunity for several of the TDP-43 proteinopathies such as ALS and frontotemporal dementia. So both of these programs, we have now initiated IND-enabling activities, and they are being prepared for clinical studies. So the next slide, please. So alpha-synuclein misfolding and aggregation is central to alpha-synuclein disease development. And our alpha-synuclein portfolio offers opportunity in several of these synucleinopathies such as Parkinson's dementia with Lewy body and multiple systemic atrophy. Exidavnemab is most advanced and is currently being tested in the EXIST study, a Phase IIa study for safety and tolerability. And in parallel to this, we are preparing for the next stage of development into Phase IIb. 2238, that I just talked about, is the newly nominated alpha-synuclein antibody combined with the BrainTransporter technology for better efficacy and better brain uptake. And BAN2238 is an alpha-synuclein antibody combined with the BrainTransporter, also representing an additional advancement in the BrainTransporter portfolio, for which further details will not be disclosed at this time. Next slide, please. I'm very excited to share some new data today on our BrainTransporter platform. So we know that the blood-brain barrier that represents a significant challenge for neuroscience. And if we can improve the delivery to the brain of our drugs, that represents an enormous opportunity for increased, of course, exposure in the brain, enhanced clinical efficacy, greater patient convenience by lowering the dose and offering other routes of administration, potentially better safety and lower manufacturing costs. So we are investing very heavily in the BrainTransporter technology to deliver different types of biopharmaceuticals beyond antibodies and enzymes that we talked about in the past. So we have developed this technology further now to enable delivery of small drug modalities to the brain. So this is a very innovative and flexible system that aims to transport various type of drugs such as genetic medicines and small molecules into the central nervous system. Next slide, please. So here, I'm very happy to show you some new data. And this image here compares the brain distribution of a standard antibody up to your upper left corner in green with a BT-coupled antibody in green below. And you can appreciate, I hope, the great increase of the green, fluorescent color, which represent the antibody present in the brain. And this is the same dose and the same time frame and the same antibodies just with and without the BrainTransporter technology. So antibodies we have worked with for quite some time, but we have also now here shown you data with the distribution in the brain of an enzyme and also a small modality. So this BT-coupled approach significantly improves the brain distribution of our -- of drug modalities. And for the BTA, the antibodies, this is a technology now that is fully implemented and validated both in mice and in nonhuman primates. And here, we have both internal and external candidates at various stage of development. And then the BTE, the enzyme platform, we have our first internal program, the BTG case for Gaucher's disease, and this is progressing very well. It's an orphan indication that offers potential -- offered market potential for BioArctic and a project that we can drive longer into the clinic. And I think that this enzyme project, it really sets the foundation for future enzyme-based projects coming along in the portfolio. And then what's new and presented here today is the BTS, the BT small modalities. And this is a novel and very flexible system that enables efficient brain delivery of genetic medicines such as ASOs or siRNA. It could be degraders. It could be small molecule approaches or anything that you want to deliver into the brain basically. And here, some key data is now being generating, showing the utility of the system. And what is shown here is then the brain distribution. And I think that there's been a really strong interest in our BrainTransporter technology at the JPMorgan Health Conference in September -- or in January in San Francisco. And we are very excited about the future further development of this platform and hope that we will be able to show you some more data in the coming year. So next slide, please. So with this, I will hand over to our Chief Commercial Officer, Anna-Kaija Gronblad, for a commercial update. Anna-Kaija Gronblad: Thank you, Johanna, and I will go back to Leqembi for a while, and I will start by just reminding everyone on the many recent and upcoming regulatory and development steps for Leqembi that really increases the treatment options for patients, but also drives the sales growth around the world. So as Gunilla mentioned, the IV formulation is now approved in 53 countries, of which the latest ones were Canada, Brazil and Malaysia. And the IV maintenance treatment once every 4 weeks is approved in 7 countries. And in the EU, the EMA accepted Eisai submission for the IV maintenance earlier this year. When it comes to the subcutaneous auto-injector, the weekly maintenance treatment was launched, as Gunilla mentioned, in the U.S. in October last year and the sBLA for the weekly induction treatment was granted priority review by the FDA, and we're looking forward to the PDUFA date set for May 24. In Japan, the application for the subcutaneous induction treatment was submitted in November last year, and Eisai expects to launch later in 2026. And then finally, Eisai also sent an application for the subcutaneous auto-injector also in China last month, where it was granted priority review and Eisai expects a launch in 2027. So many advancements, and this will drive the Leqembi growth even further, the game-changer being really the subcutaneous auto-injector, where the induction treatment is given as 2 injections of 250 milligram each, where each injection only takes 15 seconds. So next slide, please. So also with regards to the real-world evidence, Leqembi continues really to deliver more data. At the most recent Alzheimer's Congress, CTAD in December last year in San Diego, there was a lot of presentations on Leqembi. So real-world evidence coming from U.S. and Japan shows really consistent results in terms of efficacy and safety with findings from the clinical trials. Additional data presented indicated that earlier initiation may be associated with greater benefit and that continued Leqembi treatment may provide a benefit compared with stopping therapy. So finally, data also presented at CTAD verified that the subcutaneous formulation offers a convenient option with comparable exposure and safety to IV. And this can really reduce treatment burden for patients and their care partners and health care, of course. So this was really, really encouraging to see all these data in December last year. So next slide, please. So what are the trends on the key markets for Leqembi? Anders will soon show you the BioArctic royalty based on the Leqembi sales, but we can conclude that Leqembi sold for more than USD 500 million in the calendar year of 2025. That's a nice milestone. The global anti-amyloid market has more than doubled in 2025, and this is driven by mainly 3 things, I would say. First, the use of blood-based biomarkers, both for triaging and for confirmatory diagnosis is increasing. China has been really in the forefront. But also in the U.S., it is steadily increasing, and it is estimated that approximately 10% of confirmatory diagnosis in clinical practice in the U.S. are done by blood-based biomarkers. Secondly, more physicians are prescribing Leqembi. In Japan, more than 800 facilities are now starting initial treatment and 1,700 centers are focusing on the follow-up after 6 months and onwards. And in the U.S., there is an enhanced coordination between the primary care physicians and neurologists. On the slide, you can see the targeted direct-to-consumer information campaigns that Eisai has been rolling out in the U.S. and in Japan. And the second one is to address really the awareness of mild cognitive impairment. The fact that Leqembi was included in the commercial insurance innovative drug list in China in December will gradually give more physicians and patients access to Leqembi from the second half of the year, it is estimated. Thirdly, the subcutaneous auto-injector that I mentioned was launched in the U.S. for maintenance in October also drives growth. It is estimated that 80% of the patients on Leqembi want to continue treatment after 18 months. The insurance coverage through the medical exception process is increasing, and the payer approval rate is estimated to be over 80% in the U.S. And finally, in Europe, the launches in Austria and Germany are ongoing since September last year, whereas the reimbursement discussions are ongoing in other countries. And finally, the first private clinic in the Nordics started treating patients in Finland in October last year. And what we hear from the market is that there are several other private clinics that are about to start. And we also hear that there are private patients traveling to Finland also from Sweden, for example. Also since April, our team in the Nordics has gradually been out visiting memory clinics every day, educating on the Leqembi data and on the infrastructure that needs to be in place. We are active at national and regional specialist meetings, visiting regional health care decision makers, and we're increasing our digital communication on Leqembi. There is really a big interest and willingness to learn more and to make sure that all relevant staff at the clinics are educated. So next slide. So finally, this is my last slide, and I know it's a busy one, but there was a question sent to us before [ Harald ], on the progress with governments regarding Leqembi reimbursement in the Nordics. And as you probably know, Eisai is responsible for reimbursement and pricing. But this slide shows an overall picture of the different steps and the parties involved in the process and what the completed steps are for Leqembi in blue, which you can also find publicly available. It is the ambition for both Eisai and us to secure patient access to Leqembi in all Nordic countries. And as you might know, in red there, you see that in Denmark, the Danish Medicines Council came out with a negative recommendation in December. So here, Eisai is considering the next steps and will be in dialogue with the authorities regarding potential next steps. In Sweden, the TLV published their health economic evaluation in December, and the next step is to negotiate with the NT-council. And in Finland, the assessment report from Fimea has been recently published. And in Norway, the assessment is still ongoing in the Norwegian Medicines Agency. So it is -- there's no official set time lines on how long these processes are, but Eisai is working very closely in dialogue with the authorities to answer any potential questions or other requests. And clearly, the ambition is to finalize these different steps during the year. So you can go to the next slide. And by that, I leave the word to our CFO, Anders Martin-Lof. Anders Martin-Lof: Thank you, Anna-Kaija. I will then start with the Leqembi numbers where we saw solid growth globally. In Q4, the sales were JPY 20.7 billion or $134 million. That was a 15% increase from the last quarter or 55% increase year-over-year. And as Anna-Kaija mentioned, this now means that we are well above $500 million in annual sales, which is a significant milestone for a product like this. Looking at our royalties, they grew by 31% year-over-year to SEK 127 million, and this is despite the Swedish krona getting significantly stronger during the period. So if with constant exchange rates from last year, we would have seen more than 50% royalty growth. Looking then at the different markets, starting with China, the sales there are still a little bit distorted by the Q2 stockpiling effect. Sales came in at JPY 0.4 billion or roughly $3 million. That is a 100% increase from the third quarter. However, that's still on a very low level, and this is due to the fact that there was a big inventory buildup in the second quarter with sales of $53 million in the second quarter. And we have estimated roughly what our royalty would have been like if the sales in China would have been roughly in line with demand. And you see that in the pink bars in the graph that our royalty would have been roughly SEK 125 million, SEK 135 million and SEK 145 million during the second to the fourth quarters. Right now, we believe there is no more inventory to sell off, so we expect sales to return to more normal numbers for the first quarter of 2026. If we then turn to the U.S., their sales were roughly $78 million or JPY 11.9 billion. That's a 17% increase from the third quarter. And as Anna-Kaija mentioned, here, the solid growth is expected to continue, mainly driven by the introduction of Iqlik for induction and also by the introduction of blood-based biomarkers during the year. In Japan, the volumes are growing steadily. However, there was a price reduction. So the sales were JPY 6.2 billion or $40 million. That means no change from the third quarter. So the volume increase was roughly 15%, so healthy growth, but there was a one-off 15% price reduction from the Japanese reimbursement system, which is expected when volumes grow for a product. Furthermore, the EU launch has been initiated. We're well underway in Austria and Germany, but still the royalty from the European market is very, very limited and has a very small impact on our royalties. That should grow, but even in 2026, we expect the impact from Europe to be fairly small to our royalties. If we then turn to the forecast for Leqembi, Eisai has a JPY 76.5 billion forecast for their fiscal year 2025 that ends on March 31. And right now, after 9 months of that full year period, we have already reached more than 80% of the target. And you see the numbers to the right of the graph that in the U.S., they reached 78%, Japan 75% and China 87%. So what this means is that Eisai will reach the forecast even if there will be no growth in any of the larger markets, and that is not what we're seeing. So we believe they have a very good shot at reaching their forecast for the full year. If we then turn to our numbers, I think it's worth to emphasize how big of a transformation 2025 was for us when we saw an eightfold increase in revenues. I won't be able to say that often, but this time around, that actually happened. And you see our revenues on the left-hand side, you see they're very lumpy with the highest revenues in the first and second quarters, mainly driven by the agreement that we entered into with BMS in the first quarter. But even so, if you look at the fourth quarter, our net revenues were SEK 184 million. And I think it's very reassuring to see that our recurring revenue base is continuing to increase. So we had a royalty of SEK 127 million and co-promotion revenue of SEK 6 million. So all in all, SEK 133 million in the fourth quarter. And that means that we had recurring revenue of roughly SEK 520 million in 2025, and that's really starting to become a solid base for us to fund our future R&D investments. We also get some questions on the Novartis upfront. It's recognized over the initial collaboration, and we recognized SEK 51 million out of the $30 million during the fourth quarter. If we turn to our operating expenses, they actually decreased to SEK 136 million from SEK 143 million a year earlier. And if we take away currency effects that are recorded as other operating costs, the underlying operating costs were SEK 134 million. And I think it's worth to highlight that that's very, very close to the recurring revenue that was SEK 133 million. So we are actually more or less at the breakeven with our recurring revenues funding our full operations in the fourth quarter. Looking forward a little bit, our underlying costs are expected to increase in 2026, up from SEK 681 million in 2025. And this is, of course, then due to the progression of our project portfolio that Johanna mentioned. We're investing heavily into exidavnemab, where we're currently in Phase II, but we're also starting big CMC programs for our new candidate drugs, BAN2238 and BAN3014, which is really, really positive. So the higher R&D costs we have, the better it is because that means we're making progress in our portfolio. So it's hard to make a proper forecast for the cost. But if I can give, I would like to give you some guidance, and I guess or estimate that the growth will be roughly 50% to 70% in 2026. That is the cost should increase by 50% to 70% in 2026 compared to 2025. And then finally, if we turn to our operating profit on the right-hand side, it was SEK 33 million for the fourth quarter and the full year operating profit was roughly SEK 1.26 billion, more -- here, you saw a really big effect, of course, of the BMS deal that we entered into and recognized in the first quarter. If we turn to the next slide, we're looking at the net result. It was then a loss for the period that is explained by a significant accrued tax of SEK 48 million due to the big profit for the full year. The operating cash flow was significantly stronger than the result, and that is explained by the fact that the SEK 30 million upfront payment from Novartis was received during the quarter. So SEK 313 million in positive cash flow during the fourth quarter. And we ended the year with a cash balance of SEK 2.2 billion, a very solid position. And the Board decided based on that very, very solid position and our growing recurring revenues that we should pay a dividend of SEK 2 per share, which is, of course, a significant milestone for a biotech company like ours. With that, I hand the word back to Gunilla. Gunilla Osswald: Thank you so much, Anders. So we are coming towards the end of today's presentation with some upcoming news flow and some closing remarks. Next slide, please. I think it's great to see that more and more patients are getting access to Leqembi around the globe and also that in the Nordics that we have a private clinic in Finland so far, and we hope to get more and more patients in the Nordics, too. Eisai is driving continued regulatory processes on Leqembi in a very good way, and we hope to get more approvals in the future now. The Iqlik subcutaneous administration with auto-injector recently was approved for maintenance dosing in the U.S., and we are now awaiting the response for the induction treatment with a PDUFA date 24th of May. Later this year, we also expect response from Japan, and there it is both regarding initiation and maintenance dosing with the subcutaneous auto-injector. We are very much looking forward to the next big Alzheimer's Congress and Parkinson's Congress, which is in Copenhagen in March, where we will see several presentations. And then we see more things happening with exidavnemab, for example, where we expect to have the Phase IIa study readout later this year, and we are preparing for Phase IIb. So a lot of exciting times ahead of us. Next slide, please. So some key takeaways from today's presentation. I think that it's great to see how BioArctic has entered into the new era, the growth era, and we see great progress both of Leqembi as well as the rest of the portfolio, including the BrainTransporter technology. We have started really well to deliver on our 2030 ambitions, where Leqembi is well on track to become an established treatment in Alzheimer's disease. Sales continue to show increasing demand globally. And we have now had global sales of more than USD 500 million, and we are then halfway to becoming a blockbuster. Our portfolio has increased and progressed well and our BrainTransporter technology as well as our 2 CD nominations that Johanna spoke about have taken exciting development steps. Our brain -- our business development efforts continue to deliver, and we see continued strong interest. We have a strong financial position, and we can then both invest in our programs and projects, and we can also pay some dividends that the Board has recommended, SEK 2 per share. So all in all, I think we are exceptionally well positioned for the next phase of our growth journey. The future looks very bright for BioArctic, and we are bringing hope for many patients. Next slide, please. So by that, we say thank you for your attention, and we're happy to take some questions. Operator: [Operator Instructions] The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: So one first here, maybe on your effort to launch lecanemab in the Nordics. I just wanted to get a feel for how much of your operating expenses are allocated to building up an organization around this launch? And what could potentially happen to those costs in 2026 if the rest of the Nordic countries follow Denmark and deem lecanemab not cost effective, at least for the IV administration in the Nordics? Yes, I think I'll start with that question. Anders Martin-Lof: So if you look at the cost, most of our organization is already there. So we're not seeing any significant increases or in costs or even if there wouldn't be any change in Denmark and that decision would stand. I don't think we'll see any significant decreases either. We expect to fight with Denmark, and we're not planning any layoffs anytime soon despite the initial response there. So a small increase, I would say, on the cost side for marketing and sales. Viktor Sundberg: Okay. And maybe if you could speak a bit about what kind of indications outside of neurology that have sparked some interest at, for example, JPMorgan around your BrainTransporter technology? Is that mainly oncology indications? If you could elaborate on, yes, where you see interest outside of neurology for this platform? Gunilla Osswald: No, I think we -- as you know, we are not commenting about details when we talk about business development. We can just notice that there is great interest. And we see it on a broad level, and we see it on antibodies, but we also see it on other modalities, which we also know, Johanna showed some really nice data on today. So I think that there is a lot of different utilizations. But I think I also want to say with regard to business development, these things take time. It's not that it's quick things that you should expect from day to day. This is long processes. It takes time. It's really important for selecting a partner because it's a long-term commitment. So it looks really good. We are having a lot of fun, but it will take some time. Operator: The next question comes from Suzanne van Voorthuizen from Kempen. Suzanne van Voorthuizen: This is Suzanne. One on the BrainTransporter. Could you elaborate a bit more on the ALS and next-gen exidavnemab programs in particular? What preclinical activities are undertaken at this moment? And how does the road look and time line for these programs to be ready for the clinic? And perhaps still, you mentioned the interest in the platform is broad. Could you speak a bit to the relative focus of this interest between your existing programs versus interest to apply the technique to a pharma program? Just some extra color would be nice. Gunilla Osswald: So would you like to start, Johanna? Johanna Fälting: Absolutely. So thank you for that question. So we have now nominated, as I said, our alpha-synuclein antibody coupled to the PD program, coupled to the BT platform. And the activities that we are now embarking on in terms of moving the project from a research arena to the preclinical arena is the CMC activities that takes a lot of time to manufacture drug to be able to do toxicology studies. So this is the IND-enabling activities. It's mainly CMC toxicology to prepare for the clinic. And with regard to the BT-coupled ALS program, I mean, the one that we have nominated now is the standard antibody against TDP-43, but we, of course, also have a BT-coupled program going along, and there is no difference in the priority of these 2 antibodies. It's just that the BT-coupled antibody is a bit behind. So therefore, we have nominated now the antibody, the standard antibody. But we are definitely progressing both of these programs and have a lot of belief in them. And in terms of the time lines, I mean, depending on how everything is going, it takes approximately 2 years for us from a decision to first time in man. Gunilla Osswald: And I will continue with your second question about business development. I think that it's great to see that we have interest in both our internal programs and the BrainTransporter technology like a platform company that I've said previously that we also are. So I think that we see both interest also in the BrainTransporter together with antibodies, but we also see interest in BrainTransporter together with, for example, the new things that Johanna showed with small modalities. So I think it's -- that's what I mean with broad interest. But we are coming from a position of strength. As I've said before, we have fantastic, exciting own programs, and we have the luxury situation that we can invest in them. So we can drive things forward ourselves or we could partner if we find the right partner. So I think it's a really position of strength, and we have a great organization that are driving the programs further. And then I think that it's also good to see that we can utilize the company as a platform company and do things like the Novartis deal, where they come with their antibody, we reengineer the antibody. We check it and to see that it works as it should with regard to the transferrin receptor and so forth and then hand it back. So I think you will see more deals like that in the future. But if we find the right partner also for internal programs, that could also happen. But we don't have to partner, but we will partner if we find the right proposal and collaborator. Operator: The next question comes from the Natalia Webster from RBC. Natalia Webster: First one is just on Leqembi in Europe. I appreciate that you expect a small contribution here. But are you able to talk a bit more about what you expect is required to improve the slow adoption and how important you see both the longer-term data and the less frequent maintenance dosing in Europe? And then if you see potential for subcutaneous treatment here in the future? My second question is on the BrainTransporter platform. Just in terms of time lines around BAN2803. You previously had plans to go into Phase I in 2026. Appreciate this is now up to BMS, but are you able to share any details around expected time lines there? Then just finally, on overall OpEx. It looks like Q4 OpEx was lower than consensus is expecting, both on R&D and SG&A. I see that you're expecting an increase in cost in 2026. But are you able to touch on any key considerations for the cost phasing there next year? Gunilla Osswald: So Anna-Kaija, would you like to take the question about Europe? Anna-Kaija Gronblad: Yes. I heard the question was on the IV maintenance and the subcutaneous formulation. Is that correct? Yes. So I mean, as we just said, I mean, Eisai had submitted the application for the IV maintenance, and hopefully, this will be an approval on this during the year. And obviously, this will help, I mean, also in the different reimbursement processes across Europe. I mean, each country has their own reimbursement processes, and they usually, unfortunately, take a little bit more time than in the U.S. and the rest of the world. So I mean, globally, it's proceeding very well, but Europe is a bit slower. And hopefully, we will also see subcutaneous also coming to Europe in the future. Gunilla Osswald: And then continue with your next question, 2803. I mean it's now up to our partner, Bristol Myers Squibb, to comment about when and how that is progressing with more details. I can just say that I think Bristol Myers Squibb is a fantastic partner who are driving the program forward in a great way. But I will not comment about when it will go into man. And then the OpEx is an Anders' question. Anders Martin-Lof: Yes. So yes, you should not draw any trend conclusions based on the Q4 costs coming in lower than expected. It is a little bit lumpy in our R&D programs. As for the phasing in 2026, I think we will grow steadily as the year goes by. But then again, it's really hard to give you any sort of hard forecast for how much it will grow quarter-by-quarter. You should expect that it will be a growing trend. It will probably not be a huge impact in the first quarter and then will be larger and larger as the quarters go by. I think that's the right way to model it for 2026. Operator: The next question comes from Max Da from Goldman Sachs. [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments. Unknown Executive: Thank you so much. So we have a couple of written questions that we'll address now, I guess. The first one comes from Erik Hultgard, Carnegie. And he's wondering when the 2 drug candidates that we just nominated when we can expect those to be in the clinic? Maybe a question for Johanna. Johanna Fälting: Yes. As I mentioned on the question earlier is that we expect it to take approximately 2 years from our nomination to entering into clinic if everything goes according to plan, of course. That is the guidance I can give you. Unknown Executive: Yes. Super. Thank you. Then we have a couple of questions from Joseph Hedden, Rx Securities. I guess the first one, Gunilla, is for you. Anything that you can say on the BAN2802 project that we are running with Eisai and the progression of that program? Gunilla Osswald: I'm happy to see that BAN2802 program is progressing well and really nice data. Everything with the data looks really, really good. And we are now discussing with Eisai regarding potential next steps. Unknown Executive: Great. I see that we have Max Da back online. We'll take the written question first, Max, and then we'll come back to you. So then second question for Anders maybe is a question on, is there a commercial milestone, can we expect that during the course of this year for Leqembi? Anders Martin-Lof: Yes, I think it's fair to assume that we will reach a commercial milestone during the year. I cannot really comment on the timing of that. The last one we received was EUR 10 million. And as sales grow, it's normal that milestones grow, too. So I think it's fair to assume that it would be bigger than the EUR 10 million. But as for more details, I cannot really provide that at this point. Unknown Executive: We can remind everybody that we still have outstanding milestones from Eisai of EUR 54 million, I believe. Anders Martin-Lof: In total. Unknown Executive: In total, yes. Okay. And I think the last one here from Joseph is, R&D costs in Q4 '25 were lower than model, that we already discussed. Considering the Phase IIa, what do you think is a phasing? That question we already had, sorry about that. It's the same question that Natalia had at the end, right... Anders Martin-Lof: Yes. So yes, we already commented on the R&D cost phasing, so I hope that answer was enough for Joseph as well. Unknown Executive: Okay. And then I think we can go back to Max's question online in the telephone queue. Operator: [Operator Instructions] The next question comes from Max Da from Goldman Sachs. Chenxiao Da: So this is Max Da for Rajan Sharma. A couple of questions. What is your progress on finding a partner for exidavnemab? And do you require Parkinson's disease to be included in the deal or the partner has the option to license only the MSA indication? That's the first one. And could you speak to the difference between PD-BT2278 and 2238 because I couldn't tell the difference? Yes, I'll start with these 2. Gunilla Osswald: Okay. So the first question was with regard to exidavnemab and partnering. And as I said before, I mean, exidavnemab continues to progress really, really well. We are expecting the Phase IIa results later this year, and we are preparing for Phase IIb. We have interest for potential partners, and we might partner or we might not partner right now. It depends on if we get the right kind of proposal from the right kind of partner. Otherwise, we are very strong and can drive programs like this ourselves. We have the competence and so forth. And I will not comment upon details on this at all at this stage. I mean we're open. We have the open door philosophy like we do all the time. And if the right partner comes, then we will make a partnering. But we are coming from a position of strength, and we can drive things forward ourselves also a bit longer. And then there are different opportunities. I mean we have opportunities for Parkinson's disease with dementia, for example, or Lewy body dementia or other parts of Parkinson's disease or multiple systemic atrophy. And we have now 3 different programs in our portfolio, where exidavnemab is the most advanced, and we have 2238, which was just nominated and got the BAN number. So BAN2238 is the one with BrainTransporter. It's not exidavnemab, it's a slightly different antibody and it's combined with our BrainTransporter. And then as Johanna said, I will make it easy for you now, Johanna, I'll just answer that question, too. And that is 2278, which is slightly different from 2238, but we will not, at this stage, talk about what difference we have. But we have one further new invention that has been added to this program, but we are not revealing any more details at the moment. Chenxiao Da: Got it. Sorry, one more question, if you have time? Gunilla Osswald: Yes. Chenxiao Da: Could you talk about the dividend payout going forward and how we should model that? Anders Martin-Lof: So yes, this is Anders here. So yes, the Board has now proposed a dividend for SEK 2 per year. We cannot give you a forecast for what it will be in the future. However, I think it's fair to assume that the Board is expecting us to be able to pay a dividend going forward for the foreseeable future. The size of that or how certain I am of that, I cannot really comment. But I think it's fair to assume that they are hoping to pay -- hoping to be able to pay a dividend in the forthcoming years. Operator: There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments. Unknown Executive: And we have no additional written questions. So I'll hand it over to Gunilla to end the call. Gunilla Osswald: So I'll just say, thank you very much for your attention and a lot of great questions, and I wish you all a great rest of the day. Thank you so much.
Operator: Hello, everyone, and welcome to SSR Mining's Fourth Quarter and Full Year 2025 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Alex Hunchak from SSR Mining. Please go ahead. Alex Hunchak: Thank you, operator, and hello, everyone. Thank you for joining today's conference call to discuss SSR Mining's Fourth Quarter and Full Year 2025 financial results. Our consolidated financial statements have been presented in accordance with U.S. GAAP. These financial statements have been filed on EDGAR and SEDAR, and they are also available on our website. There is an online webcast accompanying this call, and you will find the information to access the webcast in this afternoon's news release and on our corporate website. Please note that all figures discussed during the call are in U.S. dollars unless otherwise indicated. Today's discussion will include forward-looking statements. So please read the disclosures in the relevant documents. Additionally, we refer to non-GAAP financial measures during our discussion and in the accompanying slides. Please see our press release for information about the comparable GAAP measures. Rod Antal, Executive Chairman; will be joined by Michael Sparks, Chief Financial Officer; and Bill MacNevin, EVP Operations and Sustainability, on today's call. I will now hand the line over to Rod. Rodney Antal: Great. Thank you, Alex, and good afternoon to you all. We closed 2025 on a high note, delivering full year production above the midpoint of our guidance range and generated more than $100 million in free cash flow in the fourth quarter. As a result, we finished the year with $535 million in cash and more than $1 billion in liquidity. Based on the operating guidance provided with today's financial results, we expect this material free cash flow generation to continue in 2026. Accordingly, and coupled with our view that our share price does not reflect the full value of our portfolio, we are pleased to announce that our Board has approved a share buyback of up to $300 million. If you remember, share buybacks have been a key component of our capital allocation framework in the past, and we are pleased to reestablish a program again. Before moving on to the next slide, I want to take a moment to highlight a number of key catalysts and milestones that we delivered since our third quarter results and also speak to some of the opportunities ahead. First, I want to note particularly strong fourth quarter results from our Cripple Creek and Victor mine and Puna operations which saw both assets exceed their full year guidance ranges and deliver exceptional free cash flow. At Puna in particular, the mine theaters production guidance for the third consecutive year and set records for tonnes processed in both the fourth quarter and over the full year, which was a terrific result. Second, we delivered two technical report summaries, both demonstrating long-term free cash flow generative assets that will bolster our portfolio. The Cripple Creek and Victor TRS, released in November, highlighted an initial 12-year life-of-mine plan with an $824 million NPV at consensus metal prices. With nearly 7 million ounces of resources in addition to the reserves, there is significant optionality here for meaningful mine life extension into the future. In January, we released a TRS for the Hod Maden development project, which highlighted a $1.7 billion NPV and a 39% internal rate of return at consensus metal prices. I will talk more on this in a moment. And thirdly, we continue to advance a compelling brownfield growth projects across the portfolio, which I'm also going to speak to in a moment. As you can see, 2025 was a very successful year, and we're well positioned to continue building on this momentum in 2026. So let's move on to Slide 4. We have a number of highly prospective growth targets across the business. These prospects represent potentially low-cost, high-return growth opportunities that can deliver significant value to our shareholders. In 2026, we have committed a substantial amount of capital investment across the business, and a large portion of that CapEx will be allocated to advancing these growth opportunities through the development pipeline. We look forward to sharing additional details on the projects, including both Marigold and Puna over the coming years. Now let's turn to Slide 5 to focus on Hod Maden. In January, we published a technical report summary for the Hod Maden development project. The TRS clearly reaffirmed Hod Maden as one of the better undeveloped copper, gold project in the sector, and we are thrilled to have a development asset of this quality in our portfolio. As a reminder, Hod Maden is an underground copper, gold project in the northeastern of Türkiye. The mine will be accessed through a single surface portal, and ore will be extracted through a combination of long-haul stoping and cut-and-fill mining methods. The process plant is designed with a nameplate capacity of approximately 2,200 tonnes per day with life of mine average head grade of 7.6 grams of gold and 1.3% of copper. The plant will produce a single high-quality concentrate with life of mine gold and copper recoveries averaging 87% and 97%, respectively. Moving on to the next slide for a few of the TRS highlights. Hod Maden is a unique project with significant scale, best-in-class grades and first quartile all-in sustaining costs that position the asset to deliver compelling free cash flow in the future. On a 100% basis, production is expected to average 240,000 gold equivalent ounces over the first 3 years and 220,000 gold equivalent ounces over the first 5 years. At consensus metal prices, Hod Maden is expected to generate average annual free cash flow of $328 million. While at $4,900 gold price, that free cash flow would jump to approximately $500 million annually. Hod Maden's execution has been meaningfully derisked as a result of the significant engineering and the work completed since our initial investment in the project as well as the benefit of early site works that are taking place. Inclusive of earn-in and milestone payments, SSR's remaining investment is expected to total $470 million, which we expect to fund from our liquidity position and free cash flow outlook. We anticipate a 2.5- to 3-year construction period once the project decision is made. We are very excited about Hod Maden and look forward to providing further updates in due course. Turn over to Slide 7, and I'll hand the call over to Michael. Michael Sparks: Thank you, Rod, and good afternoon, everyone. In 2026, we expect to produce between 450,000 and 535,000 gold equivalent ounces from our Marigold, CC&V, Seabee and Puna operations. All-in sustaining costs are expected to range between $2,360 and $2,440 per ounce or $2,180 to $2,260 per ounce, excluding the impact of care and maintenance costs at Çöpler. While Çöpler isn't in operation, we continue to guide to cash care and maintenance costs of $20 million to $25 million incurred per quarter. Total gross spend is expected to total $150 million in 2026, driven mainly by capital investments in leach pad expansions at both Marigold and CC&V as well as continued exploration and resource development spend globally. Capital expenditures at Hod Maden are expected to total up to $15 million per month as engineering access road development and site establishment activities continue ahead of a formal construction decision. Upon a positive construction decision by the joint venture, we will provide an update to our growth CapEx outlook at the project. Now let's move to our Q4 results, starting on Slide 8. In the fourth quarter, we produced 120,000 gold equivalent ounces at AISC of $22.50 per ounce or $202 per ounce, excluding costs incurred at Çöpler in the quarter. Fourth quarter sales were 117,000 gold equivalent ounces at an average realized gold price of $4,142 per ounce. Net income attributable to SSR Mining shareholders in Q4 was $181 million or $0.84 per diluted share, while adjusted net income was $190 million or $0.88 per diluted share. For the full year, production of 447,000 gold equivalent ounces exceeded the midpoint of our full-year guidance. As we discussed with our third quarter results, higher-than-forecasted royalty costs tied to higher gold prices and share-based compensation brought our full-year AISC to the top end of our consolidated guidance range. Full-year AISC, excluding costs incurred Çöpler, was $1,923 per ounce comfortably within our guidance. Now let's move to Slide 9. As highlighted in the table on this slide, free cash flow totaled $106 million in the quarter, and $252 million for the full year. Excluding the impact of changes in working capital, full year free cash flow was more than $400 million in 2025. These are excellent results, considering our investment in growth projects across the portfolio. We ended the quarter in a strong financial position with $535 million in cash and total liquidity of over $1 billion. This cash and liquidity position combined with our free cash flow outlook in 2026, supports our continued investment in growth initiatives across the portfolio while also giving us the confidence to initiate a share buyback of up to $300 million. Share buybacks have historically been a key component of our capital allocation and shareholder return approach. Between 2021 and 2024, we repurchased 20 million shares at an average price of $15.76 per share. With convertible notes issued in 2019 with a conversion price of $17.61, these share buybacks provided significant value to our shareholders. Our historical share buybacks, combined with the -- as announcement of a new share buyback program, reiterate our commitment to ensuring our shareholders realized growth on the key per share metrics going forward. Now over to Bill for an update on the Q4 results and 2026 guidance for the operations, starting on Slide 10. William MacNevin: Thanks, Michael. I'll first start with EHS&S, 2025 as a successful year of strengthening our programs and application in all areas of EHS&S. Key areas advanced were in critical controls and risk management for safety, the integration of closure work into life-of-mine plans to bring forward the work as well as to reduce costs and the upgrading of our community engagement and development application. As I will outline today, we are currently working on growing our business through both greenfield projects and brownfield growth opportunities at all the operations. Safe production and quality implementation of EHS&S standards is our focus ahead to enable an increase in activity to successfully advance all of these opportunities. Now on to Slide 11 for our year-end MRMR. We closed 2025 with 11 million ounces of gold equivalent mineral reserves, a testament to the scale and longevity of our diversified operating platform. Reserves were up nearly 40% year-over-year, driven largely by the incorporation of CC&V and Hod Maden into our consolidated totals as well as other minor impacts from drilling additions and model changes. Mineral reserve price assumptions in 2025 remain very conservative at $1,700 per ounce gold and $20.50 per ounce silver. We hold another nearly 15 million measured indicated and inferred gold equivalent ounces that can support mineral reserve growth across our portfolio in the future. More impressively, we have consistently delivered on our track record of replacing mine depletion. Since 2020, as shown on the right side of this slide, we have more than replaced depletion before incorporating any of the benefits of our accretive M&A transactions over the period. Inclusive of M&A, our mineral reserves are up approximately 40% since 2020, an impressive outcome that ensures our portfolio is poised to benefit from constructive gold and silver markets for years to come. Now on to Slide 12 for a discussion on Marigold. In the fourth quarter, Marigold produced 43,000 ounces of gold and an all-in sustaining cost of $2,089 per ounce. As expected, this is Marigold's strongest period of production in 2025. Technical work around ore body knowledge and processing planning at Marigold has now matured to where this is being integrated into the planning process. As a result of previously highlighted ore blending requirements and to ensure pad recovery performance, the Marigold mining schedule has been updated to account for the blending of durable and nondurable ore. In addition, increased gold prices have resulted in pit expansions and the relocation of a planned waste dump to avoid sterilizing ounces. While this work has changed the production schedule, the total ounces produced at Marigold at the 5-year period is materially the same, as reflected in the 2024 TRS. In 2026, Marigold is expected to produce between 170,000 to 200,000 ounces of gold and an all-in sustaining of $2,320 and $2,390 per ounce. Production is expected to be 55% to 60% weighted to the second half of the year. AISC will be highest in the first half due to both production profile and sustaining capital, which is expected by 70% weighted to the first half. Sustaining capital in 2026 is expected to total $108 million as we made significant investment in fleet and component placements and process planned improvements. These investments will help to ensure Marigold is well positioned for both additional near-term haulage requirements and to enable development of potentially significant mine life extension opportunities ahead. To that end, Buffalo Valley and New Millennium projects continue to advance and SSR Mining anticipates potentially integrating both deposits into an updated Marigold TRS over the next 18 months. Now on to Slide 13 for an update onCC&V. CC&V had another excellent quarter, producing 39,000 ounces of gold and all-in sustaining cost of $1,596 per ounce. Quarterly production benefited from better-than-expected gold recoveries and drove full year SSR Mining attributable production of 125,000 ounces, well exceeding the 110,000 ounce top-end guidance. It is also important to highlight that CC&V generated more than $200 million in mine site free cash flow to our count in 2025, an exceptional outcome when compared to the $100 million upfront transaction outlay we paid to acquire the mine last year. In November, we released a technical report summary for CC&V, showcasing an initial 12-year life of mine with an NPV of $824 million at consensus metal prices. The mine plan was based on 2.8 million ounces of reserves, and CC&V has an additional nearly 7 million ounces of measured indicated and deferred resources to support potential mine life extensions over the long term. Combined with our long-term production platform at Marigold, this TRS reiterated our position as the third largest gold mine producer in the United States. SSR now holds more than 6 million ounces of mineral reserves in U.S. along with an additional 7 million ounces of M&I resources and 2 million ounces of inferred resources, all calculated at conservative metal price assumptions well below the current spot market. In 2026, we expect CC&V's production and costs will be well aligned with figures outlined in the TRS. Full year production of 125,000 to 150,000 ounces and ASIC between 1,780 and 1,850 per ounce should position the asset well for another year of strong free cash flow. Production will be 50% to 55% weighted to the second half of the year, with costs trending above full-year guidance in the full first half. Now over to Slide 14 to discuss Seabee. As highlighted in our Q3 results, Seabee's fourth quarter reflected a continued focus on underground development in the second half and saw increased oil contributions from the lower-grade gap hanging wall. Accordingly, the production totaled approximately 9,000 ounces at an ASIC of $3,433 per ounce in the fourth quarter. In the first half of 2026, underground development will remain the focus as we look to improve stope availability going forward. Full year production of 60,000 to 70,000 ounces gold is expected to be approximately 60% weighted to the second half, with the strongest results in the fourth quarter. ASIC guidance of $2,170 to $2,240 per ounce will be higher than the first half, reflecting the aforementioned production profile and the typical cadence of spend, given the winter road season to start the year. Work at Porky continues to advance and we were able to declare a maiden 200,000 ounce mineral reserve at Porky with the year-end update. We are also excited about some of the recent drilling results at Santoy, and we'll continue advancing both near-term drilling and development at Santoy targeting high grades. Regional exploration is also expected to continue across the property in 2026. Now on to Puna to Slide 15. Puna delivered another excellent year, exceeding its production guidance for the third consecutive year. Record tonnes in both the fourth quarter and over the full year for a major factor in Puna strong results with Q4 production of 2.1 million ounces of silver and ASIC of $18.39 per ounce. Full year ASIC of $14.24 per ounce was slightly better than the guidance and drove mine site free cash flow of more than $250 million in 2025. Puna has been an exceptional contributor to our portfolio, and we see potential to extend operations of Puna well beyond 2028 through growth opportunities both at Chinchillas and Cortaderas going forward. In 2026, we expect Puna will produce 6.25 million to 7 million ounces of silver and all in sustaining costs of $20 to $22 per ounce. As noted, we are pursuing opportunities for additional pit laybacks at and chairs as well as further evaluation of the leaner target to the northeast of the current Chinchillas pit. Drilling has also been very successful at Cortaderas, an underground brownfield deposit on the [ Pirquitas ] property. And we are advancing engineering work to delineate its potential contribution to put Puna's longer-term profile. Now I'll turn back to Rod for closing remarks. Rodney Antal: Great. Thanks, everyone. We had an excellent finish to 2025. We delivered solid operating results that are well aligned with expectations and now went to 2026 in a strong financial position with a number of key catalysts on the horizon. We're well positioned to deliver year-on-year production growth and strong free cash flow and are also well advanced on a number of growth initiatives across the portfolio that we look forward to sharing over the next 12 to 18 months. So with that, I'm going to turn the call over to the operator for questions. Thank you. Operator: [Operator Instructions] Our first question comes from George Eadie with UBS. George Eadie: Can I start with Marigold, please? Just looking at the 21 million to 23 million tonnes stacked at 0.4 gram a tonne and 0.35 in Q4. My math that gets me to the top end of guidance. So maybe just a little bit more color here. Like is there a bit of conservatism baked into the guidance range of 170 to 200? Rodney Antal: I'm going hand it to Bill. William MacNevin: As we talked, we've been doing a lot of work, particularly on the technical front, and we baked that now into our updated forward schedule. And that considers how we actually have to complete our blending. So that blending and the updated plan for that is actually well outlined in the plan forward. So we believe that guidance is a good indication of what we'll deliver this year. A different stacking plan comes with that. George Eadie: Okay. But looking at the tech report, like I know it's old now, but the next 2 years, it had 0.3 gram a tonne. But given commentary before, like should we expect next year's grade incrementally higher versus this year? And then 2027 to 2028, just clarifying, like should we be looking at a stacking grade of high 0.4 to low 5s potentially, given the commentary before about keeping the sort of medium-term outlook unchanged? William MacNevin: So as always, as noted, right, across 5 years, we're basically in line. In terms of what's happening is with these metal prices, which is very exciting, we've got growth in pet sizes, we've got additional haulage. So there is a complete reschedule of the mine. So we're still delivering the same goal across the period and particularly life the mine as well, but the timing of it will be different. And that's why there's reference there, we've also got Buffalo Valley coming in, we've also got further upgrades. So the reference to completing an updated TRS port -- report comes in there as well. So there's a lot of work going on in terms of those changes ahead. George Eadie: Okay. But that referenced 5 years, what is that exactly, sorry? Like if I look at the tech report average 5 years from today, it's 235,000 ounces per annum. Like what is that reference 5 years you're speaking to? Rodney Antal: Yes. I think what he's saying -- let me answer it, Bill. George, it's Rod. Thanks for the question. Look, I think what Bill is outlining is with all the work that we have completed, I mean that's been the blending requirements that we've got for durable and nondurable law we'd actually been doing work over the last 2 years to upgrade some of the ore body knowledge. So it wasn't something that we just did in 1 quarter. It was actually in conclusion of a lot of work over a period. So that's been now built in, and that's what Bill was sort of talking about with the blending requirements in the short term and near term as well as some of these other opportunities where we've identified some shifts in the mine plan because it would have sterilized some other opportunities in the future. So we're actually wrapping all that work up. And then if you add in Buffalo Valley and New Millennium, I think what it needs is a new tech report. And then within that new tech report, we're going to outline the new profiles, not only in the 5 years, but obviously, over the life of mine as well with some of those growth opportunities. So if you just be a little bit patient with us, we'll set it out all at once for you here over the next 12 months. George Eadie: Yes. Okay. No, that's clear. And maybe just one more if I can, for Puna, what silver prices, do you sort of needed a minimum to go beyond 2028? Like it's 70 ounces or higher? Could we be talking well into the 2030s potential? Or is it a bit too early and dependent still on Cortaderas success? William MacNevin: We're excited about what we have in front of us. Cortaderas is -- be it, in the underground opportunity, there's a lot of work there to do, but it's very positive. But moving back to Chinchillas itself, we do see opportunity for it to go a lot longer with work going on both in the Chinchillas pit or potentially additional step-backs as well as the Molina pit, which is right within that area being added on as well. So let's just say that works underway at the moment, and this the silver prices more than support that. So we're doing that work as we speak now, and we see it extending into the future. Rodney Antal: Yes. I'll just -- what Bill said, George, to look at the opportunity set that at Puna has really come through a lot of hard work by the guys over a sort of extended period here. And if you sort of wanted to prioritize it as sort of Chinchillas, Molina, Cortaderas, and that's how we sort of see it sequencing out. Silver price obviously is very helpful in that regard as we look forward and look at those opportunities. But all in all, I think the future is pretty bright for Puna. We've just got to finish some of the work, particularly around Molina and Cortaderas. Operator: Next question comes from Cosmos Chiu with CIBC. Cosmos Chiu: Great to see the new TRS at Hod Maden. Maybe, Rod, can I ask, is there any kind of timeline that we can expect in terms of SSR Mining coming to a construction decision? And if you can't give us a timeline, could you maybe talk about the different factors that you will consider before making such a decision? Rodney Antal: Cosmos, it is a great tech report. It certainly outlined a terrific project for all the joint venture partners that are involved. So what's going on at side right now, the work on the ground still continues. So it's not like we've got pens down and we're waiting for approvals. It's the efforts on the ground for the early earthworks some of the creek diversions the civil works, the road access tunnels and others is underway and ongoing. So that work hasn't stopped. Post the publication of the tech report, we're now just going through the sort of review processes with our partners. And once that completed, we'll have a project decision. So I'm not going to set out a timeline on behalf of everyone. But clearly, we're maintaining some progress on the ground there as well. So don't think of it as like a pens down, then we'll pick them back up. We are maintaining some of that momentum. Cosmos Chiu: Understood. Maybe going to Puna a little bit here. I noticed that the guidance to 6.25 million to 7 million ounces, slightly lower than 7 million to 8 million ounces that you highlighted back in the August 2025 study for 2026. Could you maybe talk a little bit about that? Rodney Antal: Yes, I'll pass that one on to Bill. William MacNevin: Just the permanent timeline for the work that we're completing, was it? Rodney Antal: [ 2 5 versus ] late that we had talked about. William MacNevin: Yes. So the 6.25 to 7 as we're talking, is our guidance range. You wanted an update against that? Sorry because I missed... Cosmos Chiu: So the August 2025, your Q3 2025 update you at 2026 silver production at Puna will be between 7 million and 8 million ounces. William MacNevin: Yes. All right. Yes. No, I see. All right. quarter. Yes. So obviously, with the work we're doing at the moment, and we're continuing to do -- there's more phasing work happening with additional mining happening at Chinchillas. The timing of ounces has changed in saying that we have -- we're looking at a further depth of the production levels staying at a higher level for longer. So in other words, we saw it dropping off quicker it's come down, as you know, but we're looking at it going, maintaining a higher level for longer. We look forward to updating that as we complete some of this work going forward in future. [indiscernible] has stepped down for the year ahead, but it's going to continue for longer. That would be the best way of terming it. Cosmos Chiu: Okay. So it's a timing thing. We should take those ounces that are not produced in 2026, put into 2027 or 2028? William MacNevin: It will be, yes. It will be better. Cosmos Chiu: Perfect. And at Marigold -- sorry, going back to Marigold here, could you maybe explain to me durable versus nondurable ore and blending? I'm not fully appreciating the sort of the technical aspects behind it. William MacNevin: So to put it into a simple manner, depending on the fines content and how -- and then the height of the heap, it creates compression on the material. So the effectiveness of the solution transfer can be impacted. So if we go back in time for those that have a long history with Marigold, we've had -- we were challenged in late '22, early '23, where we had a -- where we ended up with our heap became bound up. So in other words, a lot of good work has happened to understand that ore body better. And so with that, we now have implemented different land requirements of what can be mixed with what. And then that changes the schedule of how we bring different parts of the ore body together to ensure optimum blending and optimum recovery from the -- does that make -- does that answer that sort of -- in simple terms? Cosmos Chiu: Yes. I think I got it now. When you mentioned fine, I think I remember that now. So great. And maybe one last question. I see that you're still using fairly conservative numbers for your MRMR estimate $1,700 an ounce for reserves at Marigold. So I guess my question is, I don't know how much you can answer about, but what would a higher gold price assumption due to what you can do at the ore body? It sounds like you're considering it because you're talking about not sterilizing some of the certain parts in the ore bodies or you're leaving that optionality open. And so to the point that you can share with us, what is the higher gold price assumption mean? And could that be incorporated into this new sort of technical report that could come out in 12 to 18 months' time. And you talked about Buffalo Valley and also New Millennium. Could those be part of that new study coming out as you well? Rodney Antal: Yes, that's right, Cosmos. Look, I think across the portfolio, we took a view for this year at least that given the profile that we already presented ourselves and some of these other growth opportunities that we have, we'll park any decisions on increasing the gold price kind of lowering the cutoff grade, et cetera, and maintain the margins. So -- but we really didn't see anything necessary to do that work. We do have a lot of growth studies, exclusive of gold price that are in front of us that we're looking at. And that's really the key focus at the moment to complete that technical work. So ultimately, we can start to include those into the technical reports for the future. And then obviously, we can come back to the gold price question about looking at where how sensitive some of the operations are for gold price increases as well. So that really was this year. We just got so much other work going on, we just wanted to complete that and then come back to come back to it later on. Cosmos Chiu: And then would that coincide with your timeline, say at Marigold? Because as you say, you're going to come up with a new technical study in Marigold in 12 to 18 months, could this sort of reevaluation of the gold price coincide with that timeline as well? Rodney Antal: Correct. Yes, good. And particularly New Millennium and some of those other targets as well. Operator: The next question comes from Ovais Habib with Scotia Bank. Ovais Habib: Congrats on a good quarter, especially at Puna and CC&V. A couple of questions from me and just again, going back to Marigold following up on the previous caller's questions, the fine that Marigold, looks like blending is working. And I mean, is this issue now behind us? Or are we still expecting to see this issue linger into Q1? Rodney Antal: No. In terms of the look forward -- I got this one, Bill. In terms of the look forward for the surveys, it's pretty simple. We're going to have areas where we will encounter fines in the future. It's throughout the ore body. And as Bill said, since '22, we did a lot of work, drilling et cetera, to understand at a greater level of detail, some of those pockets where the final existed. And so that's all been incorporated to the future mine plans to allow for that blending of what we call in durable and nondurable. You'll hear us say that as well in the future. So it informs the scheduling to ensure that we have the appropriate blend. So we get the right outcomes on the heap leach pads in the future. So it hasn't -- it's not a one-off. It's going to be a future feature for Marigold. And all of the work we've been doing is really just in preparation to handle that, which has been terrific work actually. And as I said to -- I think George was asking about, we'll have a new tech report, which will outline all of those requirements in the future as well as some of these other growth opportunities. Ovais Habib: Got it. And just again, I think there's a follow-up question on Puna as well. I mean drilling has been pretty successful at Cortaderas. Don't believe this deposit has been included in Puna's mine life extension. Rod, are you looking to release any sort of a new mine plan for Puna in the near term, including Cortaderas as well as Chinchillas? Rodney Antal: Look, I think what we'll probably see at Puna basin -- don't hold me to it because it depends on the work. But I think we'll see some additions to the mine life just through some of the extensions that we're going to go into encounter Chinchillas and potentially in Molina. As they start to -- the drilling programs there and also up at Cortaderas continuing some of the technical work behind those that drill program concludes, then we may consider doing a new tech report into the future. But I think at the moment, the guys have done a terrifically good job at already establishing a longer life at Puna. We see the potential for more of that. And then hopefully, in the longer-dated near term having -- sorry, in the near term for the longer-dated future some of these other larger opportunities playing our feature into Puna well into the future. So it's a pretty exciting where we've come from. If you think back, it wasn't that long ago that folks were thinking about Puna as a depleting asset that was coming towards the end of his life. And I think what we're finding there through the efforts is quite contrary to it. Ovais Habib: Excellent. And then just moving on to CC&V, which has been a real success for SSR. Currently, I mean, the project holds 4.8 million ounces in M&I. Now you already have a 12-year mine life at CC&V, but what's the plan there to accelerate these ounces into the mine plan and improve the production profile of CC&V? Is this just the permits? Is it more infrastructure that needs to be allocated? Any sort of color there? Rodney Antal: It's pretty linear from what we can tell at the moment, Ovais. The mine extension is obviously predicated on the success of the amendment for approval. That amendment for that approval allows us to continue with the pad expansions. That is already well sequenced out over sort of the next 5 to 10 years. So that's really the first sort of stage of growth, if you like, on the current reserves as you point out. Is there opportunities to optimize and do things? I mean that's our job is to try to trying to do that. But I wouldn't -- similar to Marigold, Cripple Creek has durable, nondurable ore as well, and it's really important to stay in sequence with that asset base not to put a risk the future. So we'll try. But look, I think it's fairly well set out. And then beyond it, obviously, we'll look at the opportunities for conversion of the 7-odd million ounces of resources that we also have available, which would require then another expansion permit for that regards as well. So look, I think the asset itself has done remarkably well. Since we acquired it, we're very proud of the efforts that have gone on down there and proud of the team, and they're now part of SSR and they deserve a standing ovation because I think it's been a terrific integration into the portfolio. Now our job is to optimize and to extend that asset well into the future and really demonstrate its strength in the portfolio. So we're pretty excited to have it. Ovais Habib: And just my last question then on Çöpler, Rod. I mean, any sort of progress there that we can kind of put our finger on or any sort of updates that you're looking to provide in the term future on Çöpler? Any sort of discussions going ongoing that you can talk about? Rodney Antal: Yes. Look, I think that's right, discussions are ongoing. So in terms of like activities, there really was nothing to note since the last quarter. I mean the activities at the site, as Michael sort of mentioned in his financial discussions, had sort of wound down in terms of material movements and site rehabilitation, what we're waiting for the final approvals for the e-storage facility and pad closure. The guys are obviously still very busy in that in regards of care and maintenance of the activities around the plant, in particular, to maintain integrity for a start-up. But that's really been the sort of key focus on the ground at site. And then obviously, as you note, we continue to progress the various discussions with different parts of the government and government authorities. So it's just ongoing at this stage. Operator: Next question comes from Don DeMarco with National Bank. Don DeMarco: A lot of my questions have already been answered. But Rod, I'll start off with this. For Hod Maden just continuing on as we're looking forward to this formal construction decision and I see that in the interim, you're looking at maybe spend on the order of about $15 million per month, should we pencil that into our model like beginning as of January 1, I think? Or should we wait until a construction decision? In other words, are you kind of getting ahead of yourselves a little bit here with some of that spending before the formal decision is made? Rodney Antal: No. Look, a lot of that spending was already committed, Don. On the early site works that I mentioned before, the tunneling is ongoing. We actually just had John shared actually before this meeting, the first blast of the tunnel, which is terrific for that site access tunnels, a lot of the civil works around that Creek diversion, et cetera, are all ongoing. So that was work already in progress, and that's what I was sort of saying before. I think while we're waiting for the decision, we're still very busy at side. The team is very busy on side in getting the site prepare. And then we know, obviously, once a construction decision gets going, we're well prepared to execute contracts and get moving on the bigger build as well. So it's -- I think that's fair to use that sort of number. And then obviously, we'll do a -- we'll update the guidance once we tally up what the actual cash out the door will be for the capital for the construction during 2026. Don DeMarco: Okay. Okay. That's helpful. And just my final question then, shifting to Marigold, so I see that there has been a sizable increase in sustaining CapEx in '26. And of course, the print details that there's some fleet replacements, of course, there's the plant upgrades. So is this sort of this spend to be onetime in '26? Or should we also be modeling maybe a little bit higher CapEx going forward in the next '27, '28 years? Rodney Antal: Yes. Look, I'll answer and then Bill can jump in, if you like, as well. I think we do what we always do when we look at our fleet and our mine plans in the long-term exercises around total cost of ownership. Fleets obviously have a useful life arm and particularly parts and maintenance and major component rebuilds. We completed that work for Marigold last year. And what I determined was, in some cases, that it was wise for us from a value perspective to do that work in 2026. So that's really what you're seeing there. So it's normal course. In some cases, some of them might have been accelerated by a year or 2, and some of that fleet replacement might have changed as well, but it's really just sort of an exercise in value for the fleet of understanding the optimized approach to that replacement. But nothing out of the ordinary. Bill? William MacNevin: That's correct, Rod. And a lot of work, looking at what the optimum timing, is for value. So some things are a little bit earlier than they originally planned, but that's because it gives very positive financial return to the business. That's why we're doing it. Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Steve Johnston: Good morning, everyone. Standing room only for the external participants in the Sydney office here and many, many people, I'm sure, online and listening in. So welcome, everyone. Let me begin, of course, by acknowledging the traditional owners of the lands on which we meet and pay our respects to elders past and present. As usual, I'm joined by our CFO, Jeremy Robson, and we'll present the financial results for the first half of financial year '26. We'll, as usual, run through the presentation. And of course, we have other members of the leadership team here who can join us and support us for the Q&A session that follows. As always, I'll start with a brief recap of how we believe long-term value is created at Suncorp. This is a slide I put up every time. It's our purpose slides where our purpose delivered through our people, supporting our customers and the community, but in that order, will always result in a sustainable and growing business for our shareholders. So to the headline result. And at the outset, I would acknowledge that this has been a challenging half for the whole insurance industry as we've responded to the extreme weather. The group's net profit after tax of $263 million and cash earnings of $270 million were well down when you compare it to the prior period as we managed 9 separate weather events at a net cost of $1.32 billion, which is $453 million above our allowance for the half year. Of course, I'd also make the point that the NPAT in the prior period included the one-off gain on sale of Suncorp Bank, which was $252 million. Net investment income of $259 million was also down on the prior period. And of course, it was impacted by the negative mark-to-market movements in the bond portfolio. However, of course, the flip side of this is that investment -- the investment portfolio is currently yielding 5%, and that creates a tailwind for future earnings and future margin. As you know, insurance profits are subject to the vagaries of weather and investment markets with favorable periods driving higher profits. But as we've said consistently, there are also times when the reverse occurs. And consistent with that purpose of ours, our focus as a general insurer is on creating long-term value. And while we've experienced significant natural hazard activity in this half year, the way we show up to support our customers during these events is what ultimately drives and underpins long-term value creation. So while the headline results have been impacted by those 2 factors, the underlying business continues to perform strongly, and that's reflected in the solid growth of our consumer business and our underlying insurance trading ratio, which has remained at the top end of our guidance range at 11.7%. We've also further consolidated our market-leading expense ratios. As you'll hear later in the presentation, our key strategic initiatives, the Digital Insurer program of work and our AI program are on track to deliver material value. And as Jeremy will point out, we have maximum flexibility when it comes to the structure of our reinsurance program. Balance sheet and capital position remained very strong, and the board has determined an interim fully franked dividend of $0.17 per share, representing a payout ratio of 68%. Our disciplined approach to capital management enabled us to complete $168 million of our on-market share buyback program over the half year. And we'll recommence the buyback post the results and continue to target around $400 million by the end of FY '26. So on this slide, I've focused on growth, which I know is going to be a key topic of interest, growth right across the business. And at an aggregate level, our business has delivered premium growth of 2.7%. Below the headline number in consumer, strong premium growth was driven by both rate and unit count. Home written premium grew 7% with unit growth of 0.4%. Now pleasingly, in Home, we continue to grow our share of low and medium natural hazard risk and we shrink that which we classify as high or extreme. Our Motor portfolio grew by 5.8% with unit growth of 2%. Again, that's a very satisfying outcome in the context of a highly competitive market. In Commercial and Personal Injury, GWP growth was achieved across most portfolios, but is, of course, moderated from its prior levels. In CTP, portfolio growth was driven by the pricing increases that were implemented across New South Wales and most recently, in Queensland. Now our New Zealand business tells a slightly different story. Growth contracted over the half and was impacted by challenging market conditions, particularly in commercial due to the softer market environment and, of course, heightened competition. Jeremy will go through all the GWP moves, adds and changes in more detail in just a moment. Now given the significance of weather events over the half, I've included this slide, which provides a deeper insight into the profile of the first half natural hazard events. As I mentioned earlier, we dealt with 9 declared natural hazard events through the half and we managed more than 71,000 natural hazard claims at that net cost of $1.3 billion. On the bottom left-hand side of the slide, you can see the top loss causes. Hail was by far the most significant contributor, accounting for approximately 3/4 of event-related claims and driving claims costs of more than $700 million from hail. The majority of those events arose in the October and November event periods. Now the financial cost of these events seriously underestimates their true impact on the communities. I've been on the ground across many of the affected areas, and I've seen the great work our teams are doing to support our customers in the aftermath of the events. Our meteorological and our disaster management capabilities, which many of you have seen and are housed in our event management center in Brisbane have accelerated our response while our mobile disaster response hubs have been active across 27 affected communities, engaging with customers on the ground approximate to the events that they've just experienced. Our scale in motor insurance repair meant we could quickly stand up a pop-up motor assessment center, where more than 4,000 vehicles were assessed over the course of 2 weeks, significantly speeding up the repair process. Now it's in moments like this, long-term value is either created or eroded. And while the impact on profits will be felt in this half year, I'm very confident that the way we have mobilized to support our customers will be rewarded over the medium to longer term. So with that, I'll hand back to Jeremy -- hand over to Jeremy to go through the result in more detail. Jeremy Robson: All right. Thanks very much, Steve, and good morning, everyone. I'd like to start off by reinforcing a few key points on the group results before we get into the details. Now whilst as Steve said, our reported NPAT was impacted by elevated natural hazard losses and mark-to-market losses, our underlying insurance result was up 6%. I just want to emphasize a couple of key points about the result. We delivered good unit growth in both home and motor, demonstrating the organic strength of our brand portfolio. Whilst the Suncorp business has elements that are exposed to the global insurance pricing cycle, these are a smaller subset of our business. Most of our portfolios are driven by input costs and upward supply chain pressures and natural hazard costs remain a feature. We expect acceleration in GWP growth in the second half including the impact of higher pricing already implemented across a number of portfolios. The higher yields that gave rise to the first half mark-to-market losses were a positive going forward, and give us an exit yield of nearly 5%. Our expense ratio reduced a further 40 basis points this half, reflecting our ongoing control of costs at the same time as investing in the business. Our capital position is strong. and we have reaffirmed our target for the buyback of $400 million for FY '26. We have optionality on reinsurance as markets continue to soften, which we're going to explore further. And we remain confident that our natural hazard allowance is set at an appropriate level. I also note the strong prior year reserve releases of $65 million, 90 basis points. We saw releases ahead of expectations in commercial and workers but with some offset in consumer. Okay. So now let's get into the results in a bit more detail, and we'll start with underlying ITR. The underlying ITR remained in the top half of the 10% to 12% range at 11.7%. Dynamics included the earn-through of pricing, continued improvements in the expense ratio and lower reinsurance costs, partially offset by the increased resilience built into the natural hazard allowance. On a portfolio basis, consumer benefited from the earn-through of pricing with margin remediation in home. For New Zealand, while the portfolio increased 150 basis points, the group contribution was impacted by the relatively lower growth and the weaker New Zealand dollar. The commercial portfolio was impacted by pricing pressure in property and claims repair costs in Fleet with margin expansion in the CTP portfolios following our disciplined pricing actions. Looking forward, we expect the second half margin to continue to be in the top half of the target range with the earn through of CTP price increases and platforms remediation but we do expect some headwind from New Zealand with ongoing moderating prices. On to the next slide then, and I'm going to quickly touch on overall growth before moving to the divisions. Growth in the first half was particularly strong in the consumer portfolios with unit growth across home, motor and AA in New Zealand. GWP growth was good in CTP and Fleet but workers was impacted in the first half by lower prior year adjustments. And whilst more muted than the overall market, the commercial portfolios in both Australia and New Zealand were impacted by the current cycle. We expect to see acceleration in GWP growth in the second half, and you can see that on the chart, to deliver full year '26 growth around the bottom of the mid-single-digit guidance range. In motor, inflation in parts and labor is ongoing and pricing has been adjusted to reflect this. We expect commercial growth to pick up with further product launches in Vero Specialty Lines and rate remediation in platforms. Significant pricing has gone through the Queensland and New South Wales CTP portfolios, and this will continue into the second half, and workers will also benefit from ongoing additional rate. And then we see price decreases are expected to moderate in our New Zealand commercial portfolios. I do note, of course, that the outlook is subject to the competitive environment, particularly in the commercial portfolios. Now in the context of growth, I'd like to remind you of how we see insurance pricing cycles work at Suncorp. On the chart, I've divided our portfolio into 2 broad categories, those where pricing is primarily driven by input costs. and those that are more exposed or directly exposed to global capital flows. In the first group, our portfolios that require important capabilities. So that's things like established supply chains such as motor repair networks and brands and brand presence. This portfolios are subject to cycles that are driven by input costs, such as supply chain inflation, natural hazard events and reinsurance costs. In the second group is business with direct exposure to global capital flows. Now less than 10% of our book is in this group and includes some of the property and professional indemnity portfolios in Australia as well as much of the New Zealand commercial business. The 2 key points I'd like to leave you with here are: firstly, insurance input costs tend to differ to CPI, and they continue to be elevated with ongoing inflation in motor and home repair chains as well as natural hazard costs. And then secondly, while Suncorp does have exposure to the global capital insurance cycle and our commercial portfolios, we have a good degree of portfolio diversification across the group. I also note, we benefit from this softer cycle in our reinsurance program for the whole of our business. Okay. So I'm now going to move to divisional results and start with Consumer. In Motor, GWP increased 6% with good unit growth and moderating AWP albeit with further pricing put through late in the half in response to ongoing repair cost inflation. In Home, GWP grew by 7% as we continued to price for higher natural hazard allowance and underlying claims inflation. Unit growth was positive but reflected the continued low system growth. Now pleasingly, you can see on the chart on the bottom left, we saw an improved portfolio mix with a higher proportion of low-risk homes. Underlying ITR for Consumer improved from 9.4% to 9.9%, with margin remediation ongoing in Home and Motor at the top end of its range. Looking forward to the second half, we expect consumer margins to expand modestly as pricing earned through Motor but with some moderation in Home due to the phasing of the natural hazard resilience allowance into the second half. Next then to Commercial and Personal Injury. GWP performance was mixed, reflective of our diversified portfolio. Fleet growth was strong in the double digits, reflecting our market-leading capability in this segment. CTP growth was good, reflecting the results of our disciplined approach to pricing. In Queensland, GWP was up 9%, and we continue to engage constructively with the Queensland government on reform, including a premium equalization mechanism. The Vero Specialty Lines continues to grow with 4 new lines now launched and live in market. But then the property and Profin portfolios reflected the softer cycle, albeit to a lesser extent than overall market, and workers, as I said before, was lower with the impact of prior year adjustments on premiums. Underlying ITR was a little lower with improved margins on CTP being offset by competitive pressures on property and claims inflation in Fleet. Importantly, property and Profin margins remain at the top end of the range and provide important flexibility as we manage the portfolio through this current pricing cycle. Turning then to New Zealand. The business continues to perform strongly from a profit perspective with an underlying ITR comfortably above the top end of the range, and that's as claims inflation and reinsurance costs have moderated rapidly. Whilst the business is well diversified, GWP contracted due to varying pressures across the portfolio. In consumer, unit growth continued in our Direct AA business in both Home and Motor, whilst the intermediated channel was impacted by the exit of a brokered book of business. GWP growth for commercial continues to be impacted by the softer market conditions as well as the impact of a New Zealand -- a weaker New Zealand economy. But we are seeing some signs of a bottoming of the commercial pricing market as well as an improved outlook for the New Zealand economy. Going forward, we expect margins to remain attractive, albeit to normalize down towards the top end of the New Zealand target range as moderating prices earned through the book. Okay. Now to natural hazards, and it's evident, as Steve said, the half was significantly impacted by elevated natural hazard events. The experience of $1.319 billion was $453 million above the allowance. Now just to put this into context, first half '26 for us was the highest retention ever in the half, one of the most severe halves this century, and it was significantly impacted by hail events, and those are relatively random in terms of weather patterns and less clear connection to climate change dynamics. The first half result also included an increase in attritional natural hazard claims costs, and that was primarily driven by the higher rainfall and wetter weather conditions that were prevalent over the half. Now whilst this is a disappointing result, it should be taken in the context of a natural hazard allowance that is sufficient in 7 out of the last 11 years, including this half and 4 over the last 6 years, and that's based on the current reinsurance program and current exposures and costs. Over that 11-year period, we would have cumulatively been below the allowance by over $1 billion, again, including this first half result. So we remain confident that our natural hazard allowance with the additional resilience flagged at the full year '26 results is appropriate. And we note that short-term variability is expected, and it's the long-term performance that drives value. Looking forward, the second half allowance remained the best guide for expected natural hazard experience in the second half of this year. And I do note that the January performance, and that's with the bushfires in Victoria and the storms and floods we saw in Sydney earlier in the month was in line with the allowance. Next, the related topic of reinsurance. As previously flagged, we continue to review our program against our reinsurance framework and our key objectives are optimizing capital efficiency relative to our cost of equity and managing volatility, all with the overarching goal of maximizing long-term shareholder value creation. Our FY '26 program, best met these objectives when placed in July last year, but a softening market may provide the opportunity to reassess additional cover. In the meantime, our program provides robust protection, limiting exposure to the need for reinstatements as well as drop-down cover against large events in the second half now enlivened. That means our maximum retention for further events will be limited to $260 million for our next large event and further limited for any subsequent large events. And of course, we'll continue to review our options on reinsurance leading up to the July renewal, and we'll update the market accordingly. On then to investment performance. The average underlying yield on insurance funds was lower than the PCP, reflecting lower risk-free returns and lower inflation-linked bond carry I do note our tech reserve investment managers, again performed strongly with good alpha. The higher yield environment continues to support an attractive exit yield, which is currently around the 5% mark. Now we've made some changes to our investment allocations in line with our strategic asset allocation. We've reallocated from inflation-linked bonds to structured credit and insurance funds and rebalanced from cash into property in shareholders' funds. Going forward, we'll continue with this rebalancing, but being mindful of the market outlook for inflation in particular and as suitable opportunities arise. Turning then to expenses. Operating expenses increased by 4%, and that's whilst our total expense ratio reduced by a further 40 basis points. Expense growth was largely in our growth-related costs. That's driven by investment in the digital insurer policy admin system and investment in AI capability. We also increased our spend in marketing in response to elevated competitor activity and then run the business expenses increased modestly as productivity improvements continue to help offset wage and technology inflation. Going forward, we aim to keep our run costs as low as possible through operational efficiencies as we continue to invest in our key strategic priorities of platform modernization and operational transformation, including AI. And so finally for me then to capital. Our capital position remains strong with $700 million of CET1 above the midpoint of our target range. And I'll just make a couple of points on the usual capital waterfall. The final dividend of $0.17 per share represents a payout ratio of 68%. It's around the midpoint of our target range and is fully franked. The GI capital usage you see on the waterfall was largely from the higher natural hazard experience in the half, some business growth and then some of that investment portfolio rebalancing that I referenced. The other category you see largely relates to the weaker New Zealand dollar. And then the completion of the $168 million of on-market buybacks in the first half was largely in line with our expectations. Importantly, the buyback is expected to resume after the first half results. And again, reaffirm that we continue to target $400 million for FY '26. Going forward, capital access to our needs is expected to be returned to shareholders using on-market buybacks, as we've previously flagged. I do note that we have a preference for managing capital in the top half of the range as opposed to hard on the midpoint in order to optimize ongoing capital flexibility. And with that, I'll hand you back to Steve. Steve Johnston: Okay. Thank you, Jeremy. And moving to the next slide. And here, we provide a quick update on our progress in delivering our digital insurer platform modernization program of work. Now at the bottom of the slide, I remind you of the progress that we have made in replatforming both our contact center and our pricing environment in Australia and in New Zealand. As we touched on in our investor update last November, our first release of our new policy administration system went live in April last year for new home and motor portfolios in our AA Insurance New Zealand joint venture. The system has started to deliver more simplified underwriting and greater automation, and we remain confident the expected benefits that are baked into the AI business plan, but also into the whole digital insurer business plan will be realized over time. We're now well into the delivery of our second release in our AAMI brand, which is, of course, our flagship national consumer brand. Now we're targeting this release for AAMI Home and Motor new business around the middle of this year and migration of existing policies at renewal, which will follow soon thereafter. But before I move to the outlook, I wanted to update you on our approach to AI, which as you all know, is a topic of key global interest, particularly as it relates to insurance. Now we spent a lot of time on this at our Investor Day back in November, but as usual, with these technology-based disruptions, a lot has happened in the past 4 months. On this slide, I've recapped the Suncorp AI story so far. It describes how we are well placed to leverage AI to improve customer outcomes and importantly, to support long-term returns. We believe we are uniquely placed to be towards the front of the AI adoption curve. We have market-leading AI capability within our Suncorp team, and we have established partnerships with leading AI technology companies and BPO partners. With these, partners know us, know our processes and know how AI can be redeployed -- can be deployed alongside automation and process redesign. Our agentic AI program of work that we showcased at Investor Day is now in full-scale delivery. We are on track with initial deployments across our claims and customer services processes, though we see opportunities right across the value chain of insurance to enhance the customer experience and to transform end-to-end processes. Additionally, as I outlined on the previous slide, we continue to progress our broader technology road map, which is replatforming our business with SaaS-based cloud-enabled core systems, where importantly, AI is embedded into the core. We already have AI enabled across our enterprise-wide telephony platform and our earning pricing engine. And on this slide, I provided a snapshot of just some of the AI capabilities that are embedded into the core replatforming program of work, some of which is already in place and more to come. As a manufacturer of insurance, we see material opportunities for AI to improve product design in a hyper personalized insurance future and to transform claims processes from a customer perspective, all along reducing our loss and expense ratios and importantly, addressing insurance affordability. As a distributor, we see opportunities for AI to both strengthen the effectiveness and deepen the customer engagement across our market-leading brand portfolio. This will equally apply to consumer and commercial or as premium pools move between those portfolios over time. In summary, AI will significantly improve our capabilities and efficiency in both manufacturing and distribution but over time, it will allow us to carefully and selectively assess other opportunities across the insurance value chain. So to the outlook, and I'd like to summarize a few of the key points for the full year. GWP growth is expected to be around the bottom of the mid-single-digit range given the current cycle in commercial in Australia and New Zealand. The underlying ITR is expected to remain in the top half of the 10% to 12% range. The operating expense ratio is expected to be approximately 50 basis points below FY '25, but with an increasing proportion of expenses allocated to growing the business. We maintained our disciplined approach to the balance sheet, targeting a payout ratio around the midpoint of that 60% to 80% range of cash earnings. And finally, as we've covered off, we'll be restarting the buyback as soon as possible with the target of around $400 million over the course of the year, the full year. So in summary, our team continues to rally around that purpose. We are focused at this point in time on the needs of our customers, supporting them with best-in-class event response capability. Our brands remain well supported, and our multi-brand strategy allows us to reach a broader customer base. We are investing in modern technology, which alongside AI transformation will deliver leading customer experience and competitive pricing. We ended the second half with a strong capital position, active capital management, all of which will deliver improved shareholder returns. And as Jeremy has covered off, we have optionality on reinsurance as markets continue to soften. So with that, let's move to questions. Why don't we just work our way along the front panel here, Nigel? Nigel Pittaway: It's Nigel Pittaway here from Citi. First question, just I mean, can we just clarify exactly what we mean by bottom of mid-single-digit range? Does that mean 4% to 6% is the range and 4% is the bottom. Is that a correct interpretation? Steve Johnston: It's pretty sensible arithmetic to me, Nigel, yes, mid-single digits. We would suggest would be 4% to 6% and bottom is 4%. Nigel Pittaway: Okay. Fair enough. Moving on to Motor then. I was wondering whether you can sort of elaborate on what actually surprised you in terms of Motor inflation in the period. You've obviously made some comments there about pressures across repair and total claims, but I was wondering for a bit more color there. And also whilst we're still on Motor, I think you mentioned that you put through price increases towards the end of the half, which seems to have gone the opposite direction to one of your key competitors. So I was wondering whether you've seen any change in competitive dynamics in the first 6 weeks of this half? Steve Johnston: Quickly, just -- and Jeremy can top up on lease potentially as well around what we're seeing in inflation. At the highest level, the discipline that we apply is that we monitor inflation very carefully across the whole insurance portfolio. And we've often said that you can't look at insurance inflation through a proxy of CPI. Some of the work we've done over the past 6 months to try and understand the differential between CPI and insurance inflation would put insurance inflation running at between 3% and 4% higher than CPI across our portfolio. So in Motor, let's start with Motor. Obviously, some of the dynamics might have been masked by the significant reduction in inflation as the repair chains became more accessible post COVID. So a big, big disruption in Motor. Those repair chains have broadly settled out, but labor rates remain high. That's the first point to make. The second point to make is when you think about motor, often we tend to look right over the horizon to an automated vehicle world. But what's going on in motor at the moment, there is a very significant short-term dislocation with electric vehicles coming into the market, hybrid vehicles coming into the market, particularly with Chinese origin. We've seen a lot of that happen. And that will disrupt supply chains for a period of time. We saw that with the introduction of the first round of electric vehicles, where it took periods of time to get supply chains working and get repair capability where it needed to be, and we're seeing a little bit of that in the network at the moment. We're also seeing elevated costs continuing in labor, labor rates across repair. Not to the extent they were post COVID, but certainly still elevated relative to what they might have been pre COVID. And we're seeing some impact of parts supply, some parts inflation, a bias to replace parts now with the technology that's embedded in them versus repair them as might have happened again 5 or 6 years ago. They're all the factors that we monitor very carefully. And again, to the overarching methodology for the group, we believe we need to focus on covering inflation in our pricing, and that's what we tend to do, and that's what we saw towards the back end of last calendar year and into this year. So those pricing increases have gone in, and we're very confident that they will be sustained. On the Home side, just to jump forward to probably your next question, the underlying dynamics in Home are not dissimilar to what we've seen before. So on the hazard book, we've obviously had a pretty challenging half, with a high predominance of hail-related events and we will go back through our modeling to understand the allocations of hazard premium to hail and whether the loadings that we put across the whole portfolio continue to be relevant. And I expect that there will be some adjustments to pricing, particularly in some geographies off the back of that. And also in New Zealand, where we tend to see the New Zealand numbers as small numbers in relation to the group. But relative to the size of the New Zealand market, there are quite material events that have been going through in New Zealand now for the past couple of years, had some changes in pricing there. On the Home side, the underlying factors continue to be the case and they relate largely to large loss fire severity of large loss fire. We've talked about lithium batteries that continues to be a dynamic, stabilized a bit in the portfolio, not so much frequency but more severity. And similar trends in escape of liquids, where frequency is moderated or stabilized and severity continues to be reasonably well elevated. The biggest dynamic in Home, and we'll talk about this, I'm sure, for the next 5 years will be the supply chain and the pressures that are on trade availability, particularly in some geographies, but that will flow through nationally. And so when we think about inflation in the portfolio, we think about that dynamic that elevates relative to CPI, and I think we'll continue to have it elevated for some period of time. and our overarching sort of methodology within our group and discipline within the group. And you saw it when we stood out of the market previously and we're prepared to do that from time to time when we don't have the confidence around the trajectory of inflation. But when we do have confidence around it, we will price to it in a disciplined way. And I think that's been evident in our previous performance and continues to be the case. Do you want to? Jeremy Robson: Steve, I'll just add just back to Motor and Home for that matter. I'm not sure any of those inflation signals that we're seeing, particularly idiosyncratic to Suncorp. I'll just add another 2. One is total loss, which is sort of nearly 50% of the motor loss claims, motor claims. And that's -- what we've seen there is we've seen not an increase in frequency and theft, but an increase in the average cost of theft. So we're seeing more modern vehicles getting stolen. So that's been a bit of a trend. Victoria seems to have stabilized a bit, but still at a higher level. And then the other one is third-party claims, which were a reasonable component of claims as well, and we've seen elevation in third-party claims, particularly from credit hire, which I think others have called out as well. Nigel Pittaway: Okay. And no comment on units in first 6 weeks? Steve Johnston: Look, I think put the hierarchy of decision-making inside the organization, make that clear. I mean we will price to inflation. Our preferred target is to have units land somewhere between 1.5% and 2.5%. So that we're tracking with market. In Home, it's a little bit more nuanced because the home system rate is negative. So 0.4% in an absolute sense, doesn't sound spectacular, but relative to the system, it's good. And importantly, in our Home book, it's the distribution of units and customer growth relative to the risk characteristics. And so our target for the portfolios will be to cover inflation and grow units in motor at 1.5% to 2.5%, thereabouts. But if we're above that or below that in any period of time, and we're covering inflation. Our primary objective is to cover inflation on a book that's got 26%, 27% market share. I think that's the right way and disciplined way to look at the portfolio. Nigel Pittaway: All right. And then maybe just a question on the reinsurance. I mean just aside from obviously softer pricing, has the sort of experience that you've had in the first half of this year in any way changed your approach to when you come to buy your reinsurance cover? And is it really the case that aggregate covers are likely to be more available? Steve Johnston: Well, I think they've edged closer to availability every year. And by definition, that's usually the case. We would like an aggregate cover in our arsenal. Since we divested the bank, obviously, that's amplified volatility across the group. And so an aggregate cover would be something that we would have always aspired to. 12 months ago when we went through the process of pricing it and seeing whether it was a commercially available product, sensible product in the market, we couldn't make it work. Our anticipation is that the continued softening of those markets and the profitability of the reinsurers across the broader catastrophe covers that we're offering, will put us proximate to that availability. Now we've got to go through that process. We firmly believe that as a primary insurer, we don't have the opportunity to pick and choose what markets we play in, in this country. And so we have a fantastic reinsurance panel with great partners, and we'd like to see some support to provide that volatility protection, which we think is the last part of our story. Kieren Chidgey: Okay. Kieren Chidgey, UBS. I might just start on a similar area, the GWP growth on Slide 12 that you put up, you're flagging better growth in second half across each of the portfolios. But the commentary seems to suggest most of it's coming from price. A couple of questions. Interested in if you can give us sort of, I guess, a feel for the types of level of pricing you're talking across each of those segments. And then secondly, sort of your view around the competitive backdrop in each of those and volume implications if you do have to push above market on price? Steve Johnston: Yes. I mean it's fair to say we've emphasized price. And we've emphasized pricing that's already been put into the book. Now some of that, obviously, CTP, their filings that have occurred, they're scheduled, they will come in. We know what pricing we put through New South Wales CTP. But ahead of price is inflation. And so when you think about price, think about us at that overarching level, looking to price to inflation, but... Jeremy Robson: Yes, I think if we go through it, so motor, we see a little bit more rate going through motor in the second half. As we said, we've already started to put that through in the back half of the first half. In Home, maybe a little bit more rate, but Home is pretty reasonable from a margin perspective at the moment. So a lot of the price is around margin remediation relative to where inflation is. So we think a little bit more in motor. CTP, as Steve said, it's pretty much already in. So we've got another $25-ish on New South Wales CTP this month. We've got another $6, I think, in April or so in Queensland. So we can see that price is already in situ. Workers' pricing in Western Australia and Tasmania needs to lift, probably towards the top end of the single digits. So you've got price going through those portfolios. Then as a set of elements like in Vero Specialty Lines, we expect to see continued growth there and continuing growth from the first half rollout and then there's some sort of like non-repeats, if you like. So in New Zealand, we expect the rate deterioration to start to bottom, but also the rate deterioration started in first half -- in second half '25. And so the first half -- second half '25 as a base is already in that second half '26 growth number. We expect to see some rate growth in motor in New Zealand, particularly in the AA portfolio. So that will support that. And then in workers, I flagged that we had these prior year adjustments, that's burner adjustments on claims, wage adjustments. We haven't seen the same favorability this year that we saw last year. Of course, the corollary on that is you're doing better on claims, so it sort of net P&L neutral, but it does come through the GWP line. We wouldn't expect that to occur in the second half as well. So that's the range -- there's a range of pricing that's in relative to margin remediation. There's some new business that's coming through and then there's some one-offs, if you like, baseline adjustments that aren't recurring. Kieren Chidgey: And sort of specifically on commercial, I think it's sort of your Investor Day late last year, you continue to flag, desire to grow market share to a natural level in that part of the business. I think the growth this period is suggesting that strategy is on hold in the current cycle. Can you just give us a refresh for how you're thinking about commercial over this calendar year? Steve Johnston: Yes. Obviously, as Jeremy pointed out, there is some exposure to the commercial cycle, particularly at the top end, and we have to be conscious of that. Again, back to the overarching concept of discipline, we are going to maintain our discipline in those markets. We've got good margin sufficiency, particularly in property and Profin. And our strategy there will be to very -- to be very cautious around growth, maintaining ourselves within that margin range. And as the cycle starts to change, be in a position to capitalize on that as others are potentially remediating portfolios that they've driven below the bottom end of their targets. So if we can grow sensibly and conservatively, but with good margin sufficiency and the margins are in the top end of that range, then we feel we'll be extremely well placed when that cycle starts to change and others start to remediate to go harder. But now it's not the right time to do that in our view, particularly with the discipline that we need to display around the margin performance. Jeremy Robson: I'd also just add, Steve, that when you talk about commercial, it's a broad church. And certainly, the growth in top end commercial property and to some extent, Profin has been weak. But we've had very strong growth in Fleet, which is a big part of our commercial business. We've had growth in other parts of commercial as well. We had a relatively weak growth number on packages in the first half. We need to get more rates through that portfolio. It was the other one which I had mentioned before, we need break-through packages. And so I think the key point there is commercial is a broad church, and parts of it are doing well and sensible and good margin, makes sense for us to continue Vero Specialty Lines, et cetera. But it's the top end commercial property and propene where there's a bit more pressure. Steve Johnston: Kieren, just to add to your first question. I mean, the other way of looking at Home and Motor, but particularly Motor is geographically because there's a lot going on geographically in insurance. Kieren Chidgey: That's my next question. Steve Johnston: Right. Okay. I'll answer it. So obviously, there's a Queensland activity with RACQ and the work that's going on there. And again, Home and Motor are different portfolios for us in Queensland. We're more comfortable growing in Motor, obviously, particularly in Southeast Queensland, and we'll be targeting some of that potential disruption that occurs as those portfolios, RACQ and their acquirers start to merge. New South Wales, it's been a softer spot for us historically. We feel significantly more comfortable with the performance of GIO now than we might have a couple of years ago. And AAMI is obviously very strong in that market. And we think there's a big opportunity in New South Wales for us now. And if you look at the market share leader in New South Wales, some of their performance might be an opportunity there -- there is an opportunity there for us growing in New South Wales. And then South Australia and Western Australia, where the unit volume count performance in both those markets is better than the average of the 2% that we talked about. And again, to varying degrees, there will be opportunities for us to capitalize on some of the dislocation in those markets. So if you look at it macro nationally opportunity, you look at it geographically opportunity. And then in New Zealand, with AI, we're getting 3% unit count growth there. Not all of it is attributed to the new policy administration system. But we have an embedded benefit that we believe in both -- at the written premium level, but particularly in volume through the implementation of that new portfolio. Kieren Chidgey: Steve, just a quick follow-up, and then I'll hand over. But the Victoria Motor picture is kind of skipped over Victoria. How have you seen experience there? Steve Johnston: Look, I just don't see the same material dislocation opportunity in Victoria, as I talked about in those other states. We are pricing to the higher inflation in Victoria, which is largely so much frequency, accident frequency or otherwise theft. But in the aggregate of the whole portfolio, Victoria would be a market where we'd be looking to grow with system in both Home and Motor, maybe a bit more in Home than Motor but grow at system but price to the inflationary environment. And there is a delta on theft to the rest of the country, both in terms of frequency, but particularly severity. Jeremy Robson: Steve, just to add in terms of that sort of geographic per se, but brand reach, one we don't talk about often, sort of refers as Bingle. Bingle as growing 15% GWP on the same time last year, but half of that is rates and half is units. That is an example for us of a brand that's got further reach and further stretch as we continue to roll that out. Andrew? Andrew Buncombe: Andrew Buncombe from Macquarie Securities. Just 2 from me, please. The first one is on the catastrophe experience in the month of January and rolling forward the last couple of weeks as well. You've said in the slides that, that experience was in line with the allowance. This time around, you've put slightly more of a skew on the second half for the allowance. My question is, is the January experience in line with a straight line average or some sort of shape? Steve Johnston: Very conservatively, I think you said in line with the allowance, I would call it within the allowance. So we might have been a little bit better than the allowance. What are we, touching wood, with sort of 18 days into February, and we had some weather in Queensland last weekend, which is very material and some weather ongoing in New Zealand, which will be a big reasonable event in the New Zealand, but not well within our means at the allowance level. So I think it's there or thereabouts. So nothing happened in the first 6 weeks of this calendar year that sort of says that we're anything sort of a skewed to the allowances that we would track. Jeremy Robson: Yes, we said that the second half allowance is probably the best guide for the second half experience, which holds true. But the second half allowance theoretically, we should improve a little bit because of now the enlivenment of the drop-down covers in the second half. So there's probably a conservatism in that statement a little bit. And the January experience was actually slightly better than that outcome. Andrew Buncombe: And then the other question from me was in relation to reserve releases. So 90 basis point impact from a release in the first half, correct me if I'm wrong, but my understanding is the full year guide is still 30 basis points. How should we be thinking about the second half? Should we expect a strengthening? Jeremy Robson: I think the expectation outlook is more around the underlying business performance. So we achieved, I think it was probably 40 basis points, 30, 40 basis points on CTP in the first half. And so we continue to expect to deliver that for the full year. When it comes to the other portfolios, they're sort of plus margin, obviously, in the first half with some bigger plus minuses around them. I don't think we expect all of that to reverse necessarily in the second half, but really just calling out what we expect to see on the CDP because that's where we expect to get the reserve releases. The other portfolios we will see strengthening and releases, but we would expect those to net to a neutral-ish number. Andrei? Andrei Stadnik: Andrei Stadnik from Morgan Stanley. Can I ask around the OpEx ratio? So OpEx ratio fell nicely in this half. Do you think the OpEx ratio can continue to fall into FY '27? And can it continue to fall into FY '27 even if premium growth were to slow? Jeremy Robson: Yes. I think -- I mean, we have to have opportunity from our operational transformation agenda with the AI in it. Obviously, a key determinant to the OpEx ratio is where premiums go but I mean we still see a reasonable premium outlook. So the chart I put up around that insurance pricing cycle. What we're saying is for that 90% of our portfolio, there's still a fair bit of premium growth to run through the portfolio. That obviously helps an expense ratio. So that's one part of the equation. And the other one then is the absolute expense number. I think the key thing is for us is thinking about the mix of that expense though. And so one of the things that we are fixated on is trying to keep that run the cost business as flat as possible. And it's not always possible to keep it absolutely flat, but as flat as possible. And then to reinvest back into the grow the business expenditure. That's expenditure on things like the digital insurer policy admin platform modernization and operational transformation, and we see value in that. So to the extent we can do that and achieve our overall margin outcomes, then that's a good outcome. Andrei Stadnik: And for my second question, can I -- just coming back to the catastrophe budget. Based on the internal modeling we received from the insurers, your catastrophe budget is sufficient 7 out of 10 years. QBE based on their modeling is 8 out of 10 and IAG is over 9 out of 10, right? So at the moment, the catastrophe budget is at the bottom end block of Australian listed peers. How are you thinking about catastrophe budget increase in the next year? And if there is an aggregate reinsurance cover, would that help limit the increase? Jeremy Robson: Yes. Look, I think at some point, for Australian consumers, it becomes difficult to price, for example, 100% adequacy on the catastrophe losses because it just doesn't make sense from a consumer perspective, and it doesn't make sense in terms of what insurance is there for. Now we have -- and we have all extensively lifted over the last few years from what was a 50% type number modeled. Actually, in practice, it was probably much less than 50%. So we've all lifted from there. I think there will undoubtedly be variations in modeling. So our modeling won't be the same as other people's modeling. We all use different models. And so one thing to have to think about is what might be the variability in some of that modeling. I think we feel pretty comfortable with our natural hazard allowance where it is at the moment. But having said that, as we've always said, if there was opportunity to try and strengthen it a bit further or within the realms of delivering that margin outcome, then that could be a possibility for us. But we don't feel uncomfortable with the way it's set at the moment. And yes, an aggregate cover. I don't think an aggregate cover would change the natural hazard allowance per se. It would sit on top of the natural hazard allowance wherever we set that. Freya Kong: Okay. Freya Kong from Bank of America. Just a question on margin progression in the walk there. Correct me if I'm wrong, but last year, you said you were tracking above the top end of the 10% to 12% underlying ITR ratio, some of that which you'd reinvested into a higher hazard allowance? I'm just trying to understand the moving parts here. Have you reinvested some of the additional excess margin into growth? Jeremy Robson: Yes. If we go through the portfolios on the margin walk, we have seen a little bit of margin expansion in consumer, and that has predominantly come through Home where we have -- that portfolio has been in remediation. It was below where the target range was. We're now actually up towards, if not above the top end of the range in Home. And then in Motor, we were above the top end of the range. We're now back towards the top end of the range in Motor. And then in Commercial, we are sort of around the -- around, if not a little bit above the range across the aggregate portfolio there. And obviously, in New Zealand, we're above the target range. And so when we think about are we reinvesting in growth, et cetera, what we're trying to do, as Steve said, is manage the business to that return, to that margin and then make sure we're optimizing our growth relative to other brand assets, et cetera, relative to that margin outcome. Steve Johnston: I mean we mentioned many times, I mean, you can take a complex business and simplify it quite materially through our targeted returns on incremental capital back to our book capital return, back to an ITR for the group or the Suncorp business in its entirety and then back down into the portfolios. That's a target margin that we would aspire to. We cover the cost of inflation, and we'd like to get some level of market levels growth in some portfolios, particularly Motor where we've got scale. Home, the story is more about improving the quality of the home book and going and in aggregate, delivering at system growth. Commercial, we think there's an opportunity at the other end of the cycle to grow ahead of system and get back to that natural market share. And CTP, because we've got an overweight position in Queensland, we're prepared to seed some share. So you can take a very complex business and reduce it down to something that's a little bit more simple in terms of how we sort of intellectually seek to run the business. Freya Kong: Okay. And just some capital questions. There was some drag in excess capital in the period from higher insurance liabilities, I'm presuming because of the cat claims. Will these get unwound as the claims get settled in the coming months? Jeremy Robson: Some of them do get -- I mean, theoretically, eventually, it gets unwound, but some of these events have a fair tail on them. So I would expect some of that to get unwound. I think the largest driver was that natural hazard impact on claims. You also see some impact on things like mix. So New Zealand growth was lower than the rest of the group. And so the excess tech is higher in New Zealand relative to the group because it's relatively high profitability. So you get a mix impact from that. And then there's always a bit of seasonality in that capital movement in the first half as well. So those are a couple of other moves in there as well as the rebalancing of investments. Freya Kong: Great. And just last one on capital management. Given the strength of the capital position, can I ask why the buyback was paused so early into the end of last year? Steve Johnston: Yes. I mean it's less about the capital position per se, but more about the confluence of events that we were dealing with at that particular time. So we were right up against sort of getting towards the end of the half year period. So obviously, that Christmas period is a period where you probably don't do much trading anyway. So the timing sort of was reasonably proximate and I think just with the nature of the events unfolding through October and November, we thought it best to pause. But we'll restart as soon as possible after this result. Richard Amland: Richard Amland from CLSA. Just would like to ask a little bit about risks to your pricing aspirations. There were some political sensitivities last year around sort of prices. You guys are acknowledging the input cost discussion that you've had, trying to push ahead of CPI by a magnitude, might be somewhat challenging. Can you just give a flavor of any regulatory or political engagement that you've had that gives you comfort that you're not going to get hard pushback from any unforeseen corners? Steve Johnston: Yes. I think it's never good to deliver a profit outcome that's significantly down on the PCP and probably driving returns on capital at that actual level and an aggregate level below our targeted returns. But I think what we've done as an industry and particularly at Suncorp over many years, is educate policymakers and regulators that we have got a cyclical business. So when we do generate returns that are above our cost of capital, through benign weather or favorable investment markets that we need that to deal with events like we've seen in the last 6 months or so. Yes, there's an ongoing dialogue. Affordability is a huge challenge for Australia more broadly and for New Zealand, but particularly Australia and the incoming of the new Minister for the Assistant Treasurer, Dr. Mulino is very focused on that agenda, particularly for the sort of 2% of the population or 3% or 4% or whatever it is that they can't obtain affordable insurance. And so as an industry, I think we're working constructively with the government, constructively with Treasury about how we might find an industry-wide solution for that problem. But in the industry-wide solution, has to, by definition, be industry-wide. It can't be 1 or 2 players that solve this problem. And it also needs to come with support from the government in terms of resilience and mitigation. So there's an ongoing dialogue. There's no answers to that just yet, but it is an active part of the minister's agenda and at the individual company level, at the ICA level, we're working constructively with the government around that. Beyond that, I think the factors that drive insurance inflation, and I've talked about, don't use CPI as a proxy are reasonably well understood now, I think. But we are very conscious as a business that while we might talk about inflation, while we might talk about pricing to inflation, there's a consumer with the cost of living challenge sitting off the back of that. And over time, with the things we're doing with AI and digital insurer. We need to get better at designing new policies, new premium, new product for that subset of consumers who are really challenged to continue with their insurance. Unknown Analyst: A couple of questions, if I may. In your analyst pack, you talked about the reallocation of Strata premiums from Home into Commercial. Does that reflect the pressure on them from the commercial property cycle or you've got a sign of further strata growth insurance plans? Steve Johnston: Michael, do you want to? Michael J. Miller: Thank you. It's a clear strategic move. So with VSL, Vero Specialty Lines, one of the products we do want to enter into is strata. And so we have a small Strata book in our personal lines business. It's about $120 million a year. Thought process is bring that across and then run that direct book right next to the intermediated book, and grow it as one from a pricing point of view, distribution, knowledge. It makes a lot of sense. So it's probably just the foundations of building out that Strata opportunity. Unknown Analyst: Great. Then in terms of your internal reinsurance, there was a big drop in the premiums you are booking in terms of internal reinsurance, presumably because of the fall in reinsurance costs. Should we expect further falls in that looking forward, like possibly a similar level in the second half and then if the reinsurance -- the cycle continues to fall, maybe a further reduction next year? Jeremy Robson: The key driver was retention. So that's internal reinsurance between the Australian business and New Zealand. And the key driver was an increase in the retention in the New Zealand business. So the Australian business just provided less reinsurance to the Australian business, which was then funded through Tier -- effectively through Tier 2 diversification. So it didn't have an impact on capital. So I think the level we're at now is probably a more appropriate level. That's the baseline. But yes, I mean as markets soften a bit, might move down a little bit, but the key one was just the retention levels. Unknown Analyst: Great. And then with the improvement in your underlying margins, principally the improvement due to claims costs, how much of that was due to reinsurance or alternatively, if you don't want to answer that, how much was due to the earn-through of rate? Jeremy Robson: Yes, most of it would have been -- a chunk of it would have been earned though rate. I think if you look at the accounts, you can probably see where reinsurance costs are year-on-year, and you can see a reasonable reduction in reinsurance rates. But we don't split it out between those 2 categories. But you can see reasonably chunky reduction in reinsurance year-on-year, particularly relative to some others. And you can see in the pack where our price positions are on AWP. So you probably have a stab on the back of the envelope on it. Unknown Analyst: Yes. Okay. And finally, how much of the expected drop in the expense administration ratio is due to roll-off in bank transitional costs? Jeremy Robson: Nothing. So with the bank transitional costs, they're all provided for as part of the bank sale process, and they were baked within the profit that we recorded on the sale of the bank last year. So that's all the P&L of the insurance business immunized from that bank sale process. Okay. I think we've got a couple of calls on the phone. Operator: [Operator Instructions] Your first phone question is from Julian Braganza with Goldman Sachs. Julian Braganza: Just a first question on underlying margin. Just to be super clear, in terms of the guidance where we now have expense ratio like 50 basis points as well as yields holding up better than expected into the second half compared to initial expectations. So typically, what is offsetting those 2 impact in the margin and commercial rate? Steve Johnston: Well, I'll get Jeremy to go through it in more sophistication than this, but the answer is pretty much New Zealand is the answer. So pretty much all New Zealand, Julian. Obviously, we had a period of time where the underlying margin in New Zealand is significantly elevated above its usual guide rails. We expect that, that will come back within the guide rails maybe towards the top end of the guide rails through premium adjustments that have already been made and starting to -- it's a reverse of what we've talked about in Home and Motor to some extent. Jeremy Robson: There was a little bit related to the natural hazard allowance phasing. So we put -- loaded more the resilience that $100 million into the second half than the first half. So there's a little bit there. But the key one is that margin fall in New Zealand. Julian Braganza: So just to be clear, so you have the New Zealand underlying margins coming back to 16% in the second half, just to be super clear? Jeremy Robson: Well, we've never really explicitly called out what it is, but it's something ahead of 15%. Julian Braganza: Got it. Just on second question, you mentioned growing in low risk properties as an opportunity to growth over medium term, so trying to understand how you're thinking about that from the perspective of a drag on your GWP going forward? And also secondly, what does it mean for how competitive you're being versus peers here on pricing? And then what is the strategy? And what makes you think you'll be successful in growing this part of the market? Steve Johnston: Sorry, you might have to repeat, Julian. Which portfolio are you talking about? Julian Braganza: So just in our Home portfolio, you mentioned growing in low-risk properties. There's an opportunity for growth. Just want to understand what gives you confidence that you'll be able to achieve that growth, just in terms of pricing and how competitive you will be versus peers? And will that be a drag on your GWP going forward as well? Steve Johnston: Low-risk portfolio, in Home. Yes. Look, I think -- I mean the first point I'd make is that this doesn't happen overnight. And you can see, I think, from a period of time where we started to reset ourselves around the apportionment of growth between low, medium and high from 2021 to 2026. First half '26, it's about 4% in aggregate. So this doesn't happen immediately. The 3 -- the composition of it all and go to the margin drag story is -- the components of it are to better risk select, better focus on that low and medium natural hazard area, but most importantly, to price at the technical level, close to the technical level for high and extreme. And so when we talk about that in its totality, yes, we're improving the quality of the book, but we're also focused on making sure that the cross subsidy that potentially set in those 3 categories historically has being unwound, and we're getting closer at an aggregate home portfolio level to pricing actual and technical at the same rate. And so that has an impact on the distribution of risk between the 3 areas, but also improves the margin. And when we talk about remediation of the home book, remediation is probably not the right word, but you can see 2 things. One is we're now growing at system or ahead of system. We're growing in a better quality way with a focus on low and medium. But importantly, we've also got the margin back to the top end of the range or slightly above the top end of the range. And so that's the way we think about it. Again, it's more about making sure that the cross subsidy that might have sat there previously is adjusted to reflect the fact that we need to price closer to technical because as you know, if we are providing any cross subsidy there of any significant magnitude than others in the market who don't focus on those higher end risk areas will target only the higher risk parts of the portfolio -- the lower risk parts of the portfolio. Julian Braganza: Okay. Got it. Now that's clear. And just the last question in terms of your AI transformation agenda. Can you just comment on some of the risks you see more broadly just around pricing competition and disruption to some of the risk that we have had in that area. You've talked a lot about [indiscernible]. Steve Johnston: Yes. So I think if I heard correctly, it's AI and the risks of AI, particularly around various other domains. Yes. Look, I think one of the key elements that everyone is looking at, at the moment is the risk profile of AI relative to where you sit in the adoption curve. Now you can quite easily sit sort of in the fast follower or follow a territory and sort of watch others make mistakes and potentially benefit from that, or you can be more at the leading end. So our risk settings are very much approximate to the position and the leading position that we seek to take in AI. So we're very conscious of making sure that when we implement AI initiatives right across the value chain, but particularly in the customer area that we're focused on and making sure that we don't disrupt the customer experience. And you saw a bit of that when digital started to flow through insurance and particularly banking and other industries. Those that adopted it early, obviously, made some mistakes in the early adoption of it. We're going to adjust our risk settings to make sure we can reduce or have a risk appetite to reduce those errors, but also to make sure that we're not falling behind the market. So that's the sort of aggregate risk view. Clearly, we also need to make sure that as we go through this evolution like all major corporate players that we're investing in our people to reskill and retrain them and set them up for that AI world. So yes, the risk profile. We're doing a lot of work on risk profile at the moment to make sure that when we implement the programs of work we do, that we're not disrupting the customer experience, that we're continuing to deliver what customers expect us to deliver, but we can do it in a more efficient way. Jeremy Robson: And Steve, just to add that net-net, we see AI as an opportunity. I mean, yes, there a risk around it, but we see it as a net opportunity, an opportunity in terms of within the business and how we run the business, how we can run it more efficiently, more effectively, better client experiences, et cetera. Insurance is readymade for that sort of opportunity. And then from an outside-in perspective, there's been market chatter around how AI may impact on distribution. Again, we feel well positioned around that from a consumer perspective, from a commercial perspective, with our brand portfolio and our expertise in how we, over a long period of time have dealt with that distribution channel. Steve Johnston: And I mean, obviously, there's distribution potential benefits for us if we're early adopters, and we focus on it. But at the end of the day, you have to manufacture a product and manufacturing a product in insurance is about pricing and risk selection, and it's about claims management. And that's where we see material benefits as a manufacturer of insurance products to make our products better, more personalized to make our claims processes better and to continue to improve the quality of our risk selection and underwriting. If you've got all of those things working, you're going to drive material benefits for customers and for shareholders. If you just sit there, think it's a distribution opportunity and you don't focus on risk selection, pricing and claims management, then you're going to end up with a book that's skewed to areas that you might not want it to be skewed to. Operator: The next question on the phone is from Siddharth Parameswaran with JPMorgan. Siddharth Parameswaran: A few questions, if I can. Firstly, just Queensland CTP. Steve, it has been a drag on your margins. I think 6 months or 12 months ago, quite a sharp drag from where we were with commercial margins previously. With the price increases that you're pushing through, does that get CTP back to target and where are you at with your discussions with the regulators on change particularly in Queensland CTP? Steve Johnston: Yes. Thanks, Sid. I think it's well known that sort of 12 to 18 months ago, we had a very challenging CTP portfolio, very much reflective of, what we believe it wasn't a sustainable scheme going into the future. You saw the exit of RACQ and bringing it back to 3 insurers with us holding around 60% market share. The discussions with the Queensland government and the regulator have been very constructive. We've had, I think, 4 consecutive premium increases in that portfolio of different magnitudes. From the start of the journey, we would have said those 4 in the quantum that's included in them would probably be sufficient, but there has been some deterioration in the scheme. So we still believe there's more pricing that needs to go through the scheme, but it is on a trajectory to return to the target margin that we would have in the portfolio. In terms of the broader scheme reform, there's a couple of components there. There's proposals around the premium equalization mechanism. We think that's supported by the government, supported by the regulator, but now in a process of having it legislated and system changes and all those sort of things. So that doesn't happen overnight, but we think that there's support for it. And the wheels of government are stepping in that direction. So we think that's occurring. And there is new scheme -- a new scheme regulator, not yet appointed but the old scheme regulator has moved on, and there's a new scheme regulator coming in, and we think that, that's -- we're having some constructive discussions around that at the moment. Sid? Siddharth Parameswaran: Thank you for that color. Just the second question, just on the difference between underlying and reported margin. I just wanted to check on 2 components. So the ongoing reserve release assumption of 0.3% of NEP that you expect. Is there any thought about changing that going forward? I know there was a favorable release this period, but you had previously indicated that, that might start to drift towards 0. So just on that -- just that question. And the second question was just around the risk margin strain. I think there's a risk margin strain of $35 million in the half. And I think that should be an ongoing component of the difference between reported and underlying. I just want to confirm that, that would be a consistent difference between the 2 per half. Jeremy Robson: Yes. So the reserve releases, what we've said with those is that we expected 30 basis points this year. And as I said before, that's around the CTP portfolios. The others will move a little bit, but we sort of expect those to be net-net. What we've said is that, that was 150 basis points a few years ago. It's now 30 basis points. I expect over time, it may come down to a lower number. But what we have committed to reasonably clearly and demonstrated delivery on, I think, is that -- to the extent that comes down, we will manage our underlying ITR still within the guidance ranges that we're giving. So I think it's come down to a small number. It may come down to a smaller number. It's becoming less significant, and we will manage that within the within the underlying ITR. And then the risk margin question, the elevation in risk margin adjustment that we saw this half was really off the back of the natural hazards. And so yes, to some extent, that's really part of that natural hazards adjustment because obviously, with the experience we got, we get the claims on it, we put more risk margin on. So I don't know that we would ordinarily expect a risk margin of that same quantum because it was connected to that event pattern we had in the first half. Siddharth Parameswaran: But there should be something in there, I presume, some... Jeremy Robson: There will be something. Yes, there will always be something there, yes. Siddharth Parameswaran: Okay. Great. Okay. Just a final question for me just on the -- you do have some drop-down covers, you would have done some modeling on the expectation of reinsurance recoveries and maybe things which may help your allowance in the second half versus what you're allowed for. Just wondering if you could help us understand if you are expecting anything at all given the quantum of the claims that you had in the first half, what should we expect as a possible set of recoveries in the second half? Jeremy Robson: Yes. So I mean, it is fair that on most of those drop-downs that the deductible erodables, erosions have pretty much been taken care of in the first half. So they are now, as I said, enlivened, give or take a couple of million dollars. They're now pretty much enlivened. And as I referenced, technically, we have done the modeling it, technically, when you model that through the allowance you get a slightly lower allowance in the second half than the budget, the original budget for the second half, but it's not material, but it is -- you're correct, it's a little bit lower than the budget allowance because there is expectation now of recovery against those programs. Operator: There are no further questions on the phones at this time. I'll now hand the conference back over. Steve Johnston: Okay. Anything more in the room here in Sydney? Nothing more. One more question over here. Freya Kong: Just a quick question on the Vero Specialty Line launches. How much of these new products compete with global Capital? And are the launches dependent on what happens with the cycle more broadly? Steve Johnston: Michael? Michael J. Miller: I think there's 2 parts to answer that. So firstly, strategically, VSL is around getting product breadth. We're a big believer in specialization. And so when you do these smaller products, you do them very, very well. You get the right underwriters in there. You can make some really good margin to support your brokers and your clients. And they're also not by themselves. I think it just -- when you have the breadth, you can use the specialty products and the more general products together and in multiline opportunities. So that's the reason why we do them. We look for premium pools where there is opportunity, where there is a size and where we can get the talent to do it. And the second part of that question is how we tactically actually funded. Look, we do use global reinsurers. We look at our own capital, we look at overseas as well. And if we can find the capital that is cost effective to us and they want to back us, then we will use quota shares and the like. So that's quite fluid though. We don't have to. But quite frankly, if it makes sense economically to use that capital, we will. So that's sort of the thought process there. Jeremy Robson: And just to add, Michael, I think some of the specialization that sits in there, through the underwriting, through the broker relationships, through the industry relationships, some of that helps immunize some of that global capital pressure. Steve Johnston: Okay, nothing else in the room. If not, thank you, everyone, for coming down or being on the phones, and we'll look forward to catching up over the next couple of weeks.
Sam Wells: Good morning, everyone, and welcome to the Lycopodium First Half FY '26 Results Call. I'm Sam Wells from NWR Communications. And joining me from the company today is Managing Director and CEO, Peter De Leo; as well as CFO, Justine Campbell. Following a brief summary of the results released to the market this morning, investors and research analysts will have an opportunity to ask questions. There will be the choice of 2 options. First, analysts and investors can either raise your hand should you wish to ask a verbal question of the management team and you can also submit a written question via the Q&A function at the bottom of your Zoom screen. We'll endeavor to get to the majority of questions asked, in some cases, combining submitted questions on the same or similar topic. And for those analysts asking verbal questions, we kindly ask that you keep your questions to no more than 2 or 3 live questions on today's call. Thank you. And over to you. Peter De Leo: Thank you, Sam, and welcome. Thank you for your attendance at our formal investor presentation for the first half of FY '26. As Sam said, I'm joined this morning by Justine, our CFO; and Rod Leonard, our Chair. This morning, I'll be -- mid-day for many of you. I'll be just running through a typical investor presentation, covering off a little bit about the company, providing an update on the financial highlights for the period, touching on operational highlights for the period, then addressing outlook and guidance. And we also provide, as part of the presentation, although I won't be running through in any detail this morning, appendix, which contains a lot of additional and hopefully, informative information. Lycopodium remains a leading global engineering and project delivery group, working across mineral resources, industrial processes and infrastructure industries with an extensive book of quality clientele and 18 offices across the world. I'd speak to our clientele. We have an amazing bunch of clients across all those industries I mentioned, through very, very large clients, mid-tiers and junior explorers and miners, and we're very grateful for that client order book. As a project-focused organization, it is of significant importance and to our benefit to have involvement with projects from the very early stage. Hence, our involvement in scoping and feasibility studies and the evaluation phase of projects through the full engineering and project delivery as a full-service provider in that phase and then also on to optimization and expansion phase works enables Lycopodium to benefit from a project's full life cycle. It's been something we've focused on over the years, both in broadening the services which we provide, but also broadening the time which we are involved in projects. We maintain a high workload with a strong current order book of studies and delivery phase activities on a broad range of quality projects. Committed contracts are valued at $415 million, that's up on last period. And also revenue opportunity pipeline is $1.3 billion, also up on last period, which really indicates -- and I'll talk more about it obviously later, the outlook for the business, but indicates that we are continuing to see busy market, enjoy a busy market and see a busy market. By way of financial highlights, Lycopodium did $174.5 million worth of revenue for the period and $18.3 million NPAT, which provided a 10.5% NPAT margin, which is in line with our expectations for achieving our NPAT target. The Board of Directors declared a $0.22 per share fully-franked dividend for the half year, again, returning to our traditional sort of dividend policy, our dividend expectations and had strong cash at bank at the half year. The company enjoys excellent diversification across a broad range of commodities, clientele and geographies. Those of you that have seen the slide previously may note that we continue to achieve more balance in support of this diversification across these metrics. And we're striving to continue to do this on an ongoing basis. We'd like to see a strong balance in terms of diversification across commodities, across geographies. In particular, it provides surety and strength moving forward. From an operational perspective, we've recently been awarded a number of FEED or front-end engineering and design briefs, which we expect to position us optimally for the next phase of each project. These include the Winu copper project for Rio Tinto, the Assafo-Dibibango gold project for Endeavour Mining, which is our next development project, development gold project for Resolute and a number of others, including most recently, Pilgangoora Plant Expansion lithium project in Western Australia. We've also started initial work on 2 material prospects being Tulu Kapi gold project and the Blackwater Expansion Phase 1A project Artemis Gold. In terms of the LatAm, we hope to be able to transition on to a larger project with our Blackwater Expansion project and awaits news on that thing, which we believe maybe imminent. Of note, however, there has been a shift to the right on these projects, particularly taking in Blackwater from a timing perspective, probably about a 3, 4 months shift from what we previously expected and forecasted, and it has impacted our financials and forecasts. However, we continue to invest in building capacity in anticipation of these and a swathe of other material opportunities and this is really important. We are in a competitive labor market across the world for our people, and we've retained our people and continue to grow our people count and also our capacity in terms of office space and just general corporate capacity, what we see is being a large number of prospects. Our study pipeline is very strong. And those that have been on our calls previously, you would have seen this slide in particular, which tries to demonstrate our early phase work, our work which is midstream in middle of its delivery and then that stuff that's being -- projects that's being completed in recent times. And you can see there is quite a number of new opportunities, new projects, which have ticked into early phase work. I spoke around the Blackwater Expansion Phase 1A, Tulu Kapi, Winu, et cetera. And there is other projects such as Diamba Sud, Iguidi and Doropo where we're doing the FEED work and we hope that those projects will go into full execution and we will be able to participate in the full delivery of those projects. We also got a really strong portfolio of projects, which are called heavy delivery, including Kon in C te d'Ivoire, Yanqul Copper in Oman and a number of other projects, which are listed there and of course, some projects which we already completed. So, we're very, very happy with the number of studies that we've got and that's traditionally the key metric for businesses. We're working on a good number of -- and quality of studies, which tends to be a good indicator for what we'll be doing next. Our focus on people continues as we seek to maintain and enhance our status as an employer of choice and a place where people can develop excellent careers, advance themselves personally and professionally and enjoy growing with the company. Our approach to keeping our people and those on our managed sites safe is demonstrated in our exceptional safety track record. So on to outlook. Demand for our services remains very high based on our excellent track record and performance on all of our most recent projects as well as market conditions, which generally sees commodity prices strong, if not historic high levels, obviously, gold being very, very strong. At the moment, we're seeing enormous number of opportunities emanating out of our traditional markets, including Africa, Australia, but also across the Americas. Silver being another commodity, which we're seeing. A number of projects we've started work on the PFS for Unico Silver in Argentina, supported obviously with our investment in SAXUM. We're also seeing, on the basis of our expansion across the Americas, lots of many new opportunities and the like being presented to us or prospects that we have identified and are pursuing. But we also continue to invest in building capacity and capabilities globally. We've, in the last 12 months, have planned for the next 12 months to increase the capacity in Perth, Toronto and Cape Town, in Lima and in Manila. And that's in preparation for the work and the prospects, which we continue to see, and we see that this will bear fruit in subsequent financial years, certainly, but we also expect to support a strong second half of this financial year. We revised guidance, primarily due to the shift rise of a number of those major prospects. I spoke about the 2 main ones, which are expected to contribute materially to our forecast. We now provide guidance of group revenue between $370 million and $410 million, and NPAT between $37 million and $41 million, in line with our target NPAT expectation of around 10%. We'll obviously continue to keep the market and shareholders updated on any material changes or any material awards. But we consider the second half will be strong to achieve those -- that guidance which we provided. We remain a secure, stable and sustainable business, doing great work globally. This is based on the deep engineering expertise and growing teams, and keeping teams of exceptional high-caliber personnel and we provide lots of, what I call, value in the services which we provide globally. We have a long track record of highly disciplined risk management. We're also focused on ensuring that we have a good portfolio of contracts and style of work, which talks to both risks and also talks to return. And again, leveraging experience over the years. We have a very strong history of execution of projects and execution of business generally, with strong alignment with management and our shareholders. We still have around 30% of the company's ownership held by Board and management. We have a very capital-light approach. We're not an organization that requires to spend a huge amount of capital to generate our returns, and we continue to pursue business in that fashion. I've touched on in the appendices, which you can go through your leisure. You can review the very strong field of blue-chip clients that we have. It's a very diverse list. Lots of clients have been with us a long time. We continue to deliver repeat business as predominant. The quantum of work that we do is in the form of repeat business for clients, new projects for existing clients and the like. Strong commodity diversification, I spoke around that earlier. I think we continue to strike a good balance there. Even in the light of a very strong gold price, we're still busy in lithium. We're still busy in uranium, copper and a bunch of other commodities. Lycopodium, certainly against our peers, appears to have an undemanding valuation. And the geographic diversification, I think, for us is key. We continue to expand geographically. The Americas has been a fantastic geographic expansion for us. The acquisition of SAXUM, the opening of the Lima office and Vancouver office, et cetera. We're seeing tremendous number of opportunities coming through. Again, it's fairly early days. So, we have got expressions of interest in and proposals in a number of new opportunities across Latin America in particular, but also our North American operations continue to see a level of inquiry, which is unprecedented. So, I think certainly the word is out about Lycopodium across the Americas and we expect to see continued sort of growth and opportunities for business activities across the next couple of years coming out of the Americas, let alone our traditional Africa and APAC regions. As I said, we also provide some additional, hopefully, informative content as an appendix to presentation to further explain and illustrate the strength and quality of our business. So, I'm not going to go through that this morning. I welcome you to talk through as ever after this presentation. If you have any questions, please feel free to reach out to us with those questions and hopefully, you can ask on the appendices. But thank you for attending our webinar and I welcome any questions that you may have now for us and we'll do our best to answer them. Thank you. Sam Wells: Thanks very much, Peter. [Operator Instructions] First question comes from Oliver Porter at Euroz. Oliver Porter: Just a quick one. You mentioned adding capacity and headcount kind of across the board globally. Can you just talk to how you're finding the labor market and perhaps if by geography, are you having any particular challenges or how that sort of is going to look over the next 6 to 12 months? Peter De Leo: Thanks, Oli. Yes, the availability of good talent is always challenging, and that sort of is a constant. We're seeing that in Australia. We're seeing that in Canada. We're seeing that in South Africa, in particular into large operational hubs. But we continue to recruit good people and bring good people in. And again, talking about -- I touched on our focus on people and the focus on careers and the focus on providing people new exciting and diverse work is something which we sell. And we don't -- we never have people come to light and think that they are joining anything other than an exceptional business, which is great. And so it makes it a little easier, but they are tough markets to find. There's a dearth of high-quality experienced personnel globally. So, we value it very much. To that point being, across the last part of the first half, we maintain capacity where if you weren't expecting to continue to see growth in demand, we may have trimmed capacity at times just to maintain utilization up, which is a key metric for our business. But we maintained it particularly in Cape Town, knowing full well it's not easy to get people. You can't just let people go and expect them to rejoin you in 2 months' time, knowing with the full knowledge that we had the amount of work and are seeing our work potentially ahead of us. We sort of were very careful to maintain our teams and to continue keeping on that capacity and growing that capacity. Oliver Porter: Great. And just with SAXUM, it's slightly slower start than you initially expected. But can you speak to how the opportunity pipeline as it stands today compares to your expectations when you made the acquisition? Peter De Leo: Yes. You're right. Their own performance in their own right as a business unit has been slower than we would have liked. Again, those you've heard us speak about the SAXUM acquisition before, for us, the acquisition of SAXUM wasn't so much about what they would contribute to the group in their own right. It was about the opportunities that they will bring to group and the [ features ] that they would provide within Latin America and the Americas, more particularly Latin America and enable us to access clientele and opportunities that we hadn't been previously. If we wind the clock back 18 months, Lycopodium wasn't bidding anything in Latin America. It was aware of lots of opportunities. And we're now sort of much more across and attuned to and enabling and aim to pitch flow opportunities. As I said, Unico Silver is one example. It's PFS, obviously, at this point in time, so relatively early days. They are Australian listed company with silver project in Argentina. SAXUM, in fact, secured the PFS, on the back of good relationship and it's part of our group. And it's supported -- in that case, supported by our Americas' officers and process teams. We're currently bidding a -- or express of interest with a view debating a large copper concentrator opportunity within Argentina, again, supported by APAC, driven by APAC hub, where a lot of [ horsepower ], a long track record of large copper concentrators only enabled by the fact that we have the SAXUM business. So in that respect, it's going exactly to plan. Integration of the business has occurred and has occurred really well. And there is no issues there and no concerns there. The traditional cement market is slower than they would like to have seen and they would like to see, of course. And have we landed a big fish or even medium-sized fish at this point in time, we are really in good stead on a number of great opportunities that we wouldn't have had before with SAXUM bought. Sam Wells: Next question comes from Stephen Scott at Veritas. Stephen Scott: Just on Slide 4, world of green dots. Just noticed that Europe and also maybe Middle East maybe presencess there. Do you have any thinking about that in perhaps the medium term? Peter De Leo: Thank you, Stephen. Europe is not on our radar per se. It's not a huge amount of minerals activities in Europe. There is obviously some mineral activity, but not a huge amount. Middle East, on the other hand, is on our radar. In fact, of course, we're currently working on the Yanqul project in Oman, where that project is being delivered at our Americas hub. But also the Americas hub is also seeing a number of inquiries from Dubai-based and Middle East based groups, some projects in the Middle East, some projects out of the Middle East and particularly into Africa. And we also -- we have an entity established in Dubai where at this point in time it's on the shelf. But acknowledging that we do need to find the level of prospectivity in that region increases to such a point that we consider to have an operation there. We can activate that. But certainly, I think Middle East from a level of prospectivity, it's certainly something that we have an eye to -- we can service out of APAC and out of Africa or out of our Americas' hub and where clientele are and where relationships exists. There's quite amount of, I guess, money coming out of Dubai in particular, Abu Dhabi, Saudi alike. So, I expect to see some opportunities coming out of there. Sam Wells: The next question -- we probably have a couple of questions on the shifting time lines. Are there any specific factors that caused the delays to Tulu Kapi and Blackwater? And are there any second order impacts on these delays? And specifically, there's a couple of questions around how much extra cost did you have to carry during the half that are associated with those delays? And is that visible in increased project expenses as a potential forward indicator? Peter De Leo: It's not indicated. It's not related to additional project expenses, let's say. What it relates to -- let's just deal with the first part of the question. And that is around timing, project delays and the like. Unfortunately, the reality of our world is that we don't control when projects start. We can influence obviously by completing our study work efficiently, effectively and well, making projects more fundable, more easily fundable and dealing with what we do with our partnering, our inputs to projects, making sure they are high quality and we do that regularly on an ongoing basis. But the timing when a project starts, when it gets funded, when it gets permitted, some of those we call nuances around when a projects has a full green light. It's not something we can control. I'll give you an example. We did a project last year, early last calendar year, polymetallic project in far north Canada. We gave a red hot crack. We were shortlisted and have caused [indiscernible] perhaps even the favored party. That project at the time was apparently going to be starting in calendar year '25. That project still got [indiscernible] and some effectively native title issues still in group. These things we can't control. We do our best to forecast and to do a likelihood and probability of a project going and then a likelihood probability of us securing to that project and then what that might mean for our business size, our capacity, our capabilities and all that business planning that we do. But unfortunately, we don't control the timing of projects. And two, that we sort of singled out in our presentation today, we singled out because they are material contracts potentially. They get fully green light and we fully secure them. They're both material contracts and have material demands on the business. And we prepared in advance for what was meant to be a kick-off in, call it, fourth quarter 2025. And you have to do that because you can't be caught flat-footed on all these things. They all have aggressive and challenging schedules. And when things don't kick off necessarily exactly as per our forecast, we have to enact contingency plans and the like. And to the second part of your question, increased project expenses that you're seeing in the financials really relate to FG Gold, Baomahun, which is a relatively soft form of half EPC. I can't give too much detail, but it's a project where you're seeing some direct costs being coming through our books, so as we've seen project improvement -- project costs. And on the equipment side, we've started a business about 18 months ago called [ pudco ] where we sell some form of OEM, products leveraging our technical capabilities and our technologies developed over the year and that's what you are seeing there. And to the last part, are we seeing -- have those project delays caused us to incur costs? Well, in one respect, yes. What happens with project delays where you start seeing a softening in utilization of our personnel because you bring on 40 people and they're not fully occupied to the level you'd like to see them occupied. That can have an adverse impact because you're carrying some of their costs. It's not flowing straight through projects. But again, it's just a reality. We tend to model our commercials, around a certain utilization level. If you're doing better than that utilization, then you make more profit, you are doing less than utilization, you start running into your target profits. Sam Wells: And maybe just as a follow-up to that. Can you comment on first-half '26 utilization, particularly in the second quarter against PCP? And what would your expectations be for the H2 balance? Peter De Leo: We expect to see utilization increase. Utilization was reasonably high through the first quarter of this financial year. It has softened across second quarter, as I said, certainly in some of our operational centers. APAC and Americas was running both fairly high utilization levels. Africa headcount lower as well as Process Industries business at this time in SAXUM. Again, though as a group, we were still running above target. Utilization levels were softer than we had seen in the first quarter. We expect those utilization levels to increase. Our forecasts are that they will increase through Q3, Q4 of this financial year. But certainly, beyond that, we expect, based on our forecast that we'll see utilization increase into FY '27 as well and not only increase, but we expect probably bigger numbers, bigger headcount in due course, obviously, evidenced by -- we're taking on more office space and the like. So, that's part of the plan. Sam Wells: And in regards to the number of studies being currently undertaken by Lycopodium, how much would that be up on perhaps a 12-month range? Peter De Leo: It's a bit of a tough question. It's been in studies. In terms of total quantum, it's probably there or thereabouts, maybe a little higher. But it's obviously also the mix of studies and what those projects look like and we are studying what the size of them are, what stage study it is, et cetera. So it's always a tough question to answer. But if you just look at -- are we got more studies on today than we had on this time last year? Probably I'd say we do. Because we're doing more studies in the Americas. There is similar amount of studies here in APAC and probably a similar number of studies out of Africa as well. So it's probably up. Sam Wells: And maybe just the last question this morning. Can you give us a sense of the conversion rates you currently see through the life cycle of project development, i.e., for each client that commences a scoping study, do they utilize Lycopodium for delivery and operations? Peter De Leo: Often, yes. Sometimes no. I'd say most of the project work, which we get involved in, we've been involved in study work. And we expect that you have an advantage if you completed the feasibility study, whether it be PFS. PFS, often when you are doing the scoping, you generally roll into PFS, DFS and so on and so forth. But what I will say is taking a project from scoping study, especially copper project, copper concentrator, for example, the scoping study level through execution might take you 10 years. So, these things take a long time. Gold projects somewhat less in this market. We've got a number of clients who haven't done a scoping study and want to be in execution, want to be pouring gold by Christmas next year, which is unrealistic, of course. But there is no shortage of sort of enthusiasm, call it, that side of fence at the moment. Sam Wells: I think that's all the time we have for live questions today. If there are any follow-ups, please feel free to e-mail me and/or Justine, and we'll endeavor to get back to you. And maybe just with that, Peter or Justine, I'll pass it back to you guys for any closing comments. Peter De Leo: Thank you very much. Look, nothing else to add other than we're very happy with the way the business is tracking at the moment. We're really working to plan. Obviously, dealing with the vagaries and the separate project timing and some of that impact that it has to the business over time. But in terms of the strength of the business, the fundamentals of the business, the balance sheet is, of course, remains strong. We're always looking for new opportunities, looking for how we can leverage our capabilities and do more and continue to do it as well as we are doing it, if not better. So, that's it for the presentation. Again, as I said earlier, if you have any questions, please feel free to reach out to myself or Justine and we'll try to help you out with answers. And thank you very much for your attendance. Sam Wells: Thank you very much for joining today's Lycopodium first half results call. Enjoy the rest of your day. Goodbye.
Operator: Greetings, and welcome to the Nano Nuclear First Quarter 2026 Financial Results and Business Update Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Matthew Barry: Thank you, and good afternoon, everyone. Joining me on the call today are Jay Yu. Nano Nuclear's Founder, Chairman and President; James Walker, our CEO, and Jaisun Garcha, our CFO. Please note that today's press release and slide presentation to accompany this webcast are available on our website. Before moving ahead, I'll quickly address forward-looking statements made on this call. As reflected in more detail on Slide 2, today's presentation contains forward-looking statements about Nano's future that are made under the safe harbor provisions of the applicable federal securities laws. You are cautioned that actual results including, without limitation, the results of Nano's microreactor development activities, strategies, time lines and other operational plans may differ materially and adversely from those expressed or implied by the forward-looking statements. Important risks and other factors that could cause actual results to differ from those in our forward-looking statements are contained in our filings with the SEC including our annual report on Form 10-K filed this past December, which you are encouraged to review. The forward-looking information provided today is accurate only as of today, and Nano disclaims any obligation to update any information provided except as required by law. With that, I'll turn the call over to Jay Yu, Nano's Founder, Chairman and President. Jiang Yu: Thank you, Matt, and thank you, everyone, joining the call today. Nano Nuclear continues to differentiate itself as a microreactor developer with a focus on vertical integration across the nuclear fuel supply chain. We are advancing our K MMR, KRONOS MMR, a high TRL, high temperature gas-cooled reactor design backed by decades of operating history and meaningful prior capital investments, which we believe can significantly derisk future construction, licensing and deployment. We expect the compact modular design of our KRONOS MMR system to support factory fabrication, repeatable construction and learnings that can accelerate deployment time lines and drive cost efficiencies over time. Importantly, we believe the inherent safety profile of our KRONOS MMR and can enable a smaller footprint, co-location and off-grid deployment, unlocking high-value applications previously unavailable to traditional nuclear reactors. We paired this foundation with a focus on vertical integration across critical aspects of the nuclear fuel supply chain, which we believe will give us an advantage over our competitors, uniquely positioning us to expedite reactor deployment, benefit from growing nuclear renaissance and enhance long-term economics of our reactors. Turning to our Q1 highlights. We continue to make meaningful progress across business during this quarter. Our KRONOS MMR continues to advance towards licensing and construction. We completed site characterization and drilling at the University of Illinois and are incorporating those results into our planned construction permit application to the U.S. Nuclear Regulatory Commission. We also signed a formal MOU with the Board of Trustees at the University of Illinois, detailing the next steps as we advance the project. The State of Illinois announced that we will receive $6.8 million in incentive awards, underscoring growing support for advanced nuclear technology. In Canada, we continue to make progress towards initiating formal licensing following our acquisition of Global First Power, now rebranded as True North Nuclear. And lastly, we're advancing discussions with numerous supply chain partners for key components and long lead items as well as discussions with commercial enrichment provider and TRISO manufacturers to procure fuel for our first KRONOS MMR prototypes. On the commercial side, we signed a feasibility study agreement with BaRupOn to evaluate the potential deployment of many KRONOS MMR systems to provide up to 1 gigawatt of power for their AI data center and manufacturing campus under development. We believe this announcement highlights the potential scalability of our platform for customers with significant energy needs. Nano is also expanding its pipeline of potential data center, industrial and military customers interested in KRONOS for a range of power needs. Nano saw a growing interest from potential strategic partners, highlighted by a recent MOU with DS Dansuk to explore localization, manufacturing and deployment opportunities for KRONOS reactors in South Korea and the broader Asian region. DS Dansuk is a leading South Korean industrial enterprise with extensive capabilities in energy, chemical processing and advanced manufacturing, providing a strong platform to support commercialization of our technology. We also signed an MOU with Ameresco to explore integration of their EPC capabilities for deployments for our KRONOS MMR systems on federal and commercial sites. These announcements reflect a broader trend of interest from strategic partners, including established companies with decades of experience with large-scale energy and industrial infrastructure projects who recognize the value proposition of KRONOS. As it relates to our strategic focus of vertical integration, we also made progress towards expanding our conversion and transportation capabilities through active exploration partnerships and acquisitions. In addition, our strategic affiliate LIS Technologies received a key radioactive material license for Tennessee's demonstration facility while also announcing plans to invest $1.38 billion over time to build a commercial enrichment facility in Oak Ridge, Tennessee supported by its patented laser enrichment technology. Each of these announcements reinforce our progress in securing our nuclear fuel supply chain. From a financial perspective, we raised gross proceeds of $400 million through an October private placement, significantly strengthening our balance sheet and extending our operational runway. This capital raise included participation from a growing base of institutional investors, reflecting increased confidence in our strategy and execution. We were also added to the Morgan Stanley National Security index, further expanding our visibility among institutional investors. Our Q1 progress reflects our continued execution, advancing KRONOS towards licensing, construction, expanding commercial traction, working to expand our vertical integration across the nuclear fuel supply chain and maintaining our strong financial position to support execution of our long-term strategy. We believe our progress to date differentiates technology and strategy have positioned us to be a key benefactor of the global nuclear renaissance driven by several durable secular growth trends. These include growth in demand and reliable baseload energy for AI data centers, industrial reshoring and the broader electrification, energy, sustainability, independence and climate mandates and unprecedented policy support. Recent developments in the U.S. power markets are bringing increased focus on each of these trends. Electricity demand tied to AI data centers and other power-intensive applications is expanding faster than the new generation and transmission can be delivered creating rising concerns around power availability, grid expansion and energy affordability. In January, the administration supported an emergency auction organized by the largest regional grid operator aimed at driving 15-year power purchase agreements to fund an estimated $15 billion of new generation. The same grid operator is also considering co-location generation policies to help large energy users bring supply closer to demand. While these actions are important and reflect a growing recognition of current power bottlenecks, they alone are unlikely to close the structural gap between demand growth and reliable supply. Against that backdrop, we believe assets capable of delivering high uptime, long-term cost certainty and operational resilience independent of constrained grid infrastructure are likely to command a meaningful premium in the future. We view our KRONOS MMR as an ideal feature solution to address these challenges, which are expected to intensify in the years ahead. By offering the potential to provide behind-the-meter or off-grid baseload power directly to the end users and customers, we can meet expected demand growth without driving higher costs for everyday Americans. In short, the recent actions across the country are reinforcing the need for global nuclear renaissance and highlighting what we have long believed. Reliable, clean baseload energy is a strategic necessity, and we are building our KRONOS MMR as a next-generation solution aligned with national priorities, customer needs and long-term economics of the AI-driven energy future. Before handing the call over to our CEO, James, I'll briefly highlight why we view 2026 as an important year with multiple potential catalysts offering the opportunity to create shareholder value. First, we expect progress towards regulatory licensing of KRONOS in the U.S. and Canada. We are targeting submission of a construction permit application to the NRC in the coming months to formally begin the U.S. lysis process. This submission will represent a key milestone that could set the stage for initial construction at the University of Illinois in mid- to late 2020. Second, we see potential for several commercial announcements this year, reflecting growing interest in our KRONOS MMR from customers in several markets. Third, we're advancing discussions on commercial partnerships and acquisition opportunities across nuclear fuel supply chain, providing the potential to address key bottlenecks in areas like conversion and field transportation. And lastly, we expect additional progress to our strategic partnerships that could accelerate and derisk large-scale deployment of our reactors while also significantly expanding commercial opportunities globally. With that, I'll turn the call over to James. James Walker: Thank you, Jay. Let me start with a brief update of our University of Illinois prototype project, which will be essential to advancing our KRONOS MMR towards commercial deployment. As Jay mentioned, we've completed site characterization and drilling and also signed an MOU with U. of I's Board of Trustees to outline the next steps for the design, construction, ownership and operation of our KRONOS MMR system on campus. We remain on track to submit our construction permit application to the NRC in the coming months under the Part 50 licensing pathway. Our team is working on the application closely with AECOM and other partners and have begun engaging with the NRC for several months to ensure alignment on scope and technical requirements. In parallel, we're advancing discussions to procure key long lead components, including discussions around reactive pressure vessel capacity, fuel enrichment application, graphite supply and other key components. Based on our progress to date, we aim to begin construction in mid- to late 2027 and see a realizable road map to a full-scale prototype online in or around 2030. Our team is also evaluating opportunities to accelerate this schedule and secure additional project funding to reduce overall capital costs. Turning to our growing pipeline of commercial opportunities. We believe growing commercial interest has been driven by KRONOS' compelling value proposition. KRONOS has a strong safety profile that we expect to enable colocation directly at the customer site and provides the option for off-grid power. KRONOS is also particularly well suited for large-scale multiunit deployments where reactors can be connected and scaled over time to match customer demand. Its modular architecture and compatibility with factory fabrication and standardized production create the opportunity to capture meaningful economies of scale as we deploy at larger scales. We believe manufacturing efficiencies combined with operational learning curves can position us to achieve highly competitive economics over time, while still delivering the 24/7 reliability and uptime that data centers, industrial customers and other mission-critical users require. Moreover, KRONOS' patented flexible design also provides the ability to serve projects with smaller power needs requiring only one or several units, expanding our served available market to new applications previously unavailable to nuclear energy. During the quarter, we announced a feasibility study with BaRupOn to evaluate the potential deployment of up to 1 gigawatt of power to support their AI data center and manufacturing campus. We are actively advancing the study, which includes the site evaluation, project scoping and time line development. Following completion, we'll aim to perform EPC cost estimates, begin early project development activities and work towards finalizing a formal agreement to sell our reactors. Beyond BaRupOn, we continue to build a growing pipeline of prospective customers across data center, industrial and military applications. A consistent theme across these discussions is the need for reliable baseload power, particularly solutions with favorable footprints that can be deployed behind the meter to reduce grid dependence and accelerate deployment time lines. Notably, power requirements for these projects range from below 50 megawatts up to 1 gigawatt plus. We also see meaningful opportunities in additional markets where KRONOS is well suited, including remote communities, mining operations and other energy-intensive applications requiring reliable off-grid solutions. And as Jay highlighted, we're making progress towards several strategic partnerships we believe can further expand our commercial reach and accelerate deployment, beginning with our recent MOU with DS Dansuk. We recently announced a collaboration with DS Dansuk, a leading South Korean industrial company to accelerate deployment of our KRONOS MMR in South Korea. DS Dansuk brings deep capabilities and operational experience across energy, chemical processing and advanced manufacturing, along with long-standing relationships across key industrial and government stakeholders in South Korea. We're confident their credibility within the Korean industrial ecosystem can facilitate engagement with state-owned entities as well as potential Korean industrial customers seeking reliable carbon-free baseload energy. As such, our collaboration with DS Dansuk has the potential to meaningfully derisk regulatory licensing as well as accelerate site identification and project development, facilitate introductions to prospective customers and support localization of manufacturing and component production within South Korea. Moreover, we also see this collaboration as a pathway to strengthen project financing opportunities and establish broader strategic partnerships that can accelerate commercialization and deployment in South Korea, one of the world's most sophisticated nuclear and industrial markets as well as the broader Asia region. Now that we've touched upon KRONOS' growing commercial momentum and value proposition, I'd now like to elaborate on KRONOS' technical differentiation. KRONOS is supported by a proven and well-understood foundation with nearly a decade of development and an estimated $120 million invested into its design by its prior owner. We believe this materially derisks the platform and provides a strong technical basis as we advance towards licensing and deployment. KRONOS' 15-megawatt electric design builds on high-temperature gas-cooled reactor technology that has been deployed and validated across multiple countries for more than 5 decades. Core elements of the design, including TRISO fuel, helium coolant and graphite moderation are mature technologies supported by extensive real-world operating data. Beyond the reactor itself, our balance of plant strategy prioritizes commercially proven systems, including steam generators, turbines and thermal energy storage technologies already in use in today's concentrated solar plants. We also expect to operate within conservative temperature and pressure parameters that align with successful deployments. As a result, our focus is not on developing new or experimental reactor technology, but on integrating well-understood components into a compact modular microreactor platform that can be licensed, manufactured and deployed efficiently. With that operating history in mind, I'll now outline the key advantages of KRONOS as a prismatic high-temperature gas-cooled reactor. First, on technology readiness, prismatic high-temperature gas-cooled reactors utilize well-characterized materials with established commercial supply chains and the performance data from prior deployments provides a high TR level foundation for our design. Second, the safety profile is fundamentally different from other reactor types. TRISO fuel retains vision products at extreme temperatures. Helium is an inert coolant and the design relies on passive heat removal. As such, we don't expect a credible meltdown pathway, and the core can shut itself down without reliance on active safety systems. Third, prismatic high-temperature gas-cooled reactors are inherently simple. There are few active systems and high-stress components, and many elements can be commercially off-the-shelf rather than safety grade. The core configuration itself has no moving parts other than the control rods and the materials are inert and well understood, contrasting with the complexity of certain other advanced designs. Fourth, prismatic high-temperature gas reactors like KRONOS are especially well suited for export. The use of TRISO fuel presents minimal proliferation risk compared with other fuel technologies and a superior safety case potentially offers streamlined licensing with international regulators. Fifth, we believe this architecture is uniquely flexible. In particular, the standard design can be deployed for smaller capacities by simply decreasing operating pressure. This flexibility allows KRONOS' output to be scaled without redesign to meet the needs of a wide array of customers. And lastly, we believe these characteristics could enable lower long-term maintenance and stronger economies of scale. And inert coolant, passive safety and advanced fuel reduce the need for complex chemistry controls and high maintenance systems. Combined with a simpler design and greater use of nonspecialized commercial components, we see opportunity for reduced operating costs, lower maintenance costs and favorable cost scaling over time. Our focus on vertical integration stems from our belief that one of the largest constraints to deploying advanced reactors at scale isn't the reactor technology, but fuel availability. We're working to gain exposure to several critical stages of the fuel cycle, starting with enrichment through our collaboration with our affiliate, LIS Technologies. LIS owns the only U.S. origin patented laser enrichment technology and our relationship with List has the potential to provide Nano with a differentiated uranium enrichment solution. In parallel, we're exploring opportunities to build our capabilities in conversion and fuel transportation through strategic commercial partnerships and acquisitions. Further progress in each of these areas can not only derisk future reactor deployments, but also positions Nano to generate revenue across the nuclear fuel cycle while remaining aligned with federal funding opportunities and national energy security needs. With that, I'll turn the call over to our CFO, Jaisun, to provide financial highlights. Jaisun Garcha: Thank you, James. I'll now provide a summary of our Q1 financial performance. Our overall cash position increased significantly during the quarter, ending the period with cash and cash equivalents of $577.5 million. This was an approximate $374 million increase during the quarter ended December 31, driven by the net proceeds of our successful October 2025 private placement. We're confident our substantial cash balance and proven ability to raise capital at scale position us well to accelerate development and commercialization of the KRONOS MMR. Our strong financial position also provides flexibility to pursue value-accretive opportunities via M&A and strategic partnerships to enhance our vertical integration. Turning to the income statement. Q1 loss from operations was $11.6 million. The higher year-over-year loss resulted from an approximate $8 million increase in operating expenses. A substantial majority of these expenses focused on advancement of our KRONOS MMR and other strategic growth opportunities. Q1 net loss totaled $6.5 million, up approximately $3 million from the comparable prior year period. The net loss was lower than the loss from operations as we earned approximately $5 million of interest income on our larger cash balance. Net cash used in operating activities increased by approximately $1 million from the prior year period to $4 million. This resulted from the aforementioned increase in G&A and R&D expenses. Net cash used in investing activities totaled $3.1 million and included payments for our Oak Brook, Illinois engineering facility. Before turning the call over to the operator for Q&A, I'd like to reiterate that our strong balance sheet places us in a great position to execute our strategy of advancing our KRONOS MMR and enhancing our vertical integration. As we look ahead, we will continue to generate value for shareholders by allocating our time and capital prudently toward opportunities offering compelling return on investment. With that, I'll now turn the call over to the operator to open up the call for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Sameer Joshi with H.C. Wainright. Sameer Joshi: So the 1 strategic alliance you announced with the DS Dansuk group, are there any sort of milestones or catalysts over the next 12 to 18 months that we should be watching out for? James Walker: So yes, I'm quite pleased to answer the question about this actually because the plan with DS Dansuk is actually a pretty large one. So what they actually wanted was that they envision massive bottlenecks with regard power for their industry. And so when we went over there and me and the technical team, we were talking to them about how we actually create a manufacturing facility there. And we've been working with them in the interim months to break down the reactor into sections and how we would manufacture those sections and what can be done in Korea, what cannot be. So what's been happening over the last few months is we've been looking at what can be fabricated in Korea, what can be sourced there, where materials would going to be come from because one major thing that companies are looking at is that great, you build a reactor and it gets licensed. How are you going to mass manufacture that reactor? So we are obviously turning our attention to that in the U.S., but DS Dansuk wants to do the same thing with our reactor in Korea. So what we're likely going to see over the coming year is just more development in that direction. We are going to put together a plan about how we arrive at a centralized local core manufacturing facility to take the South Korean market initially, but it's really the whole East Asia region where there's a huge demand for the product. So in terms of what you are going to see, you're going to see more engagement with us and DS Dansuk. You're going to see that MOU advancing into more critical planning stages. At some point, you're going to start seeing -- it's difficult to say exactly the time lines now. You're going to see [indiscernible] factories that are going to be built for the purposes of mass manufacturing reactor. And you're going to see additional partnerships between us and them regarding certain key strategic things like partnerships on graphite acquisitions and fuel supply and things like that to get things into place. The other part is what you're going to see is that there's a big demand for this. So you're probably going to see some related news about our interaction with the government, with KHNP, with big vendors in South Korea. And ultimately, over the years, you'll see increasing contracts between ourselves and customers in the region regarding offtake agreements for power, PPA agreements, those kind of things, as we look to actually ourselves so that when we hit that period when we have the reactor fully constructed and licensed, we're then ready able to start manufacturing the reactor immediately, achieve economies of scale and then start installing those reactors en masse. Sameer Joshi: Understood. So should we -- I mean we also talk about strategic partnerships worldwide, but also within the U.S. and North America. Should we also include like an EPC kind of a strong partnership signed in this region? James Walker: Yes. So this is a very good point actually because [indiscernible] now is that we are on the verge of submitting our construction permit. We're very close to finishing that submission. Now when that goes in, that means that we can pivot the technical team to be able to refocus on what the next big stages are. And one of the big next stages is going to have to be how we mass manufacture these things. Now beyond that, there becomes a larger question. Say we have 10 sites, a dozen sites, whatever it is, that we need to surface. Now that is a lot of local construction crews that need to be coordinated. And so the EPC element to this becomes quite important because when you are doing that kind of digging that well for the reactor to go into because [indiscernible] concrete, that's all stuff that Nano doesn't have to be involved and it can locally contract out. But that's still a huge amount of coordination. So you might have seen partnerships between ourselves and Ameresco and Hatch. And previously, actually even Hyundai, I think, we were involved in looking at how we deploy this reactor around the world. So the EPCM part of this is going to be a fairly large component of how we deploy here. So we have made a few announcements as we begin to look at how we deploy these things, how it gets coordinated. That is obviously a very separate thing to DS Dansuk where they are going to be an industrial factory partner. So they wouldn't be doing EPC. But those EPC contractors in the U.S. are going to be very important. In South Korea, they're going to be just as important as well. Sameer Joshi: Understood. And then just one last one. The construction permit, should we see any like news prior to your -- like submitting the application, which also is it on track for like first half of this year? James Walker: It is on track for the first half of this year. It's actually going very well at the moment. We've been quite aggressive about it. So we worked the team pretty hard on this one because it is a very big differentiator. There's actually not many companies -- there might be a lot of reactor companies that are sprouting up because it's a hot market, but there's nobody putting in for a construction permit because it is a big difference between a paper reactor that you can make in your bedroom and an application to actually build. There's a lot of technical data that need to go into it. I wouldn't say we're going to announce anything prior to the submission specifically on this, but we will announce when it gets submitted because it is important to let the industry know where we are. And it is as well a very good indicator for the market that this is a very credible thing that's being taken forward at a time when there's not a lot of reactors being constructed. And if we stick to our time lines, we should still be the first company in the U.S. to build a full-scale licensed microreactor system. Operator: Our next question comes from the line of Nate Pendleton with Texas Capital Bank. Nate Pendleton: Congrats on the continued progress. Staying on the same topic, James, in your prepared remarks, you mentioned looking at ways to accelerate the 2030 time line for the UIUC project. Can you elaborate on the potential pathways there? James Walker: Sure. So it's a very good question. So obviously, there's -- what's happened very recently is that there's been a huge amount of government pressure that's come on to the NRC to try and expedite time lines. And you've seen that manifest in things like the formal licensing period being firstly reduced to 18 months and then subsequently 12 months. So there's a possibility there that the licensing process is expedited for us. Now I would say with our 2030 time line, we've not factored into consideration these adjustments because we want to be as conservative as possible, but there's also a reality to the assessment of a reactor system for any regulator anywhere in the world. And their principal focus is safety. And to do -- to interrogate that properly for any design, it is still very difficult to expedite that even if you throw people at the problem. So the 2030 time line could be expedited. It's certainly possible. But it's prudent, I think, for us to stick to that because there is a -- there's been a tendency in recent years of companies to make very ambitious date targets. And I think all of those are going to be missed now or they're just going to keep evaluating and moving things right. We don't really want to be in that situation. If we say 2030 and maybe gets delivered earlier, great. If there are expedited time lines that benefit us as well, fantastic. I would say that aside from those sort of things, obviously, we will work on the construction, get all that expedited. We've got a lot of resources already that we can pay to the full construction of this. A lot of it will depend on industry and supply chains and those kind of things. But those things we're already identifying now and working on. So a lot of it is already derisked. The other thing I would say, too, is that what's missed a bit in the industry is that a lot of companies might be focused in the near term on getting their first reactor constructed and licensed. And obviously, that's a very important milestone. But when you hit that period and you have a reactor that can be commercially sold, how do you actually get economies of scale? You need to be able to mass manufacture it. So when we talk about expediting the time lines, it would be very nice to hit 2030 and be in a position where we are actually able to start mass selling the reactor. And that's going to mean that over the next few years, while the reactor is being constructed, we do actually refocus a lot of our attention on reactor for manufacturing facilities, how these things are going to be mass produced, how the EPCM contractors are going to get into place for coordinating localization. So there's 2 answers to the question is, one, there's a lot of initiatives that can benefit us and can move our time line forward. And the other part is that if we really want to expedite ourselves as a business, we need to attack this problem now. So once the construction permit goes in, we really want to focus people's energy on getting these -- what can actually be manufactured in the U.S., how much can we centralize them. All of these different considerations will come into it. Which partners do we need to bring in to make certain components that centralize their production capacities within this facility as well? All of this is going to be very important so that we hit the ground running when it gets to 2030, hopefully earlier. But again, the reason why we haven't adjusted those time lines is that we -- myself and a lot of others in Nano, we've done a lot of licensing before. And we're very familiar with what's typically involved. And even though there are pressures on the NRC to expedite things, it still seems prudent to us to keep the longer time lines because the evaluation process, it is difficult to see how it could be shortened substantially from what it currently is. Nate Pendleton: Got it. That makes complete sense. And then shifting gears a little bit for my follow-up. Can you talk a bit about your decision to announce the request for information for the LOKI MMR? Specifically, what options are your team looking at for that reactor design? And have you received any notable feedback? James Walker: So we did. So the interesting part about this was that the LOKI design can be thought of a bit like a scaled-down KRONOS reactor. So as we work on KRONOS, it has immediate benefits for the advancement of the LOKI reactor. But the LOKI reactor was originally envisaged as being a solution for space power. Now when we began looking at actually attributing more resources towards LOKI, we looked at who the previous interest came from, and that was predominantly things like Blue Origin, NASA. These kind of groups were interested in it because it was a very advanced space reactor type. And there was this kind of examination of additional resources being allocated into LOKI was coming at the same time when there was an emerging bigger push into space. And we realized actually we're in a very advantageous position to produce a working system that could actually supply power for a lot of these initiatives. So whether it was zero gravity or low gravity because it was a base. And this could be for a variety of different applications in the space program. But we are not a space industry either. We're not -- we don't have space engineers and people who are involved in that space. So if we are going to pursue this, it needs to be done in partnership with groups that are involved in that space and know what they're doing. So when we put out the RFI, effectively, we were looking for partners already involved in that and they were looking for power. So what we can say is that there are a number of companies that were looking for power that were not involved in that space, launch companies, people like that. So we did receive a large number of RFIs. And I believe we just completed a submission with one at the moment. Obviously, it's -- these are very early days, and we're just putting our toe in the water of the space industry. It's not to say that LOKI couldn't be applied in terrestrial environments either. But certainly, we wanted to take advantage of the interest in the space industry. LOKI had a big head start on a lot of other space reactor types, years and years and millions and millions of investment. And so that's what precipitated the -- our interest to partner with people in the existing space industry because nuclear, we know very well. Space industry build is foreign to us. Operator: Our next question comes from the line of Jeff Grampp with Northland Capital Markets. Jeffrey Grampp: James, I'm curious, with respect to the supply chain and some of the work you guys are doing to engage various partners and strategics there, what's your all kind of assessment on the longest lead times or most challenging parts of that puzzle that need to get solved sooner rather than later? And is there any imminent need from your standpoint to solve any of these, say, in calendar '26? Or would you say you have a little bit of time given the timing with engaging with the NRC, getting the permit, that sort of thing? James Walker: So this is actually a very good question. I think it's pertinent to anybody involved in the nuclear space at the moment. So what I would say the advantage we have with KRONOS is the vast majority of components are not that specialized. So the complete adjacent plant that converts the thermal output of the reactor into electricity as an example, basic turbine systems, even things like heat exchangers, control rod mechanisms, the citadel thing. These are all things that can be built independently of any NRC involvement. Obviously, they need to be up to a certain standard, which we can ensure. But the vast majority of components, we don't need to worry about the long lead times. These are things that can be readily manufactured now or there are immediate solutions that are very obvious that could be put together in short order. Now there are actually components though that are the longer lead items. So there's a number -- like our reactor and a number of other reactors use like nuclear-grade graphite. And I would say that's an item that needs special consideration because there's only, as far as I know, 3 nuclear-grade graphite producers in the world. I think 2 are in China and 1 is in Japan. Now what that means is that, obviously, there's going to be a lot of demand for these things, but it's also -- it's too much to expect more nuclear-grade graphite to come online anytime soon. The reason why is that principally, a lot of these manufacturers of the substance are located at the mine site. So first of all, you need the graphite mine. And then to get yourself to a point where you reach that sort of certification level where you're at an acceptable level of quality, that can take a substantial amount of time. So the time to bring a mine online to get producing and then get it certified, you could be looking at more than 10 years. So I expect at some point in the future, North America will bring on some nuclear-grade graphite line. But for the next few years, what we expect to do is just buy or even -- maybe even co-build production lines to make our graphite blocks with these manufacturers. So that's probably going to take us some investment that goes into that. We're obviously talking with them. We know what their prices are, and we're arranging for the first-of-a-kind and second-of-a-kind cause with these suppliers now. So that's obviously an important part of it. The other major part for the U.S. is the fuel supply. Now the U.S. is obviously throwing money back at the problem. The DOE has put billions of dollars back into things like enrichment. But there's bigger bottlenecks beyond that. There's conversion considerations to provide the feed grade. Now it is actually investing a substantial amount of labor and [indiscernible] involve itself in that [indiscernible] can have its own uranium hexafluoride that it can then provide to enrichment companies. So it keeps ownership of that fuel. But the -- but for everybody involved in this, that enrichment capacity to come online, whether it's Centrus or Arano or LIS Technologies or General Matter or even Urenco increasing their capacity, the time lines on that are a little bit uncertain. So that's principally also why Nano has opted to use -- to make a reactor that can utilize LEU because that's fuel that can be manufactured today. Now there's going to be -- that's fine because most [indiscernible] use HALEU fuel. So that means that even they might even have much longer wait times to get towards that fuel than we do because, one, they're going to need several things. They're going to need a Category 3 site to be upgraded to a Cat 2 site. That could take some time by [indiscernible] the facility to be licensed up to a level so it can handle Cat 2 material, so 10% to 20% material. That could be a long lead time, too. We don't have to wait for that, which is fortunate. We could benefit from HALEU fuel and the reactor will have the ability to switch out the LEU for HALEU in the future, but we can -- we want to get going as soon as possible. But the fuel supply thing needs a lot of consideration. And then related to that also is the fabrication of the TRISO. Now there are several companies that are really leading in this space. I would say Standard Nuclear in partnership with Framatome. Framatome obviously has a huge experience with fuel. And BWXT, again, very experienced company, very competent. So there's no -- I don't think there's any risk that these big companies don't know how to do this kind of thing. What could happen with them is that there could be a bit of a bottleneck on fuel supply just because of the demand. So getting in now and putting in the orders is going to be very important. And then two, what we're weighing up at the moment is the right contracts because even though we understand the first-of-a-kind reactor might be expensive, we need to have a sustainable fabrication toll fee applied to the material that we supply the fabricators so they can make the TRISO. Well -- and this is principally our strategy, too. We're going to invest very heavily into the fuel supply so we can own our own fuel and supply it to the fabricators, so we don't get stuck, but they will still have to increase their capacity probably to meet the market expectations. And I would say those are principally the main issues -- not issues exactly, but longer lead items that need consideration. But beyond those, even the reactor vessel, the capability exists to do that in North America. It's those longer lead items, the fuel and the graphite, I think, which need more consideration and earlier engagement to derisk. Jeffrey Grampp: Great. I really appreciate that answer, James. You kind of hit on the follow-up that I was hoping to ask on the fuel side of things. You guys have been seemingly increasingly vocal about some acquisition or strategic opportunities to put some capital to work there. So I was just hoping to get a little bit of an update on, I guess, level of maturity or intensity of conversations with different companies in that endeavor or just any kind of, I guess, update on what we could see from you guys in that avenue of the cycle. James Walker: Sure. So I'm going to be a little bit careful because obviously, it's not public information at the moment. But I don't think it's any great secret that we've been very concerned about the fuel supply chain. And because we're obviously very focused now as we get on in advancement about mass manufacturing reactor, we want to make sure the fuel supply is in place. And part of that over the last few years has involved us looking at fuel supply options. And that involves, obviously, we had a related party transaction called LIS Technologies that we were behind the creation of. And that was obviously -- that is a separate entity that we have a partnership with for enrichment. It's old chemical tech. It had very good results in the '90s. So that has reasonable levels of confidence that we'll get that to a place where it can eventually enrich. But the lead time on that is still going to be after when we want to get going with the mass manufacture reactors. So that means that we need to be working with companies like Urenco that are enriching now. They can enrich your LEU, which is the fuel that we need for a reactor. But even then, if you look at enrichment and you look at all the build back of enrichment, that actually creates the next bottleneck, which is the uranium hexafluoride. So we identified this, I think, back as early as 2023. And for a while, we were in discussions with countries like Namibia, which were large uranium producers about potentially building facilities in the country to take yellow cake and make it into that uranium hexafluoride product for export. I don't mind saying that we have found better options than that, and we've made substantial progress with the governments, the national governments on the acquisition of some of these facilities. I can't give a lot more details at the moment, but I would expect you will see sometime this year some big announcements in that space as we complete some of those discussions and acquisitions. Operator: Next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif Elmaghrabi: I missed a little bit of your response on LEU versus HALEU fuel, but I thought it was pretty interesting. So a couple more on that. From a regulatory point of view, are we talking about a separate regulatory process at NRC or CNSC to use one versus the other? Or is it kind of one approval to run at any enrichment level? James Walker: It's a good question because when we do get the reactor licensed, we'll almost certainly get it licensed so we can demonstrate that it could operate with HALEU fuel. We're in a nice position to be able to do that. And the reason why is the operating parameters that we use for our reactors are enormous. So for instance, if we're operating at like 600 degrees centigrade, the melting temperature is 1,800. Now when you've got that kind of margin, then the safety case that you submit to the NRC for a higher enriched fuel is fairly straightforward. I don't think a lot of companies are in that kind of advantage position. So when they are licensing their reactors, they will do it at HALEU level directly, whereas our safety parameters basically allow us to do it simultaneously. The main challenge, I think, with the HALEU is that it's not that it can't be done. Like it's -- we've been enriched much higher up to HEU levels for decades. It's really the fact that in the U.S. at the moment, there's no commercial Cat 2 site. I think BWXT does have a Cat 1 site, but obviously, that's very centered towards military and would make everything very expensive if you manufacture through there. So it's a question of the NRC will need to upgrade sites to Cat 2. They will need to upgrade fuel facilities to be able to handle HALEU fuel and the proliferation -- the increased proliferation concerns that attribute to that fuel. Now those proliferation concerns go away once it's fabricated, but it's still a process the NRC will need to go through for that enrichment of fuel. So it's an interesting thing. We want to take advantage of HALEU fuel as much as everybody else. But like having that option to license the reactor immediately so it can be deployed with LEU. And then once the HALEU is available, immediately switch it out without further licensing engagement is going to be a very important part of the strategy here. Sherif Elmaghrabi: Yes, that's interesting. It sounds like it's not as binary as for other operators. So just one more on University of Illinois. You guys signed that MOU kind of lengthening your relationship. It looks like Illinois will lend a hand designing the reactor. So do they retain a commercial stake when you look to commercialize your design down the road? James Walker: No. So they will be the owners and operators of the first-of-a-kind reactor system. And they will supply a huge amount of labor and resources into this project to make sure the first-of-a-kind reactor is built. But beyond that, we own and operate the design of this reactor and the commercial venture [indiscernible] UIUC will be Nano's exclusively. Now the University of Illinois, the big benefit to them is obviously a reactor system that provides them clean energy for their campus system. And -- and also it's obviously, they have got a big nuclear engineering department that they all benefit from involved in this. So it's obviously a big draw if you're training nuclear engineers to say we're building this next-generation Gen 4 reactor system. So they get immediate benefits from this first-of-a-kind. But beyond this, once we have a commercial venture, that will be a strictly Nano endeavor. Operator: Our next question comes from the line of Subhash Chandra with StoneX. Subhasish Chandra: A couple of, I guess, NRC questions. So first, the licensing, so you got on the reactor. To what degree is the balance of plant in that process? And as you sort of address these various use cases, does that again go through the NRC? So just sort of confused there on where that distinction is between the reactor and balance of plant. James Walker: No, it's actually a very good question because, for instance, ironically, most of the KRONOS MMR system is not a nuclear system. So for instance, even though your reactor vessel is -- it needs to be nuclear qualified up to a certain level so it can house the reactor itself. It can still be manufactured in a facility that the NRC does not need to oversee that facility. So if you're fabricating that reactor vessel, that facility does not need inspection. Now the component does need to meet a certain standard. So there's still -- when you even get to those sort of parts that are instrumentally important in a reactor deployment, there's still that nuance. I think when -- the NRC mostly care about safety systems, how safe a reactor is. And so their assessment only becomes relevant when it is a nuclear device. So okay, the balance of plants, so you could say things like the entire adjacent plant. So you've got the secondary cooling loop that stores power that creates essentially a battery, so you can ramp up and ramp down very quickly. It's a nonnuclear device that is a heat sync device. That sits outside the NRC. The adjacent plant where you have the turbine systems that convert heat to electric. Again, that would be roughly the same sort of contraction you would find for a gas operation as you would for a nuclear operation. Again, that sits outside of the NRC. Now as you get closer to the reactor, then it becomes a bit more blurry because say, for instance, the citadel, which is the cavity that the reactor sits in, so you dig that into the ground. Now obviously, that can be built by local contractors, that can be concreted and the steel can be put in. Now the standard has to be up to scratch, and you need to be able to demonstrate that it has met those requirements. But the construction itself is not as relevant as the operation of the reactor system. Because what's likely going to happen here is that I think it's Part 52 subpart F. It allows for the -- once the reactor is licensed at the NRC, like KRONOS will be in, say, 2030, all the subsequent reactors that will inherently be licensed to be deployed. So you wouldn't need much more regulatory engagement, and you're going to have a big cost saving as a result of that. Now there's some nuance to that because you still need to be able to supply the NRC with information that they would need at any one time if they wanted to inspect a reactor. So you're still going to have to do the geotechnical drilling, make sure you have all that data that you can demonstrate the ground meets the criteria the NRC allocated. There might have to be inspections of the cores that are being mass produced. Those might need to be inspected to make sure they're up to grade. But provided you are meeting all of those criteria, you could still deploy dozens of those reactors across the country without further regulatory engagement. But yes, the majority of the system can be -- what we anticipate doing is a centralized manufacturing facility where we do a lot of things like the reactor protection and control mechanism, the helium service systems, the mold and salt loops, the instrumentation, the electrical systems, operator training, those kind of aspects, those are still mostly mechanical engineering items. And the majority of the reactor comes under that. And that -- a lot of that stuff can be done under, say, ISO standards rather than NQA1 nuclear-grade standards. It does break down, but it gets a lot easier after that first reactor is licensed because then you have your template and your standards that you need to meet. And provided you meet those, the actual necessity for further regulatory engagement drops off quite dramatically. Subhasish Chandra: Yes. Thank you. Then I guess, to the AI question, I think initially AI was about looking to the vast trove documents and perhaps making it a little bit easier and less repetitive and things like that. But I think lately in the last few weeks or so, they're talking about bringing in digital twins for simulation of these. Do you see -- I mean we see that having a real-time effect in other sectors, of course. And given how lengthy the licensing process is, do you see some of this having a very material effect on the licensing process? Sorry, go ahead. James Walker: No, no, I was going to say like that is my actual big hope because I've been involved in licensing before. And it is an enormously complicated thing. So just -- I'm not trying to throw Vogtle under the bus. But for instance, Vogtle is being built, being built very competently. But say, for instance, the regulator suddenly says, well, what about this component of this reactor that was installed 2 years ago? Well, that's already buried in concrete. Well, how do we know it's safe? Did it meet -- where's the checklist with regard the inspection of this component before it was installed and it was encased in concrete? Well, we don't have that. Well, that means we need to dig it up. That means there's going to be a delay to the reactor. That means there's going to be an additional cost component that's going to -- that's why Vogtle is so expensive because you get these things. Now ultimately, that example there is human error. Either someone missed that, that component needed to be qualified or it got installed without anyone realizing that they had to submit it for qualification or something like that. If you have an AI system, my hope here is that it would actually be able to identify very quickly what needs to be qualified, what needs to be identified and you actually will reduce the human error of it down substantially because it will creep into it. If you're thinking just -- it's difficult to even put into -- to explain how complicated a licensing process can be. But if you think about a warehouse and you were to fill it with A4 sheets of paper that contain the licensing documentation, you would fill a warehouse. It would be that much paper, millions and millions of documents. It's a crazy process. Now for a human, that's -- it's -- even if you are 99.99% perfect, that still means thousands and thousands of errors just because of the size of the undertaking that you're going through. So my hope here is that AI can substantially reduce the risk of things being missed. And there's no reason why a computer that's operating like that, that's very familiar with the process that's been exposed to recent licensing data documentation couldn't immediately identify what needs to be focused on, what does need to be done at certain stages. I think that could be a big step forward for nuclear to reduce times of licensing, errors in terms of components get missed, they get very inconrete like the example I gave. There definitely -- that will definitely help us enormously. It will help the whole industry. And I can't see why that won't happen. And that's my big hope for AI. It's not so much reading through all of our submissions and making sure things. It's what needs to be done and when, what has been missed, what could potentially be missed and that kind of thing. I think that looks very plausible. And if that is plausible, then that makes our life a lot easier, and it will make reactors a lot cheaper in the long run. Operator: There are no further questions at this time. I would like to turn the floor back over to Jay Yu for any closing remarks. Jiang Yu: I want to thank everyone again for joining us on today's call. The interest and enthusiasm of our investors and market participants is important to us, and we're very grateful for your support. We look forward to providing additional updates in the future. Have a great evening. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Wayne Pickup: Okay. Good morning, and thank you for joining. I'm Wayne Pickup, the CEO of The Lottery Corporation. With me today are our CFO, Adam Newman; and Chief Commercial Officer, Callum Mulvihill. We'll run through the investor presentation lodged with the ASX and take any questions you have. I've now been with the business just under 3 months after relocating from Chicago. Let me firstly share with you some of the observations I've had so far on Slide 4. Many of these are the same things that attracted me to join the company in the first place. The Lottery Corporation is a global leader. We have exceptional assets, household brands, millions of Australians engage with our unmatched license portfolio. The balance sheet is strong. That gives us options and it supported -- and it has supported consistent shareholder returns. The culture is also strong. There's great people here, and that's not always a given. This is supported by capable leadership and teams that understand their business and their customers. I've spent time with our technology teams, our commercial teams and our contact center, listening to how we serve and interact with customers. I've spent time with our technology teams, our commercial teams, and our contact center, listening to how we serve and interact with customers. I've spent time in the lottery outlets across the Eastern Seaboard from news agents in Central Melbourne to pubs and clubs in regional Queensland. It's clear we have an engaged workforce and a strong retail network. So I'm starting from a position of strength, but there is upside ahead, and that's what energizes me about the opportunity. Our strategy has served the company well, but we can unlock more value. And going forward, we have 3 focus areas as outlined on Slide 5. The first is accelerating our evolution as a digital entertainment company. This is evolution, not revolution. It's about embedding technology across the enterprise, modernizing platforms, and creating seamless customer experiences. I want to be clear, this is not at the expense of retail. It's about choice and integration. In fact, online store syndicates show how retailers can engage with this digital shift. Many of our retailers, in fact, about 80%, sell shares in their store syndicates through our online store syndicates platform. This is enabling lottery agents to earn revenue around the clock, extending well beyond the traditional shop front. We've just rolled out a major digital signage upgrade across 3,300 lottery outlets that enables more dynamic in-store advertising. It also unlocks the next phase of delivering data-driven, automated, and API-enabled content into stores. This will improve our speed to market, promotional effectiveness, and consistency across our network. Ultimately, we want customers to choose us for entertainment, not just for big jackpots. Technology enables personalized experiences at scale. That's what keeps customers coming back and engaged. The second theme is concentrating on our local, highly regulated markets. The Australian market is attractive. The license structure is unique, generally decades long with staggered maturities. We've got a long history of growth through jackpot and economic cycles, underpinned by population growth and one of the highest spends per capita globally. There's broad acceptance of lotteries. Typically, 1 in 2 Australian adults participate each year, but only half of them have registered and there's upside there. So the focus will be on existing business and adjacent lottery opportunities. The third theme rather is focused execution. The fundamentals we'll maintain are straightforward: continued innovation and active management of our game portfolio. We will make strategic technology investments to maximize the digital opportunity and oversee disciplined capital and cost allocation to deliver strong returns on our shareholders' capital. We intend to detail more about our strategy at an Investor Day in the middle of this year. Now let me turn to the results on Slide 6, which demonstrates the business' underlying strength. Firstly, jackpot activity was well below statistical averages. In fact, it was the leanest jackpot environment we have seen since listing. Despite this, we delivered solid financial outcomes. Strong free cash flow enabled us to maintain the dividend in line with the prior period. More than half our lotteries turnover typically comes from Powerball and Oz Lotto, so a lean jackpot run has impact. That flowed through to participation levels and also impacted digital share growth. Saturday Lotto game changes delivered with high early retention of the recent price increase, albeit in a low jackpot environment. Keno continued its strength in retail, capitalizing on pub and club foot traffic. Our balance sheet gives us strategic flexibility few lottery businesses have globally. We remain mindful of balancing investment with generating returns to shareholders. I'll now hand over to Adam for the group financial overview. Adam Newman: Thanks, Wayne. Hi, everyone. Thanks for taking the time to join us here this morning. Let's move to Slide #8. As Wayne has covered, our first half '26 was a period of lean jackpot activity with Division 1 offers for jackpot games down 14% on the PCP. Despite this, the group delivered a resilient financial performance, reaffirming the strength of our business model. Group revenue was $1.8 billion, demonstrating the value of our diversified portfolio and helping to cushion jackpot variability. OpEx growth remained tightly controlled at 2.9%, consistent with our disciplined approach to managing costs. EBITDA was $367 million, down just 0.7% with Keno's record performance partly offsetting jackpot-related impacts. Interest expense rose 2% due to both lower average cash balances and lower average rates. We remain materially insulated from movements in interest rates given around 85% of our debt is fixed or hedged against foreign exchange movements, and we earn significant income on our cash balances. And while net profit after tax declined 1.4%, the directors determined to pay an $0.08 per share fully franked interim dividend in line with the first half of 2025, and this represents 103% of net profit for the half. If we turn now to Slide #9. Our performance reflects the underlying strength of the portfolio despite the jackpot headwinds that adversely impacted EBITDA by approximately $26 million versus the prior period. Several drivers demonstrate the business resilience. Base games performed strongly with Saturday Lotto and Lucky Lotteries being the standouts. Instant Scratch-Its continued their momentum, supported by new products and pricing, where Keno delivered another record half with strong retail visitation and venue partner initiatives sustaining growth and mirroring the themes that we saw in FY '25. Importantly, digital turnover continued to grow, reinforcing what we highlighted at the full year results that digital penetration is a structural margin driver, which represents significant long-term opportunity for us. In summary, these elements enabled the business to manage short-term jackpot volatility with diversification across our portfolio of games, channels, and customer segments continuing to provide stability. If we can now move to Slide #10. And as we have stressed previously, we manage our business for the long term with the strong fundamentals in mind and our cost and capital discipline is not unduly influenced by short-term jackpot outcomes. OpEx for the half was $146 million, and this was an increase of $4 million or 2.9% and reflected the timing of Powerball product changes and increased employee costs. FY '26 OpEx target is $310 million to $320 million. And consistent with prior periods, our OpEx is expected to skew to the second half, and this is predominantly due to advertising and promotion expenditure, technology, and project-related costs. We'll continue to seek to manage costs tightly, maintaining the aim of keeping annual OpEx growth below normalized revenue growth over time. CapEx for the half was $34 million and is expected to ramp up through the second half with digital and core transformation and retail terminal upgrades continuing. We are targeting FY '26 CapEx between $90 million and $100 million, consistent with the investment profile for the next 3 years that we described at the full year results release. This is a resilient business that generates strong and predictable cash flows with low CapEx and a highly variable cost base. We allocate capital in order to drive long-term shareholder value, and our balance sheet provides us with flexibility to maximize shareholder returns. Net debt-to-EBITDA is at the bottom end of our targeted leverage range at 3x. We have $560 million of available liquidity and a 4.5-year average debt tenor, preserving flexibility for disciplined investment and returns. The Board remains committed to the 3 to 4x leverage target, and we continue to explore opportunities to deploy capital to deliver long-term growth that's in line with our strategy, which includes license enhancements. We'll always exercise discretion and make pragmatic risk-based assessments of any near-term investment requirements and ultimately, we'll seek to return any excess funds to shareholders in the most tax-efficient manner. So in conclusion, with strong cash flows, a robust balance sheet, and continued focus on our costs as well as digital transformation that's driving both margin expansion and improving the customer experience. We remain well placed to deliver long-term value to our shareholders. Thank you, and I'll now hand back to Wayne. Wayne Pickup: Yes. Thanks, Adam. Turning to the business results, starting with lotteries on Slide 12. A strong underlying performance given jackpots were well short of statistical norms, making it the least favorable half for jackpots since our ASX listing in 2022. The net result being a circa $400 million unfavorable impact on turnover versus circa $200 million unfavorable impact in the first half of '25. That said, the changes to our 2 largest games, Powerball and Saturday Lotto are resonating. Saturday Lotto's $6 million core offer is generating good incremental revenue every draw. Early signs on Powerball pricing are positive. If we turn to Slide 13, it shows digital share of turnover grew to 41.2% of lottery's turnover in the half. Big jackpots stimulate participation. You can see the impact their absence had on active customer numbers during the half. If we go to Slide 14, it shows our portfolio diversification at work. Base game growth largely offset the unusually low jackpot games with Saturday Lotto being the standout. Instant Scratch-Its were also particularly successful, a refreshed range and the use of higher price points such as $30 sold through well, especially in key gifting periods such as Christmas, where we had sales up 8.5% over last year. Lucky Lotteries was up over 60%, driven by the Mega jackpot, which reached $21 million at period end and now sits at just over $24 million. If we turn to Slide 16, it shows our success refreshing the game portfolio. The new $6 million Division 1 offer and price increase for Saturday Lotto in May won immediate acceptance. The early price retention of 103% is well above expectations. For context, that surpasses the retention of prior Saturday Lotto price increases, including during COVID when the Division 1 offer went to $5 million. The full effects of the Powerball price change introduced in November are expected to become evident with a return to statistically normalized jackpot levels over time. Set for Life will be our next game refresh, which we want to implement in September 2026, subject to the necessary regulatory approvals. The changes are backed by research. Customers are saying they'd like more upfront prices and promotional draws. So with that in mind, we'll introduce an extra $200,000 upfront for Division 1 winners and a subscription price increase from $0.60 to $0.70 is going to enable more promotional offers. Moving to Slide 17 and 18 on Keno, which continued its strong performance. Turnover was up 7%, growing above historical trend. This performance was valuable given the softness in jackpot games and a reminder of why Keno in the portfolio matters. Promotional initiatives and venues and the clear positioning of Keno as a fun social game as part of the growth story amid strong visitation in pubs and clubs. We have prioritized making sure our in-venue assets, terminal screens, marketing collateral are set up for maximum impact. The online channel returned to growth post the introduction of spend limits in FY '25 with turnover up 3.5% in the half. That's positive as we look to build the online Keno opportunity going forward. Slide 20 sets out our priority areas for the next 12 months. First, the digital experience. We're growing digital, but we can capture growth faster. Digital-first customers expect seamless experiences, instant gratification, and personalization. There's an opportunity to better embed data and AI across the enterprise, so we use technology to understand what each customer enjoys and just simply show them more of it. On short-term initiatives to drive registered customer sign-ups, check and collect will let customers scan their ticket and claim their prize immediately via our app. We're rolling out QR codes in our retail outlets to simplify customer registration and help acquire customers. These are practical steps that remove friction. On product, Set for Life is next for refresh. But as we think about the portfolio, we'll increasingly test opportunities beyond traditional lotteries. The focus is on customer entertainment, not just jackpot anticipation. We're reviewing how we position and market our products. The evidence tells us customers choose by game first. They play Powerball or Saturday Lotto or Oz Lotto, not lottery as a category. There's an opportunity to lean into that insight, making our hero products the stars and building stronger entertainment experiences around them. This is about amplifying what already works. We have strong product brands, and we will make them more central about how we go to market. Keno also fits into this evolution. It's entertainment beyond the jackpot cycle, and we'll continue to invest in it. There's more Keno growth to capture, including online where we are underrepresented. On the operating model, we'll structure for the speed and agility required in a competitive digital market. Finally, we'll prioritize protecting and enhancing our license portfolio. We hold incredibly valuable and unique licenses. These carry rigorous regulatory obligations and in return, generate material lottery duty revenue that funds state services and community programs as well as supporting thousands of small businesses. This is a social compact we take very seriously. But the competitive landscape is evolving. Operators licensed in the Northern Territory offer foreign matched lottery products that sit outside the broader established state-based regulatory frameworks. They contribute no lottery duty to Australian governments other than the NT and operate under lighter regulatory obligations than we do. The federal government continues to review these products. The issue should be more fully addressed. We'll continue to advocate for consistent regulation that upholds the integrity of Australian lotteries and preserves the value of our licenses. Where opportunity exists to extend or enhance our licenses, we'll do so prudently deploying shareholders' capital. Now let me wrap up with Slide 21. The first half shows the core business remains resilient and the fundamentals are sound. The changes to games like Saturday Lotto are delivering as intended. Looking forward, there's upside. We have the assets, market position, and financial strength to unlock more value, be more relevant, and position the business around digital entertainment. That's the business we'll be building, not just a steward of licenses, but a company that earns its market position every day. We intend to detail the strategy further at an Investor Day in the middle of the year. I look forward to taking you through our plans in more depth then. We'll now open up for questions, and Adam and Callum will join me. Operator: [Operator Instructions] Your first question comes from Rohan Sundram from MST Financial. Rohan Sundram: Just one from me. Thanks for the summary, and thanks for the strategic insight. In light of that, Wayne, and with regards to the slides in the pack, where -- which opportunities excite you the most? And where do you perceive the best uses of capital for the group? Wayne Pickup: Thanks for the question. I'm not sure I want to rank opportunities, and we're still sort of actively evaluating. But there's -- look, I think there's a lot of upside on digital that we can deliver in the business and simply make the games more engaging to customers, whether that's through retail or whether that's through app or online. But I think I wouldn't go as far to say it's low-hanging fruit, but it's certainly where a lot of short-term focus will be applied. Operator: Your next question comes from Justin Barratt from CLSA. Justin Barratt: I also wanted to sort of look at the strategic opportunities -- or sorry, priorities for '26. And Wayne, your comment in the presentation around exploring new product opportunities and I guess expanding on that in your prepared remarks, increasingly test opportunities beyond the traditional lotteries. I was just wondering if you could share any more details around those opportunities and what you've potentially seen in other markets that you think could work here in Australia? Wayne Pickup: Sure. I mean, at the moment, we're sort of actively evaluating those. I think there's opportunities in terms of just the way we present the product and the front end and making that more engaging and it's almost like a product in front of a product in some regards. So making the user journey just far more engaging and fun. Then there's certainly room in the portfolio for new product, but that takes time. It takes time to build. It takes time to gain regulatory approvals. So these are all under active consideration. And I'm not able to get into specifics today, but certainly at the Investor Day that we will schedule around middle of the year, I'll be able to sort of get into more details then. Justin Barratt: Great. My follow-up question, just on Saturday Lotto, clearly had very strong retention to that game change last year. But I just wanted to get your expectations on how much that retention has benefited from the weaker Powerball and Oz Lotto jackpot run recently. And I guess whether you still -- or do you think that it will -- that retention will normalize to that sort of 50% to 75% range in time? Wayne Pickup: It's a good question. I'll pass over to Callum, who can provide more historical reference than I can. Callum Mulvihill: Yes. Thanks, Wayne. Thanks, Justin. I think probably a good frame of reference is the last change, which was during a COVID period, which I think we experienced about an 80% retention early on sort of from 8 weeks pre and 8 weeks post. And then we had a real COVID environment that sort of clouded that one. This one is probably surprised on the upside to be holding 103% after 29 weeks is impressive to say the least. It's probably surpassed expectations. And I think we settled -- I think that one back in 2000, we settled at about 50%. So sort of early days, it was 80% and settled at 50%. So this is certainly surprised on the upside. And I think back in that jackpot environment, it was highly varied back in 2000 as well. Operator: Your next question comes from Kai Erman from Jefferies. Kai Erman: You've obviously shown pretty strong pricing momentum across the last 2 Powerball increases, the most recent Saturday increases. And how are you guys thinking about pricing going forward? Do you still think it's a sort of every 2- to 3-year cadence? Or do you think you can sort of get into an annual price rise kind of cadence given the momentum that you've shown to date? Wayne Pickup: Wayne here, I can take that. It's something that the business has done extremely well over time, and it will be -- it will certainly continue to be one of our levers, but not the only lever that we look to pull. So I won't go much further than that just now other than, again, like I don't want this to be my stock answer, but it's under active consideration. It will certainly be one of the levers that we have in the toolkit going forward. And as you probably know, with these lottery products, that price increase correlates through to bigger jackpots, bigger prices. So there's an immediate upside for customers, for our retail partners as well through commissions. So it's certainly something that we'll continue to look at or continue to utilize. And we're also -- the frequency of those is under active consideration. Kai Erman: Understood. And just a follow-up, you mentioned in your sort of earlier remarks around balance sheet optionality given you are sort of at 3x leverage. Would you be able to give any clarity on what some of those options might be? Wayne Pickup: Adam, do you want to take that? Adam Newman: I'll have that, Kai. Kai, I'll just go back to my earlier prepared comments. I think in my speech at the end of the day is we can't get overly specific. The Board remains committed to that 3 to 4x leverage target. And obviously, we're looking at things on a risk-adjusted basis within our strategy of which license enhancements form an important part of that. And to the extent that the Board determines that we've got excess funds, then we'll seek to return them back to shareholders in the most tax-efficient manner. Operator: Your next question comes from David Fabris from Macquarie. David Fabris: Just with my first question, you made some comments around the ability to maybe extend existing licenses. Can we talk through that big license, which expires in '28? I mean if we think about Victoria, they did open up the Keno license to multiple operators back in 2022. Should we be worried about what Victoria might do with this lottery license? Adam Newman: Yes. So David, Adam, I'll take that again. It's a hard question for us to answer. Obviously, we're in discussions with governments on a number of different jurisdictions across the time. But ultimately, you need scale in these lottery businesses at the end of the day. So opening up to multiple participants is not necessarily readily easy to do. And I think you'll just have to see how that process opens up. Obviously, '28 is a couple of years away yet. And we'll just have to see how it plans out at the end of the day. David Fabris: Yes. Got it. Understood. And the next question, look, just appreciate the prepared remarks around operating costs. But can you clarify whether first half '26 benefited from the low jackpot activity on marketing spend? And to kind of dovetail that, if we look at where OpEx has tracked in the first half over the last couple of years and at the midpoint of guidance, it kind of suggests a 46% first half weighting. I know you haven't provided FY '27 guidance, but under the premise of normalized jackpot activity, the fact you're launching new games in the first half or innovation, call it Set for Life in September, which probably requires increased spend. Will that phasing change? Or should we really think about cost for your business agnostic to volumes and it kind of tracks around or below inflation? Adam Newman: Yes, you covered a lot of topics there. So maybe I'll just step back a little bit and say the first half, second half split that we're seeing this year is pretty consistent with what we've seen pretty much every year since we've demerged to start with. So -- and I think we've talked about it in the past that 50% of our costs are people. We do have some ebb and flow in relation to advertising and promotion spend subject to jackpot outcomes. And it would probably be fair to say that the first half maybe benefited from sort of low to mid-single digits from an advertising and promotion spend. I say benefited, but spend that wasn't forthcoming because we didn't have the revenue opportunity. And so if you look forward to the second half, a large proportion of that second half step-up that you're seeing does relate to advertising and promotion spend, of which some of that relates to an expectation that you'll get some potential mean reversion in the second half. Not all because it does -- we've got an Oz Lotto brand refresh going on at the end of the day. So it does depend upon certain timing of different campaigns and programs, but it's not completely dependent upon that. We haven't given guidance to look forward for FY '27. Obviously, we've given it for FY '26. All I can say is we spend a lot of time on our OpEx cost base come through separation at the end of the day. And as I mentioned in the prepared remarks, we're continuing to focus to keep our OpEx at or below normalized revenue growth over time. David Fabris: Yes. Okay. But I guess under the premise of normalized volumes in first half '27, which is how we forecast, you'd expect a pretty significant step-up in OpEx commensurate with jackpot activity and marketing. Adam Newman: I don't want to get and predict into FY '27. I'm not sure that necessarily holds what you just said. Operator: Your next question comes from Sam Bradshaw from Evans & Partners. Sam Bradshaw: Wayne, you mentioned that you believe you're underrepresented in online Keno and there's currently an ongoing review of online Keno and foreign match lotteries. Are you able to give us any color on the status of the review and how it translates to your strategy? Wayne Pickup: No, I can't give you much more color than probably what you already are aware of. It's coming into this market from the U.S., it's -- frankly, it's a bit of an anomaly as it relates to the foreign match lotteries out of the ANZ, I know. Again, coming out of the U.S., the U.S. regulators and lotteries don't particularly like it. The fact that we have these sort of curious services operating through the U.S. and then reselling into international markets. But we -- what I'll say is that we are strongly in favor of fair regulated markets with transparent revenue arrangements with governments, and we'll continue to lobby for those arrangements vigorously. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Just wanted to ask first question about the health of the Powerball game and the underlying demand there. I guess you've called out a negative like-for-like year-on-year for Powerball, but at the same time, 61% retention of the 17% price increase. So I'm wondering, firstly, how you can reconcile that 10% growth that you call out in the retention calc with the like-for-like environment. But also, is it just too hard to judge in a period where you haven't seen major jackpots? Wayne Pickup: Maybe I'll kick off and then hand over to Adam and Callum to sort of put more -- sort of being the new guy on the block, I can only sort of contribute so much. But -- it's always challenging when you sort of bookend a period with a game like Powerball. And I see the same thing with the Powerball product in the U.S. coming in still somewhat of an outside-in view, it is a very healthy product. It has millions of customers. It's a brand that Aussies love. And so if you look at it sort of big picture, it's gone through -- as these things do from time to time, it's gone through a statistically lean time, but that will regress to the mean. But it's certainly one of our hero products and one that we'll continue to invest in, continue to do more with and has a very, very strong loyal customer following. I don't know, Callum or Adam, if you want to add to that? Callum Mulvihill: Yes. Look, if I can build off that, Andre, I mean, it's incredibly -- echo what Wayne said, incredibly strong product. It is our leading product. We've priced that product on its strength. It's now the premium-priced product in the portfolio. Yes, it's had a leaner run, statistically driven. But I think the retention is bang on where we would have expected it to be. It's far too short a period. Retention jumps around quite a bit from the low end to the high end. I think sitting in that 60% range at this point is exactly where we'd like it to see -- like to see it, and it's an incredibly strong product, and it is our leading product in the portfolio. Wayne Pickup: And it performs extremely well on digital as well. Callum Mulvihill: And the portfolio, as you would have seen previously, it feeds off its momentum. And obviously, the momentum that's had in the last half has been lower, but we know the customer recovers. And in the meantime, people have pivoted and we've seen people play in Saturday Lotto and that change be really well accepted. So it's a pretty dynamic environment, but there's no issues with the health -- with Powerball. Andre Fromyhr: Great. My other question is specifically on the digital mix. We've seen it up year-on-year for the half but down a bit on the second half of '25. So how much of that is also relating to the lack of major jackpots? Or is there some seasonality there? And I guess the question is how much of a -- there's several mentions of digital as a strategic priority in the presentation today. But is that something because of the margin benefits that we're going to see more actively pushed up over the next few years? Wayne Pickup: Yes. Wayne here, I can start again and if Callum or Adam want to contribute. We'll -- I mean, I guess, firstly, we'll sort of follow where the consumer goes. And the large jackpots certainly bring in -- yes, they're a strong acquisition tool for us in digital channels. So when you get an event like a $200 million or a powerful jackpot, you're getting -- I mean, it's just common sense, right? You're getting a whole lot of customers that come in that will play once in 1 or 2 years and then drop out again. What we want to do is obviously retain them. So the job isn't just around sort of acquisition. It's around giving them reasons to come back. And as I said at the start, this is why we sort of look there is opportunity in the portfolio. So overall, I look at it, and I think digital has plateaued a bit largely because of -- as a derivative of the Powerball -- particularly the Powerball jackpot environment. But there's opportunity there, a lot of opportunity there to do more with it. I don't know, Callum or Adam, if you want to add anything. Callum Mulvihill: Look, the only thing that I would add to that it is a long-term structural trend that sustains many, many periods, and it has some short-term volatile sort of fluctuations around the macro factors like jackpots. But we're also investing in, as Wayne said, we bring them into the funnel and how do you make them stick and how do you make people register and give them reasons to register with us and convert them through the digital funnel. So there's investment in that space, but it does rely on some of those bigger macro factors like the game offers. Operator: Your next question comes from Matt Ryan from Barrenjoey. Matthew Ryan: I just wanted to ask a question around Slide 27, where you've sort of shown a pretty long-term chart of how resilient the lottery sector is. And I guess just more specifically the past years post 2020, where it looks like the growth rate is a bit elevated relative to history. Just curious on your thoughts on what's driven that? Obviously, the jackpots have been there. And as a result of that, just trying to get, I guess, some color on where to from here? I know you've talked about a $400 million headwind in the half, which is pretty elevated. But I guess we're all just looking for confidence that the reversal of that comes out rather than perhaps, I guess, an unwind of those years, which look to have grown quite a lot more than normal after that 2020 period. Any thoughts would be good. Wayne Pickup: Yes. Well, maybe -- again I'll start and Wayne here. Matt, the look, I'm not going to predict what comes out of the Powerball machine. But these are just simple probabilities. So if we run those, we've got to assume that we're going to revert back to a mean and have jackpots throughout the year of $100 million plus on a relatively regular basis, right? So -- but again, I can't predict what -- unfortunately, sort of what balls get drawn on a Thursday evening or Tuesday evening. What we -- part of the strategy, and we'll sort of get into this more into the Investor Day middle of the year, but we also want to give -- when I look at the portfolio, we want to give people more reason to engage with us beyond that jackpot anticipation. So it's -- I haven't sort of quite looked at the chart the same way as you have, but I understand where you're going. But I'm certainly not concerned that we can't continue to drive sort of more growth, more engagement with what we have and with more innovation and product going forward. Adam Newman: Sorry, Matt, I was just going to add one other thing. It's Adam here that we look at that chart from another lens is that we saw a lot of acceleration into the category as a consequence of COVID because everyone is sitting at home with nothing else to do. One pleasing thing that we've often referred to internally is that we've been able to lock in those benefits. So there was a new high watermark that came out of the COVID period for us in addition to the game changes that we were able to make during that period as well. Callum Mulvihill: Yes. And thanks, Adam. I'll pick up. Probably on Slide 31, Matt, I mean, what we can control in that environment. I mean, clearly, we couldn't control COVID. We really couldn't control the $200 million event in '24. But what are the activities that we're putting in market to continue to capture the market as it evolves. I've always liked this chart because it does show an underlying long-term CAGR. We have been able to accelerate it even if you back out the noise of COVID and statistical one-offs. We've got activity to capture the market and keep growing the market. Keno sits on top there and just continues to grow steadily to add some diversification as well. So for me, this chart shows the resilience of this business. And then what can we control within that market is really Page 31 and beyond. Matthew Ryan: Yes. I guess that's all really helpful. I'm just also curious as a follow-up, whether the volatility in earnings and cash flow poses any negatives for you guys? And I guess the context is that you're clearly showing what is a very defensive long-term chart. The share price appears to me at least to be trading more like a cyclical industrial around shorter-term events. But taking that out of it, are there ways, I guess, to reduce that volatility over time? Or is it something that isn't a real priority for you guys? Adam Newman: Yes. I mean 50% of our turnover comes from jackpot games. So there is going to always be a period of volatility depending upon where those balls come out of the barrel, I don't think we can get away from that. The extent of how maybe you can smooth some of the volatility or grow, we've seen with Saturday Lotto game change, for example, which is the second largest game, we've been able to grow that game from a base game perspective. I don't think from -- we take -- I mean, it was interesting that you raised that chart on [ 27 ] because we do try to take a medium- to long-term view of the business and the decisions that we make. So I don't think -- one of your questions was does the volatility cause us concerns? I don't think it does internally in the way we manage the business and the way we look at run and make decisions. And then I think our balance sheet strength just gives us the overall flexibility to deal with some of this volatility as well. Callum Mulvihill: And so Matt, I'll pick up that as well, less about cash flow volatility, but more about the volatility in the portfolio and a slight correction. My Page 31 is your Page 16, just on the product actions that we've taken over the period. But we do sequence the investment in our portfolio around the core base offers. And Saturday is an incredibly important investment. The fact that, that's stuck after 29 weeks, I mean, I can't overemphasize that provides stability in that core repeat behavior. And to Adam's point, you really can't do much about the noise and the volatility in those jackpot games. When they deliver, it's fantastic. But in short periods, they can go away a little bit. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just in terms of the simplification of the org structure, do you expect this to lead to any material savings in FY '27? Or do you expect any savings to be reinvested into digital or other areas, please? Wayne Pickup: The -- I mean, we're actively looking at the org structure at the moment. It's more around sort of getting clear lines of accountability. And I think we're underinvested in some areas and maybe the counter is true. But it's too early to tell whether we expect any material savings and it's -- but we do anticipate some changes. Adam Newman: Maybe I'll just add, as you heard us talk a bit before about keeping our OpEx growth below our normalized revenue growth over time. And the benefit that you get in this business in terms of a high degree of our costs are variable and the ability to grow your top line is very beneficial in terms of the way we've levered to the bottom line at the end of the day as well. So reinvesting some of those OpEx savings back into growing the top line is something that we actively seek to do as well. Operator: Your next question comes from Liam Robertson from Jarden. Liam Robertson: Just two for me. First one, just on active customers. I appreciate the jackpot weakness, but with that number falling to 8.6 million, is there anything you can tell us about genuine churn versus jackpot-driven lapses? Like anything you can quantify for us there? Wayne Pickup: Would you mind sort of just asking the question again or maybe just slightly rephrasing it? I'm not sure I follow. Liam Robertson: Okay. Sorry, I've just jumped on the call on a conflicting call. So I'm just interested in -- I mean, half-on-half looks like customer numbers in total or active customers have fallen to 8.6 million. I'm just interested if there's anything maybe in the digital cohort that you can tell us about actual underlying genuine churn in active customers as opposed to what has just been driven by that jackpot weakness? Wayne Pickup: It's predominantly driven by jackpot. We've got the loyal sort of registered, particularly the registered customer base. There's a very strong registered customer base that is omnichannel that sort of play both in digital and retail. I mean what you find is when you get these sort of big spikes, these one-off jackpots, people just come in for those -- just those one-time events and then back out. The job to be done is for us to retain them. But there's -- in terms of the data that I see coming into the business, there's no structural issues in terms of the core player base. Liam Robertson: Okay. Perfect. Makes sense. And then I mean, conscious of the comments you just made to the previous question around OpEx, you've given out -- you pointed to looking to automate a bunch of your processes. Conscious that 50% of your OpEx base is currently labor. So I'm just conscious how we should potentially think about composition moving forward, conscious that you might need to invest short term, but long term, if there's sort of anything that might change in the composition of your OpEx base? Wayne Pickup: Adam, if you want to add to that. But I don't see any sort of major deviations from -- we will continue to be prudent in terms of the way we operate the business. We're probably underinvested in some areas around AI at the moment, but -- and we can find savings elsewhere to sort of offset those. But it's -- this is sort of an active analysis at the moment. But what I would say, it's a balancing act. We're definitely not going to see OpEx go up outside of target ranges, that's for sure. Operator: There are no further questions at this time. I'll now hand back to Mr. Pickup for closing remarks. Wayne Pickup: Look, well, just thanks for joining my first earnings call at TLC, and I appreciate you all following the business. This -- just to finish on, this is an incredibly healthy business. We've got millions of loyal customers throughout Australia, brands Australians love. And I'm looking forward to contributing and there's opportunity to do more. So thanks for further engagements, and you can get on to your next call now. Thank you, guys. Bye.
Operator: Thank you for standing by, and welcome to Vicinity Centres FY '26 Interim Results. [Operator Instructions] I'd now like to hand the conference over to Mr. Peter Huddle, CEO and Managing Director. Peter Huddle: Good morning, and thank you for joining us for Vicinity Centres results call for the 6 months ended 31st of December 2025. Joining me on today's call is Adrian Chye, our Chief Financial Officer. Before we begin, I'd like to acknowledge the traditional custodians on the land on which we meet today and pay my respects to their elders past and present. I extend that respect to the Aboriginal and Torres Strait Islander peoples on the call today. I will start today's presentation on Slide 5, owing to the continued success of our strategic execution, disciplined focus on delivering our immediate, medium and long-term growth priorities and amid a supportive retail property sector fundamentals, I'm pleased to report that we have had a strong start to FY '26. Touching on the results themselves. Vicinity delivered a net profit after tax of $805.6 million for the 6 months, up by more than 60%, reflecting growth from funds from operation, or FFO, and a meaningful uplift in portfolio valuations. At 3.7%, comparable net property income growth reflects the continued strength of our portfolio metrics having increased portfolio occupancy and achieved a leasing spread of positive 4.6%, representing the highest leasing spread reported since Vicinity's inception in 2015. And of note, strong cash flows generated by our retail assets were augmented by a lowering of cap rates, which resulted in a $407 million or 2.6% net valuation uplift. And consequently, our net tangible asset per security increased to $2.52, up 4.8% in the half. I'm particularly pleased to announce that we have irrevocably accepted IFM's offer to sell the residual 75% interest in Uptown to us for $212 million. I'll share more on why we believe this is an exciting, strategically aligned and compelling business decision shortly. We also exchanged contracts to sell Whitsunday Plaza and Gympie Central in Queensland, Armidale Central in New South Wales, Victoria Park Central in Western Australia and several ancillary land parcels. Totaling $327 million, these most recent divestments were executed at a blended 18.2% premium to June 2025 book values. We completed and opened successfully the first stage of the reimagined Chatswood Chase on October 23 with the unveiling of this truly unique retail asset. Adding to this, just last month, we were delighted to welcome Kmart's headquarters to the One Middle Road office tower at Chadstone. Having joined Adairs' head office team at One Middle Road, Chadstone is now home to an additional 2,000 office workers in weekday trading. Our investment strategy is clear. We are confident it remains fit for purpose, and we are executing it with precision, consistency and importantly, with discipline. Showcased by our strategic and financial highlights today, we continue to actively reposition our asset mix, curating a more resilient and higher-growth portfolio that is well positioned to deliver sustained income and value growth today and for the long term. We are driving this via accretive acquisitions, important developments at our premium assets and by divesting nonstrategic assets at attractive pricing, where we are maintaining, if not strengthening our strong balance sheet and preserving our sector-leading credit ratings. What's more, we are executing this strategy in an environment of favorable retail sector fundamentals. As we've highlighted for some time now, population growth and increased household spending together with limited incremental retail floor space are collectively driving a growing shortage of quality retail gross lettable area per capita. This is increasing the fight for space in the best-performing retail assets that are owned and managed by retail property experts, which is, in turn, creating greater price tension and opportunity for superior rent growth. At 3.8%, comparable NPI growth delivered by our premium asset portfolio was modestly above the portfolio average but was disproportionately impacted by burdensome taxes and levies on a like-for-like basis, our premium asset portfolio delivered an impressive 4.6% NPI growth. At a solid 9.7% premium leasing spreads achieved were more than double the portfolio average. Our outlets were a standout, achieving a 14% leasing spread as retailers continue to expand their stores and increase sales productivity. The appeal of our outlet assets is reinforced by occupancy at 99.8%. We're near full capacity and retailer demand is creating strong leasing tension. And perhaps of most significance, our premium assets are now generating retail sales of around $17,000 per square meter, 26% higher than the portfolio average, once again reinforcing our view that we can sustain positive leasing spreads and rent growth. Since embarking on this strategy in late 2022, our focus on delivering leasing outcomes that drive real income growth from a more premium, high-growth asset portfolio has underpinned a $1.8 billion uplift in total value of our assets. Noting the uplift incorporates our developments on a stabilized basis. And this is despite a net reduction of 12 assets and a 20 basis point expansion in capitalization rates and as a strategically located CBD asset with immense growth potential, the acquisition of Uptown is strongly aligned with this investment strategy. Located on Queen Street Mall in Brisbane striving CBD, Uptown is a landmark retail asset with a long history and deep connection with Brisbane's retail identity. Today, Uptown acts as a primary gateway to the Queen Street bus interchange, Adding to this, the asset is expected to be a major beneficiary of sizable state-led infrastructure projects intended to enhance the connectivity of Brisbane CBD, notably in preparation for the 2032 Olympics. What's more? Brisbane CBD sits in a large and growing total trade area but currently lacks a large-scale full-line retail offering. We are confident we have the blueprint to fill this gap. Securing full ownership enables us to mobilize and leverage our core competencies across development execution and project leasing and accelerate the rejuvenation of the asset and importantly, unlock its latent value. Our vision for Uptown is to introduce a retail, dining and entertainment offer that in many aspects is akin to Emporium in Melbourne CBD. Naturally, this vision would complement the luxury offer we have curated at Queens Plaza, also located on Queen Street Mall. Commencing in calendar year 2027, we are anticipating a total project spend of between $300 million and $350 million. Funded by a mix of asset sales and debt, development returns are expected to be in line with our hurdle rate being a stabilized yield on cost of greater than 6% and and an unlevered internal rate of return of greater than 10%. Furthermore, the net impact of the acquisition of Uptown and the asset sales announced today is largely neutral to FY '26 FFO. The acquisition bolsters Vicinity's already unrivaled CBD retail portfolio and allows us to deploy our proven playbook, delivering superior and sustained asset performance and an outstanding retail destination for the broader Brisbane catchment. And speaking of asset performance, on an annual basis, our assets welcome more than 384 million visitors and generated in excess of $18 billion in annual sales. After a strong second half of FY '25, where portfolio sales were up 3.8%, we are pleased to observe a continuation of shopper confidence and capacity to spend in our centers with total sales up 4.2% in the first half of FY '26. Specialty and mini majors delivered 5.1% sales growth for the half, reflecting both solid growth in specialty sales as well as the value created by remixing strong-performing specialties into larger format flagship stores, notably across our premium assets. Our portfolio-wide approach to ensuring the retail offering each center is contemporary and satisfies ever-evolving shopper needs is showcased by the positive sales growth delivered by both our premium and core asset portfolios up 5.3% and 4.9%, respectively. The combination of which strengthened specialty sales productivity to over $13,400 per square meter. Every retail category and every state enjoyed positive sales growth for the half. Jewelery outperformed, growing an impressive 11% on the prior period spanning all price points. Jewelery was closely followed by leisure at 10.3% growth, which was driven by the popular athleisure category recording growth of 10.8% as shoppers continue to show a strong and enduring affinity for on-brand retailers in these segments. The luxury category delivered positive sales growth for 4 of the 6 months with luxury jewelry the standout performer, growing at 8.1%. The Black Friday sales event, which we increasingly consider as Black November, was strong as retailer participation in the promotional event grows and as shoppers increasingly take advantage of pre-Christmas discounts. As such, we are increasingly of the view that November and December trading should be assessed together. On a blended basis, November and December achieved 4.5% sales growth in the first half of FY '26, which compares to 4.9% growth reported in the first half of FY '25. As we look ahead, we maintain a cautiously optimistic outlook for the retail sector, premised on persistent strong employment but somewhat tempered by the recent shift in the RBA's monetary policy settings on lifting interest rates and the ongoing prevalence of geopolitical uncertainty. Turning now to leasing, where our portfolio metrics showcase our disciplined approach to negotiating new leases where the structure, tenure and value of rent written strengthens our current and future income growth profile. We finished the half with occupancy at 99.6%, representing a 10 basis point improvement on June 2025. And at 76%, we maintained strong tenant retention, and we lengthened the average tenure on deals completed to 4.6 years, all of which reinforces the sustained demand for our quality assets in a market where retail floor space continues to tighten. We also achieved the strongest leasing spread since Vicinity's inception in 2015 at positive 4.6%, driven by exceptional performance across the premium asset portfolio. Also supporting income growth, we maintained the average annual escalators on deals completed at a healthy 4.7%. The confluence of our strategic leasing activity, maintaining occupancy and delivering positive leasing spreads amid a robust retail sales environment has enabled us to grow rent while maintaining our specialty occupancy cost ratio. At 14.1%, our OCR continues to provide sufficient headroom for further rent growth. With that, I'll hand the call to Adrian to talk through the financial results in more detail. Adrian Chye: Thanks, Peter, and good morning. I'll begin on Slide 11. Statutory net profit for the half was $806 million. This comprised $351 million of FFO and $455 million of statutory and other items, of which the net property valuation gain was the largest contributor. While FFO per security was up 1.3% when adjusted for lower loss of rent from developments as well as one-off items, FFO per security was up 4.1%. Underpinning this robust result was comparable NPI growth of 3.7%. And excluding new and increased taxes and levies, comparable NPI was up 4.1%. Moving to external management fees. Due to the transition of a third-party leasing mandate and the divestment of co-owned assets, management fee income was $2.5 million below the prior year. That said, our disciplined approach to cost management provided a partial offset, delivering a $1.4 million or 3.3% reduction in net corporate overheads. Our net interest expense reduced by $2.7 million, largely driven by lower debt volume arising from asset sales and proceeds from the DRP. Turning now to valuations on Slide 12. The net portfolio valuation growth was $407 million or 2.6% for the 6-month period. This represented the fourth consecutive half year period our portfolio realized net valuation gains. Pleasingly, the net valuation gain was supported by both income growth and a meaningful compression in capitalization rates. Income growth was again a key driver of valuation growth, particularly for Chadstone, the outlet centers and the CBD portfolio. Cap rate tightening was a main contributor to valuation growth in the core portfolio on the back of heightened demand for higher-yielding retail assets. Overall, the weighted average portfolio cap rate tightened by 11 basis points to 5.5% in the period. Looking forward, we continue to expect that with resilient income growth Vicinity's portfolio will continue to be well positioned for future growth. Turning to capital management. Preserving our strong balance sheet and sector-leading credit ratings remains a guiding principle for Vicinity when managing and deploying capital. In a period of elevated development expenditure, the combination of asset valuation growth and proceeds from the DRP have ensured gearing remained at the lower end of our 25% to 35% target range at 26.3%. When adjusted for the acquisition of the residual 75% interest in Uptown for $212 million and the $327 million of proceeds from asset sales announced today, pro forma gearing sits at a healthy 25.8%. We maintained our investment-grade credit ratings of A stable and A2 stable with S&P and Moody's, respectively, and we continue to actively manage our funding risk. Our debt book is well diversified with a mix of debt sources and maturities. And with undrawn bank facilities of $1 billion, we have sufficient liquidity to fund all debt expires this calendar year and committed developments and acquisitions. Our debt maturities for FY '27 of $300 million is relatively modest. That said, we are always monitoring debt capital markets for opportunities that support a lengthening of our weighted average maturity profile and a lowering of our weighted average cost of debt. Consistent with our disciplined capital management approach, our average hedge ratio on drawn debt is expected to be 89% for FY '26 and 85% for FY '27. Consequently, we are able to maintain our previous guidance of a 5% weighted average cost of debt for FY '26. Our balance sheet remains a source of competitive advantage and strength and is a crucial enabler of our current and potential growth agenda. Thank you. I'll now hand back to Peter. Peter Huddle: Thanks, Adrian. FY '26 is an important year for development projects, both completions and new commencements. We have always held the view that investing in our assets is a critical driver of sustained earnings and value accretion. And we have consistently demonstrated our willingness to invest in accretive developments both large and small. In fact, since 2019, we have actively allocated strategic investment capital to reposition assets through large, medium and smaller projects across 70% of our assets. We have embedded this discipline, committed our own balance sheet and successfully delivered development projects in arguably one of the most challenged construction sectors in memory. We have achieved this because we have the requisite organizational capability where our expertise in development leasing and development property management integrate with our purposely assembled team of development specialists and deliver real income and valuation upside. This is not easily replicated, which brings me to our major transformation of Chatswood Chase. The opening of Stage 1 in October last year marked the beginning of a new era for this landmark asset. Stage 1 introduced 65 new retailers spanning leading local and international brands across fashion, beauty, lifestyle and dining. Among the prize list of retailers who have opened are David Jones newest department store, flagship Apple, Mecca and Sephoras as well as an Australian designer fashion precinct featuring Zimmerman, Camilla and Scanlan and Theodore, alongside international brands such as Ralph Lauren, Hugo Boss, Armani Exchange and Max Mara. Our Level 2 precinct features on-trend athleisure brands such as Nike, LSKD and 2XU, which are complemented by Australian fashion staples, the likes of a Country Road, Seed, Witchery and R.M. Williams. Between the opening of Stage 1 on the 23rd of October and December, Chatswood welcomed 2.4 million visitors who in the December quarter, spent a total of $119 million and on a same-store basis, delivered 34% sales growth. The success of Stage 1 provides a powerful foundation for the highly anticipated launch of the second stage opening, being now eagerly-anticipated luxury precinct which I'm pleased to report remains on track to open from the fourth quarter of FY '26. Anchored by over 20 luxury brands, the Stage 2 opening will see us complete the retail reimagination of Chatswood Chase and solidify the asset status as the most prominent, compelling and differentiated retail destination on Sydney's affluent North Shore. And at $625 million, our investment in this project remains unchanged, and the return profile also remains compelling with a stabilized yield of greater than 6% and and an unlevered internal rate of return of circa 10%. As I'll come to shortly, our vision for Chatswood Chase extends beyond the completion of this project as we progress our plans to augment the asset's patronage with the construction of 2 highly bespoke luxury residential towers on separate sites adjacent but connected to this iconic asset, much like what we have done at Chadstone. Since 2019, we have progressively enhanced Chadstone's patronage and therefore, sales and income growth potential with the construction of more than 50,000 square meters of A-grade office space now home to more than 6,500 office workers as well as a 250-bedroom 5-star hotel that welcomes close to 110,000 visitors a year. What's more? With the likes of Kmart, Adairs' and Officeworks selecting Chadstone as the location for their new headquarters, the caliber of office tenants the asset is attracting is testament to both the quality of the office space and the overall appeal of Chadstone as a highly sought-after one-of-a-kind retail-led mixed-use destination. Together with the retail offer that places Chadstone amongst the world's best, Chadstone continues its evolution as a city within a center where people come to shop, stay, work, dine and be entertain. In partnership with our co-owner, Gandel Group, close to $900 million has been invested in the current and future growth potential of Chadstone, spanning the opening of the hotel Chadstone in 2019, the construction and opening of the Social Quarter in 2023, the refurbishment and opening of Chadstone Place office tower in 2024, now home to Officeworks headquarters and the construction of the One Middle Road office tower opened in 2025 and now home to headquarters of Adairs' and Kmart and which seamlessly integrates into a first-of-its-kind, truly unique fresh food and dining precinct, the market pavilion as well as a significantly elevated and bespoke laneway dining offer. In fact, every development, both large and small, has reinforced Chadstone as an all-day, everyday retail-led destination. And while we are never done, our multiyear strategic investments has consistently added to the scale, significance and leadership of this remarkable asset. Turning now to the redevelopment of Galleria in Morley, Western Australia, comprising a new and immersive entertainment, leisure and dining precinct as well as a significantly elevated and contemporary fashion offer. This important redevelopment will deliver a completely refreshed customer experience for Galleria's large and loyal customer base in and around Central Perth. Importantly, construction and leasing are progressing well and we remain on track to complete the project in time for Christmas this year, and deliver on our previously stated project costs and development return targets. While the larger, more transformational developments continue to shape our retail destinations, I've always believed that what's inside the box creates the most enduring value. In this context, we have maintained our commitment to consistently refreshing and contemporizing our retail offers across all of our assets and in doing so, creating growth opportunities for our highest-performing retail partners. At Emporium Melbourne, we recently expanded, refurbished and opened UNIQLO's flagship store at more than 4,500 square meters and having opened in November 2025, this store has reclaimed its position as the most productive UNICLO's store in their Australian stable. And at Mandurah Forum, we've recently refurbished a former David Jones department store space with the introduction of Rebel and Timezone. Opening in September 2025, the combined 3,300 square meter Rebel and Timezone introduced 2 market-leading sporting and family entertainment offers to the center and a new and exciting proposition for the trade area. This reconfiguration of former major space has delivered a 20% uplift in sales productivity across the October to December quarter with an almost equivalent level of rental uplift, thereby demonstrating the value that can be unlocked when retail space is strategically repositioned. While only 2 examples of many, UNIQLO at Emporium and Timezone and Rebel at Mandurah provide a powerful example of the mutual value that can be delivered when we invest in and cultivate strategic long-term partnerships with retail category leaders in Australia. Turning now to a brief update on our mixed-use development opportunities. As we have shared previously, we continue to advance our mixed-use strategy with a particular focus on residential opportunities that are strongly aligned with state government housing priorities that importantly have the potential to deliver meaningful long-term value creation for Vicinity. Two opportunities are now firmly in the spotlight. Chatswood Chase and Bankstown Central. Both assets have been identified as ideal sites for higher-density residential development. And both assets have secured support of an accelerated state planning pathway by the New South Wales Housing Development Authority, which is ultimately intended to streamline and expedite approval processes. Our early plans for Chatswood Chase contemplate around 480 luxury apartments across 2 separate towers. Relative to Bankstown Central and other assets in our portfolio earmarked for potential mixed-use development at this stage, Chatswood Chase likely represents the most near-term opportunity for us. And just on Bankstown in Sydney's West, our initial plans envision more than 1,500 apartments across 7 towers on a sizable 23,700 square meter site immediately adjacent to the retail center. Of significant benefit is that Bankstown Central sits in the heart of the city of Bankstown directly connected to the new metro station and proximate to major tertiary and medical precincts. As I've said before, while approvals create the potential to unlock significant value at our assets, we will continue to retain complete optionality in terms of how and when value is unlocked. Before I provide an update to our FY '26 earnings guidance, let me reinforce that delivering predictable and growing income for our security holders while simultaneously driving capital growth over time remain at the core of our business decisions and investments. For the past 3 years, we have been focused on increasing the momentum of execution across the organization and ensuring that every action we take supports earnings resilience and sustain value accretion over time. And I think our results to date demonstrate our investment strategy is working as intended. Closing now with a positive update on FY '26 earnings guidance. As Adrian and I have outlined in some detail, we've had a stronger-than-anticipated start to FY '26. And pleasingly, the upside to our expectations is entirely driven by the continued strength of our leasing outcomes and portfolio metrics, including an increase in percentage rent. The confluence of which underpin an uplift in our expectation for FY '26 comparable NPI growth to 3.5%, which has, in turn, enabled us to guide to around the top end of our FFO and AFFO per security guidance ranges of $0.15 to $0.152 and $0.128 to $0.13, respectively. Meanwhile, we continue to expect our full year distribution payout ratio to be within the target range of 95% to 100% of adjusted FFO. And finally, I know I speak on behalf of Adrian, our Board and our executive leadership team when I say that it is a privilege to lead the team at Vicinity and to share our strategic operational and financial progress with the market. We'd like to acknowledge and thank everyone who works for, partners with and is associated with Vicinity for their ongoing contribution and support. Thank you. Operator, I'll hand the call over for Q&A. Operator: [Operator Instructions] Your first question comes from Solomon Zhang from UBS. Solomon Zhang: First question was just on Chatswood. Just wanted to hone in on the December '25 passing yield and maybe just the proportion of the asset that's income generating at this point in time? And maybe just an update on the expected path to get to the 6% stabilized yield on cost, please. Peter Huddle: Solomon, Peter here. Yes, if I got the three questions, right, there's just a bit of noise coming over the top. So yes, the stabilized yield is about -- is 6%. What we do is we run that stabilized yield over a 3-year period. So essentially, by the end of FY '26, we anticipate around about roughly about a 4% return that leads into a 5% return next year, then stabilizes in early FY '28. That all depends, Solomon, really on how much potential assistance that we may need to provide or also in terms of the lease-up. In terms of the lease-up by June of this year, we'll be 95% opened and operating in terms of Chatswood. So we mentioned in these results that we'll commence opening the second stage, which is really the luxury opening from the start of FY '26, and we expect that to be majoritively complete by the time we have a chat again in August. So again, around 95% of it will be open. In terms of income, it represents broadly about the same amount of income by the end of this fiscal year. So I might have missed another question. Solomon Zhang: Second question is just on your premium portfolio. So obviously printing very strong productivity numbers circa 20% higher than the rest of the portfolio. But just looking at Slide 26, when you look at the occupancy costs, they're only marginally above the portfolio average. So I mean is that the appropriate spread do you think? Or what sort of, I guess, occupancy cost do you think is appropriate given the productivity of that premium portfolio? Peter Huddle: Yes, Solomon, we can potentially provide you a number that separates it out. The key differential is we put all of our outlet business in the premium portfolio, that typically works on an occupancy cost of around 12%. So just the nature of that business model, the retailers operate on a lower occupancy cost ratio. We're driving significant dollar per square meter sales through that. And in terms of revenue, we've driven revenue through that outlet business substantially higher in the last 5 years. But the occupancy cost ratio for that business right now is around about 12.8%. If you exit that out, the occupancy cost ratio for the premiums would be higher than our average. Solomon Zhang: And do you see, I guess, headwind to getting back to your pre-COVID occupancy costs? Peter Huddle: Look, we're confident we've been -- the pleasing thing, I would say, Solomon, is we've been growing our leasing spreads and growing our rent, growing our NPI through the course of the last few years, and the occupancy cost ratio has also been maintaining broadly similar. So ultimately, that essentially means that retailers have had sustainable growth through that period of time as well, all but we don't know their current profits through their current reporting season. So ultimately, it gives us confidence we're able to continue to grow our revenues through the portfolio. Operator: Your next question comes from Daniel Lees from Jarden. Daniel Lees: Just a question on your Uptown development. I appreciate it doesn't start until 2027, but construction costs remain pretty elevated in Queensland. Just wondering how you're getting comfortable on your underwrite there and if you have any provisions within that underwrite. Peter Huddle: Yes, Daniel, it's Peter here. It's a fairly broad range that we gave at $300 million to $350 million. We've obviously in the process of concluding that transaction to have 100% ownership, not too dissimilar to what we did at Chatswood, to be honest. In terms of the underwrite, we've spent a lot of time with at least 3 of the key contractors within the Brisbane market to really understand the capacity within that market in the trade -- in the subcontracts or the trades that we need to execute that job. In the next update, we will provide even further comfort to the market in terms of how we've derisked that project and give them confidence within that range. We've done a lot of work on this project previously as well. So at this particular point in time, there's a window that we want to hit. That's what we've guided to here is really to commence that project in calendar year 2027, finish it before the end of 2028. And at this point in time, we're comfortable with the ranges that we provide the market. Daniel Lees: And just on corporate overhead, it looks like they were down 3.3%. Maybe if you could just give us some color as to what the drivers were there and how you want us to think about corporate overhead growth moving forward? Adrian Chye: Yes. Thanks, Daniel, Adrian here. Yes, corporate overheads, a key driver of that was probably some cost discipline that we have tried to stay focused on in the business. We also do have the benefit of some capitalized costs or capitalized overheads in relation to development personnel given the elevated development expenditure at this point in time. We do expect the second half to increase a little bit. So I guess from an overall full year perspective, we're probably expecting corporate overheads to be in the high 80s. And into next year, as we continue to reduce our development spend in FY '27, we probably expect a little bit of an unwind into FY '27 as well. Of course, we'll continue to maintain our cost discipline. So hopefully, there shouldn't be a significant increase into FY '27. Operator: Your next question comes from Simon Chan from Morgan Stanley. Simon Chan: It looks like Chatswood Chase resi has jumped the queue in terms of mixed use. I think over the last few years, you've been promoting Bankstown, Buranda and all that stuff. In your prepared remarks, Pete, you talked about how you want to leave optionality, et cetera. Can you just talk to what's the realistic timing for Chatswood Chase resi? And if it's not imminent, what are some of the things that actually need to happen for it to take effect? Peter Huddle: Simon, it's Peter here. I know it's a dear to you being a local to Chatswood as well. So the likely -- so we are in the government facilitation process via the what acronym known as the HDA process, which is a fast track process for rezoning and to be DA to be then shovel ready. Our expectation, even going through a fast-track facilitation process from where we are today, we anticipate that it's still towards the end of next calendar year for a DA to be actually approved through that process. And then you have, even on best case in our scenario, predevelopment activity around design documentation to get you ready for construction. So the best case to know from our point of view is 2 to 2.5 years away from being an ability to shove a shovel in the ground, so to speak. That said, we still think it's a tremendous opportunity. Why did it jump ahead of others? Primarily, and we haven't fully baked this out. But on our numbers today, just given the level of potential sales that can be achieved through a suburb like Chatswood, it's the most valuable opportunity that we're looking at across our fleet of residential projects. But again, it's a couple of years away from commencing and that's why we're giving ourselves time to ensure the approvals that we get add the most value. And I think I've mentioned before, Simon, we will be looking for partners to execute our residential platform as well. Simon Chan: That's very clear, Pete. I just got one more. Chatswood Chase, the yield. I think in your answer to one of the previous Chap's question, F '26 at 4%, leading to 5% next year and 6% the year after. It is effectively fully leased anyway, and you start collecting rent from day 1. I get it, and you also said it depends on how much potential assistance you may need to provide, right? So that's why there's a glide path. But Level 1 is essentially open now. Do you have a better picture of how much potential assistance you actually need to hand out? Or the other way to word my question is, is your 4% going to 5% going to 6% over 3 years, a little bit too conservative? Peter Huddle: I'd like to think so, Simon. We always -- and same with Chadstone. So we always put a stabilization number in. There's not a huge amount of science that go around that stabilization number. It's a provision that's a percentage of total specialty rent that is a decline in percentage over a number of years. But in terms of Chatswood, yes, the ground -- lower levels open, ground levels, open, Level 2 is open. There is some step rent in those openings until the Level 1 opens, which is the luxury precinct. And there's also annualization of the rents that have opened through FY '26. So to your point, we're confident we're happy with the way that Chatswood's performing at the moment, particularly since our opening on October 23. And if luxury hits the market like we think it's going to, we'd expect to have less stabilization moving into FY '27 and in particular FY '28. I don't have those specific numbers for you. I mean, if required, we can catch up and give you a bit of a heads up what they may be, but I don't have them off the top of my head here. Simon Chan: That's right. But have you had to provide a lot of assistance to the tenants that have opened so far in Level 2 or ground level, et cetera? Or it's actually tracking okay? Peter Huddle: No, it's tracking as per our expectation. We always knew Level 2 there because the Level 1 is still to open. There would be some assistance, whether it's to the tenants or additional marketing activities. And we're very, very comfortable with the lower level and the ground level trading very well. Operator: Your next question comes from Howard Penny from Citi. Howard Penny: Just understanding the earnings impact of commencing Uptown and finalizing the developments that have just completed. Could you just give some detail on potential loss of rents in Uptown and of course, the capitalized interest and capitalized other costs as far as possible. I know that's more a next year story. But just giving us a feel for that loss of rent versus the capitalized costs that will be reduced off the current income statement? Adrian Chye: Howard, Adrian here. I think with Uptown, I think as we mentioned, it's probably going to be really a calendar year FY '27 development story by the time we, I guess, get our plans in place, and we kick off the development and where loss of rent would impact. At this stage, we're very confident around our FY '27 guidance for loss of rent, which is $15 million. We don't see that changing with commencing up down in calendar year '27. We'll probably have more to say in August around what that future loss of rent profile looks like beyond that. Probably one thing to, I guess, emphasize with Uptown is we do have a very strong performing car park, which delivers actually most of the income to that asset today. We're not expecting as part of the development that a large part of that income from the car park is going to be disrupted. So probably unlike Chadstone or Chatswood, the loss of rent impact from uptown is expected to be a lot less than those developments. So that's probably just one thing to keep in mind. In relation to overheads capitalized overheads, capitalized interest, we'll probably give more an update as we get closer to firming up those development plans. Peter Huddle: I'll just add a bit to that, Howard. I mean you know our business very well. we're not giving guidance, obviously, into FY '27 at this particular point. But clearly, we've concluded Chadstone, Kmart, moved into their office in January. Chatswood will be 95% opening by June. They were the key developments that had significant loss of rent as we concluded those developments. You will see an uptick in revenues going into FY '27. And then the smaller even though there's still important developments, you'll start to see Galleria then start to annualize going into FY '27, FY '28 and then Uptown will then follow into that. So if it's helpful, we'll provide you a bit more insight into that. But our anticipation, you'll start to see some real strong revenue growth. Howard Penny: And then just talking a little bit about residential. You make a good point to say that you are -- at this stage, it's the optionality that you've unlocked. But do you have any sense on whether you would fund this through third-party funds or development partners or any -- do you have any views on how best you would develop those residential opportunities? Peter Huddle: Look, we'll look at each residential opportunity on a side-by-side basis as well as other options. But Howard, our plan is to be capital light in terms of those opportunities. We're not known in the market as a residential developer. Our core capability and skills is retail development, leasing management and all things associated with that. We like to ensure that we control master planning in terms of our sites. But in terms of execution and capital, we'd be looking for other partnerships to come in to help us execute and unlock the value of those. Operator: Your next question comes from Andrew Dodds from Jefferies. Andrew Dodds: Just a couple of quick ones. Firstly, just around some of the comments you made in the guidance and the assumptions, comp NPI growth expectations have been upgraded from, I think, 3% to 3.5% half. Just interested to hear what sort of drove this movement. Peter Huddle: It's Peter, Andrew. I'll be as simple as I can. We've got increased rent, increased occupancy, hence, less vacancy and increased percentage rent. So it's all business fundamentals heading in the right direction. Andrew Dodds: All right. That's clear. And then just picking up on some of the comments around the Uptown development. Is it fair to assume that the -- or I guess, the underwriter is sort of assuming that [indiscernible] it's got a similar stabilization period to that of Chatswood. So maybe 4% trading to 6% over the 3-year period. Peter Huddle: No, good question. If I backtrack when I first came to the company, we never used stabilization. So typically, we do now, we think the -- and across all of our projects, we are typically conservative and hopefully, it trades better than our stabilization assumptions. In terms of Uptown, it will be a different style of development than what Chatswood or what Chatswood is, is it's planned to be a phased development. So we're not intending to shut the shopping center broadly down and then reopen it. It will be phased over a period of 18 months to 2 years. But yes, there will be stabilization. If you're looking for a modeling type of scenario as a working assumption, I put in the assumptions that you suggested, 4, 5 and 6 as working assumptions, we would hope that in the essence of doing what we're doing for Uptown, that would be a conservative assumption. Andrew Dodds: All right. And then just finally, on retail sales. I mean, the momentum heading into December is clearly very strong. I'd just be interested into if you can sort of speak to any anecdotes or sort sales data that you've already picked up on throughout January and early Feb post RBA rate hikes? Peter Huddle: Yes. Andrew, we don't have any roll up of January and part of our technology doesn't give real-time sales updates. In discussion with some of the retailers, and we're obviously very keen on seeing their results. It is a little choppy from -- in terms of January moving into February. And part of January and February will need to seasonalize because Lunar New Year, which is such an important sales period was in January in '25 was last -- this week, essentially for February. So at this point, we're as keen as you are to really understand what the trend is post the direction that the RBA went in terms of interest rates. At this point in time, all I could say is traffic still remains strong at our centers. So we'll see how that converts into sales over January and February, and we'll come back and report that in the Q3 update. Operator: Your next question comes from James Druce from CLSA. James Druce: One very quick one. What was the yield on the $327 million of divested assets? Peter Huddle: Slightly over 6%. James Druce: Okay. And can you just talk to the NTA growth was pretty pleasing at almost 5% for the 6 months. Part of that, I think, was coming from the [ subregional ] portfolio, but can you just talk through the contributions of sort of market rents versus value assumptions and sort of the different movements across the categories, please? Peter Huddle: I'll kick off, and I'm sure Adrian will -- so of the 2.6% growth, about 68% of that was really in cap rate compression. The rest of it was in income growth. Some of it was related to we -- the assets that we're selling. We mentioned that they were 18% below our June book values. So we've rebook it at the sales price as part of market validity of those sales price. That also led to market evidence for the valuers for similar type of assets within the portfolio. Adrian Chye: Probably the only thing I'd add is, typically, what we do for development is we'll -- as the project goes through development, we'll change the valuation methodology to an as of complete basis, and we'll put a profit and risk allowance. For Chatswood, we released $50 million of that profit and risk allowance. There's still over $100 million of profit and risk to come through in the next period. So that should aid further valuation growth and NTA growth in the future, but that was a contributing factor as well to the 2.6% gain. James Druce: Okay, fantastic. And just on the tax drag from property expenses, does that -- is that sort of stabilized in the second half or not? Peter Huddle: We'll have -- it will be annualized. It will stabilize in FY '27. So to be specific, the taxes are predominantly congestion levies that have occurred in Victoria. It's the fire services levy, which was transferred from insurance to property taxes. I don't mean to beat them up, but again in Victoria. And some incremental taxes associated with our land leases on airports that are in our premium property. So they will get back to normal growth from -- to the degree that we can control them in FY '27. Operator: Thank you. Your next question comes from David Pobucky from Macquarie Group. David Pobucky: Just around the balance sheet gearing sits towards the low end of that range with potentially more divestments to come, are you seeing any further opportunities to acquire in this market? Or is the focus now on development around Uptown and the resi opportunity? Peter Huddle: David, it's Peter, and thank you for the question. Look, we're acquisitive at the moment. We have a very strict network plan across the country. We know we're underweight in Greater Sydney, and we know we're underweight in Greater Brisbane that led to our decision around the acquisition and then subsequent development of Uptown. So if good opportunities come on to the marketplace, and we do anticipate some that will come on to the marketplace, then we'll assess them on their merits and see if we can add value to those as long as they are at attractive pricing. Similar to that, we constantly review our own portfolio. And whilst we don't disclose divestments, it's not as if that we already have them, we typically use assets that are not carrying their weight within our portfolio or don't have a strategic benefit for us to divest those assets to fund our growth opportunities. And that divestment may be at 100% or 50%. It also helps us moving up the premium scale of our portfolio, which generally, for us, moving into the larger more fortified, so to speak, assets allows us to deliver greater growth, which we've tried to highlight in the presentation as well. David Pobucky: Maybe one for Adrian, just around debt. I know you're monitoring debt capital market opportunities. You just talked to any kind of refinancing that you've undertaken or expected to undertake and the margin improvement there? And where does your weighted average margins sit at the moment? Adrian Chye: Yes. Thanks, David, for the question. Weighted average margin for us is about 155 basis points. Bank debt margins around 115. So we've actually done quite a lot of renegotiation of bank debt and cancellations as well as we've been selling assets to bring that weighted average margin down on bank debt. With the DCM margin, it's probably closer to 170, 180. Some of that is with some of the nearer-term expiries. So you'll notice there's a GBP 655 that's expiring in April this year. That does provide us an opportunity to look at reducing our margin. We are looking at a very liquid debt capital markets at the moment. And based on some of the secondary trading of our previous bonds and also looking at the market comps, we think that there's very attractive margins out there as well. So in terms of opportunities in the future, we are looking probably in that market, refinancing some of the expiring DCM to reduce our margins. As we said, we're pretty highly hedged in the future. So we shouldn't expect too much from a floating rate impact. So hopefully, we'll just get some margin compression going forward. Operator: Your next question comes from Richard Jones from JPMorgan. Richard Jones: Pete, just wondering if you could tell us what the estimated end value is of the luxury retail at Chatswood Chase? Peter Huddle: Just the luxury, the end value, Richard? Richard Jones: Yes. Peter Huddle: I'm not -- yes, Rich, not quite sure of the question. But ultimately, luxury represents about -- in broad numbers, it's about 25% of the income of Chatswood Chase. So we'll have to come -- we'll come back to you and let you know what component of the valuation the luxury may represent in terms of that, but that's basically what it is. Richard Jones: Sorry. So my question was in relation to the luxury residential, sorry. Peter Huddle: Residential. Sorry. Yes. We're just -- we're finalizing the numbers as we speak. And I know that's like I'll push your question down the road, but literally, we're in the process of commencing the presales with appointment of agents, we're just validating what they anticipate to be the income levels on a BTS, which is likely to be Chatswood. And then it will depend on the final yield coming from the development approvals that we're achieving through the Housing Development Authority process. So a little bit too early. We anticipate it to be a reasonable amount of residual land value coming from the 2 sites from Chatswood, but we're not releasing a number until we have those two things just locked in, Rich. Sorry, mate. Richard Jones: Okay. That's fine. Just in terms of, I guess, your strategic thinking around acquiring full stakes in assets and undertaking major developments. You've obviously done at Chatswood Chase, planning at Uptown. Just do you think these are a long-term 100% hold assets? Or will you look to introduce capital post hopefully extracting value out of the projects? Peter Huddle: Well, we're happy to keep it 100% at this point in time and take a situation like Chatswood, Rich. We want to prove the full cash flow potential of that asset to really realize the valuation that we think it should be, which is not the valuation that's in our numbers today because we still hold profit and risk in that valuation until we deliver, and at that point in time, if there were opportunities, and if we needed the capital and if Chatswood, for example, was an opportunity for us to transact in the market then it's probably, I would say, it's an attractive one to bring in a partner at that particular point in time. But with the balance sheet currently at 25.8% on a pro forma basis, there's no pressing need for us to bring partners into either of those assets. And if they perform above, if they deliver better returns above -- well above the portfolio average, then why not just hold on to them at 100%. Operator: Your next question comes from Adam Calvetti from Bank of America. Adam Calvetti: Look, the first one is on NPI growth is 3.7% first half, we're guiding to 3.5% full year. I mean, occupancy is at the highest on record, leasing spreads are strong. What's going to be dragging it down in the second half? Peter Huddle: Adam, there's a couple of things that are in there. We are putting some additional security provisions into our assets. We've been planning on this for a significant period of time. It's clearly a consequence of the nature of what's occurring across the country, highly publicized by the Bondi coronial inquiry. So we have upped our security provisions and they haven't been annualized at this particular point in time. There might be a point associated with that. And then there's also annualization of the glorious congestion levies that were implemented by the Victorian government, and a few other items, which are essentially just second half items, to be honest, that are coming in. They would be the main things. We are anticipating that -- for context, we're still rolling into a full year leasing spread of around about 3%, hitting the first half at 4.6%. If we do better than that, then there will be some upside. Adam Calvetti: Okay. That makes sense. And just sticking with leasing spreads, I mean, I think Andrew Dodds touched on this, just the pathway back to pre-COVID occupancy levels, I mean, the 7% expiring, how do you really drive rents in some of these assets? There's really no supply coming online. They're quality assets. I appreciate you've got to manage relationship with the tenants. But I mean, I don't know how much power they have to really push back. Peter Huddle: Yes, Adam. Look, for us, it's got to be sustainable growth as well. Ultimately, Australia is still a fairly small market in terms of the number of retailers that's getting consolidated as well. It's got to be a sustainable relationship with all of us. If you look at our premium asset portfolio, you're essentially driving spreads at 9.7%, and you've got the outlets growing at double digits, and that's been the last few reporting periods. So for us, it's about managing appropriate growth through the course of the cycle, not only on income growth, but also on capital value. And if -- and what -- the other thing that we've done, you'll see that there's a 76% retention rate. Obviously, there's a 24% retention rate, which is essentially introducing new product or new tenants into our portfolio, which also helps to drive rents. I get your question, but we're actually quite happy that we have the capacity to grow rents based on where the fundamentals of the portfolio are on OCR. We just have to do it in a very managed way. Adam Calvetti: Maybe just really quickly following on, how many more options do tenants usually have in terms of boxes and other sites to go into when they're looking at either renewing or moving on? Peter Huddle: Well, it's another good question. I mean, it's part of the reason why we're really focused on the premiumization of our portfolio, CBD's outlets, the Chadstone, Chatswood Joondalups of the world is because they are assets that tenants need to be in, period, in our view. So there are other options there, of course, but there's more limited options for those assets than there would be in the neighborhood, subregional or even the regional space. Operator: Your next question comes from Claire McHugh from [ Green Street. ] Unknown Analyst: Just a quick one on Uptown's yield cost. Appreciating your IRR framework too. So Brisbane is firing on all cylinders, is the 6% yield on cost more of a sort of a bear-case scenario? Just when I run some of the numbers at the top end at the $350 million and just look at relative rent, it just seems like even a mid to sort of high 6% is still a conservative estimate. Just wondering how you're thinking about the underwriting there. Peter Huddle: Claire, and you come in and speak to our leasing team. They would love that. It's an early stage. We've done an early stage sort of feasibility associated with it. There's still some work to do between now and probably year-end. At that particular point in time, we would hope that we're formalized in terms of the development approval that we would have lodged with the city. We know the city is very supportive, fantastic Lord Mayor there and -- but we also know that there's heightened construction costs within that marketplace. Now we found a window and we understand the construction capacity, but you're still building into quite a heated construction market at the moment. So we're leaving contingency associated with the construction cost side as well. We understand that there is no full line -- full-scale, full-line priced offer within the Brisbane CBD. For us, being prominent in Sydney CBD, Melbourne CBD and Brisbane CBD is essential. And we see -- to your point, we see that the demand for the space will be strong. Unknown Analyst: Yes. No, I take your point on construction costs. I understand with union activity, productivity of construction workers is low in a national context. But anyway, in terms of just generally speaking, just touching on underwriting hurdles. So clearly, real interest rates are edging up, which is weighing on cost of debt, but your cost of equity capital has improved and growth is stronger. So I'm just curious as to in your internal IC committee meetings, how you're evaluating your underwriting hurdles? How have they changed over the last 6 months against that backdrop? Adrian Chye: Claire, Adrian here. You're right. Obviously, in the last few periods, there has been a slight increase in expectation around interest rates. What we try to do is take a through-the-cycle, longer-term view on our hurdle rates. We are conscious that sentiment changes around interest rates and cost of capital, so we try to look over a 5- to 10-year period to say, what is our underlying weighted average cost of capital. We've therefore then said, well, how do we also compensate for risk, particularly on developments, less so for acquisitions where you've got known cash flows. And typically, that drives that yield on cost of 6% threshold and the greater than 10% unlevered IRR. So I wouldn't say that's materially changed in the last 6 months, given that we've taken that through-the-cycle approach. Obviously, if volatility were to increase significantly or rates were to rise in a more material way, then we would look at changing those. But we do review them every 6 months as a matter, of course. Unknown Analyst: Okay. That's helpful. And then maybe just a final one, if I can bring it in. Just in terms of sources of capital. So is it fair to assume that this will -- the capital rotation will remain front of mind in terms of disposing noncore assets? Or I know the DRP is on -- your cost of equity now is now pretty solid. How are you thinking about your various sources of capital to fund the development? Peter Huddle: Yes, Claire, in terms of whether it's acquisition or development activity in the future, it probably still revolves around some divestment strategy. That said, we've been very active and leading into that space, to be honest, over the last 3 years. And so the portfolio that we have at the moment is we're quite happy with. But ultimately, there's other opportunities that come along, whether it's the Uptown development or an acquisition that on a risk-adjusted basis delivers us higher returns, there is a small section of the portfolio that we potentially may unlock some value and might even be bringing in a joint venture partner to fund those developments. That's something that we assess basically biannually just in terms of the forward return of each asset within our portfolio, just making sure that they're pulling their weight. The DRP, as you mentioned, it provides us just with an extra funding source opportunities, an extra lever to look for opportunities. And in terms of gearing at the moment, we're obviously very comfortable with where we sit, particularly on a pro forma basis. Okay. I don't think there's any further questions. So look, on behalf of Adrian and myself, a big thank you, firstly, to the Vicinity team for putting these results together or delivering these results to be quite frank. And then secondly, to all the analysts and investors on the call today, look, a big thank you for your interest in our company, and we will continue to do our best to continue with a positive performance for you and for us, to be honest, into the future. I look forward to having a chat to you as a follow-up from this results call. Thank you again.
Operator: Welcome to BioArctic Q4 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Gunilla Osswald; and CFO, Anders Martin-Lof. Please go ahead. Gunilla Osswald: Good morning, and welcome to BioArctic's presentation for the fourth quarter and for the full year of 2025. It has been a fantastic year for BioArctic. In 2025, we entered into a new era that we call the growth era. And we can conclude that we have a transformative year behind us with record financial results. We are making our science accessible to more and more patients than ever before. And I think it's great and reassuring to see that more and more patients are getting access to Leqembi. We are accelerating our innovations. Our portfolio is progressing really well and has been further expanded, and our BrainTransporter technology is further evolving with new innovations. We have increased focus on business development. We are broadening our collaborations and utilizing our BrainTransporter technology, and we'll talk more about all this in today's presentation. Next slide, please. BioArctic is listed at Nasdaq Stockholm Large Cap, and this is our disclaimer. Next slide, please. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Anders Martin-Lof; and our Chief R&D Officer, Johanna Falting; and our Chief Commercial Officer, Anna-Kaija Gronblad. Next slide, please. I'll start our presentation by giving some key highlights. Next slide, please. I'm proud to state that BioArctic is among the world's leading innovators in precision neurology. We have 2 key platforms, where the first one is innovation and generation development of highly selective antibodies that are targeting aggregated misfolded forms of toxic proteins like lecanemab. And we also have then projects targeting alpha-synuclein, TDP-43 and Huntingtin. The second area is the BrainTransporter platform, where we have an innovative way to deliver antibodies. And I want to highlight that we are broadening the platform to enable more efficient transportation of other modalities into the brain with new innovative approaches. We'll talk more about that in today's presentation. Next slide, please. Last year, we held our first Capital Markets Day, where we presented our ambitions for 2030. And I'm so happy to see that we are already clearly delivering on our ambitions. If we start with the first one, LEQEMBI to be established treatment in Alzheimer's disease. LEQEMBI demand continues to grow to more and more patients, and we are now having global sales above USD 500 million. I think it looks bright with the blood-based biomarkers and the subcutaneous administration coming. The second aspect is balanced and broader pipeline with projects in all stages of development. And the pipeline is already broader with new projects added last year for both Parkinson-related diseases as well as Huntington's disease. The third one is additional successful global partnerships, and we are very pleased with Eisai and our 2 new collaborations since last year, Bristol Myers Squibb and Novartis. We are also really happy with the further discussions that are ongoing. The fourth one is about our finances and our aim is to be profitable and have recurring dividends in the future. And we were highly profitable 2025, and our strong financial position allows us to continue to invest heavily in our business and at the same time, give something back to our shareholders. And there is a proposal by the Board of dividends of SEK 2 per share. Next slide, please. So I just want to comment on some of the latest highlights towards delivering on our ambitions. So we start with Leqembi, and I would like to start by thanking -- thanks to our partner, Eisai's great work, Leqembi is now approved in 53 countries around the world. The subcutaneous auto-injector that is called Iqlik in the U.S. has been launched for maintenance dosing in the U.S. The next important step is approvals of subcutaneous initiation dosing. And it was great to see that both the authorities in the U.S. and in China has granted priority review. And I think this points to how important the subcutaneous opportunity is for the patients. And we are very much looking forward to the PDUFA date that FDA has set by the 24th of May this year. It's also reassuring to notice that all data being presented at congresses, including long-term data and real-world evidence data are very encouraging for Leqembi. If we then turn to the pipeline, it's progressing really well, and we are growing the pipeline and they are advancing. If we look at our alpha-synuclein portfolio and start with exidavnemab, which is our antibody, which currently is in Phase IIa. The second part of the study with both Parkinson's disease and multiple systemic atrophy patients will be finalized this year, and we are actively preparing for Phase IIb. We can also communicate that we have nominated 2 new candidate drugs, and we are preparing for INDs. And we have also further expanded our portfolio. And as you know, I'm very excited about our BrainTransporter technology platform, where we have further innovations for different modalities, including our BrainTransporter -- utilizing our BrainTransporter technology, and Johanna will talk more about this and show some nice new data. The third one is about our partnerships. And as I've said, I'm really happy with all 3 partners: Eisai, Bristol Myers Squibb and Novartis. All 3 programs looks great. And it's also happy to notice that we were very busy during JPMorgan in January this year. And it's great to see that we have continued strong interest for our projects and for our BrainTransporter technology, both for antibodies as well as other modalities. The fourth aspect is about our financials, and they are strong, and we were highly profitable in 2025 with record full year results of SEK 1.2 billion. The royalties for Leqembi are steadily increasing. And during 2025, we received several milestones also, both from Eisai and upfront payments from Bristol Myers Squibb and Novartis, and that led to that we have a strong cash position of SEK 2.2 billion, and Anders will talk more about this. Next slide, please. So by that, I will now hand over to our Chief R&D Officer, Johanna Falting, for an update on R&D. Johanna Fälting: Thank you so much, Gunilla. Next slide, please. So this slide provides an overview of our R&D portfolio, featuring the 2 main platforms that Gunilla talked about, the antibodies and the BrainTransporter platform and also the highlighted cross-program synergies. So the portfolio includes fully funded projects, partnered with major global pharmaceutical companies such as Eisai, Bristol Myers Squibb and Novartis. And we also have several in-house projects and technology platforms with substantial market and out-licensing opportunities. All collaborations involving the BrainTransporter platform are advancing well and as planned. And since the last quarterly update, we have also achieved important milestones within the portfolio, including the nomination of 2 candidate drugs, BAN2238 for alpha-synuclein disease and BAN3014 for TDP-related proteinopathies such as ALS. Additionally, you will notice a new project in the BrainTransporter portfolio, the PD-BT2278, and this is targeting the alpha-synuclein disease. So next slide, please. So both BAN2238 and BAN3014 were recently nominated as candidate drugs and have now advanced from research into preclinical development. BAN2238 is targeting toxic aggregated alpha-synuclein such as oligomers, protofibrils and aggregates, and this is combined with the BrainTransporter technology. And it offers opportunities in several different synucleinopathies such as Parkinson's disease, MSA and dementia with Lewy body. And for BAN3014, this antibody targets toxic aggregated TDP-43 proteins, such as oligomers, protofibrils and aggregates, and it offers opportunity for several of the TDP-43 proteinopathies such as ALS and frontotemporal dementia. So both of these programs, we have now initiated IND-enabling activities, and they are being prepared for clinical studies. So the next slide, please. So alpha-synuclein misfolding and aggregation is central to alpha-synuclein disease development. And our alpha-synuclein portfolio offers opportunity in several of these synucleinopathies such as Parkinson's dementia with Lewy body and multiple systemic atrophy. Exidavnemab is most advanced and is currently being tested in the EXIST study, a Phase IIa study for safety and tolerability. And in parallel to this, we are preparing for the next stage of development into Phase IIb. 2238, that I just talked about, is the newly nominated alpha-synuclein antibody combined with the BrainTransporter technology for better efficacy and better brain uptake. And BAN2238 is an alpha-synuclein antibody combined with the BrainTransporter, also representing an additional advancement in the BrainTransporter portfolio, for which further details will not be disclosed at this time. Next slide, please. I'm very excited to share some new data today on our BrainTransporter platform. So we know that the blood-brain barrier that represents a significant challenge for neuroscience. And if we can improve the delivery to the brain of our drugs, that represents an enormous opportunity for increased, of course, exposure in the brain, enhanced clinical efficacy, greater patient convenience by lowering the dose and offering other routes of administration, potentially better safety and lower manufacturing costs. So we are investing very heavily in the BrainTransporter technology to deliver different types of biopharmaceuticals beyond antibodies and enzymes that we talked about in the past. So we have developed this technology further now to enable delivery of small drug modalities to the brain. So this is a very innovative and flexible system that aims to transport various type of drugs such as genetic medicines and small molecules into the central nervous system. Next slide, please. So here, I'm very happy to show you some new data. And this image here compares the brain distribution of a standard antibody up to your upper left corner in green with a BT-coupled antibody in green below. And you can appreciate, I hope, the great increase of the green, fluorescent color, which represent the antibody present in the brain. And this is the same dose and the same time frame and the same antibodies just with and without the BrainTransporter technology. So antibodies we have worked with for quite some time, but we have also now here shown you data with the distribution in the brain of an enzyme and also a small modality. So this BT-coupled approach significantly improves the brain distribution of our -- of drug modalities. And for the BTA, the antibodies, this is a technology now that is fully implemented and validated both in mice and in nonhuman primates. And here, we have both internal and external candidates at various stage of development. And then the BTE, the enzyme platform, we have our first internal program, the BTG case for Gaucher's disease, and this is progressing very well. It's an orphan indication that offers potential -- offered market potential for BioArctic and a project that we can drive longer into the clinic. And I think that this enzyme project, it really sets the foundation for future enzyme-based projects coming along in the portfolio. And then what's new and presented here today is the BTS, the BT small modalities. And this is a novel and very flexible system that enables efficient brain delivery of genetic medicines such as ASOs or siRNA. It could be degraders. It could be small molecule approaches or anything that you want to deliver into the brain basically. And here, some key data is now being generating, showing the utility of the system. And what is shown here is then the brain distribution. And I think that there's been a really strong interest in our BrainTransporter technology at the JPMorgan Health Conference in September -- or in January in San Francisco. And we are very excited about the future further development of this platform and hope that we will be able to show you some more data in the coming year. So next slide, please. So with this, I will hand over to our Chief Commercial Officer, Anna-Kaija Gronblad, for a commercial update. Anna-Kaija Gronblad: Thank you, Johanna, and I will go back to Leqembi for a while, and I will start by just reminding everyone on the many recent and upcoming regulatory and development steps for Leqembi that really increases the treatment options for patients, but also drives the sales growth around the world. So as Gunilla mentioned, the IV formulation is now approved in 53 countries, of which the latest ones were Canada, Brazil and Malaysia. And the IV maintenance treatment once every 4 weeks is approved in 7 countries. And in the EU, the EMA accepted Eisai submission for the IV maintenance earlier this year. When it comes to the subcutaneous auto-injector, the weekly maintenance treatment was launched, as Gunilla mentioned, in the U.S. in October last year and the sBLA for the weekly induction treatment was granted priority review by the FDA, and we're looking forward to the PDUFA date set for May 24. In Japan, the application for the subcutaneous induction treatment was submitted in November last year, and Eisai expects to launch later in 2026. And then finally, Eisai also sent an application for the subcutaneous auto-injector also in China last month, where it was granted priority review and Eisai expects a launch in 2027. So many advancements, and this will drive the Leqembi growth even further, the game-changer being really the subcutaneous auto-injector, where the induction treatment is given as 2 injections of 250 milligram each, where each injection only takes 15 seconds. So next slide, please. So also with regards to the real-world evidence, Leqembi continues really to deliver more data. At the most recent Alzheimer's Congress, CTAD in December last year in San Diego, there was a lot of presentations on Leqembi. So real-world evidence coming from U.S. and Japan shows really consistent results in terms of efficacy and safety with findings from the clinical trials. Additional data presented indicated that earlier initiation may be associated with greater benefit and that continued Leqembi treatment may provide a benefit compared with stopping therapy. So finally, data also presented at CTAD verified that the subcutaneous formulation offers a convenient option with comparable exposure and safety to IV. And this can really reduce treatment burden for patients and their care partners and health care, of course. So this was really, really encouraging to see all these data in December last year. So next slide, please. So what are the trends on the key markets for Leqembi? Anders will soon show you the BioArctic royalty based on the Leqembi sales, but we can conclude that Leqembi sold for more than USD 500 million in the calendar year of 2025. That's a nice milestone. The global anti-amyloid market has more than doubled in 2025, and this is driven by mainly 3 things, I would say. First, the use of blood-based biomarkers, both for triaging and for confirmatory diagnosis is increasing. China has been really in the forefront. But also in the U.S., it is steadily increasing, and it is estimated that approximately 10% of confirmatory diagnosis in clinical practice in the U.S. are done by blood-based biomarkers. Secondly, more physicians are prescribing Leqembi. In Japan, more than 800 facilities are now starting initial treatment and 1,700 centers are focusing on the follow-up after 6 months and onwards. And in the U.S., there is an enhanced coordination between the primary care physicians and neurologists. On the slide, you can see the targeted direct-to-consumer information campaigns that Eisai has been rolling out in the U.S. and in Japan. And the second one is to address really the awareness of mild cognitive impairment. The fact that Leqembi was included in the commercial insurance innovative drug list in China in December will gradually give more physicians and patients access to Leqembi from the second half of the year, it is estimated. Thirdly, the subcutaneous auto-injector that I mentioned was launched in the U.S. for maintenance in October also drives growth. It is estimated that 80% of the patients on Leqembi want to continue treatment after 18 months. The insurance coverage through the medical exception process is increasing, and the payer approval rate is estimated to be over 80% in the U.S. And finally, in Europe, the launches in Austria and Germany are ongoing since September last year, whereas the reimbursement discussions are ongoing in other countries. And finally, the first private clinic in the Nordics started treating patients in Finland in October last year. And what we hear from the market is that there are several other private clinics that are about to start. And we also hear that there are private patients traveling to Finland also from Sweden, for example. Also since April, our team in the Nordics has gradually been out visiting memory clinics every day, educating on the Leqembi data and on the infrastructure that needs to be in place. We are active at national and regional specialist meetings, visiting regional health care decision makers, and we're increasing our digital communication on Leqembi. There is really a big interest and willingness to learn more and to make sure that all relevant staff at the clinics are educated. So next slide. So finally, this is my last slide, and I know it's a busy one, but there was a question sent to us before [ Harald ], on the progress with governments regarding Leqembi reimbursement in the Nordics. And as you probably know, Eisai is responsible for reimbursement and pricing. But this slide shows an overall picture of the different steps and the parties involved in the process and what the completed steps are for Leqembi in blue, which you can also find publicly available. It is the ambition for both Eisai and us to secure patient access to Leqembi in all Nordic countries. And as you might know, in red there, you see that in Denmark, the Danish Medicines Council came out with a negative recommendation in December. So here, Eisai is considering the next steps and will be in dialogue with the authorities regarding potential next steps. In Sweden, the TLV published their health economic evaluation in December, and the next step is to negotiate with the NT-council. And in Finland, the assessment report from Fimea has been recently published. And in Norway, the assessment is still ongoing in the Norwegian Medicines Agency. So it is -- there's no official set time lines on how long these processes are, but Eisai is working very closely in dialogue with the authorities to answer any potential questions or other requests. And clearly, the ambition is to finalize these different steps during the year. So you can go to the next slide. And by that, I leave the word to our CFO, Anders Martin-Lof. Anders Martin-Lof: Thank you, Anna-Kaija. I will then start with the Leqembi numbers where we saw solid growth globally. In Q4, the sales were JPY 20.7 billion or $134 million. That was a 15% increase from the last quarter or 55% increase year-over-year. And as Anna-Kaija mentioned, this now means that we are well above $500 million in annual sales, which is a significant milestone for a product like this. Looking at our royalties, they grew by 31% year-over-year to SEK 127 million, and this is despite the Swedish krona getting significantly stronger during the period. So if with constant exchange rates from last year, we would have seen more than 50% royalty growth. Looking then at the different markets, starting with China, the sales there are still a little bit distorted by the Q2 stockpiling effect. Sales came in at JPY 0.4 billion or roughly $3 million. That is a 100% increase from the third quarter. However, that's still on a very low level, and this is due to the fact that there was a big inventory buildup in the second quarter with sales of $53 million in the second quarter. And we have estimated roughly what our royalty would have been like if the sales in China would have been roughly in line with demand. And you see that in the pink bars in the graph that our royalty would have been roughly SEK 125 million, SEK 135 million and SEK 145 million during the second to the fourth quarters. Right now, we believe there is no more inventory to sell off, so we expect sales to return to more normal numbers for the first quarter of 2026. If we then turn to the U.S., their sales were roughly $78 million or JPY 11.9 billion. That's a 17% increase from the third quarter. And as Anna-Kaija mentioned, here, the solid growth is expected to continue, mainly driven by the introduction of Iqlik for induction and also by the introduction of blood-based biomarkers during the year. In Japan, the volumes are growing steadily. However, there was a price reduction. So the sales were JPY 6.2 billion or $40 million. That means no change from the third quarter. So the volume increase was roughly 15%, so healthy growth, but there was a one-off 15% price reduction from the Japanese reimbursement system, which is expected when volumes grow for a product. Furthermore, the EU launch has been initiated. We're well underway in Austria and Germany, but still the royalty from the European market is very, very limited and has a very small impact on our royalties. That should grow, but even in 2026, we expect the impact from Europe to be fairly small to our royalties. If we then turn to the forecast for Leqembi, Eisai has a JPY 76.5 billion forecast for their fiscal year 2025 that ends on March 31. And right now, after 9 months of that full year period, we have already reached more than 80% of the target. And you see the numbers to the right of the graph that in the U.S., they reached 78%, Japan 75% and China 87%. So what this means is that Eisai will reach the forecast even if there will be no growth in any of the larger markets, and that is not what we're seeing. So we believe they have a very good shot at reaching their forecast for the full year. If we then turn to our numbers, I think it's worth to emphasize how big of a transformation 2025 was for us when we saw an eightfold increase in revenues. I won't be able to say that often, but this time around, that actually happened. And you see our revenues on the left-hand side, you see they're very lumpy with the highest revenues in the first and second quarters, mainly driven by the agreement that we entered into with BMS in the first quarter. But even so, if you look at the fourth quarter, our net revenues were SEK 184 million. And I think it's very reassuring to see that our recurring revenue base is continuing to increase. So we had a royalty of SEK 127 million and co-promotion revenue of SEK 6 million. So all in all, SEK 133 million in the fourth quarter. And that means that we had recurring revenue of roughly SEK 520 million in 2025, and that's really starting to become a solid base for us to fund our future R&D investments. We also get some questions on the Novartis upfront. It's recognized over the initial collaboration, and we recognized SEK 51 million out of the $30 million during the fourth quarter. If we turn to our operating expenses, they actually decreased to SEK 136 million from SEK 143 million a year earlier. And if we take away currency effects that are recorded as other operating costs, the underlying operating costs were SEK 134 million. And I think it's worth to highlight that that's very, very close to the recurring revenue that was SEK 133 million. So we are actually more or less at the breakeven with our recurring revenues funding our full operations in the fourth quarter. Looking forward a little bit, our underlying costs are expected to increase in 2026, up from SEK 681 million in 2025. And this is, of course, then due to the progression of our project portfolio that Johanna mentioned. We're investing heavily into exidavnemab, where we're currently in Phase II, but we're also starting big CMC programs for our new candidate drugs, BAN2238 and BAN3014, which is really, really positive. So the higher R&D costs we have, the better it is because that means we're making progress in our portfolio. So it's hard to make a proper forecast for the cost. But if I can give, I would like to give you some guidance, and I guess or estimate that the growth will be roughly 50% to 70% in 2026. That is the cost should increase by 50% to 70% in 2026 compared to 2025. And then finally, if we turn to our operating profit on the right-hand side, it was SEK 33 million for the fourth quarter and the full year operating profit was roughly SEK 1.26 billion, more -- here, you saw a really big effect, of course, of the BMS deal that we entered into and recognized in the first quarter. If we turn to the next slide, we're looking at the net result. It was then a loss for the period that is explained by a significant accrued tax of SEK 48 million due to the big profit for the full year. The operating cash flow was significantly stronger than the result, and that is explained by the fact that the SEK 30 million upfront payment from Novartis was received during the quarter. So SEK 313 million in positive cash flow during the fourth quarter. And we ended the year with a cash balance of SEK 2.2 billion, a very solid position. And the Board decided based on that very, very solid position and our growing recurring revenues that we should pay a dividend of SEK 2 per share, which is, of course, a significant milestone for a biotech company like ours. With that, I hand the word back to Gunilla. Gunilla Osswald: Thank you so much, Anders. So we are coming towards the end of today's presentation with some upcoming news flow and some closing remarks. Next slide, please. I think it's great to see that more and more patients are getting access to Leqembi around the globe and also that in the Nordics that we have a private clinic in Finland so far, and we hope to get more and more patients in the Nordics, too. Eisai is driving continued regulatory processes on Leqembi in a very good way, and we hope to get more approvals in the future now. The Iqlik subcutaneous administration with auto-injector recently was approved for maintenance dosing in the U.S., and we are now awaiting the response for the induction treatment with a PDUFA date 24th of May. Later this year, we also expect response from Japan, and there it is both regarding initiation and maintenance dosing with the subcutaneous auto-injector. We are very much looking forward to the next big Alzheimer's Congress and Parkinson's Congress, which is in Copenhagen in March, where we will see several presentations. And then we see more things happening with exidavnemab, for example, where we expect to have the Phase IIa study readout later this year, and we are preparing for Phase IIb. So a lot of exciting times ahead of us. Next slide, please. So some key takeaways from today's presentation. I think that it's great to see how BioArctic has entered into the new era, the growth era, and we see great progress both of Leqembi as well as the rest of the portfolio, including the BrainTransporter technology. We have started really well to deliver on our 2030 ambitions, where Leqembi is well on track to become an established treatment in Alzheimer's disease. Sales continue to show increasing demand globally. And we have now had global sales of more than USD 500 million, and we are then halfway to becoming a blockbuster. Our portfolio has increased and progressed well and our BrainTransporter technology as well as our 2 CD nominations that Johanna spoke about have taken exciting development steps. Our brain -- our business development efforts continue to deliver, and we see continued strong interest. We have a strong financial position, and we can then both invest in our programs and projects, and we can also pay some dividends that the Board has recommended, SEK 2 per share. So all in all, I think we are exceptionally well positioned for the next phase of our growth journey. The future looks very bright for BioArctic, and we are bringing hope for many patients. Next slide, please. So by that, we say thank you for your attention, and we're happy to take some questions. Operator: [Operator Instructions] The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: So one first here, maybe on your effort to launch lecanemab in the Nordics. I just wanted to get a feel for how much of your operating expenses are allocated to building up an organization around this launch? And what could potentially happen to those costs in 2026 if the rest of the Nordic countries follow Denmark and deem lecanemab not cost effective, at least for the IV administration in the Nordics? Yes, I think I'll start with that question. Anders Martin-Lof: So if you look at the cost, most of our organization is already there. So we're not seeing any significant increases or in costs or even if there wouldn't be any change in Denmark and that decision would stand. I don't think we'll see any significant decreases either. We expect to fight with Denmark, and we're not planning any layoffs anytime soon despite the initial response there. So a small increase, I would say, on the cost side for marketing and sales. Viktor Sundberg: Okay. And maybe if you could speak a bit about what kind of indications outside of neurology that have sparked some interest at, for example, JPMorgan around your BrainTransporter technology? Is that mainly oncology indications? If you could elaborate on, yes, where you see interest outside of neurology for this platform? Gunilla Osswald: No, I think we -- as you know, we are not commenting about details when we talk about business development. We can just notice that there is great interest. And we see it on a broad level, and we see it on antibodies, but we also see it on other modalities, which we also know, Johanna showed some really nice data on today. So I think that there is a lot of different utilizations. But I think I also want to say with regard to business development, these things take time. It's not that it's quick things that you should expect from day to day. This is long processes. It takes time. It's really important for selecting a partner because it's a long-term commitment. So it looks really good. We are having a lot of fun, but it will take some time. Operator: The next question comes from Suzanne van Voorthuizen from Kempen. Suzanne van Voorthuizen: This is Suzanne. One on the BrainTransporter. Could you elaborate a bit more on the ALS and next-gen exidavnemab programs in particular? What preclinical activities are undertaken at this moment? And how does the road look and time line for these programs to be ready for the clinic? And perhaps still, you mentioned the interest in the platform is broad. Could you speak a bit to the relative focus of this interest between your existing programs versus interest to apply the technique to a pharma program? Just some extra color would be nice. Gunilla Osswald: So would you like to start, Johanna? Johanna Fälting: Absolutely. So thank you for that question. So we have now nominated, as I said, our alpha-synuclein antibody coupled to the PD program, coupled to the BT platform. And the activities that we are now embarking on in terms of moving the project from a research arena to the preclinical arena is the CMC activities that takes a lot of time to manufacture drug to be able to do toxicology studies. So this is the IND-enabling activities. It's mainly CMC toxicology to prepare for the clinic. And with regard to the BT-coupled ALS program, I mean, the one that we have nominated now is the standard antibody against TDP-43, but we, of course, also have a BT-coupled program going along, and there is no difference in the priority of these 2 antibodies. It's just that the BT-coupled antibody is a bit behind. So therefore, we have nominated now the antibody, the standard antibody. But we are definitely progressing both of these programs and have a lot of belief in them. And in terms of the time lines, I mean, depending on how everything is going, it takes approximately 2 years for us from a decision to first time in man. Gunilla Osswald: And I will continue with your second question about business development. I think that it's great to see that we have interest in both our internal programs and the BrainTransporter technology like a platform company that I've said previously that we also are. So I think that we see both interest also in the BrainTransporter together with antibodies, but we also see interest in BrainTransporter together with, for example, the new things that Johanna showed with small modalities. So I think it's -- that's what I mean with broad interest. But we are coming from a position of strength. As I've said before, we have fantastic, exciting own programs, and we have the luxury situation that we can invest in them. So we can drive things forward ourselves or we could partner if we find the right partner. So I think it's a really position of strength, and we have a great organization that are driving the programs further. And then I think that it's also good to see that we can utilize the company as a platform company and do things like the Novartis deal, where they come with their antibody, we reengineer the antibody. We check it and to see that it works as it should with regard to the transferrin receptor and so forth and then hand it back. So I think you will see more deals like that in the future. But if we find the right partner also for internal programs, that could also happen. But we don't have to partner, but we will partner if we find the right proposal and collaborator. Operator: The next question comes from the Natalia Webster from RBC. Natalia Webster: First one is just on Leqembi in Europe. I appreciate that you expect a small contribution here. But are you able to talk a bit more about what you expect is required to improve the slow adoption and how important you see both the longer-term data and the less frequent maintenance dosing in Europe? And then if you see potential for subcutaneous treatment here in the future? My second question is on the BrainTransporter platform. Just in terms of time lines around BAN2803. You previously had plans to go into Phase I in 2026. Appreciate this is now up to BMS, but are you able to share any details around expected time lines there? Then just finally, on overall OpEx. It looks like Q4 OpEx was lower than consensus is expecting, both on R&D and SG&A. I see that you're expecting an increase in cost in 2026. But are you able to touch on any key considerations for the cost phasing there next year? Gunilla Osswald: So Anna-Kaija, would you like to take the question about Europe? Anna-Kaija Gronblad: Yes. I heard the question was on the IV maintenance and the subcutaneous formulation. Is that correct? Yes. So I mean, as we just said, I mean, Eisai had submitted the application for the IV maintenance, and hopefully, this will be an approval on this during the year. And obviously, this will help, I mean, also in the different reimbursement processes across Europe. I mean, each country has their own reimbursement processes, and they usually, unfortunately, take a little bit more time than in the U.S. and the rest of the world. So I mean, globally, it's proceeding very well, but Europe is a bit slower. And hopefully, we will also see subcutaneous also coming to Europe in the future. Gunilla Osswald: And then continue with your next question, 2803. I mean it's now up to our partner, Bristol Myers Squibb, to comment about when and how that is progressing with more details. I can just say that I think Bristol Myers Squibb is a fantastic partner who are driving the program forward in a great way. But I will not comment about when it will go into man. And then the OpEx is an Anders' question. Anders Martin-Lof: Yes. So yes, you should not draw any trend conclusions based on the Q4 costs coming in lower than expected. It is a little bit lumpy in our R&D programs. As for the phasing in 2026, I think we will grow steadily as the year goes by. But then again, it's really hard to give you any sort of hard forecast for how much it will grow quarter-by-quarter. You should expect that it will be a growing trend. It will probably not be a huge impact in the first quarter and then will be larger and larger as the quarters go by. I think that's the right way to model it for 2026. Operator: The next question comes from Max Da from Goldman Sachs. [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments. Unknown Executive: Thank you so much. So we have a couple of written questions that we'll address now, I guess. The first one comes from Erik Hultgard, Carnegie. And he's wondering when the 2 drug candidates that we just nominated when we can expect those to be in the clinic? Maybe a question for Johanna. Johanna Fälting: Yes. As I mentioned on the question earlier is that we expect it to take approximately 2 years from our nomination to entering into clinic if everything goes according to plan, of course. That is the guidance I can give you. Unknown Executive: Yes. Super. Thank you. Then we have a couple of questions from Joseph Hedden, Rx Securities. I guess the first one, Gunilla, is for you. Anything that you can say on the BAN2802 project that we are running with Eisai and the progression of that program? Gunilla Osswald: I'm happy to see that BAN2802 program is progressing well and really nice data. Everything with the data looks really, really good. And we are now discussing with Eisai regarding potential next steps. Unknown Executive: Great. I see that we have Max Da back online. We'll take the written question first, Max, and then we'll come back to you. So then second question for Anders maybe is a question on, is there a commercial milestone, can we expect that during the course of this year for Leqembi? Anders Martin-Lof: Yes, I think it's fair to assume that we will reach a commercial milestone during the year. I cannot really comment on the timing of that. The last one we received was EUR 10 million. And as sales grow, it's normal that milestones grow, too. So I think it's fair to assume that it would be bigger than the EUR 10 million. But as for more details, I cannot really provide that at this point. Unknown Executive: We can remind everybody that we still have outstanding milestones from Eisai of EUR 54 million, I believe. Anders Martin-Lof: In total. Unknown Executive: In total, yes. Okay. And I think the last one here from Joseph is, R&D costs in Q4 '25 were lower than model, that we already discussed. Considering the Phase IIa, what do you think is a phasing? That question we already had, sorry about that. It's the same question that Natalia had at the end, right... Anders Martin-Lof: Yes. So yes, we already commented on the R&D cost phasing, so I hope that answer was enough for Joseph as well. Unknown Executive: Okay. And then I think we can go back to Max's question online in the telephone queue. Operator: [Operator Instructions] The next question comes from Max Da from Goldman Sachs. Chenxiao Da: So this is Max Da for Rajan Sharma. A couple of questions. What is your progress on finding a partner for exidavnemab? And do you require Parkinson's disease to be included in the deal or the partner has the option to license only the MSA indication? That's the first one. And could you speak to the difference between PD-BT2278 and 2238 because I couldn't tell the difference? Yes, I'll start with these 2. Gunilla Osswald: Okay. So the first question was with regard to exidavnemab and partnering. And as I said before, I mean, exidavnemab continues to progress really, really well. We are expecting the Phase IIa results later this year, and we are preparing for Phase IIb. We have interest for potential partners, and we might partner or we might not partner right now. It depends on if we get the right kind of proposal from the right kind of partner. Otherwise, we are very strong and can drive programs like this ourselves. We have the competence and so forth. And I will not comment upon details on this at all at this stage. I mean we're open. We have the open door philosophy like we do all the time. And if the right partner comes, then we will make a partnering. But we are coming from a position of strength, and we can drive things forward ourselves also a bit longer. And then there are different opportunities. I mean we have opportunities for Parkinson's disease with dementia, for example, or Lewy body dementia or other parts of Parkinson's disease or multiple systemic atrophy. And we have now 3 different programs in our portfolio, where exidavnemab is the most advanced, and we have 2238, which was just nominated and got the BAN number. So BAN2238 is the one with BrainTransporter. It's not exidavnemab, it's a slightly different antibody and it's combined with our BrainTransporter. And then as Johanna said, I will make it easy for you now, Johanna, I'll just answer that question, too. And that is 2278, which is slightly different from 2238, but we will not, at this stage, talk about what difference we have. But we have one further new invention that has been added to this program, but we are not revealing any more details at the moment. Chenxiao Da: Got it. Sorry, one more question, if you have time? Gunilla Osswald: Yes. Chenxiao Da: Could you talk about the dividend payout going forward and how we should model that? Anders Martin-Lof: So yes, this is Anders here. So yes, the Board has now proposed a dividend for SEK 2 per year. We cannot give you a forecast for what it will be in the future. However, I think it's fair to assume that the Board is expecting us to be able to pay a dividend going forward for the foreseeable future. The size of that or how certain I am of that, I cannot really comment. But I think it's fair to assume that they are hoping to pay -- hoping to be able to pay a dividend in the forthcoming years. Operator: There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments. Unknown Executive: And we have no additional written questions. So I'll hand it over to Gunilla to end the call. Gunilla Osswald: So I'll just say, thank you very much for your attention and a lot of great questions, and I wish you all a great rest of the day. Thank you so much.
Operator: Hello, everyone, and welcome to SSR Mining's Fourth Quarter and Full Year 2025 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Alex Hunchak from SSR Mining. Please go ahead. Alex Hunchak: Thank you, operator, and hello, everyone. Thank you for joining today's conference call to discuss SSR Mining's Fourth Quarter and Full Year 2025 financial results. Our consolidated financial statements have been presented in accordance with U.S. GAAP. These financial statements have been filed on EDGAR and SEDAR, and they are also available on our website. There is an online webcast accompanying this call, and you will find the information to access the webcast in this afternoon's news release and on our corporate website. Please note that all figures discussed during the call are in U.S. dollars unless otherwise indicated. Today's discussion will include forward-looking statements. So please read the disclosures in the relevant documents. Additionally, we refer to non-GAAP financial measures during our discussion and in the accompanying slides. Please see our press release for information about the comparable GAAP measures. Rod Antal, Executive Chairman; will be joined by Michael Sparks, Chief Financial Officer; and Bill MacNevin, EVP Operations and Sustainability, on today's call. I will now hand the line over to Rod. Rodney Antal: Great. Thank you, Alex, and good afternoon to you all. We closed 2025 on a high note, delivering full year production above the midpoint of our guidance range and generated more than $100 million in free cash flow in the fourth quarter. As a result, we finished the year with $535 million in cash and more than $1 billion in liquidity. Based on the operating guidance provided with today's financial results, we expect this material free cash flow generation to continue in 2026. Accordingly, and coupled with our view that our share price does not reflect the full value of our portfolio, we are pleased to announce that our Board has approved a share buyback of up to $300 million. If you remember, share buybacks have been a key component of our capital allocation framework in the past, and we are pleased to reestablish a program again. Before moving on to the next slide, I want to take a moment to highlight a number of key catalysts and milestones that we delivered since our third quarter results and also speak to some of the opportunities ahead. First, I want to note particularly strong fourth quarter results from our Cripple Creek and Victor mine and Puna operations which saw both assets exceed their full year guidance ranges and deliver exceptional free cash flow. At Puna in particular, the mine theaters production guidance for the third consecutive year and set records for tonnes processed in both the fourth quarter and over the full year, which was a terrific result. Second, we delivered two technical report summaries, both demonstrating long-term free cash flow generative assets that will bolster our portfolio. The Cripple Creek and Victor TRS, released in November, highlighted an initial 12-year life-of-mine plan with an $824 million NPV at consensus metal prices. With nearly 7 million ounces of resources in addition to the reserves, there is significant optionality here for meaningful mine life extension into the future. In January, we released a TRS for the Hod Maden development project, which highlighted a $1.7 billion NPV and a 39% internal rate of return at consensus metal prices. I will talk more on this in a moment. And thirdly, we continue to advance a compelling brownfield growth projects across the portfolio, which I'm also going to speak to in a moment. As you can see, 2025 was a very successful year, and we're well positioned to continue building on this momentum in 2026. So let's move on to Slide 4. We have a number of highly prospective growth targets across the business. These prospects represent potentially low-cost, high-return growth opportunities that can deliver significant value to our shareholders. In 2026, we have committed a substantial amount of capital investment across the business, and a large portion of that CapEx will be allocated to advancing these growth opportunities through the development pipeline. We look forward to sharing additional details on the projects, including both Marigold and Puna over the coming years. Now let's turn to Slide 5 to focus on Hod Maden. In January, we published a technical report summary for the Hod Maden development project. The TRS clearly reaffirmed Hod Maden as one of the better undeveloped copper, gold project in the sector, and we are thrilled to have a development asset of this quality in our portfolio. As a reminder, Hod Maden is an underground copper, gold project in the northeastern of Türkiye. The mine will be accessed through a single surface portal, and ore will be extracted through a combination of long-haul stoping and cut-and-fill mining methods. The process plant is designed with a nameplate capacity of approximately 2,200 tonnes per day with life of mine average head grade of 7.6 grams of gold and 1.3% of copper. The plant will produce a single high-quality concentrate with life of mine gold and copper recoveries averaging 87% and 97%, respectively. Moving on to the next slide for a few of the TRS highlights. Hod Maden is a unique project with significant scale, best-in-class grades and first quartile all-in sustaining costs that position the asset to deliver compelling free cash flow in the future. On a 100% basis, production is expected to average 240,000 gold equivalent ounces over the first 3 years and 220,000 gold equivalent ounces over the first 5 years. At consensus metal prices, Hod Maden is expected to generate average annual free cash flow of $328 million. While at $4,900 gold price, that free cash flow would jump to approximately $500 million annually. Hod Maden's execution has been meaningfully derisked as a result of the significant engineering and the work completed since our initial investment in the project as well as the benefit of early site works that are taking place. Inclusive of earn-in and milestone payments, SSR's remaining investment is expected to total $470 million, which we expect to fund from our liquidity position and free cash flow outlook. We anticipate a 2.5- to 3-year construction period once the project decision is made. We are very excited about Hod Maden and look forward to providing further updates in due course. Turn over to Slide 7, and I'll hand the call over to Michael. Michael Sparks: Thank you, Rod, and good afternoon, everyone. In 2026, we expect to produce between 450,000 and 535,000 gold equivalent ounces from our Marigold, CC&V, Seabee and Puna operations. All-in sustaining costs are expected to range between $2,360 and $2,440 per ounce or $2,180 to $2,260 per ounce, excluding the impact of care and maintenance costs at Çöpler. While Çöpler isn't in operation, we continue to guide to cash care and maintenance costs of $20 million to $25 million incurred per quarter. Total gross spend is expected to total $150 million in 2026, driven mainly by capital investments in leach pad expansions at both Marigold and CC&V as well as continued exploration and resource development spend globally. Capital expenditures at Hod Maden are expected to total up to $15 million per month as engineering access road development and site establishment activities continue ahead of a formal construction decision. Upon a positive construction decision by the joint venture, we will provide an update to our growth CapEx outlook at the project. Now let's move to our Q4 results, starting on Slide 8. In the fourth quarter, we produced 120,000 gold equivalent ounces at AISC of $22.50 per ounce or $202 per ounce, excluding costs incurred at Çöpler in the quarter. Fourth quarter sales were 117,000 gold equivalent ounces at an average realized gold price of $4,142 per ounce. Net income attributable to SSR Mining shareholders in Q4 was $181 million or $0.84 per diluted share, while adjusted net income was $190 million or $0.88 per diluted share. For the full year, production of 447,000 gold equivalent ounces exceeded the midpoint of our full-year guidance. As we discussed with our third quarter results, higher-than-forecasted royalty costs tied to higher gold prices and share-based compensation brought our full-year AISC to the top end of our consolidated guidance range. Full-year AISC, excluding costs incurred Çöpler, was $1,923 per ounce comfortably within our guidance. Now let's move to Slide 9. As highlighted in the table on this slide, free cash flow totaled $106 million in the quarter, and $252 million for the full year. Excluding the impact of changes in working capital, full year free cash flow was more than $400 million in 2025. These are excellent results, considering our investment in growth projects across the portfolio. We ended the quarter in a strong financial position with $535 million in cash and total liquidity of over $1 billion. This cash and liquidity position combined with our free cash flow outlook in 2026, supports our continued investment in growth initiatives across the portfolio while also giving us the confidence to initiate a share buyback of up to $300 million. Share buybacks have historically been a key component of our capital allocation and shareholder return approach. Between 2021 and 2024, we repurchased 20 million shares at an average price of $15.76 per share. With convertible notes issued in 2019 with a conversion price of $17.61, these share buybacks provided significant value to our shareholders. Our historical share buybacks, combined with the -- as announcement of a new share buyback program, reiterate our commitment to ensuring our shareholders realized growth on the key per share metrics going forward. Now over to Bill for an update on the Q4 results and 2026 guidance for the operations, starting on Slide 10. William MacNevin: Thanks, Michael. I'll first start with EHS&S, 2025 as a successful year of strengthening our programs and application in all areas of EHS&S. Key areas advanced were in critical controls and risk management for safety, the integration of closure work into life-of-mine plans to bring forward the work as well as to reduce costs and the upgrading of our community engagement and development application. As I will outline today, we are currently working on growing our business through both greenfield projects and brownfield growth opportunities at all the operations. Safe production and quality implementation of EHS&S standards is our focus ahead to enable an increase in activity to successfully advance all of these opportunities. Now on to Slide 11 for our year-end MRMR. We closed 2025 with 11 million ounces of gold equivalent mineral reserves, a testament to the scale and longevity of our diversified operating platform. Reserves were up nearly 40% year-over-year, driven largely by the incorporation of CC&V and Hod Maden into our consolidated totals as well as other minor impacts from drilling additions and model changes. Mineral reserve price assumptions in 2025 remain very conservative at $1,700 per ounce gold and $20.50 per ounce silver. We hold another nearly 15 million measured indicated and inferred gold equivalent ounces that can support mineral reserve growth across our portfolio in the future. More impressively, we have consistently delivered on our track record of replacing mine depletion. Since 2020, as shown on the right side of this slide, we have more than replaced depletion before incorporating any of the benefits of our accretive M&A transactions over the period. Inclusive of M&A, our mineral reserves are up approximately 40% since 2020, an impressive outcome that ensures our portfolio is poised to benefit from constructive gold and silver markets for years to come. Now on to Slide 12 for a discussion on Marigold. In the fourth quarter, Marigold produced 43,000 ounces of gold and an all-in sustaining cost of $2,089 per ounce. As expected, this is Marigold's strongest period of production in 2025. Technical work around ore body knowledge and processing planning at Marigold has now matured to where this is being integrated into the planning process. As a result of previously highlighted ore blending requirements and to ensure pad recovery performance, the Marigold mining schedule has been updated to account for the blending of durable and nondurable ore. In addition, increased gold prices have resulted in pit expansions and the relocation of a planned waste dump to avoid sterilizing ounces. While this work has changed the production schedule, the total ounces produced at Marigold at the 5-year period is materially the same, as reflected in the 2024 TRS. In 2026, Marigold is expected to produce between 170,000 to 200,000 ounces of gold and an all-in sustaining of $2,320 and $2,390 per ounce. Production is expected to be 55% to 60% weighted to the second half of the year. AISC will be highest in the first half due to both production profile and sustaining capital, which is expected by 70% weighted to the first half. Sustaining capital in 2026 is expected to total $108 million as we made significant investment in fleet and component placements and process planned improvements. These investments will help to ensure Marigold is well positioned for both additional near-term haulage requirements and to enable development of potentially significant mine life extension opportunities ahead. To that end, Buffalo Valley and New Millennium projects continue to advance and SSR Mining anticipates potentially integrating both deposits into an updated Marigold TRS over the next 18 months. Now on to Slide 13 for an update onCC&V. CC&V had another excellent quarter, producing 39,000 ounces of gold and all-in sustaining cost of $1,596 per ounce. Quarterly production benefited from better-than-expected gold recoveries and drove full year SSR Mining attributable production of 125,000 ounces, well exceeding the 110,000 ounce top-end guidance. It is also important to highlight that CC&V generated more than $200 million in mine site free cash flow to our count in 2025, an exceptional outcome when compared to the $100 million upfront transaction outlay we paid to acquire the mine last year. In November, we released a technical report summary for CC&V, showcasing an initial 12-year life of mine with an NPV of $824 million at consensus metal prices. The mine plan was based on 2.8 million ounces of reserves, and CC&V has an additional nearly 7 million ounces of measured indicated and deferred resources to support potential mine life extensions over the long term. Combined with our long-term production platform at Marigold, this TRS reiterated our position as the third largest gold mine producer in the United States. SSR now holds more than 6 million ounces of mineral reserves in U.S. along with an additional 7 million ounces of M&I resources and 2 million ounces of inferred resources, all calculated at conservative metal price assumptions well below the current spot market. In 2026, we expect CC&V's production and costs will be well aligned with figures outlined in the TRS. Full year production of 125,000 to 150,000 ounces and ASIC between 1,780 and 1,850 per ounce should position the asset well for another year of strong free cash flow. Production will be 50% to 55% weighted to the second half of the year, with costs trending above full-year guidance in the full first half. Now over to Slide 14 to discuss Seabee. As highlighted in our Q3 results, Seabee's fourth quarter reflected a continued focus on underground development in the second half and saw increased oil contributions from the lower-grade gap hanging wall. Accordingly, the production totaled approximately 9,000 ounces at an ASIC of $3,433 per ounce in the fourth quarter. In the first half of 2026, underground development will remain the focus as we look to improve stope availability going forward. Full year production of 60,000 to 70,000 ounces gold is expected to be approximately 60% weighted to the second half, with the strongest results in the fourth quarter. ASIC guidance of $2,170 to $2,240 per ounce will be higher than the first half, reflecting the aforementioned production profile and the typical cadence of spend, given the winter road season to start the year. Work at Porky continues to advance and we were able to declare a maiden 200,000 ounce mineral reserve at Porky with the year-end update. We are also excited about some of the recent drilling results at Santoy, and we'll continue advancing both near-term drilling and development at Santoy targeting high grades. Regional exploration is also expected to continue across the property in 2026. Now on to Puna to Slide 15. Puna delivered another excellent year, exceeding its production guidance for the third consecutive year. Record tonnes in both the fourth quarter and over the full year for a major factor in Puna strong results with Q4 production of 2.1 million ounces of silver and ASIC of $18.39 per ounce. Full year ASIC of $14.24 per ounce was slightly better than the guidance and drove mine site free cash flow of more than $250 million in 2025. Puna has been an exceptional contributor to our portfolio, and we see potential to extend operations of Puna well beyond 2028 through growth opportunities both at Chinchillas and Cortaderas going forward. In 2026, we expect Puna will produce 6.25 million to 7 million ounces of silver and all in sustaining costs of $20 to $22 per ounce. As noted, we are pursuing opportunities for additional pit laybacks at and chairs as well as further evaluation of the leaner target to the northeast of the current Chinchillas pit. Drilling has also been very successful at Cortaderas, an underground brownfield deposit on the [ Pirquitas ] property. And we are advancing engineering work to delineate its potential contribution to put Puna's longer-term profile. Now I'll turn back to Rod for closing remarks. Rodney Antal: Great. Thanks, everyone. We had an excellent finish to 2025. We delivered solid operating results that are well aligned with expectations and now went to 2026 in a strong financial position with a number of key catalysts on the horizon. We're well positioned to deliver year-on-year production growth and strong free cash flow and are also well advanced on a number of growth initiatives across the portfolio that we look forward to sharing over the next 12 to 18 months. So with that, I'm going to turn the call over to the operator for questions. Thank you. Operator: [Operator Instructions] Our first question comes from George Eadie with UBS. George Eadie: Can I start with Marigold, please? Just looking at the 21 million to 23 million tonnes stacked at 0.4 gram a tonne and 0.35 in Q4. My math that gets me to the top end of guidance. So maybe just a little bit more color here. Like is there a bit of conservatism baked into the guidance range of 170 to 200? Rodney Antal: I'm going hand it to Bill. William MacNevin: As we talked, we've been doing a lot of work, particularly on the technical front, and we baked that now into our updated forward schedule. And that considers how we actually have to complete our blending. So that blending and the updated plan for that is actually well outlined in the plan forward. So we believe that guidance is a good indication of what we'll deliver this year. A different stacking plan comes with that. George Eadie: Okay. But looking at the tech report, like I know it's old now, but the next 2 years, it had 0.3 gram a tonne. But given commentary before, like should we expect next year's grade incrementally higher versus this year? And then 2027 to 2028, just clarifying, like should we be looking at a stacking grade of high 0.4 to low 5s potentially, given the commentary before about keeping the sort of medium-term outlook unchanged? William MacNevin: So as always, as noted, right, across 5 years, we're basically in line. In terms of what's happening is with these metal prices, which is very exciting, we've got growth in pet sizes, we've got additional haulage. So there is a complete reschedule of the mine. So we're still delivering the same goal across the period and particularly life the mine as well, but the timing of it will be different. And that's why there's reference there, we've also got Buffalo Valley coming in, we've also got further upgrades. So the reference to completing an updated TRS port -- report comes in there as well. So there's a lot of work going on in terms of those changes ahead. George Eadie: Okay. But that referenced 5 years, what is that exactly, sorry? Like if I look at the tech report average 5 years from today, it's 235,000 ounces per annum. Like what is that reference 5 years you're speaking to? Rodney Antal: Yes. I think what he's saying -- let me answer it, Bill. George, it's Rod. Thanks for the question. Look, I think what Bill is outlining is with all the work that we have completed, I mean that's been the blending requirements that we've got for durable and nondurable law we'd actually been doing work over the last 2 years to upgrade some of the ore body knowledge. So it wasn't something that we just did in 1 quarter. It was actually in conclusion of a lot of work over a period. So that's been now built in, and that's what Bill was sort of talking about with the blending requirements in the short term and near term as well as some of these other opportunities where we've identified some shifts in the mine plan because it would have sterilized some other opportunities in the future. So we're actually wrapping all that work up. And then if you add in Buffalo Valley and New Millennium, I think what it needs is a new tech report. And then within that new tech report, we're going to outline the new profiles, not only in the 5 years, but obviously, over the life of mine as well with some of those growth opportunities. So if you just be a little bit patient with us, we'll set it out all at once for you here over the next 12 months. George Eadie: Yes. Okay. No, that's clear. And maybe just one more if I can, for Puna, what silver prices, do you sort of needed a minimum to go beyond 2028? Like it's 70 ounces or higher? Could we be talking well into the 2030s potential? Or is it a bit too early and dependent still on Cortaderas success? William MacNevin: We're excited about what we have in front of us. Cortaderas is -- be it, in the underground opportunity, there's a lot of work there to do, but it's very positive. But moving back to Chinchillas itself, we do see opportunity for it to go a lot longer with work going on both in the Chinchillas pit or potentially additional step-backs as well as the Molina pit, which is right within that area being added on as well. So let's just say that works underway at the moment, and this the silver prices more than support that. So we're doing that work as we speak now, and we see it extending into the future. Rodney Antal: Yes. I'll just -- what Bill said, George, to look at the opportunity set that at Puna has really come through a lot of hard work by the guys over a sort of extended period here. And if you sort of wanted to prioritize it as sort of Chinchillas, Molina, Cortaderas, and that's how we sort of see it sequencing out. Silver price obviously is very helpful in that regard as we look forward and look at those opportunities. But all in all, I think the future is pretty bright for Puna. We've just got to finish some of the work, particularly around Molina and Cortaderas. Operator: Next question comes from Cosmos Chiu with CIBC. Cosmos Chiu: Great to see the new TRS at Hod Maden. Maybe, Rod, can I ask, is there any kind of timeline that we can expect in terms of SSR Mining coming to a construction decision? And if you can't give us a timeline, could you maybe talk about the different factors that you will consider before making such a decision? Rodney Antal: Cosmos, it is a great tech report. It certainly outlined a terrific project for all the joint venture partners that are involved. So what's going on at side right now, the work on the ground still continues. So it's not like we've got pens down and we're waiting for approvals. It's the efforts on the ground for the early earthworks some of the creek diversions the civil works, the road access tunnels and others is underway and ongoing. So that work hasn't stopped. Post the publication of the tech report, we're now just going through the sort of review processes with our partners. And once that completed, we'll have a project decision. So I'm not going to set out a timeline on behalf of everyone. But clearly, we're maintaining some progress on the ground there as well. So don't think of it as like a pens down, then we'll pick them back up. We are maintaining some of that momentum. Cosmos Chiu: Understood. Maybe going to Puna a little bit here. I noticed that the guidance to 6.25 million to 7 million ounces, slightly lower than 7 million to 8 million ounces that you highlighted back in the August 2025 study for 2026. Could you maybe talk a little bit about that? Rodney Antal: Yes, I'll pass that one on to Bill. William MacNevin: Just the permanent timeline for the work that we're completing, was it? Rodney Antal: [ 2 5 versus ] late that we had talked about. William MacNevin: Yes. So the 6.25 to 7 as we're talking, is our guidance range. You wanted an update against that? Sorry because I missed... Cosmos Chiu: So the August 2025, your Q3 2025 update you at 2026 silver production at Puna will be between 7 million and 8 million ounces. William MacNevin: Yes. All right. Yes. No, I see. All right. quarter. Yes. So obviously, with the work we're doing at the moment, and we're continuing to do -- there's more phasing work happening with additional mining happening at Chinchillas. The timing of ounces has changed in saying that we have -- we're looking at a further depth of the production levels staying at a higher level for longer. So in other words, we saw it dropping off quicker it's come down, as you know, but we're looking at it going, maintaining a higher level for longer. We look forward to updating that as we complete some of this work going forward in future. [indiscernible] has stepped down for the year ahead, but it's going to continue for longer. That would be the best way of terming it. Cosmos Chiu: Okay. So it's a timing thing. We should take those ounces that are not produced in 2026, put into 2027 or 2028? William MacNevin: It will be, yes. It will be better. Cosmos Chiu: Perfect. And at Marigold -- sorry, going back to Marigold here, could you maybe explain to me durable versus nondurable ore and blending? I'm not fully appreciating the sort of the technical aspects behind it. William MacNevin: So to put it into a simple manner, depending on the fines content and how -- and then the height of the heap, it creates compression on the material. So the effectiveness of the solution transfer can be impacted. So if we go back in time for those that have a long history with Marigold, we've had -- we were challenged in late '22, early '23, where we had a -- where we ended up with our heap became bound up. So in other words, a lot of good work has happened to understand that ore body better. And so with that, we now have implemented different land requirements of what can be mixed with what. And then that changes the schedule of how we bring different parts of the ore body together to ensure optimum blending and optimum recovery from the -- does that make -- does that answer that sort of -- in simple terms? Cosmos Chiu: Yes. I think I got it now. When you mentioned fine, I think I remember that now. So great. And maybe one last question. I see that you're still using fairly conservative numbers for your MRMR estimate $1,700 an ounce for reserves at Marigold. So I guess my question is, I don't know how much you can answer about, but what would a higher gold price assumption due to what you can do at the ore body? It sounds like you're considering it because you're talking about not sterilizing some of the certain parts in the ore bodies or you're leaving that optionality open. And so to the point that you can share with us, what is the higher gold price assumption mean? And could that be incorporated into this new sort of technical report that could come out in 12 to 18 months' time. And you talked about Buffalo Valley and also New Millennium. Could those be part of that new study coming out as you well? Rodney Antal: Yes, that's right, Cosmos. Look, I think across the portfolio, we took a view for this year at least that given the profile that we already presented ourselves and some of these other growth opportunities that we have, we'll park any decisions on increasing the gold price kind of lowering the cutoff grade, et cetera, and maintain the margins. So -- but we really didn't see anything necessary to do that work. We do have a lot of growth studies, exclusive of gold price that are in front of us that we're looking at. And that's really the key focus at the moment to complete that technical work. So ultimately, we can start to include those into the technical reports for the future. And then obviously, we can come back to the gold price question about looking at where how sensitive some of the operations are for gold price increases as well. So that really was this year. We just got so much other work going on, we just wanted to complete that and then come back to come back to it later on. Cosmos Chiu: And then would that coincide with your timeline, say at Marigold? Because as you say, you're going to come up with a new technical study in Marigold in 12 to 18 months, could this sort of reevaluation of the gold price coincide with that timeline as well? Rodney Antal: Correct. Yes, good. And particularly New Millennium and some of those other targets as well. Operator: The next question comes from Ovais Habib with Scotia Bank. Ovais Habib: Congrats on a good quarter, especially at Puna and CC&V. A couple of questions from me and just again, going back to Marigold following up on the previous caller's questions, the fine that Marigold, looks like blending is working. And I mean, is this issue now behind us? Or are we still expecting to see this issue linger into Q1? Rodney Antal: No. In terms of the look forward -- I got this one, Bill. In terms of the look forward for the surveys, it's pretty simple. We're going to have areas where we will encounter fines in the future. It's throughout the ore body. And as Bill said, since '22, we did a lot of work, drilling et cetera, to understand at a greater level of detail, some of those pockets where the final existed. And so that's all been incorporated to the future mine plans to allow for that blending of what we call in durable and nondurable. You'll hear us say that as well in the future. So it informs the scheduling to ensure that we have the appropriate blend. So we get the right outcomes on the heap leach pads in the future. So it hasn't -- it's not a one-off. It's going to be a future feature for Marigold. And all of the work we've been doing is really just in preparation to handle that, which has been terrific work actually. And as I said to -- I think George was asking about, we'll have a new tech report, which will outline all of those requirements in the future as well as some of these other growth opportunities. Ovais Habib: Got it. And just again, I think there's a follow-up question on Puna as well. I mean drilling has been pretty successful at Cortaderas. Don't believe this deposit has been included in Puna's mine life extension. Rod, are you looking to release any sort of a new mine plan for Puna in the near term, including Cortaderas as well as Chinchillas? Rodney Antal: Look, I think what we'll probably see at Puna basin -- don't hold me to it because it depends on the work. But I think we'll see some additions to the mine life just through some of the extensions that we're going to go into encounter Chinchillas and potentially in Molina. As they start to -- the drilling programs there and also up at Cortaderas continuing some of the technical work behind those that drill program concludes, then we may consider doing a new tech report into the future. But I think at the moment, the guys have done a terrifically good job at already establishing a longer life at Puna. We see the potential for more of that. And then hopefully, in the longer-dated near term having -- sorry, in the near term for the longer-dated future some of these other larger opportunities playing our feature into Puna well into the future. So it's a pretty exciting where we've come from. If you think back, it wasn't that long ago that folks were thinking about Puna as a depleting asset that was coming towards the end of his life. And I think what we're finding there through the efforts is quite contrary to it. Ovais Habib: Excellent. And then just moving on to CC&V, which has been a real success for SSR. Currently, I mean, the project holds 4.8 million ounces in M&I. Now you already have a 12-year mine life at CC&V, but what's the plan there to accelerate these ounces into the mine plan and improve the production profile of CC&V? Is this just the permits? Is it more infrastructure that needs to be allocated? Any sort of color there? Rodney Antal: It's pretty linear from what we can tell at the moment, Ovais. The mine extension is obviously predicated on the success of the amendment for approval. That amendment for that approval allows us to continue with the pad expansions. That is already well sequenced out over sort of the next 5 to 10 years. So that's really the first sort of stage of growth, if you like, on the current reserves as you point out. Is there opportunities to optimize and do things? I mean that's our job is to try to trying to do that. But I wouldn't -- similar to Marigold, Cripple Creek has durable, nondurable ore as well, and it's really important to stay in sequence with that asset base not to put a risk the future. So we'll try. But look, I think it's fairly well set out. And then beyond it, obviously, we'll look at the opportunities for conversion of the 7-odd million ounces of resources that we also have available, which would require then another expansion permit for that regards as well. So look, I think the asset itself has done remarkably well. Since we acquired it, we're very proud of the efforts that have gone on down there and proud of the team, and they're now part of SSR and they deserve a standing ovation because I think it's been a terrific integration into the portfolio. Now our job is to optimize and to extend that asset well into the future and really demonstrate its strength in the portfolio. So we're pretty excited to have it. Ovais Habib: And just my last question then on Çöpler, Rod. I mean, any sort of progress there that we can kind of put our finger on or any sort of updates that you're looking to provide in the term future on Çöpler? Any sort of discussions going ongoing that you can talk about? Rodney Antal: Yes. Look, I think that's right, discussions are ongoing. So in terms of like activities, there really was nothing to note since the last quarter. I mean the activities at the site, as Michael sort of mentioned in his financial discussions, had sort of wound down in terms of material movements and site rehabilitation, what we're waiting for the final approvals for the e-storage facility and pad closure. The guys are obviously still very busy in that in regards of care and maintenance of the activities around the plant, in particular, to maintain integrity for a start-up. But that's really been the sort of key focus on the ground at site. And then obviously, as you note, we continue to progress the various discussions with different parts of the government and government authorities. So it's just ongoing at this stage. Operator: Next question comes from Don DeMarco with National Bank. Don DeMarco: A lot of my questions have already been answered. But Rod, I'll start off with this. For Hod Maden just continuing on as we're looking forward to this formal construction decision and I see that in the interim, you're looking at maybe spend on the order of about $15 million per month, should we pencil that into our model like beginning as of January 1, I think? Or should we wait until a construction decision? In other words, are you kind of getting ahead of yourselves a little bit here with some of that spending before the formal decision is made? Rodney Antal: No. Look, a lot of that spending was already committed, Don. On the early site works that I mentioned before, the tunneling is ongoing. We actually just had John shared actually before this meeting, the first blast of the tunnel, which is terrific for that site access tunnels, a lot of the civil works around that Creek diversion, et cetera, are all ongoing. So that was work already in progress, and that's what I was sort of saying before. I think while we're waiting for the decision, we're still very busy at side. The team is very busy on side in getting the site prepare. And then we know, obviously, once a construction decision gets going, we're well prepared to execute contracts and get moving on the bigger build as well. So it's -- I think that's fair to use that sort of number. And then obviously, we'll do a -- we'll update the guidance once we tally up what the actual cash out the door will be for the capital for the construction during 2026. Don DeMarco: Okay. Okay. That's helpful. And just my final question then, shifting to Marigold, so I see that there has been a sizable increase in sustaining CapEx in '26. And of course, the print details that there's some fleet replacements, of course, there's the plant upgrades. So is this sort of this spend to be onetime in '26? Or should we also be modeling maybe a little bit higher CapEx going forward in the next '27, '28 years? Rodney Antal: Yes. Look, I'll answer and then Bill can jump in, if you like, as well. I think we do what we always do when we look at our fleet and our mine plans in the long-term exercises around total cost of ownership. Fleets obviously have a useful life arm and particularly parts and maintenance and major component rebuilds. We completed that work for Marigold last year. And what I determined was, in some cases, that it was wise for us from a value perspective to do that work in 2026. So that's really what you're seeing there. So it's normal course. In some cases, some of them might have been accelerated by a year or 2, and some of that fleet replacement might have changed as well, but it's really just sort of an exercise in value for the fleet of understanding the optimized approach to that replacement. But nothing out of the ordinary. Bill? William MacNevin: That's correct, Rod. And a lot of work, looking at what the optimum timing, is for value. So some things are a little bit earlier than they originally planned, but that's because it gives very positive financial return to the business. That's why we're doing it. Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Hello, and thank you for standing by. Welcome to Beneficient's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Dan Callahan. You may begin. Dan Callahan: Thank you, operator. Good afternoon, and thank you all for joining us for Beneficient's Fiscal Third Quarter 2026 Conference Call and Webcast. In addition to the call and webcast, we issued a results press release today that was posted to the Shareholders section of our website at shareholders.trustben.com. Today's webcast, as the operator indicated, is being recorded, and a replay will be available on the company's website. On today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and in the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimate and Beneficient assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures, including adjusted operating expense. Please refer to our earnings press release, which again is available on our website for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures. Hosting the call today will be Beneficient's Interim CEO, James Silk. Following his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights. I'll turn the call over to James. Take it away, James. James Silk: Thank you, Dan. Good afternoon, everyone, and thank you for joining us. Before I get into the third quarter, I'd like to address the passing in December of Tom Hicks, who has been a member of the Board since 2017. Tom was a legendary figure in American business, a pioneer in private equity and a dedicated leader who brought extraordinary vision, discipline and experience to Beneficient. We appreciate his many contributions to the company and his guidance and friendship will be missed. Pete Cangany, a Board member since 2019, was appointed Chairman of the Board effective December 15, 2025. In addition to his experience with Ben as a long-standing Board member, Pete brings deep experience from a more than 30-year career at Ernst & Young, including as a partner from 1993 until his retirement in 2017. We are fortunate to have his leadership along with all members of the Board, and they are closely engaged in setting Ben's go-forward strategy as we seek to unlock value in private assets. For the past several quarters, the Beneficient management team has been working through a number of challenges related to the separation from our former CEO. These challenges have required significant resources and management attention. But we believe executing on our plan to address these challenges is a necessary step to better position the company to realize and execute on its business strategy. The company continues to see strong market opportunity. And during our fiscal third quarter, we were able to accomplish numerous critical items to stabilize and strengthen our core business that we believe better positions the company to close additional liquidity and GP primary commitment financings in the future. In December, we closed our first new GP primary commitment financing since June of last year, signaling our dedication to our business strategy and continued market interest in company products. Our third quarter results are also indicative of our continued focus and discipline on operational and financial management. We continue to prioritize creating an efficient technology and AI-enhanced services platform. a platform designed to allow the company to operate more efficiently with a focus on delivering steady, profitable deal flow and growth. This increased focus is demonstrated by a reduction in adjusted operating expenses of 6.5% year-over-year and 18% year-to-date, excluding onetime and nonrecurring expenses. We have also worked to pay down the company's payables. To achieve this, we generated approximately $50 million in gross proceeds through asset sales and equity redemptions. That capital has, among other things, allowed us to systemically reduce debt, including approximately $27.5 million that was ultimately owed to a Texas State Bank. We believe these actions have collectively strengthened our financial position. And going forward, we will continue to focus on expense reduction as well as potential simplifications of our capital structure to deliver long-term shareholder value. In January, we received notification from NASDAQ that we have regained full compliance with NASDAQ continued listing requirements. Given the circumstances, this was no small feat as we completed an annual audit. We filed financials for multiple periods in a compressed time frame. We engaged in extensive external reviews. We improved our balance sheet equity and we increased the stock price to satisfy NASDAQ's minimum listing requirement. Throughout this process, the company maintained regular contact with the exchange, submitted plans to regain compliance and executed on those plans. We are also very pleased to have reached the final court-approved settlement related to the GWG Holdings litigation and to have done so within the limits of our existing insurance policies. Collectively, these milestones represent a turning point that allows us to focus more fully on driving growth and enhancing the value of our liquidity solutions. In addition to resolving the GWG matters, we have cooperated fully with the United States District Court for the Southern District of New York on matters relating to our previous CEO. Our former CEO's criminal trial related to his conduct is scheduled for early April 2026. We are considering all options that the company may pursue related to our former CEO's conduct, including bringing litigation against our former CEO, his entities and other parties for potential financial, equitable and/or other relief. Of specific note, the company intends to vigorously pursue claims regarding the validity of over $100 million in debt purportedly owed to an entity related to our former CEO. Looking forward, we are working on a number of initiatives that we believe will broaden our financing options, increase our capacity to grow our loan portfolio backed by alternative assets and ultimately improve the returns for our stockholders. This includes focusing on our core mission of liquidity and primary capital, implementing simpler, more streamlined approaches to providing these services and broadening our deal flow opportunities and capabilities. As we head further into 2026, we believe we will be well positioned to better leverage our infrastructure and maximize the robust and diverse markets we serve. Building a stable base for growth has been a priority of management since my return to the company. By addressing the key issues I mentioned earlier, we believe we are now able to bring more of the company's resources to growing the core business, and I look forward to providing more details on that in the coming quarters. Now I'd like to turn the call over to Greg Ezell, Beneficient's CFO, to go over some of the financial highlights. Following Greg's remarks, we'll take a few questions from the analyst community. Greg? Gregory Ezell: Thank you, James. Let's now turn to our quarterly results and financial position as of December 31, 2025. As James stated earlier, due to circumstances surrounding the resignation of our former CEO, we were unable to grow our investment portfolio through new financings other than one transaction that closed in December for approximately $3.0 million in NAV. We reported investments with a fair value of $206 million compared to $291 million at the end of the prior fiscal year. These investments serve as collateral for Ben Liquidity's net loan portfolio of $188 million and $244 million, respectively. Asset sales or equity redemptions of certain investments held by the Customer ExAlt Trusts resulted in an aggregate of $50 million in gross proceeds on a year-to-date basis, which have been used to pay down certain debt and provide working capital. As of December 31, 2025, Ben's loan portfolio was supported by a highly diversified alternative asset collateral portfolio, providing diversification across approximately 150 private market funds and approximately 430 investments across various asset classes, industry sectors and geographies, a breakdown of which is available in the accompanying earnings release as well as on our shareholder website. GAAP revenues were $18.7 million for the current quarter and $3.3 million for fiscal 2026 on a year-to-date basis. The positive GAAP revenues were driven by a $44.1 million increase in fair value of a derivative asset related to the appreciation forfeiture provision included in the conversion of preferred stock to Class A common stock by Mr. Hicks and Mr. Silk. Adjusted revenues, which excludes the derivative asset fair value adjustment, were a negative $25.4 million for the current quarter and $40.8 million negative on a year-to-date basis. This derivative asset settles in January 2028 and will be fair valued each period until then. Upon settlement, a portion of the Class A common stock issued to Mr. Hicks and Mr. Silk could be returned to the company based on the terms of the appreciation forfeiture provision. Operating expenses were approximately $15 million compared to approximately $14 million in the prior year third quarter and included a $1.7 million noncash accrual. Excluding this noncash item, operating expenses declined 6.5% period-over-period. On a year-to-date basis, excluding the noncash and related items in each period as applicable, operating expenses were approximately $44 million as compared to $53 million for the first 3 quarters of fiscal 2025, a decline of 18%. Next, we'll move on to our primary business segments, Ben Liquidity, which generates interest revenue for supplying liquidity off the balance sheet and Ben Custody, which produces fee revenue for the use of the platform and trust services. As typical, I will be focusing my discussion on these business segments as it's their operations along with corporate and other that accrues to Ben equity holders. Ben Liquidity recognized $8.2 million of interest income during the third quarter of fiscal 2026, a decrease of 3.6% sequentially, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Year-to-date, Ben Liquidity recognized $25.5 million of interest income, down 25.2% compared to the prior year period, primarily driven by lower loans net of allowance for credit losses, resulting from higher level of nonaccrual loans and loan prepayments, partially offset by new loans originated. Operating loss for the fiscal third quarter was $29.2 million, a decline from an operating loss of $0.8 million sequentially. The decrease in operating performance was due to higher intersegment credit losses in the current fiscal period as compared to the quarter ended September 30, 2025, due to larger declines in NAV arising from updated financial information received from the fund's investment manager during the period and asset sales transacting generally at lower prices as a percentage of NAV during the quarter than in prior quarters, which resulted in lower relative loan paydowns. Year-to-date operating loss was $36.0 million versus operating loss of $0.5 million in the prior year period. The increase in the operating loss is partially a result of the lower revenues period-over-period plus an increase in the intersegment credit losses in the current fiscal year as compared to the same period in the prior year. Turning to Ben Custody. NAV of alternative assets and other securities held during the third fiscal quarter was $230.2 million as of December 31, 2025, compared to $338.2 million as of March 31, 2025. The decrease was driven by disposition of certain alternative assets, distributions and unrealized losses on existing assets, principally related to adjustments arising from updated financial information received from the fund investment manager during the period or the fair value of investments deemed probable to be sold at an amount that differs from NAV, offset by $14.8 million of new originations. Revenues applicable to Ben Custody were $2.9 million for the fiscal third quarter compared to $3.1 million for the quarter ended September 30, 2025. The decrease was a result of lower NAV of alternative assets and other securities held in custody at the beginning of the period when such fees are calculated, along with certain upfront intersegment fees that are amortized into revenue over time being fully amortized in the prior year period. Operating income for the third fiscal quarter decreased to $2.0 million from $2.3 million sequentially, largely attributable to the decline in revenues applicable to this operating segment as described above and slightly higher employee compensation and benefits expense. Year-to-date revenues were $10.2 million, down 36.9% compared to the prior year period, largely the result of lower NAV of alternative assets and other securities held in custody, along with certain upfront intersegment revenues that are amortized into revenues over time being fully recognized in a prior period. Operating income was $7.4 million for the 9-month period compared to operating income of $9.1 million in the prior year. While revenues declined in the current year period as compared to the same period in the prior year, operating expenses declined by $4.3 million, reflecting noncash goodwill impairment in the prior year period of $3.4 million and intersegment provision for credit loss of $1.3 million. No such impairment or credit losses were recorded in the current year period. Adjusted operating income was $7.4 million for the 9-month period compared to $13.9 million in the prior year. This decline is principally related to lower revenues in fiscal 2026 as compared to the same period in the prior year. As of December 31, 2025, the company had cash and cash equivalents of $7.9 million and total debt of $100.3 million. Distributions received from alternative assets and other securities held in custody totaled $11.3 million for the 9 months ended December 31, 2025, compared to $19.3 million for the same period of fiscal 2025. Total investments at fair value of $205.8 million at December 31, 2025, supported liquidity's loan portfolio. This concludes my prepared remarks on the financials. We will now open the call to questions from our covering research analysts. Operator, will you please give the instructions for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Michael Kim with Zacks. Michael Kim: That's better. Sorry, can you hear me okay? James Silk: We've got you Michael. Giles Haycock: It's actually Giles Hock. I'm the Managing Director at Zacks Investment Research. Michael is on an airplane. I had a chat with them this morning. I wanted to ask about the core liquidity platform, particularly with the sort of high net worth and smaller institutional clients. Could you give us a quick update on how you're approaching channels like advisers, family offices, private banks and how you're thinking about marketing and awareness building there? James Silk: Well, I think the -- as we mentioned on the call, the focus has been on really stabilizing and develop that platform for sort of rollout as we move forward. I do think the -- going forward, it will be a focus on the really the family office and the adviser network as well as continuing to provide follow-up through our AltQuote product, which is on our website, which provides a sort of quick and easy access into a preliminary indication of interest on the assets. So we'll have more to, I think, announce on that as we move forward, but it's -- that's really where we're going directionally. Giles Haycock: And then on the legal side, you mentioned the litigation briefly. Was there sort of any forward momentum or anything investors should keep in mind from a sort of balance sheet or debt perspective with regards to the litigation? James Silk: We're not going to comment too much about litigation. As mentioned before on the call, the former CEO's criminal trial is set to commence on April 6. We would anticipate, again, not within our control. It's obviously the U.S. government, that to take a few weeks, 3, 4 weeks to run its course. And we will be closely monitoring that situation, and we've preparing a variety of different options as that outcome is determined. And certainly, one thing that we've mentioned before and we'll focus on as part of that is to attack the validity of the debt that is purportedly held by a party related to our former CEO of approximately $120 million or so. But we would expect to likely expand our litigation approach beyond just the debt as well. Operator: Our next question comes from the line of Brendan McCarthy with Sidoti. Brendan Michael McCarthy: Just wanted to start off looking at the results and liquidity. Obviously, the revenue line item looks pretty stable, just considering where loans receivable came in at. But can you walk us through the operating loss there? Is that just mostly driven to the asset sales? Or is that really more so from updated NAV values? Gregory Ezell: Brendan, it's Greg. Yes, a lot of it, I would attribute it to the asset sales activity that were happening during the quarter. But equally, there were some updated financial information marks that kind of a couple of larger negative ones that are attributing to it as well, right? So mainly asset sale related, but also has a flavor coming from GP reported NAV updates. Brendan Michael McCarthy: Got it. I appreciate that. And it's probably safe to assume those are probably more just kind of one-off instances just considering you run a pretty diversified portfolio. Gregory Ezell: Yes, I believe that is correct. Brendan Michael McCarthy: Okay. And then just looking at operating expenses overall, I'm sorry, I actually think within liquidity, OpEx continues to come down. I think you're at like $13 million for the quarter. Is that a fair quarterly run rate at this point? Or do you think you have much more room to continue cutting there? Gregory Ezell: Yes. I think it's getting close to fair. There's still a little bit that we're going to try to take advantage of in reducing expenses in that operating segment and not just in that operating segment, but across the board. But in particular, for Ben Liquidity, there still is a little bit of room in there. We think that we can reduce those costs a little bit further in the future. Brendan Michael McCarthy: Got it. And then just wondering -- just curious about the pipeline for liquidity transactions. It seems like you've had good momentum in the primary capital space with GPs. Can you talk about the pipeline a little bit? James Silk: Yes. We have continued to have discussions and inquiries coming in over the last few months being out of the market with the financials as we were for a significant period of time, as we discussed, put a hold on that. And really, where we are now is sort of following up on the opportunities that we have, both potentially, let's call it, larger scale transaction or 2, but also really trying to for the next quarter as we go forward, beginning to sort of act on what we have in front of us, which is a fair amount of contacts and potential opportunities. And we've had some positive experiences with some of our counterparties over the last quarter plus that have participated in these previously. So I think we do have some very solid momentum that we'll be looking forward to providing more information on, particularly as we get through that April period, I think that's going to be an important period of time for the company given the clarity that it will likely provide or potentially provide to the company on some of these other obligations. Brendan Michael McCarthy: Just last question for me on the balance sheet. I think it said you had cash of right around $8 million, total debt of $100 million. Does that $100 million debt include the amount owed to entities related to the previous CEO? Gregory Ezell: Yes. Of that $100.3 million, I believe, of debt, all of the balance relates to an entity associated with our former CEO, except $3.7 million. Brendan Michael McCarthy: Okay. Okay. Maybe one last question here. So I know you've done a great job, obviously, navigating the management transition, regaining NASDAQ compliance, cleaning up the balance sheet a little bit. What can investors really take away? What's the near-term priorities for you guys going forward? James Silk: The market opportunity is still very strong. I think the near-term priorities for the company in addition to sort of continuing to resolve some of these outstanding matters is to begin to demonstrate the validity of the business model by executing on some of the transactions that we have in front of us, perhaps not in volume, but in terms of how we are structuring them from the standpoint of potentially approaching them from a more efficient and simplified way and, let's just say, a clearer description to the market in terms of how those deals attach to the bottom line. As I said, that will still take, I think, some time to do that in volume, in particular, as you get -- but I think as you get through the spring period, I think that's where I think the opportunity really lies. But near term, it's going to be executing on a handful of deals that demonstrate that the market is still there and that the product is still viable and that the way we're thinking about doing these newer deals is a better way to do it, I guess, is the way I'd characterize it. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Dan for closing remarks. Dan Callahan: I want to thank everybody for tuning in today. Again, you can read the press release about the third fiscal quarter and listen to the replay of this webcast on the Shareholder website at shareholders.trustben.com. Thanks again, and have a great evening. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Beta Bionics Inc. Q4 and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to hand the conference over to your speaker today, Blake Beber, Head of Investor Relations. Blake Beber: Good afternoon, and thank you for tuning into Beta Bionics Fourth Quarter and Full Year 2025 Earnings Call. Joining me for today's call are Chief Executive Officer, Sean Saint and Chief Financial Officer, Stephen Feider. Both the replay of this call and the press release discussing our fourth quarter and full year 2025 results will be available on the Investor Relations section of our website. The replay will be available for approximately 1 year following the conclusion of this call. Information recorded on this call speaks only as of today, February 17, 2026. Therefore, if you're listening to any replay, time-sensitive information may no longer be accurate. Also on our website is our supplemental fourth quarter 2025 earnings presentation and updated corporate presentation. We encourage you to refer to those documents for a summary of key metrics and business updates. Before we begin, we would like to remind you that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations about future events our product pipeline, development timelines, financial performance and operating plans. Please refer to the cautionary statements in the press release we issued earlier today for a detailed explanation of the inherent limitations of such forward-looking statements. These documents contain and identify important factors that may cause actual results to differ materially from current expectations expressed or implied by our forward-looking statements. Please note that the forward-looking statements made during this call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances, except to the extent required by law. Today's discussion will also include references to non-GAAP financial measures with respect to our performance, namely adjusted EBITDA. Non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operations. We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods. Any non-GAAP information presented should not be considered as a substitution independently or superior to results prepared in accordance with GAAP. Please refer to our earnings release and supplemental earnings presentation on the Investor Relations section of our website for a reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measure. With that, I'd now like to turn the call over to Sean. Sean Saint: Thanks, Blake. Good afternoon, everyone, and thank you for joining. With this call, we're officially turning the page on our first full year as a public company. It's been an exciting year to say the least and I want to take a brief moment to reflect on it before we dive into the details of our Q4 and full year 2025 performance. Beta Bionics exists to deliver solutions to people with diabetes that reduce burden, expand access and ultimately improve outcomes at the population level. We believe that in doing so, we can, for the first time, begin to lower the average A1c of people living with diabetes in the U.S. Our performance over the last year is strongly indicative that we're on the right track. On our first earnings call, we shared our key targets for the full year 2025. And as we'll highlight in more detail shortly, we outperformed substantially on each of those metrics. Close to 20,000 new users adopted our technology in 2025, more than doubling our installed base entering the year, which now stands about 35,000 total users that have adopted the iLet since launch. We added those users with what we believe is a substantially smaller sales force than our competitors, which we believe on a per territory basis made our sales reps potentially the most productive in the durable pumps market in 2025. That goes to show you the power of our fully adopted algorithm, our robust ecosystem of digital tools to support our users, their caregivers and their providers and ultimately, our team's ability to execute and deliver results. We continue to lead from the front on our pharmacy channel strategy for durable pumps and established formulary agreements with all the major pharmacy benefit managers or PBMs that operate in the U.S. We were also effective by driving adoption of those formulary agreements at the individual plan level, which is a critical step in the process that ultimately enabled many of our users to access the iLet and its related consumables for significantly lower out-of-pocket costs. We also believe our gross margin profile is already the strongest in the durable pump space, as evidenced by our performance this year, especially considering the success that we've seen in the pharmacy channel, which had a short-term dilutive effect on gross margin in 2025. On the R&D side of the business, we took meaningful steps in the development of Mint, our patch pump program, which we unveiled to the world at our first Investor and Analyst Day in June. We also completed our first clinical trials as a drug company, executing a PK/PD trial for our glucagon asset and a first-in-human feasibility trial for the entirety of our bihormonal system in development. I'm proud of all we've accomplished in 2025, and I look forward to 2026 as another year of relentless execution on our key objectives that we believe will ultimately position us to revolutionize diabetes care in the years to come. We have lots of ground to cover on today's call, beginning with our fourth quarter and full year 2025 results, Stephen will then provide some additional detail on our fourth quarter performance before introducing our guidance for full year 2026. I'll wrap up the call with regulatory and pipeline updates, and then we'll take Q&A. Starting with a brief overview of full year 2025 performance, I'm proud to announce that we delivered $100.3 million in net sales, which grew 54% year-over-year. Our gross margin of 55.4% expanded slightly year-over-year, while our percentage of new patient starts through pharmacy grew to a high 20s percentage for the full year 2025 relative to a high single-digit percentage in the prior year. To put it simply, these are excellent results. The iLet is winning with its unmatched automation. Our highly transparent and inclusive real-world efficacy and safety outcomes are excellent and available for the world to see in our latest corporate presentation. Beyond the product, we're quickly innovating the business model for durable insulin pumps and we're remaining disciplined in our execution and cost control. Diving into Q4 results. Specifically, we generated $32.1 million in net sales, which represents 57% growth year-over-year. Q4 revenue growth was driven by a few items. Number one, we delivered 5,592 new patient starts in the quarter, which grew 37% year-over-year. Number 2 is our growing installed base of users accessing their monthly supplies for iLet through the pharmacy channel, whom we're retaining at a high level. Number 3 is modest favorability in stocking revenue that we saw in both the DME and pharmacy channels relative to the prior quarter year. In pharmacy, in particular, we saw a modest pull forward of about $1 million of stocking orders from Q1 into Q4 and ahead of price increases that were implemented at the end of the year in that channel. In Q4, a low 30s percentage of our new patient starts were reimbursed through the pharmacy channel, increasing slightly relative to the prior quarter and substantially relative to the low teens percentage we saw in Q4 of the prior year. Our gross margin in Q4 was 59%, expanding 179 basis points year-over-year. Gross margin expansion is being driven by the benefits of increased scale and manufacturing volume leverage, greater contribution of high margin revenue from our growing pharmacy installed base and continued cost discipline. With that, I'll hand the call over to Stephen to provide some additional color on our fourth quarter performance and introduce our full year 2026 guidance. Stephen? Stephen Feider: Thanks, Sean. Our Q4 revenue, pharmacy mix and gross margin results exceeded our guidance across the board. While we don't guide on this metric, our 5,592 new patient starts grew 5% sequentially relative to the prior quarter which was in line with the lower end of our expectation for the quarter. While Q4 remains the strongest quarter seasonally for new patient starts in the diabetes market as it has been for us since we launched the iLet, we believe its relative strength compared to the other quarters is diminishing. We believe that historically, Q4's relative strength was predicated on people with diabetes who waited to purchase an insulin pump until they met their out-of-pocket maximums for the year and before their deductibles reset in the New Year. By waiting until their out-of-pocket maximums are reached, patients could save as much as $1,000 to $2,000 on a pump they purchased later in the year through the DME channel. Since 2023, the majority of new pump users in the U.S. have acquired their device through the pharmacy channel, where the majority of users can initiate and maintain therapy for under $50 per month. Said another way, we believe that over the past few years, people with diabetes who may have previously waited until Q4 to adopt a new pump are waiting less frequently than they used to. Our pharmacy channel strategy enables us to compete for those new users and is a key reason why we've seen great adoption of the iLet throughout the year. In Q4, approximately 69% of our new patient starts came from people with diabetes that used multiple daily injections prior to starting the iLet, which is an important representation of how much the iLet is expanding the market for insulin pumps and addressing an unmet need. Moving on to gross margin. Q4 gross margin was 59%, the improvement we saw in our Q4 gross margin relative to the prior year and the prior quarter was driven by 2 primary factors. Number one, growth in the pharmacy installed base, which generates high margin recurring revenue and where we continue to see strong patient retention; and number two, lower cost per unit from higher manufacturing volumes driven by growth in patient demand. Total operating expenses in the fourth quarter were $35.1 million, an increase of 42%, compared to $24.7 million in the fourth quarter of 2024. The increase in sales and marketing expenses relative to the prior year is driven by the expansion of our field sales team, which still stands at 63 territories exiting Q4. The increase in R&D expenses relative to the prior year is driven by the Mint and bihormonal projects. The increase in G&A expenses relative to the prior year is driven by new costs related to operating as a public company. As of December 31, 2025, we have approximately $265 million in cash, cash equivalents and short and long-term investments. We are sufficiently capitalized to fund all our key initiatives and remain well positioned to begin generating free cash flow well ahead of historical diabetes peers. I'd now like to introduce our full year 2026 guidance. Starting with revenue. We expect to generate $130 million to $135 million of revenue in 2026. On our channel mix, we expect 36% to 38% of our new patient starts to be reimbursed through the pharmacy channel. Lastly, we expect gross margin to be between 55.5% and 57.5%. Our revenue guidance contemplates our expectations for the iLet to continue to expand the pump market while taking market share, stable and strong patient retention in both the DME and pharmacy channels, stable pricing in the DME channel, and a low single-digit increase in price for supplies sold through the pharmacy channel. Other key variables that may impact our revenue performance relative to our guidance include the percentage of new patient starts in the pharmacy channel, and the rate at which we expand our sales force throughout the year. Our gross margin guidance contemplates our continued cost discipline, improved leverage of manufacturing overhead at greater scale and continued contribution of high-margin revenue from growing pharmacy installed base. Another key variable that could impact our gross margin performance is our pharmacy mix of new patient starts where meaningful changes from 1 quarter to the next can have a material impact on our near-term gross margin. A quick comment on operating expenses and CapEx. For 2026, we expect OpEx and CapEx to increase as a percentage of revenue relative to the prior year. We expect both sales and marketing and R&D spend to accelerate on a year-over-year basis, driven by sales force expansions as well as Mint and bihormonal costs, respectively. We expect G&A spend to increase slightly year-over-year to support the organization as it scales. CapEx spend will accelerate predominantly related to Mint. In terms of revenue cadence, we expect Q1 to decline sequentially from Q4 2025. As I mentioned earlier, while the growth of the pharmacy channel is muting traditional seasonality in the insulin pump market, Q4 remains the strongest quarter on a relative basis even if its relative strength is diminishing. Q1 also continues to be the softest quarter on a relative basis due to annual deductible resets. While many patients do not wait for their medical deductibles to be met before purchasing an insulin pump, a portion still do. As a result, the pool of patients initiating therapy through the medical benefit is typically larger in the back half of the year, especially relative to Q1. In Q1 of 2025, we were able to partially offset this typical Q1 seasonality headwind for 2 primary reasons. Number one, we were still benefiting from momentum generated by our late 2024 product launches, including Color iLet, Bionic Circle and the Libre 3 Plus Integration. Number two, we meaningfully expanded pharmacy coverage in Q1 2025 through our agreement with Prime Therapeutics. That expansion allowed significantly more patients to access iLet earlier in the year with minimal out-of-pocket costs, driving incremental new patient starts. While we continue to view iLet as highly competitive in the market, we do not expect Q1 2026 to benefit from the same level of tailwinds. We did not have comparable product launches in late 2025. And although we anticipate incremental growth in pharmacy coverage from Q4 2025 to Q1 2026. We do not expect a similar step change in pharmacy coverage expansion as we experienced in Q1 2025. Stepping back from Q1, we expect full year 2026 revenue to be slightly more weighted towards the first half of the year compared to 2025. In the first half of 2025, we experienced a significant increase in the percentage of new patient starts flowing through the pharmacy channel. That mix shift was dilutive to revenue in the first half, but became accretive in the back half of the year. In 2026, we again expect the pharmacy mix to increase with that growth weighted towards the front half of the year. However, we expect the magnitude of the shift to be more modest than what we saw in early 2025. As a result, we expect a modestly higher revenue weighting in the first half of 2026 relative to the prior year. Beyond pharmacy mix, the other key variable that could influence revenue cadence throughout the year is the pace at which we expand our sales force. In 2026, we plan to add at least 20 new sales territories up from the 63 territories we had at the end of 2025. We expect to expand throughout the year as we identify high-quality sales reps in priority markets. Going forward, however, we will no longer provide specific quarter-end territory counts in order to better align our disclosure practices with those of our peers. With that in mind, I'd like to address our approach to the new patient starts disclosure going forward. Since our IPO, we have provided exact new patient starts figures to support the investment community and understanding the complexity of our traditional DME channel model versus our innovative pay-as-you-go model in pharmacy. We now feel at this stage that the investment community has a strong understanding of our dual channel business model. Therefore, to better align our disclosure practices with industry peers, we will no longer provide an exact quarterly new patient starts figure. That said, we remain committed to an industry-leading level of transparency, and we will continue to provide our quarterly revenue by product and channel. Our mix of new patient starts going through the pharmacy channel and quantitative trend-based commentary on new patient starts each quarter. Again, this is more disclosure and transparency than we typically see in the insulin pump space. We will continue to evaluate our disclosure strategy to align with industry practices while maintaining a leading level of transparency in line with our brand. Shifting back to our 2026 guidance. Regarding the trajectory of gross margin throughout the year, we expect Q1 gross margin to decline relative to the levels we saw in the second half of 2025 driven by 2 factors. Number 1 is Q1 demand tends to be seasonally lighter, which translates to lighter manufacturing volume. Number 2 is we expect to see an increase in our mix of new patient starts in the pharmacy channel in Q1 as discussed earlier. Beyond Q1, we expect gross margin to sequentially improve in each quarter throughout the year as we drive more leverage from greater scale, and we generate more and more high-margin revenue from our growing pharmacy installed base. Before I hand the call back to Sean, I want to say how proud I am with this team. And just our second full year on the market, we scaled past $100 million in revenue, high-need pharmacy reimbursement for a tubed insulin pump and made significant progress across our R&D programs. We did all that while operating with a level of cost discipline the industry simply hasn't seen. Energy and enthusiasm at Beta Bionics are high -- at their highest since joining the company. The team has filled with competitive people, all focused on winning and doing their very best for people living with diabetes. I'm excited. With that, I'll hand the call back to Sean. Sean Saint: Thanks, Stephen. Before I get into the innovation pipeline, I'd like to address the warning letter that we received from the FDA in late January related to observations made by the agency following the inspection of our Irvine facility in June of 2025. After that inspection, the agency issued us a Form 483, which we highlighted on our previous earnings call. We take the FDA's observations very seriously. And following issuance of the Form 43, we immediately began remediation efforts to directly address the observations. We were disappointed to receive a warning letter, but I remain proud of the incredible work our teams are doing to address the agency's concerns and confident in our ability to resolve them. We look forward to working together with the FDA to evolve and strengthen our quality systems and processes. I want to briefly highlight those key issues and discuss our remediation efforts and spirit of transparency and to instill confidence in the work we're doing to address the agency's concerns and ultimately close out the warning letter. First, the agency had several findings concerning our complaint handling system. Specifically, they found that our definitions of complaints that rose to the level of Medical Device Report or MDR, were not consistent with their expectations. This alignment is a hard thing to do without direct feedback from the FDA and many companies have had to work through the exact issue with the agency to get it resolved. I'd like to highlight an example of what I'm talking about. In the agency's view, a reportable hypoglycemia event includes those that are self-treated with glucose drinks or candies. By contrast, prior to receiving feedback from the agency, our definition of a reportable hypoglycemia event included only those requiring third-party assistance, which was aligned to the ADA's definition for severe hypoglycemia. The FDA's view that self-treated hypoglycemia should also be reported isn't codified to us without direct feedback from the agency and through our collaboration. Beta Bionics has aligned our definition of reportability with the expectations of the agency and the warning letter seem to confirm that the agency agrees with our new criteria. These criteria often vary meaningfully between different companies in the industry. So 1 of the most important things that we're staying mindful of is collaboratively establishing and implementing practices that the agency agrees with, specifically in the context of Beta Bionics. Another finding in the warning letter is that certain MDRs that were previously filed or caused to be filed by this change in definition were filed after the 30-day deadline. In many cases, these late filings were caused by the change in reportability definitions. Specifically, when we remediated old complaints that were previously not reportable and later became reportable, the 30-day time clock had already expired causing a number of late reports. Beta Bionics believes that both our new definition as well as our new complaint handling system will eliminate this problem in the future. We previously discussed that while we remediate our old complaints, an elevated MDR rate would be present and this remediation would last through Q2 of this year. We're on track with this remediation and reiterate our intention to have all of our old filings fully compliant by the end of Q2. Additionally, findings in the warning letter relate to our procedures for tracking, trending and analyzing our complaint data to ensure our product meets expectations in the field. I want to be clear on this one. We certainly had procedures and they've been previously audited as acceptable. But as with most things, the more you use them, the more you can identify areas for improvement, and that's what happened here. We've been working on those improvements since June and are confident through our collaboration with the agency that we will sufficiently address their observations. Another typical area that the agency had feedback on was our CAPA or corrective and preventative action system. Again, while we had a CAPA system, the agency found areas where we could have -- could have opened a CAPA and did not or could have done a better job with what we call VOE or verification of effectiveness. Which is the process to ensure that changes we make through the CAPA process worked. The agency's feedback was crucial to our understanding of where our CAPA process needed to evolve and this is another area that we've devoted a lot of attention towards remediating as it relates to the agency's observations. And lastly, the agency had feedback on our corrections and removals procedure. In today's day and age, companies like Beta Bionics are in the advantageous position to be able to push out software updates to our products easily with firmware over-the-air updates. This is a benefit to our users as it allows the product to get better without users having to send it to us. However, the FDA takes a broad view of what constitutes a safety change, and their feedback was that there were certain software updates that we had made where we should have filed a corrections and removal report. Beta Bionics must now file all the required reports and to be clear, these reports have to do with changes previously made to the software and no additional changes that we are currently aware of are required. We expect the agency will be satisfied with our response to their concerns here. As many of you may have noticed, there have been several warning letters recently issued in the diabetes space. From the limited public information available, these letters generally seem to have to do with this use concerning quality systems, indicating how challenging it can be to get these systems fully aligned with the FDA's expectations with our direct feedback from the agency. While these findings are serious, we also believe that they are straightforward and that our remediation of the systemic issues found is well underway. I'm proud of our team's response to both the 483 and the subsequent warning letter and as we previously stated, we do not believe this warning letter impacts any of our previously shared time lines. Now for the fun stuff. Let's start with an update on Mint, our patch pump in development. I spoke earlier about our leadership in the durable pump space, propelled by our differentiated algorithm, pharmacy channel strategy and excellent gross margin profile. We expect that Mint will enable us to extend our leadership into the broader automated insulin delivery market beyond just the durables segment. We expect Mint to be a game-changing product with an advantaged user experience from both a form factor and algorithm standpoint relative to other patch pumps on the market or in development. Our efforts in the pharmacy channel with iLet have been critical in terms of our ability to form key relationships with PBMs and payers that we'll leverage to build coverage for Mint. In many cases, we expect that existing contracts for iLet will be amended to incorporate Mint. And in other cases where we don't yet have coverage for the iLet in pharmacy, we expect to be able to generate coverage for Mint, given mechanisms for patch pump coverage already exist for the majority of payers. On gross margin, we expect Mint's design will eventually enable us to drive industry-leading gross margins for any automated insulin delivery system at scale. In Q4, we continued to make great progress on Mint just tracking well towards key internal milestones on the way to unconstrained commercial launch by the end of 2027. Our work in Q4 continued to boost our confidence in the product's merit and ultimately, our ability to potentially obtain FDA clearance and manufacture at scale. For our bihormonal system in development, in Q4, we completed our first in-human feasibility trial in New Zealand. This was our first time testing the entirety of the bihormonal system, inclusive of our glucagon asset in humans, which represents a key milestone for the program. The trial was highly informative to our go-forward development strategy and we continue to observe no safety signals for the glucagon asset. As we've progressed this development program, we've also gotten greater clarity from the agency on our regulatory path to approval for the system, which can be described in development phases. We're currently in Phase IIa for the program, meaning we are conducting feasibility trials in small groups of patients to stress test the systems capabilities and iterated accordingly. The first in-human feasibility trial was just completed as part of Phase IIa, and we'll be initiating another Phase IIa feasibility trial in the first half of this year to stress test and iterate the system further in preparation for the more advanced stages of development. Following the completion of our upcoming Phase IIa trial, we expect to progress to Phase IIb, which we anticipate will be a much more robust feasibility trial that will enable us to advance to concurrent Phase III pivotal trials. This pathway doesn't represent a change to our development program, but rather, it provides increased specificity to the expected requirements for our system to ultimately gain NDA approval for the glucagon asset and 510(k) approvals for the pump and algorithm. We continue to be extremely excited by the bihormonal system's potential to transform clinical outcomes for people with diabetes, but more importantly, the potential to transform the way people experience their diabetes and shift their mindset from diabetes being a disease that they manage to simply a disease that they have. Lastly, on our innovation pipeline, I want to cover type 2 diabetes. In Q3, we continued to see some health care providers prescribe iLet to their type 2 patients off-label. We estimate that 25% to 30% of our new patient starts in Q4 were from type 2, increasing slightly relative to the prior quarter. While we're not committing to a specific time line, we remain eager to pursue to diabetes label through the FDA. To conclude our prepared remarks, I want to highlight the key message from today's call. It's been about 2.5 years since we launched the iLet, and in that time, Beta Bionics has emerged as a leader in the durable insulin pump space. Our product is exceptional, and it's changing lives. Our real-world evidence strategy is setting the gold standard for transparency in our industry, enabled by the iLet's automation, which has been shown to improve clinical outcomes regardless of our users baseline A1c or engagement with the product. Our pharmacy channel strategy is making durable insulin pumps more accessible for our users than they've ever been. Our digital solutions are delivering users, their caregivers and their providers the information and support they need to generate the best outcomes possible on our product. Our product is breaking the mold of what has historically believed to be possible in durable pumping, and we're delivering financial results that we're proud of. But our work doesn't stop here. We're working to expand our capabilities to the broader automated insulin delivery market with Mint and with the bihormonal system, we're looking to redefine how people experience their diabetes and the outcomes they can achieve. This cohesive strategy is what defines our business and what we believe will drive our ability to succeed over the short, medium and long term. Stay tuned. With that, thank you all for joining today's call, and we'll now open the floor to Q&A. Operator: [Operator Instructions] Our first question comes from David Roman with Goldman Sachs. Philip Coover: This is Phil on for David. Want to start with the top line. Last year, you delivered north of 20% upside to your initial sales guidance for the year despite stronger pharmacy conversion than initially anticipated. As we think about the forecast for this year, given the increasingly recurring nature of the business, our model only contemplates pretty modest new patient growth to be able to hit the high end of your guidance. I guess, could you talk a bit more about the level of conservatism that's still in guidance moving forward, and any additional color you can give on the outlook for new patient starts embedded in this initial guidance? Stephen Feider: Hey, Phil, this is Stephen. I appreciate the question. Look, I don't want to call the guidance for 2026 conservative. So I'm not going to use that word. I think -- and also, I'm not going to speak to exactly the new patient starts that are embedded in the guidance. But we do, of course, have confidence in hitting the guidance that we've communicated. And then the 1 little extra color I would add as it relates to the revenue guidance is any time that we have dramatically outsized performance in the pharmacy channel, meaning the percentage of new patient starts that get reimbursed in pharmacy, it creates a short-term headwind on revenue. And so we do have to embed in our revenue guidance, knowing that we need to continue to beat -- to hit the revenue guidance that we communicate. We have to be ready for the fact that we could massively outperform on our pharmacy new patient starts percentage. And because of that revenue headwind, we do embed that in our 2026 revenue guide. Philip Coover: Fair enough. The gross margin guidance for the year came in a little bit light of what we were expecting, given the underlying leverage in the back half of the year. Wondering how much of that maybe comes from your rate of pharmacy conversion versus underlying the direction of travel for underlying gross margins would be helpful. Stephen Feider: Yes. The point you just alluded to is really the reason for the gross margin guidance being where it is, besides the fact that, again, we like to have confidence in any particular guidance that we communicate. But in the event that we outperform on the percentage of new patient starts growth from 2025 to 2026. That again creates a short-term revenue headwind, but it also creates a short-term drag on our gross margin profile because, again, in the pharmacy business model, as you know, we give away the iLet for free, and then we charge a monthly recurring revenue -- we generate monthly recurring revenue of around $450 for all patients that continue using the product in the pharmacy channel. But in the event that we massively outperformed our guidance in 2026 in terms of pharmacy new patient starts. That can, again, will create a short-term drag on gross margin and hence, we're guiding gross margin where we have. Operator: Our next question comes from Michael Polark with Wolfe Research. Michael Polark: I'm curious on the fourth quarter, just with all the focus on your starts performance of 5% sequentially. Have you developed a view as to what the pump market in the U.S. starts were up, how that performed Q-over-Q? Do you have a number of a chance, obviously, your peers are still mostly to report, I'm curious if you developed an opinion. Stephen Feider: Yes, Mike, I appreciate the question. For the reasons that you stated, because our competitors haven't really published their earnings, we don't have a particular perspective on what our market share was in the fourth quarter and how that performed relative to Q3. So I'm sorry, I don't have a take on that yet. I'll wait to see our competitors' numbers. Michael Polark: Fair enough. For the follow-up, maybe about '26, I heard 20 new sales territories to be created, invested in, that's over 30% growth in territories. I know it will be done over the course of the year. I know you're not going to be too precise, but can you maybe comment 1H-2H centric, I think I'm interested in what the formal guidance has considered for the timing of those incremental territories. Stephen Feider: Yes. Of course. The guidance is at least 20 territories, will be expanding by in 2026, and there will be a large expansion in the first half of the year. I don't want to say that there won't be an expansion at some level in the second half, but there's much of that expansion is in the first half of the year. Operator: Our next question comes from Mathew Blackman with TD Cowen. Mathew Blackman: Can you hear me okay? Sean Saint: Yes, we got you, Mat. Mathew Blackman: I just want to start, I want to make sure I [Audio Gap] so correct me if I've gotten some of this wrong, but it sounds like 1Q will be down more than, let's call it, roughly 14% quarter-over-quarter decline that you saw in 2025 versus 4Q '24. But then it sounded like first half of 2026 should be modestly higher than [Audio Gap] like 41% of the full year revenue we saw in the first half of 2025. Did I capture all of that correctly? Maybe start there. Stephen Feider: I'm sorry, Mat, can you -- you cut out a little on our end. I hope it's not us, but can you repeat the second half of your question there? Mathew Blackman: I think my headset cut out. So yes, let me do it again, I apologize. It sounded like your commentary for the first quarter was that it will be down more than I think the roughly, let's call it, 14%, you were down in the first quarter of '25 versus the fourth quarter of '24, but then you expect the first half of 2026 should be modestly higher than the first half revenue you saw in 2025? Did I capture that commentary correctly? Stephen Feider: Yes, you did directionally. So I'm going to repeat some of that back to you. What we did say is that the -- there is seasonality to the business and -- this is with regards to the step change from Q4 to Q1. So there is seasonality to the insulin pump business. The biggest step change that we see in terms of seasonality in our businesses from Q4 to Q1, and you should expect a reduction in revenue and new patient starts from Q4 '25 to Q1 '26. And that step change or that reduction should be larger than what you saw for both new patient starts and revenue than what you saw last year. So from, again, Q4 2024 to Q1 2025, that reduction, you should see a larger reduction from Q4 2025 to Q1 '26. And the reason for that is that there's product launches that were unique in Q4 2024 and notably the Color iLet, which created a lot of pent-up demand in Q4 '24 and Q1 '25 that kind of obfuscated traditional seasonality. Again, we launched a Color iLet that was smaller, massively different form factor. And then the second thing is that we did see a very large uptick in the percentage of new patient starts going through the pharmacy channel from Q4 '24 to Q1 '25, which created also this demand improvement in those comparative periods. And we won't see the same from Q4 '25 to Q1 '26. So that's the first part of your answer is yes, and for all those reasons, I think that were important to share. The second part is I was -- in the prepared remarks, I was just commenting on the weighting of revenue, and we expect the weighting of revenue to be more heavily weighted towards first half 2026 than what we saw first half 2025 weighting to be, meaning, first half '25 revenue divided by total year '25 revenue, that percentage, that will be lower in '25 than what we'll see in '26. Mathew Blackman: Okay. I appreciate that. I guess the other question I wanted to ask I don't know if you have this handy, but even if just directionally thinking about the sales territory expansion in '26, is there a way to even roughly quantify how much of the addressable market you were able to cover in 2025. How much incremental the 20 territories would give you, again, even just directionally? And I guess, maybe most important, how much of a rate limiter do you think that's been in terms of iLet adoption. Stephen Feider: Yes. All right. Well, another good question. I think that the right number of territories in the U.S. for an insulin pump company, and this is kind of a wide range because I want to reserve the right to change as we sort of grow here is somewhere between 120 to 180 sales territories. That's like when you have the level of sort of adoption that in particular, like, let's say, our patch pump competitor has, I think it's probably on the higher end of that. But the point is, I think, in order to cover all of the endocrinologists and high-prescribing primary care doctors in the country, you need somewhere between 120 to 180. And so for most of last year, as you know, we had 63 territories. So obviously, the simple math is we had 1/2 to 1/3 of the country covered. Now the reality is that our territories tended to be a little wider or a little larger. So we are probably covering actually more than 33% to 50% of the entire country, but that gives you a directional understanding of how much of the country generally we were sort of addressing and what 20 incremental territories does. Operator: Our next question comes from Jon Block with Stifel. Jonathan Block: Maybe just to pick up on that thread or to pull that thread a little bit. Maybe you guys can just talk to why are 20 reps the right number, right? It takes you to the low 80s. But Stephen, you just talked about a number 120 plus. And when I think about exiting 2026, I mean, you're that much closer to Mint, you're that much closer to type 2 label as a possibility. So maybe just talk about why the organization with the balance sheet you have wouldn't push a little bit harder and faster just when we think about the number of reps that you're onloading or plan to unload this year. Stephen Feider: Yes, good question. And Sean, I'll start here and just if you want to jump in and add a little more. Look, we, of course, have confidence in the product that we're offering. And so expansion is absolutely the intention of the company, and we are underpenetrated in terms of doctors that are aware of what the islet is and having a sales rep that's communicating to them what the great clinical outcomes are for their patients. So that absolutely is true. But I also did say that we're going to expand by at least 20. So I don't want us to just anchor on 20 is like on the low end of that and say that's the only amount that will be -- or that's the amount that we will be limited to in 2026 in terms of expansion. And then the last point I would make is that we are anticipating, as you know, from our R&D pipeline, we are anticipating future products. And Sean mentioned them in his prepared remarks. And I think embedded in sort of like our plan for the sales force expansion is being a little cagey here is sort of anticipation of future time when we have another product on the market. So there's that as well. Sean Saint: I'll just add to that, Jon, that we always believe in being deliberate, right? I mean I don't think that you can realistically launch a product, come out of the gate, hire 200 people and field 200 fully trained people and expect that your manufacturing line can produce that many -- the whole bit, right? There's so many systems, et cetera, that have to scale along with the number of reps, and there's a lot of opportunities to get it wrong. Beta Bionics is playing the long game here, and I don't think anybody needs us to take over the world on day 1. So we're going to do this deliberately and conservatively at some level, and we're going to get it right. Jonathan Block: Great. That's helpful. Maybe just a shift in I guess I'll go there. There is this hypoglycemia concerns or chatter, and it's out there. Maybe it's more Wall Street than Main Street, et cetera. But Sean, any data or metrics that you plan to share with TheStreet that might be forthcoming? And then maybe just to add on to that, I'm curious, in the real world or out in the field, what are your reps hearing or any blowback and has that evolved in the past 3 or 6 months? Sean Saint: Yes. Fair question, Jon. Well, first of all, in terms of data, I would point you to our current corporate deck on the website, which does speak to this. Look, our best information on the iLet, of course, we see all of our data in our cloud, et cetera. Yes I'll just say a few things. First of all, it's consistent with our clinical trial, right? We're seeing the same or even slightly lower rates of hypoglycemia that we saw in our clinical trial that was clearly acceptable at that time, number one. Number two, those rates of hypoglycemia seem to be roughly 1/3 -- 1/4 to 1/3 of the ADA guidelines for hypoglycemia. So we're meeting that metric by 4x. Again, I'll point you to our data on the corporate deck as well. But what I'm telling you is, to the best of our knowledge, yes, we hear the narrative. No, we don't see some outsized hypo problem with any description. It is a true statement that people with diabetes do occasionally get low. They get low on every system. And in fact, if you look at severe hypoglycemic events, it's roughly an order of magnitude worse than it is with iLet or other AID systems. But I do want to highlight a difference. And I believe I've talked about this before. And it's at this point, what we call the Tesla effect. People -- there are car crashes every day, but when a Tesla crashes, it's national news. I think the data at this point is clear. Teslas are safer than the average driver, full self-driving, of course, is what I'm referring to. And yet that's national news when something happens. We do believe that there is a version of that, that's happening with the iLet. We've provided an increased level of automation than the world has ever seen with insulin pumps. There is very, very little to do for the user of an iLet. However, lowes do still happen. When a person chooses their dose, gives that dose, goes for a walk and gets low, they think, wow, I probably shouldn't have done that. When a user utilizes the iLet, doesn't choose a dose at any level and then goes for a walk and gets low, they think, look at what this thing did to me. So I think that's where that's coming from. And I think it's somewhat natural that Beta Bionics will live that world because we are the tip of the spear in terms of automation and insulin pumps here. But again, I'll focus back on what I started my response with. All of the data that we've published, all the data we are aware of do not indicate any level of outsized hypo problem with the iLet. Operator: Our next question comes from Matthew O'Brien with Piper Sandler. Matthew O'Brien: Congrats on getting to $100 million in sales so quickly. Maybe just a follow-up on -- maybe to follow up on Phil's question to start with. Just on the guide, even if you go to the midpoint of the range, the absolute dollar number is actually lower in '26 versus '25, and you're getting the benefit of all these pharmacy patients from a revenue perspective here in '26 versus '25. So is there something else that's contemplated in here that we should be thinking about? I don't know if it's potential impact of the warning letter or competition or higher attrition because of more pharmacy, anything like that specifically to call out here in terms of this initial guide versus what you kind of did on an absolute basis last year? Stephen Feider: Matt, good question. And I appreciate the congrats. In short, no, there's no odd characteristics of the competitive landscape that we're particularly afraid of. We're not seeing any elements of our pharmacy business model where there's attrition that's trending any different than what we've seen. And by the way, we've had great retention on the product. We're just setting a guide that we have confidence in and we feel good about. Matthew O'Brien: Very fair. And then on the gross margin side, I mean, the number in Q4 is eye-popping as far as how well you did on the gross margin side for the range that you gave for the rest of -- for '26, it just implies a pretty big step down in the first half of this year. So I'm just wondering if there's something maybe even in the back half that you're contemplating, I don't know, is that a, we could start to see some Mint sales? Is that something that's -- just to be specific on Mint, do you still expect to be second to market as far as patch pumps go? Stephen Feider: I'll let you answer the question on Mint. But yes, as it relates to -- I'm sorry, I just lost my train. Can you take the Mint question, the Mint part? Sean Saint: Yes, sure. And to be clear, when he said you can take the question, I don't think you meant you, I think you meant me. All right. So on Mint, I don't recall exactly the statements we've made in the past on order of release. And I frankly, Matt, don't remember the exact details of when all of our competitors are currently saying their products will come to market. What we're doing today is reiterating our time line of an unconstrained launch by the end of '27. So that's what I'll commit to. But I'm not going to call our shot on exactly what position that puts us in because, frankly, we don't have visibility to what others are doing. And thanks for the eye-popping comment though. Stephen? Stephen Feider: Yes. And in terms of the gross margin guide for the year, yes, obviously, 59% in Q4 is a great number. I think something notable about Q4 gross margin was that we didn't see a big uptick in the percentage of pharmacy new patient starts from Q3 to Q4 2025. But remembering that, that particular metric for us is only so predictable. So obviously, we do guide to that metric in 2026. But in the event that it outperforms our expectations, which it has the possibility to do, we have to be ready for a short-term headwind on our gross margin profile. And so hence, that's embedded in the guidance. But there's nothing competitive about the product or there's no like new problem or they're not seeing an uptick in warranty rates or anything of that nature. It's just, again, simply us being careful in the event that a particular metric outperforms what we've communicated. Operator: Our next question comes from Mike Kratky with Leerink Partners. Michael Kratky: Maybe just to start, now that we're more than halfway through the first quarter, can you share any qualitative or quantitative commentary around what you've seen so far year-to-date in terms of new starts and if that's aligned with your expectations on seasonality and your outlook for the sequence from 4Q to 1Q? Stephen Feider: Yes. Yes, I guess I'm going to kind of repeat something I already had communicated. So sorry, this is just a regurgitation, Mike, although I do certainly appreciate the question. So as it relates to the first quarter, there absolutely is seasonality in the insulin pump business and -- where we see the largest step change in seasonality is from the fourth quarter to the first quarter. And so you should expect a reduction in revenue and new patient starts from Q4 2025 to Q1 2026. And you should expect that reduction in new patient starts, in particular, to be larger than what we saw -- and what we saw in the last year's reduction. So last year's reduction was [ 6% ] reduction for reasons that I've already communicated regarding new product launches and the change in pharmacy adoption, you should expect our production to be in excess of that 6%. Michael Kratky: Understood. And just a follow-up. I think 1 thing that stood out in the guidance in that 36% to 38% of expected pharmacy mix. So to get to the upper end of that range exiting this year in the low 30s, is it fair to think that you could be above 40%? And what needs to happen in order to achieve that? Stephen Feider: Yes. Look, I don't want to call it like a number above our guide. Obviously, we guide to the 36% to 38% for a reason. But what would have to happen for us to outperform that. And by the way, that is, of course, possible is well, first of all, we need PBM agreements, which we have most -- almost -- over 80% of all lives in the country covered under a PBM agreement. So for the most part, that's a green check box. And then the next, we need the underlying health plans associated with those PBMs. We need an underlying agreement with those. And that's where the lion's share of the work still is left to grow our pharmacy adoption from where it is today to be coming mostly -- mostly or all a pharmacy reimbursed product. But like in terms of specifics, I mean, we have some Medicaid contracts, some Medicaid programs where we -- or states where we're seeing Medicaid coverage, and we can continue to grow more of those -- those state adoptions for Medicaid and then underlying plan agreements, again, associated with the already existing PBM contracts that we have. But it absolutely is possible for us to outperform the guide. Sean Saint: I'll remind everybody that the -- these things do tend to be a little front half weighted. They do happen throughout the year, but it does tend to occur a little heavier in the front half of the year. Operator: Our next question comes from Richard Newitter with Truth Securities. Felipe Lamar: This is Felipe on for Rich. I guess just a follow-up on Mint, you guys are clearly guiding to a step-up of CapEx spend for the platform and investing. So I'm just wondering if you could maybe just give any update on like where are you at on the checklist before submission. Any color would be helpful. Sean Saint: Yes. Sorry, Felipe, I don't think we're going to go beyond what we've said in prepared remarks in terms of exact status on Mint at this point. I'm sorry. Felipe Lamar: No, no problem. And then just a follow-up on pharmacy. You guys have a bunch of competitors now that are durable competitors who are starting to make progress in channel. So I'm just wondering one, like how -- are you seeing any impact to your contract like conversations with PBMs? And then two, I guess, like if there are more low-cost durable pump options like how does that maybe potentially impact you competitively on the go forward? Sean Saint: I'd like to start this 1 and maybe you can provide some color, Stephen. I would say that the conversations are evolving slightly and that you're right. There's more people out there, more durable pump companies now knocking on the doors. And from my perspective, that's a positive because it's providing an expectation that this is exactly how these things are covered. Beta Bionics was the company to go out and start this conversation, and we were pretty successful doing it. But with everybody following along, it's just a bit of a tidal wave of momentum that's going to help the entire industry move there. And -- to the extent that pharmacy is a competitive advantage, we love that. But the reality is it's an improved business model to allow these companies to operate better and a better experience for our users. So we're happy to have pioneered that, and we're happy to have more momentum moving in that direction. So -- that's the color. But Stephen, anything to add to that? Stephen Feider: I think well said. Operator: Our next question comes from Jeff Johnson with Baird. Jeffrey Johnson: Coming to go back to the territory question. I know a few questions have been asked here on it. But as we track some of the metrics for you guys, it does look like you maybe -- and I'll stress the word maybe hired 40 or so new sales reps that would cover about 20 territories just in the last couple of months. And again, our visibility isn't clear on that by any means. But I guess, Sean, I'd love to hear from you, and I do have one follow-up question then, but I'd love to hear from you how much of that was maybe backfilling reps. We've actually lost 1 or 2 of your reps that we've talked to over the last year, 1.5 years. So it feels like maybe there's been a little bit of rep departure, but how much of that was backfilling reps versus hiring and expanding territories over the last couple of months? Sean Saint: Yes, Jeff, thanks for the question. I'm not going to comment on exactly how many people we've hired recently, just not going to do it. What I will say is we are always hiring backfills at some level, in any group of like I said, 63 territories, 126 people, or whatever that is, you're going to have turnover for multiple reasons, some for performance, some for other jobs that were offered what have you and you're always going to be backfilling. So there is some of that going on at all times, but I'm not going to comment on exactly how many we may have hired outside of that group or even in that group recently. Jeffrey Johnson: Yes, fair enough. Understood. Yes. No, Stephen, maybe clarifying for you. You talked about $1 million pull forward in the PBM channel or the pharmacy channel, I'm sorry, from Q1 into Q4. I think -- I can't remember it was a conversation with you or someone else over the last month or so as we kind of were trying to titrate our '26 model. It sounded like there was going to be maybe $10 million to $12 million in additional stocking in 2026, mostly in supplies, some in pumps. Is that still the right number to be thinking about as a component of your revenue guidance for '26? And how would that $10 million to $12 million, if we're ballpark accurate compare to maybe total stocking you saw in2025? Stephen Feider: Yes. I actually don't -- I don't think I've ever communicated any particular number on what the stocking dynamic would be for 2026 in terms of dollars. So the $10 million to $12 million actually isn't -- it's not -- it wouldn't be even directionally accurate. So in terms of -- yes, I guess that number is not accurate, and I don't really want to comment on it. Operator: Our next question comes from Travis Steed with Bank of America Securities. Travis Steed: I guess I just want to make sure we've got the street models in the right place. I see $27 million in street models for Q1. Taking all the comments you've given, is that kind of the right place to be? Or does that need to move one way or the other? Stephen Feider: Yes, that's directionally accurate. Travis Steed: And then gross margin, I think that 54% in Q1. Is that the right place to be roughly as well? Stephen Feider: I don't want to comment specifically on any quarterly guidance as it relates to margin. Travis Steed: And there were some comments on stepping up OpEx as a percent of sales in '26. Just wanted to try to think about how much of that's R&D, sales and marketing versus G&A? And kind of the how much of that pipeline versus kind of sales force expansion? And kind of any color on how that kind of rolls out. Stephen Feider: Yes. I don't want to -- I'm not going to give you a numeric answers for how much to expand sales of each of those particular line items. But the most notable expansions in terms of OpEx will be number one is sales and marketing for reasons that we discussed already with the sales force expansion. But we're also going to see a pretty dramatic uptick in investments in marketing, notably some direct-to-consumer advertising and some marketing branding for direct-to-patient initiatives. And then the second thing is relates -- sort of the other line item to comment on is with regards to R&D investments. And there's various projects that Sean outlined in his prepared remarks that we're working on. And as a result of those particular projects, notably the bihormonal program and Mint, you will see an uptick in R&D expense in 2026, that's pretty meaningful from 25%. And then G&A will be -- will show a very mild increase. Operator: Our next question comes from Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: I have 1 follow-up on pharmacy channel starts related to the 36% to 38% guidance. How should we think about that cadencing. Is there an element of DME having more pronounced seasonality in Q1, potentially resulting in that pharmacy channel start number actually starting higher in Q1 and then kind of staying flat throughout the year? Or is that not a phenomenon that occurs? . Sean Saint: You want me to take that? Sure. Yes. That's a really good question. Unfortunately, it layers a couple of things on top of one another that make it a little bit hard to answer. So let me talk about seasonality for a quick moment. Historically, seasonality in DME was a question of early in the year, you have this big co-pay, eventually, you start meeting your co-pays and it gets cheaper to get a pump. So people were waiting to get that pump until later in the year. Now with pharmacy being available all year round with certain competitors, we think that the waiting aspect has gone away. Instead of waiting for one pump, you would just get a different pump right now. So that decreases the vast increases at the end of the year that we see. However, and this is associated with your question, Q1, you're still going to see a drop because you do still see resets of deductibles. So people who would have come to you in, let's say, December and been able to get the pump for relatively 0 out-of-pocket costs may, in January, have a higher out-of-pocket cost. So that's why the pronounced drop in January. And I'm losing my question. Stephen Feider: Yes. I guess, Frank, does that make sense? Frank Takkinen: Yes, that's sort of helpful. I think really the concept of just DME starting at a higher -- or sorry, pharmacy starting at a higher percent of total starts in Q1 and then kind of staying flat? Or like how does that -- pharmacy starts trend throughout the year? Sean Saint: All right. Thanks a reminder, Frank. So pharmacy coverage goes up earlier in the first half or more in the first half of the year than it does the second half of the year, right? So that's going to be 1 layer. Additionally, you're right, likely a higher percentage in Q1, holding everything else constant, would go through a pharmacy because of the DME decisions being made. So those 2 things layer in. But again, it's not unlike seasonality we've talked about in the past, there's more than 1 thing causing that. So I think it becomes kind of hard to predict. But directionally, yes, you should probably see a higher -- well anyway, those 2 things are on top of 1 another. Hopefully, that makes sense. Frank Takkinen: Yes. That's great. And then just 1 quick follow-up. Just can you talk about the Phase IIb a little bit more? I heard the prepared remarks, but just maybe what are you looking for exactly in that Phase IIb before kicking off the pivotal? Sean Saint: Yes. From Beta Bionics side, the Phase IIb is primarily about confidence that when we get into the pivotal, we're going to have success. Over the course of Beta Bionics history with the bihormonal trial, and this has been true all the way from, I don't know, 2007 until now, all of the trials that we've run, all of the formative trials that we run that we now call IIa trials were very, very small. And we've published a bunch of in the past, I won't rehash it now. It can be very difficult to extrapolate the results of a several hundred patient year-long clinical trial from a very short small end trial. So it's a bit of a diligence item to walk before you run and just step up and make sure we're not going to get to an enormous trial and really fail. So that's primarily what that's about. And the agency would have slightly different words for that. But I think at the end of the day, it would be similar reasoning. Operator: Our next question comes from Danielle Antalffy with UBS. Danielle Antalffy: Just a question here on type 2 and less about the time line for approval, et cetera. But just at a high level, how you guys think about that market as you already see adoption of iLet in type 2. We hear at the very pump for type 2 patients. So go-to-market strategy in that patient population probably a little bit different than type 1, particularly given where these patients are managed. So I'm just curious about how you guys are thinking about that ahead of a potential FDA approval there and sort of really getting after that. Sean Saint: Yes. Good question, Danielle. I think you just identified the right point there, which is where the patients are managed. And I think what I'll illustrate, and I think you know this from your very question, is that in the endocrinology space, the health care providers have proved to be quite mature and understanding of what the iLet is and other products are, and they know where they can be utilized. And that's exactly what we're seeing across the different devices. In the primary care space, that's probably going to be less true. And so I think it does become more important that a type 2 indication is there by the time we start to market meaningfully in the primary care space, which we've already said that we don't have a primary care sales force at this point. So -- and the way we intend to do that is a little bit different. But I do agree that a type 2 indication is going to be extremely important there because -- well, for the reasons that you implied. So we're aware of that dynamic. Unknown Executive: And Danielle, thanks for launching coverage on us. Great work. Operator: [Operator Instructions] Our next question comes from Jeffrey Cohen with Ladenburg Thalmann & Company. Jeffrey Cohen: I wonder if you could dive into R&D a little bit as far as '26 with regard to cadence throughout the year. I know you had called out just an incremental increase across the board. Stephen Feider: Yes. So I don't want to speak specifically on what timing of the investments you'll see in R&D. But generally, Jeff, you can expect consistent investments -- consistent pattern of investments throughout the year. There may be some lumpiness when we say start trials or the like, but I wouldn't model anything more heavily -- significantly heavily weighted in 1 quarter or another. Jeffrey Cohen: That's helpful. And you called out maybe taking some pricing in the pharmacy channel. Any plans for the DME channel? Or what are you expecting on pricing throughout the year? Stephen Feider: Yes. As we alluded to, we took a small -- or a low single-digit price increase in pharmacy for our supply revenue and then no change to your modeling for DME revenue price. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Sam Wells: Good morning, everyone, and welcome to the Lycopodium First Half FY '26 Results Call. I'm Sam Wells from NWR Communications. And joining me from the company today is Managing Director and CEO, Peter De Leo; as well as CFO, Justine Campbell. Following a brief summary of the results released to the market this morning, investors and research analysts will have an opportunity to ask questions. There will be the choice of 2 options. First, analysts and investors can either raise your hand should you wish to ask a verbal question of the management team and you can also submit a written question via the Q&A function at the bottom of your Zoom screen. We'll endeavor to get to the majority of questions asked, in some cases, combining submitted questions on the same or similar topic. And for those analysts asking verbal questions, we kindly ask that you keep your questions to no more than 2 or 3 live questions on today's call. Thank you. And over to you. Peter De Leo: Thank you, Sam, and welcome. Thank you for your attendance at our formal investor presentation for the first half of FY '26. As Sam said, I'm joined this morning by Justine, our CFO; and Rod Leonard, our Chair. This morning, I'll be -- mid-day for many of you. I'll be just running through a typical investor presentation, covering off a little bit about the company, providing an update on the financial highlights for the period, touching on operational highlights for the period, then addressing outlook and guidance. And we also provide, as part of the presentation, although I won't be running through in any detail this morning, appendix, which contains a lot of additional and hopefully, informative information. Lycopodium remains a leading global engineering and project delivery group, working across mineral resources, industrial processes and infrastructure industries with an extensive book of quality clientele and 18 offices across the world. I'd speak to our clientele. We have an amazing bunch of clients across all those industries I mentioned, through very, very large clients, mid-tiers and junior explorers and miners, and we're very grateful for that client order book. As a project-focused organization, it is of significant importance and to our benefit to have involvement with projects from the very early stage. Hence, our involvement in scoping and feasibility studies and the evaluation phase of projects through the full engineering and project delivery as a full-service provider in that phase and then also on to optimization and expansion phase works enables Lycopodium to benefit from a project's full life cycle. It's been something we've focused on over the years, both in broadening the services which we provide, but also broadening the time which we are involved in projects. We maintain a high workload with a strong current order book of studies and delivery phase activities on a broad range of quality projects. Committed contracts are valued at $415 million, that's up on last period. And also revenue opportunity pipeline is $1.3 billion, also up on last period, which really indicates -- and I'll talk more about it obviously later, the outlook for the business, but indicates that we are continuing to see busy market, enjoy a busy market and see a busy market. By way of financial highlights, Lycopodium did $174.5 million worth of revenue for the period and $18.3 million NPAT, which provided a 10.5% NPAT margin, which is in line with our expectations for achieving our NPAT target. The Board of Directors declared a $0.22 per share fully-franked dividend for the half year, again, returning to our traditional sort of dividend policy, our dividend expectations and had strong cash at bank at the half year. The company enjoys excellent diversification across a broad range of commodities, clientele and geographies. Those of you that have seen the slide previously may note that we continue to achieve more balance in support of this diversification across these metrics. And we're striving to continue to do this on an ongoing basis. We'd like to see a strong balance in terms of diversification across commodities, across geographies. In particular, it provides surety and strength moving forward. From an operational perspective, we've recently been awarded a number of FEED or front-end engineering and design briefs, which we expect to position us optimally for the next phase of each project. These include the Winu copper project for Rio Tinto, the Assafo-Dibibango gold project for Endeavour Mining, which is our next development project, development gold project for Resolute and a number of others, including most recently, Pilgangoora Plant Expansion lithium project in Western Australia. We've also started initial work on 2 material prospects being Tulu Kapi gold project and the Blackwater Expansion Phase 1A project Artemis Gold. In terms of the LatAm, we hope to be able to transition on to a larger project with our Blackwater Expansion project and awaits news on that thing, which we believe maybe imminent. Of note, however, there has been a shift to the right on these projects, particularly taking in Blackwater from a timing perspective, probably about a 3, 4 months shift from what we previously expected and forecasted, and it has impacted our financials and forecasts. However, we continue to invest in building capacity in anticipation of these and a swathe of other material opportunities and this is really important. We are in a competitive labor market across the world for our people, and we've retained our people and continue to grow our people count and also our capacity in terms of office space and just general corporate capacity, what we see is being a large number of prospects. Our study pipeline is very strong. And those that have been on our calls previously, you would have seen this slide in particular, which tries to demonstrate our early phase work, our work which is midstream in middle of its delivery and then that stuff that's being -- projects that's being completed in recent times. And you can see there is quite a number of new opportunities, new projects, which have ticked into early phase work. I spoke around the Blackwater Expansion Phase 1A, Tulu Kapi, Winu, et cetera. And there is other projects such as Diamba Sud, Iguidi and Doropo where we're doing the FEED work and we hope that those projects will go into full execution and we will be able to participate in the full delivery of those projects. We also got a really strong portfolio of projects, which are called heavy delivery, including Kon in C te d'Ivoire, Yanqul Copper in Oman and a number of other projects, which are listed there and of course, some projects which we already completed. So, we're very, very happy with the number of studies that we've got and that's traditionally the key metric for businesses. We're working on a good number of -- and quality of studies, which tends to be a good indicator for what we'll be doing next. Our focus on people continues as we seek to maintain and enhance our status as an employer of choice and a place where people can develop excellent careers, advance themselves personally and professionally and enjoy growing with the company. Our approach to keeping our people and those on our managed sites safe is demonstrated in our exceptional safety track record. So on to outlook. Demand for our services remains very high based on our excellent track record and performance on all of our most recent projects as well as market conditions, which generally sees commodity prices strong, if not historic high levels, obviously, gold being very, very strong. At the moment, we're seeing enormous number of opportunities emanating out of our traditional markets, including Africa, Australia, but also across the Americas. Silver being another commodity, which we're seeing. A number of projects we've started work on the PFS for Unico Silver in Argentina, supported obviously with our investment in SAXUM. We're also seeing, on the basis of our expansion across the Americas, lots of many new opportunities and the like being presented to us or prospects that we have identified and are pursuing. But we also continue to invest in building capacity and capabilities globally. We've, in the last 12 months, have planned for the next 12 months to increase the capacity in Perth, Toronto and Cape Town, in Lima and in Manila. And that's in preparation for the work and the prospects, which we continue to see, and we see that this will bear fruit in subsequent financial years, certainly, but we also expect to support a strong second half of this financial year. We revised guidance, primarily due to the shift rise of a number of those major prospects. I spoke about the 2 main ones, which are expected to contribute materially to our forecast. We now provide guidance of group revenue between $370 million and $410 million, and NPAT between $37 million and $41 million, in line with our target NPAT expectation of around 10%. We'll obviously continue to keep the market and shareholders updated on any material changes or any material awards. But we consider the second half will be strong to achieve those -- that guidance which we provided. We remain a secure, stable and sustainable business, doing great work globally. This is based on the deep engineering expertise and growing teams, and keeping teams of exceptional high-caliber personnel and we provide lots of, what I call, value in the services which we provide globally. We have a long track record of highly disciplined risk management. We're also focused on ensuring that we have a good portfolio of contracts and style of work, which talks to both risks and also talks to return. And again, leveraging experience over the years. We have a very strong history of execution of projects and execution of business generally, with strong alignment with management and our shareholders. We still have around 30% of the company's ownership held by Board and management. We have a very capital-light approach. We're not an organization that requires to spend a huge amount of capital to generate our returns, and we continue to pursue business in that fashion. I've touched on in the appendices, which you can go through your leisure. You can review the very strong field of blue-chip clients that we have. It's a very diverse list. Lots of clients have been with us a long time. We continue to deliver repeat business as predominant. The quantum of work that we do is in the form of repeat business for clients, new projects for existing clients and the like. Strong commodity diversification, I spoke around that earlier. I think we continue to strike a good balance there. Even in the light of a very strong gold price, we're still busy in lithium. We're still busy in uranium, copper and a bunch of other commodities. Lycopodium, certainly against our peers, appears to have an undemanding valuation. And the geographic diversification, I think, for us is key. We continue to expand geographically. The Americas has been a fantastic geographic expansion for us. The acquisition of SAXUM, the opening of the Lima office and Vancouver office, et cetera. We're seeing tremendous number of opportunities coming through. Again, it's fairly early days. So, we have got expressions of interest in and proposals in a number of new opportunities across Latin America in particular, but also our North American operations continue to see a level of inquiry, which is unprecedented. So, I think certainly the word is out about Lycopodium across the Americas and we expect to see continued sort of growth and opportunities for business activities across the next couple of years coming out of the Americas, let alone our traditional Africa and APAC regions. As I said, we also provide some additional, hopefully, informative content as an appendix to presentation to further explain and illustrate the strength and quality of our business. So, I'm not going to go through that this morning. I welcome you to talk through as ever after this presentation. If you have any questions, please feel free to reach out to us with those questions and hopefully, you can ask on the appendices. But thank you for attending our webinar and I welcome any questions that you may have now for us and we'll do our best to answer them. Thank you. Sam Wells: Thanks very much, Peter. [Operator Instructions] First question comes from Oliver Porter at Euroz. Oliver Porter: Just a quick one. You mentioned adding capacity and headcount kind of across the board globally. Can you just talk to how you're finding the labor market and perhaps if by geography, are you having any particular challenges or how that sort of is going to look over the next 6 to 12 months? Peter De Leo: Thanks, Oli. Yes, the availability of good talent is always challenging, and that sort of is a constant. We're seeing that in Australia. We're seeing that in Canada. We're seeing that in South Africa, in particular into large operational hubs. But we continue to recruit good people and bring good people in. And again, talking about -- I touched on our focus on people and the focus on careers and the focus on providing people new exciting and diverse work is something which we sell. And we don't -- we never have people come to light and think that they are joining anything other than an exceptional business, which is great. And so it makes it a little easier, but they are tough markets to find. There's a dearth of high-quality experienced personnel globally. So, we value it very much. To that point being, across the last part of the first half, we maintain capacity where if you weren't expecting to continue to see growth in demand, we may have trimmed capacity at times just to maintain utilization up, which is a key metric for our business. But we maintained it particularly in Cape Town, knowing full well it's not easy to get people. You can't just let people go and expect them to rejoin you in 2 months' time, knowing with the full knowledge that we had the amount of work and are seeing our work potentially ahead of us. We sort of were very careful to maintain our teams and to continue keeping on that capacity and growing that capacity. Oliver Porter: Great. And just with SAXUM, it's slightly slower start than you initially expected. But can you speak to how the opportunity pipeline as it stands today compares to your expectations when you made the acquisition? Peter De Leo: Yes. You're right. Their own performance in their own right as a business unit has been slower than we would have liked. Again, those you've heard us speak about the SAXUM acquisition before, for us, the acquisition of SAXUM wasn't so much about what they would contribute to the group in their own right. It was about the opportunities that they will bring to group and the [ features ] that they would provide within Latin America and the Americas, more particularly Latin America and enable us to access clientele and opportunities that we hadn't been previously. If we wind the clock back 18 months, Lycopodium wasn't bidding anything in Latin America. It was aware of lots of opportunities. And we're now sort of much more across and attuned to and enabling and aim to pitch flow opportunities. As I said, Unico Silver is one example. It's PFS, obviously, at this point in time, so relatively early days. They are Australian listed company with silver project in Argentina. SAXUM, in fact, secured the PFS, on the back of good relationship and it's part of our group. And it's supported -- in that case, supported by our Americas' officers and process teams. We're currently bidding a -- or express of interest with a view debating a large copper concentrator opportunity within Argentina, again, supported by APAC, driven by APAC hub, where a lot of [ horsepower ], a long track record of large copper concentrators only enabled by the fact that we have the SAXUM business. So in that respect, it's going exactly to plan. Integration of the business has occurred and has occurred really well. And there is no issues there and no concerns there. The traditional cement market is slower than they would like to have seen and they would like to see, of course. And have we landed a big fish or even medium-sized fish at this point in time, we are really in good stead on a number of great opportunities that we wouldn't have had before with SAXUM bought. Sam Wells: Next question comes from Stephen Scott at Veritas. Stephen Scott: Just on Slide 4, world of green dots. Just noticed that Europe and also maybe Middle East maybe presencess there. Do you have any thinking about that in perhaps the medium term? Peter De Leo: Thank you, Stephen. Europe is not on our radar per se. It's not a huge amount of minerals activities in Europe. There is obviously some mineral activity, but not a huge amount. Middle East, on the other hand, is on our radar. In fact, of course, we're currently working on the Yanqul project in Oman, where that project is being delivered at our Americas hub. But also the Americas hub is also seeing a number of inquiries from Dubai-based and Middle East based groups, some projects in the Middle East, some projects out of the Middle East and particularly into Africa. And we also -- we have an entity established in Dubai where at this point in time it's on the shelf. But acknowledging that we do need to find the level of prospectivity in that region increases to such a point that we consider to have an operation there. We can activate that. But certainly, I think Middle East from a level of prospectivity, it's certainly something that we have an eye to -- we can service out of APAC and out of Africa or out of our Americas' hub and where clientele are and where relationships exists. There's quite amount of, I guess, money coming out of Dubai in particular, Abu Dhabi, Saudi alike. So, I expect to see some opportunities coming out of there. Sam Wells: The next question -- we probably have a couple of questions on the shifting time lines. Are there any specific factors that caused the delays to Tulu Kapi and Blackwater? And are there any second order impacts on these delays? And specifically, there's a couple of questions around how much extra cost did you have to carry during the half that are associated with those delays? And is that visible in increased project expenses as a potential forward indicator? Peter De Leo: It's not indicated. It's not related to additional project expenses, let's say. What it relates to -- let's just deal with the first part of the question. And that is around timing, project delays and the like. Unfortunately, the reality of our world is that we don't control when projects start. We can influence obviously by completing our study work efficiently, effectively and well, making projects more fundable, more easily fundable and dealing with what we do with our partnering, our inputs to projects, making sure they are high quality and we do that regularly on an ongoing basis. But the timing when a project starts, when it gets funded, when it gets permitted, some of those we call nuances around when a projects has a full green light. It's not something we can control. I'll give you an example. We did a project last year, early last calendar year, polymetallic project in far north Canada. We gave a red hot crack. We were shortlisted and have caused [indiscernible] perhaps even the favored party. That project at the time was apparently going to be starting in calendar year '25. That project still got [indiscernible] and some effectively native title issues still in group. These things we can't control. We do our best to forecast and to do a likelihood and probability of a project going and then a likelihood probability of us securing to that project and then what that might mean for our business size, our capacity, our capabilities and all that business planning that we do. But unfortunately, we don't control the timing of projects. And two, that we sort of singled out in our presentation today, we singled out because they are material contracts potentially. They get fully green light and we fully secure them. They're both material contracts and have material demands on the business. And we prepared in advance for what was meant to be a kick-off in, call it, fourth quarter 2025. And you have to do that because you can't be caught flat-footed on all these things. They all have aggressive and challenging schedules. And when things don't kick off necessarily exactly as per our forecast, we have to enact contingency plans and the like. And to the second part of your question, increased project expenses that you're seeing in the financials really relate to FG Gold, Baomahun, which is a relatively soft form of half EPC. I can't give too much detail, but it's a project where you're seeing some direct costs being coming through our books, so as we've seen project improvement -- project costs. And on the equipment side, we've started a business about 18 months ago called [ pudco ] where we sell some form of OEM, products leveraging our technical capabilities and our technologies developed over the year and that's what you are seeing there. And to the last part, are we seeing -- have those project delays caused us to incur costs? Well, in one respect, yes. What happens with project delays where you start seeing a softening in utilization of our personnel because you bring on 40 people and they're not fully occupied to the level you'd like to see them occupied. That can have an adverse impact because you're carrying some of their costs. It's not flowing straight through projects. But again, it's just a reality. We tend to model our commercials, around a certain utilization level. If you're doing better than that utilization, then you make more profit, you are doing less than utilization, you start running into your target profits. Sam Wells: And maybe just as a follow-up to that. Can you comment on first-half '26 utilization, particularly in the second quarter against PCP? And what would your expectations be for the H2 balance? Peter De Leo: We expect to see utilization increase. Utilization was reasonably high through the first quarter of this financial year. It has softened across second quarter, as I said, certainly in some of our operational centers. APAC and Americas was running both fairly high utilization levels. Africa headcount lower as well as Process Industries business at this time in SAXUM. Again, though as a group, we were still running above target. Utilization levels were softer than we had seen in the first quarter. We expect those utilization levels to increase. Our forecasts are that they will increase through Q3, Q4 of this financial year. But certainly, beyond that, we expect, based on our forecast that we'll see utilization increase into FY '27 as well and not only increase, but we expect probably bigger numbers, bigger headcount in due course, obviously, evidenced by -- we're taking on more office space and the like. So, that's part of the plan. Sam Wells: And in regards to the number of studies being currently undertaken by Lycopodium, how much would that be up on perhaps a 12-month range? Peter De Leo: It's a bit of a tough question. It's been in studies. In terms of total quantum, it's probably there or thereabouts, maybe a little higher. But it's obviously also the mix of studies and what those projects look like and we are studying what the size of them are, what stage study it is, et cetera. So it's always a tough question to answer. But if you just look at -- are we got more studies on today than we had on this time last year? Probably I'd say we do. Because we're doing more studies in the Americas. There is similar amount of studies here in APAC and probably a similar number of studies out of Africa as well. So it's probably up. Sam Wells: And maybe just the last question this morning. Can you give us a sense of the conversion rates you currently see through the life cycle of project development, i.e., for each client that commences a scoping study, do they utilize Lycopodium for delivery and operations? Peter De Leo: Often, yes. Sometimes no. I'd say most of the project work, which we get involved in, we've been involved in study work. And we expect that you have an advantage if you completed the feasibility study, whether it be PFS. PFS, often when you are doing the scoping, you generally roll into PFS, DFS and so on and so forth. But what I will say is taking a project from scoping study, especially copper project, copper concentrator, for example, the scoping study level through execution might take you 10 years. So, these things take a long time. Gold projects somewhat less in this market. We've got a number of clients who haven't done a scoping study and want to be in execution, want to be pouring gold by Christmas next year, which is unrealistic, of course. But there is no shortage of sort of enthusiasm, call it, that side of fence at the moment. Sam Wells: I think that's all the time we have for live questions today. If there are any follow-ups, please feel free to e-mail me and/or Justine, and we'll endeavor to get back to you. And maybe just with that, Peter or Justine, I'll pass it back to you guys for any closing comments. Peter De Leo: Thank you very much. Look, nothing else to add other than we're very happy with the way the business is tracking at the moment. We're really working to plan. Obviously, dealing with the vagaries and the separate project timing and some of that impact that it has to the business over time. But in terms of the strength of the business, the fundamentals of the business, the balance sheet is, of course, remains strong. We're always looking for new opportunities, looking for how we can leverage our capabilities and do more and continue to do it as well as we are doing it, if not better. So, that's it for the presentation. Again, as I said earlier, if you have any questions, please feel free to reach out to myself or Justine and we'll try to help you out with answers. And thank you very much for your attendance. Sam Wells: Thank you very much for joining today's Lycopodium first half results call. Enjoy the rest of your day. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to Iluka Resources FY 2025 Results. [Operator Instructions] Please be advised that this call is being recorded. I would now like to hand the conference over to your first speaker today, Tom O'Leary, Managing Director of Iluka Resources. Please go ahead. Tom O'Leary: Good morning. I have Adele Stratton and Luke Woodgate with me in Sydney this morning. Thanks for joining us. I'll keep my opening short, and then we'll go straight to questions. The full result that was published this morning was really pre-reported and discussed at our quarterly review back on 29 January a few weeks ago. While there's been some incremental progress since then the key takeaways are the same. In Mineral Sands, we expect to have greater clarity around the market outlook post Chinese New Year for zircon and the head of the North American coating season for titanium dioxide feedstocks. Since we last spoke, we've maintained prior and locked in some additional contracted zircon sales, which for the first quarter, now stand at 41,000 tonnes of sand and 11,000 tonnes of zircon in concentrate. All of the industry developments I outlined at the quarterly. Rio Tinto's review of its titanium feedstocks business, the rationalization of global pigment capacity, the impact of antidumping duties on Chinese exports and the operational settings adopted by other mineral sands producers continue to play out and remain likely to influence outcomes in 2026. Iluka is well placed to respond to a range of scenarios in the context of our $1.1 billion inventory position, diversified product suite and Australian operating base. Slide 7 in today's pack expands on the uses of funds expected during 2026. As you can see, it's a significant step down from last year being over $600 million lower. This is the result of cost reduction measures enacted late last year, including the decision to idle Cataby and SR2 the conclusion of capital investment in the Balranald development. Turning to Balranald. You'll recall, we commenced mining on 1 rig in January. The second rig will commence in February, after which we'll be mining on both. Ramp-up will occur over the first half with investment case production targeted for midyear. Heavy mineral concentrate will be transported to our Narngulu mineral separation plant for further processing. With the first finished mineral sands products from Balranald to enter the market in the second half. Balranald rare earths will be transported to Eneabba to await refinance. And that brings us to the rare earth business in the Eneabba refinery, where construction continues to progress well and will accelerate over the next year ahead of commissioning in 2027. Engineering is now over 95% complete. Equipment continues to arrive at site for early placement and SMPEI contracts will be awarded over the coming months. Not long after the quarterly, we saw some further announcements from the U.S. government and commentary from the Australian and other governments regarding international cooperation to diversify the supply chain, including in relation to potential price support. These developments are obviously of interest to Iluka, their tailwinds for our rare earth business. Nevertheless, as I said a few weeks back, we're focused on building that business to be commercially sustainable for decades. Construction, commissioning, operational performance, offtake and feedstock longevity are all vital to this endeavor, and we look forward to continue to update you on our progress. To reiterate, upon commissioning next year, Eneabba will be one of the few rare earth refineries operating outside of China, a multi-decade infrastructure asset capable of processing a diverse range of feedstocks from Australian and international projects and producing both light and heavy separated rare earth oxides. I appreciate there's been a repetition from the quarterly and what I've just covered. The materials we put out this morning included some updated visuals of Balranald and Eneabba, which we hope are helpful and give some color to the exciting times ahead. With that, over to you for questions. Operator: [Operator Instructions] First question comes from Paul Young from Goldman Sachs. Paul Young: Thanks for putting the cash flow I guess, stack chart on Slide 7, that's pretty helpful. So just a few additional questions on just cash flow and other items for this year, just to sort of step through some different scenarios. Can you firstly just talk about the working cap position. I think you've got receivables of about $300 million and also payables about $270 million, which there's a bunch of accruals and there I presume then over CapEx. But just on the receivables and the unwind, how do you see receivables unwinding over the course of the year? Adele Stratton: Yes. Great question, Paul. Look, we're already starting to see that. So our net debt position at the end of January is down to $420 million for the Mineral Sands business. So those receivables will start to unwind to more normalized levels over the next month or 2. As you've noted in the payables because of those two big capital projects, elevated levels of capital accruals, but once again, Balranald come in to the end, so you'd see that pushing through. So the purpose of the new slide that we put in is to really show that step down from 2025. We're not deploying such significant amounts of capital in '26, and that's obviously clearly very material. Paul Young: Yes. Great. And just a few smaller items. I know you've -- you always do FX hedging, and I think you have USD 200 million of hedging in place of $0.68 or so for the year. So I just wanted to your comments on that, if that's correct. And then -- and also just with anything we should think about tax rebates or anything cash tax related? I mean, and the reason for the specifics, I'm just trying to really nut down the cash flow scenarios for the year. Adele Stratton: Yes, great question. So in terms of exchange, our approach to FX hedging is normally looking at the contracted sales, so we don't do speculative hedges. So we look at what contracted sales we have and put hedging in place for that. And as you rightly have pointed out, we've got USD 200 million of hedges covering 2026 at the moment. And we've done those as collars and caps, so I think it's got a $0.63 floor $0.685 ceiling. So as we progress through '26, we'll continue to do that sort of hedging approach to ensure that you're quite conservative in terms of forecasting your cash income on your revenue. I think just on the sensitivity for any -- a lot of people ask, well, how sensitive are you to exchange. As you'd be fully aware, Paul, most resource companies price their products in U.S. dollars. So they do have exposure for every USD 100 of revenue. That's about a AUD 2 million FX impact for each $0.01 change in the exchange rate, but we've got the hedging in place. Coming -- we've got a tax refund due in the first half. So as a result of some of those accounting adjustments that we put through in December, so specifically the inventory write-down, you actually get a tax credit for that. So on the balance sheet, you'll see a current tax asset of about $52 million. So that cash will come through in H1, and depending on earnings in '26, your installments will start in the second half. Paul Young: Great. Okay. So it seems like plenty of headroom. I know some offer facilities still about $250 million of undrawn as well. So that's great. And then maybe just turning to Balranald just briefly. I know that a really good picture there of the ore/pure HMC on the ground. Tom, just to share exactly how the mining unit is performing. Any like operating data you can share with us with respect to uptime, utilization, production rates versus plan? Anything you can share with us? Tom O'Leary: It's probably a little bit early to be specific about that, Paul. We've had the one mining rig up from January. And we're experiencing the usual commissioning pickups along the way, but we're pretty pleased with the extraction rates, which have been at times at investment case levels. And we're now getting the next mining rig operating really probably in the next week or so. So pretty pleased with how it's progressing generally and really on track to be at investment case rates by the middle of the year. Operator: Next, we have Rahul Anand from Morgan Stanley. Rahul Anand: Look, for my two questions. The first one I'd like to cover on markets and then the second one on Eneabba perhaps an update on the offtake. So I guess the second one is for Adele. So for the first one, I just wanted to touch on zircon and TiO2 markets, Tom, and if there's others on the call. Firstly, on zircon, obviously, your sales for zircon this year would be a significant bit lower. Do you think that void gets filled in? And perhaps does that create any sort of tightness or improvement in demand on the zircon side? And then for the TiO2 side, I mean, obviously, we're waiting for that U.S. housing recovery. But is there perhaps a read on sort of where inventories sit on the feedstock or the downstream side for the pigment guys as well for them to be able to kind of deliver into that upswing into the housing cycle in the U.S. I'll come back with my question on Eneabba for Adele. Adele Stratton: Sure. So on zircon, I don't think our decline in zinc sales is going to have a significant tightening impact on the market. We are pleased to see the sales we're achieving in the first quarter. There's still, I think, pretty solid demand for premium zircon. And we continue to see that persist over the last couple of years. I expect it to continue. On titanium, look, we, like you, are looking forward to the recovery in the Northern Hemisphere. There seemed to be a bit of optimism about recovery. But as I said on the call a few weeks ago, it's really a bit early to be weighing into that optimism at this stage. Let's just see how it plays out. And your other question was in our inventory. Yes. Look, I think in the -- sorry, go on, Rahul. Rahul Anand: No, sorry, I was saying that's on inventory, but you already picked that up. So please go ahead. Tom O'Leary: Yes. Look, not had a lot to add on inventories to what we've said in the past, there's not a lot of inventory in the paint end of the supply chain and the pigment producers, I don't think, are holding a lot of inventory of pigment. Some are holding inventories of feedstock, but it's different among different players. So I think there's a potential for a pretty rapid uptick in demand for our products when we see that pull through in -- from construction activity in the North. Rahul Anand: Got it. Perfect. Second one is perhaps for Adele, just perhaps an update on those conversations in terms of offtakes how they're progressing? And any sort of color you can add in terms of, I guess, what you guys are looking for and what the companies you're talking to want and perhaps what are some of the topics being discussed in terms of arriving at an offtake? And then just as a second part of that question, are there any specific requirements in terms of I guess, minimum volumes or price, et cetera, in the offtakes that you require for the funding? Adele Stratton: Yes, let me deal with the second part of that question first, Rahul. So in terms of the funding that we have with the Commonwealth, the clause within the second tranche of the export finance Australia facility just says offtake sort of satisfactory to the government. So there's no more specificity than that. So no volume, no price, no duration. It really is what is satisfactory and as you can imagine, we work very closely with our strategic partnerships and the world is forever changing in this space is what I'm saying. Just coming back to the offtake question more broadly. I think we've probably touched on this before in terms of this has been -- I'd call it a marathon and not a sprint in terms of when we entered this market back in 2022, we were very clear that we'd be entering the market in a very different manner to all the other players in the market at that time and that being that everybody else price the products based on the Asian Metals Index. So a price linked to China. And from the very outset, we didn't want to tie our P&L to Chinese government policy. And hence, we've been introducing the concept of a different pricing mechanism. I think we've touched on this, that can be quite a variety of different types of contracts. So it could be fixed pricing, it could have floor prices that could have floor and in ceiling. There's a number of different ways to skin the cat. And that's really what we've probably spent the first 18 months discussing as a different approach to market. Those discussions have most definitely been helped by the deal, the MP Materials struck with the U.S. administration. Around putting in place floor prices. And that's specific to the light rare earth, so just the NdPr. I don't think that really crystallized for a lot of potential customers that there are different ways to play in this market. And we've had good traction to date, but that was probably a bit of a catalyst. So coming back to where we are now, we have a range of different conversations with a range of different customers. Rahul, they all have different strategies and methodologies that works better for them. But we are really focused around delivering sustainable returns that are commercial, so really looking at what is the cost of new feedstock into the refineries. They're not really reflecting any other stockpile because as a result of history, that sits on our balance sheet at 0 cost, but we want to create a sustainable business. So we focus on the cost of new supply into the refinery and ensuring we have achieved appropriate returns. So as I've said a couple of weeks ago, really confident that we'll have some contracts in place in 2026 and unfortunately, I can't really give a blow by blow as to with whom and for how much, et cetera, and the contract is never really done until it's signed. But yes, I have confidence that we'll get there. Operator: Next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just a couple of quick questions. Firstly, just on Balranald. I know you -- I think you made a comment in your opening remarks that you hope to have first finished products to enter the market in the first half. But -- it may be a moot question, but have you actually produced any finished product yet over in the West? Or is it still in transit? Tom O'Leary: So Glyn, I said second half that it would be in the market. Yes. So, no, we haven't got finished product in the West yet. It's still in Balranald. So those stockpiles you see in the deck still in Balranald. Glyn Lawcock: Okay. So we'll have to wait what another month before we know how it processes? Or is that the least that your worries? Tom O'Leary: Just looking at it, you can see that the material really just passing through the concentrator is kind of looking like high-quality product already. It's the grades we've seen haven't disappointed. So yes, I don't think we've got concerns about how it's going to process at all. In fact, we have process some in the past, so it's not really a risk on the register, if you like. Glyn Lawcock: Yes. No, that's great. And just Second question, just on your comments in the release about Eneabba, it would appear contingencies gone down a little bit from $270 million to $235 million. Just Two-part question. Just what's changed, like what's eaten into that extra $235 million, if I'm correct? And then secondly, you're obviously tendering for your remaining work packages will award them this half. It feels like a little bit like what's happening with South32 last week. But just any early indications should we be concerned on anything you're seeing in those tenders? Tom O'Leary: No, I don't think so, Glyn. The -- we've always said that the SMPEI arrangements were the larger but they're obviously the largest of the construction contracts and we're looking forward to getting those done this half. No, I wouldn't say I was concerned about them, but it's a -- concern is an interesting one. When we're building a refinery, it's kind of a heightened state of attention for the entire duration. And that's the way it needs to be to ensure that we remain on track. The utilization of $35 million of that amount dedicated to contingency growth and so on is really not material in the context of the overall project. So again, not alarmed by that. Operator: Next we have Austin Yun from Macquarie. Austin Yun: Just to expand into the question from Glyn. For the remaining $235 million contingency, where is the residual kind of -- for the component where is most likely to be deployed as you continue with the project? Adele Stratton: Yes, Austin. Just in terms of capital projects, you'd be very aware in terms of obviously, when you're selling your budgets, you have your input costs in terms of your materials, your labor, your schedules. And within that, you'll always allow for growth contingency and escalation, which is what the $235 million relates to in terms of where do I expect that to be consumed. I think really what people should be taking from what we've announced today is that we've now spent and committed well over, what, 60% in terms of where the projects are, and you've still got a really, really healthy contingency for the remaining spend to come. So there's no particular point whereby I think that might be consumed here or there. That's just really prudent project management. So this number will ebb and flow every day. It goes up and down depending on sort of where the contracts are at and sort of volumes of offtakes, et cetera. So I think the takeaway from what we've announced should be a real confidence around the capital range of the $1.7 billion to $1.8 billion is really what the takeaway should be. Austin Yun: Yes, totally great. Just a second quick one on the cash flow management into 2026. I can see all those efforts to reduce the cash spend and the slide was really a good one on Page 7. Just given the current net debt level, keen to understand if there has been any changes in the thinking around your stake in Deterra Royalties, given the company offers different exposure. Does that really align to pivoting to critical mineral phase company? And also, like, I believe Deterra indicated yesterday that the shareholder return will stay around 75% to sort of 100%. Just wondering how to think about that stake given you try to unlock cash to support the business to pushing towards the critical minerals space? Tom O'Leary: Yes. Thanks, Austin. Really, it's not a lot to add to our previously stated position that it's not regarded as core business, just for the avoidance of doubt, royalties and so on is for Iluka. But the key is that to divest that stake would attract pretty significant capital gains given the tax cost base there. So it's an expensive form of capital. So I think unlikely to be utilized, but it is there and provides comfort to counterparties, to lenders, to shareholders and so on. Operator: Next, we have Chen Jiang from Bank of America. Chen Jiang: Just on Eneabba project, 95% engineering down, 60% of CapEx has been spent and committed. I'm wondering when is the peak construction in 2026? And how long would it take from peak construction to code commissioning? Tom O'Leary: Yes, I mean, peak construction is very much approaching us. I think we've disclosed, we've got some 600 people on site on rotation, obviously, but some 600 people working at Eneabba, and that will increase somewhat over the second half of this year. So you should expect peak construction in the second half of this year, beginning of next, moving into commissioning later in '27. Chen Jiang: Right. So -- and then CapEx, I guess, given 60% already spent, you must be very comfortable with your CapEx outlook over the next 12 months with -- in parallel with how you construction or peak construction? Tom O'Leary: Yes. Comfortable is probably too close to complacent in the dictionary. So I wouldn't say that, Chen. I'll just go back to my earlier comment that managing a project like this, you need to have a heightened state of attention throughout to ensure that we meet our targets in terms of capital expenditure, and that's precisely what we're doing. Operator: We have a follow-up question from Paul Young from Goldman Sachs. Paul Young: Just a question on inventories and this possible drawdown of that, just starting that finished inventories of zircon rutile SR and now it's sitting around 380,000 tonnes, I think up from 320,000 or so for midyear. So it sort of makes sense based on just looking at production and sales, obviously, over the last 6 months. Just curious around, first of all, specifically the zircon component in that because I think SR probably around 150,000, just wondering where zircon inventory sit within that? And actually an extension to just overall operating parameters for the year and just how you manage costs in general. We haven't really spoken about JA and just the operating sort of strategy down there. Is the operating strategy on JA just to run at full tilt at the 10 million tonnes sort of ore throughput rate? Or have you got some flex around sort of costs and optimizing cost of JA? Adele Stratton: Yes. Paul, happy to take both of those. So in terms of inventory position, as you say, we've highlighted that on Slide 8 in terms of where we're at on finished goods. So rightly so, 379,000 tonnes. We generally try not to give breakdowns in terms of the mix of that pool just from a competition perspective. But I should say, we have guided that we've got 110,000 tonnes of sales in 2026, and we've also noted that we're not running the kiln. So one can deduce that all of that sales volumes are coming out of inventory. So we are certainly looking to draw down inventory in '26 and that obviously supports cash generation. You've already spent the money on producing this material. So it's really the next step in liberating cash. And I think we're very well positioned coming to your question around zircon and JA. Generally, when we're running our operations, we do run them at full capacity in order to optimize unit costs. Jacinth-Ambrosia coming towards the end of its life. And as you're fully aware, the team are very focused on the Typhoon project, which provides a couple of years extension to Jacinth-Ambrosia that's a big focus for the team. But yes, in 2026, our cost outlook assumes that JA is running a full tilt and a real driver of that is also to generate that zircon premium as Tom talked to earlier. We still see good strong demand in the premium market. There's not huge amounts of premium all over the place, so JA premium is very designed in the market. Paul Young: Okay. Great. Just one final question. Just on third party. You obviously got Linden agreement in place and the investment in Northern Minerals. Is there any update on Northern Minerals. There's a lot going on at the corporate level with that company, but I've got some additional funding -- government funding for their project in Northern Territory, any update on just how that project is tracking and potentially when that could be coming into production? Adele Stratton: So look, yes, Paul, as you say, Northern Minerals released the definitive feasibility study sort of, I think it was third quarter, early fourth quarter last year. And on the back of that, being very successful in achieving sort of funding through the U.S. And so really, the job of the management team there is to continue to get that project fully funded to enable us to take the FID. I think there will always be noise around the share register. This is a unique deposit globally. I know that we've talked about this in terms of just the high assemblage of heavy rare earth. And that's really quite interesting because what we're seeing in more recent times have in China as a bifurcation of heavy rare earth pricing in China, so it's much cheaper. If it works and stays in country than when it's exported. So this focus on ability to secure heavy rare earths, I can imagine that will continue to be a focus globally. Tom, anything you would like to add? Tom O'Leary: Yes. No, I think that's pretty comprehensive Adele. I think we're really pleased to see they've had the expression of support from the U.S. and Australian government, and we'll obviously do what we can to support their achievement of FID in a timely way to very attractive deposit for the West's independence in terms of supply chain for heavy rare earths and an important development. Operator: [Operator Instructions] Next question comes from Dim Ariyasinghe from UBS. Dim Ariyasinghe: Yes. Can you just refresh us really quickly on what you've said on commissioning in terms of the time line for that? And then just in terms of the offtake, has the idea of prepayments come up? Is that something that we should increasingly think about? What can we think about that? Tom O'Leary: Look, I'll hand over to Adele around prepayments and so on for offtake. We think about a lot of things, Dim, but we're pretty focused on selling the product and getting cash for the sale. But in terms of commissioning. We've talked about the mid next year, we'll be in commissioning at Eneabba. So no real change or update on that. Anything to add on offtakes, Adele? Adele Stratton: Yes. No, not really in terms of prepayments, is that a big focus? Not really, Dim. There's always trade-offs in terms of different payment terms or prepayments and all of those types of things. We're very focused, as I said at the outset in terms of putting in place commercial contracts that underpin longevity of the refinery. So yes, it's not been a particular focus at all for us. Dim Ariyasinghe: Understood. Sorry, not commissioning, a ramp-up like when -- I presume -- like what's that ramp-up period look like? And I presume that will just be the stockpile at first? Adele Stratton: Yes. In terms of the refinery and the commissioning, obviously, there's a number of stages to that commissioning of any plant, Dim, including initially wet commissioning and then introducing the product. I think when we've talked in terms of when you would start to introduce your reagents into the plant, then that can take 3 to 6 months to work its way all the way through into the separation and finishing. And then there's a ramp-up curve. We use McNulty, different curves to be perfectly frank. So I think historically, we've said to get from commissioning all the way to full ramp-up is about a 2-year period to full ramp up. But yes, very much as Tom's articulated, commissioning in mid-'27. Tom O'Leary: Yes. And Jim, just you asked on Balranald -- sorry, on Eneabba, we'll be using Eneabba monazite to be commissioning the part exclusively for that period. Well, look, I think that's all the questions we have. So thank you all for joining us. Really look forward to catching up in person over the coming days and weeks. Bye for now. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome, ladies and gentlemen, to the Fourth Quarter and Full Year 2025 Earnings Conference Call for Tactile Medical. [Operator Instructions] Please note that this conference call is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Bentzinger, Investor Relations at Gilmartin Group, for a few introductory comments. Please go ahead. Sam Bentzinger: Good afternoon, and thank you for joining the call today. With me from Tactile's management team are Sheri Dodd, Chief Executive Officer; and Elaine Birkemeyer, Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties. These could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our annual report on Form 10-K to be filed with the Securities and Exchange Commission as well as our most recent 10-Q filing. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. With that, I'll now turn the call over to Sheri. Sheri Dodd: Thanks, Sam. Good afternoon, everyone, and welcome to our fourth quarter and full year 2025 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer. 2025 was a pivotal year for Tactile Medical as we advanced our mission of improving the lives of over 95,000 patients with lymphedema and chronic inflammatory lung disease while also strengthening the foundation of our business for scale. Through disciplined execution across our commercial and operational strategies, we delivered strong profitable revenue growth while continuing to make critical investments in people and workflow-related processes. Total revenue for the full year was $329.5 million, a 12% increase year-over-year. Beyond the top line, we expanded our full year gross margins by 190 basis points year-over-year to 75.9%. And adjusted EBITDA increased 21% year-over-year to $44.8 million. From a cash perspective, we repaid the full outstanding principal balance of $26.3 million to retire our term loan and repurchased $26.5 million of our stock. We ended 2025 with $83.4 million in cash and cash equivalents, and generated close to $43 million in operating cash flow during the year. This strong cash generation is durable and positions us to continue reinvesting in the business and drive growth in 2026 and beyond. Our focus on strategy, refinement and execution throughout 2025 culminated in a strong Q4. The commercial momentum we described during our last call persisted through the fourth quarter, and we delivered total Q4 revenue growth of 21% year-over-year, resulting in $103.6 million of revenue. By business line, lymphedema revenue increased 16% year-over-year to $89.5 million and airway clearance revenue increased 66% year-over-year to $14.1 million. For 2026, we expect total revenue to be in the range of $357 million to $365 million, representing year-over-year growth between 8% and 11%. This outlook reflects the strength of our expanded sales force, improving sales rep productivity and our market-leading positions in both lymphedema and airway clearance therapy while also incorporating a potential short-term market impact from the recently announced Medicare prior authorization requirement for pneumatic compression devices. Importantly, this outlook also reflects our proven ability to adapt and execute effectively in a dynamic reimbursement environment. Elaine will elaborate more on this guidance and new prior authorization requirements shortly. In addition to our strong Q4 and 2025 financial performance, this afternoon, we announced our acquisition of LymphaTech, a privately held medical technology company pioneering a novel approach to assessing and monitoring fluid in patients with chronic swelling such as lymphedema. This is an exciting milestone in Tactile's evolution from a product-based company to a comprehensive integrated lymphedema solutions leader, and I believe it has meaningful potential to enable more accurate identification of lymphatic dysfunction, adoption of lymphedema therapy and new capabilities to inform future product development. For the remainder of the call, I will review our strong Q4 performance by business line and then discuss our acquisition of LymphaTech in more detail. I will then provide updates on our ongoing strategic priorities, which we anticipate will continue to drive momentum through 2026. As a reminder, these priorities include improving access to care, expanding treatment options to optimize patient care and reinforce our market-leading position and enhancing the lifetime patient value with both products and services, given the chronic nature of the disease states we support. Elaine will follow with a review of our full fourth quarter results and outlook for 2026. With that, let's turn to a deeper review of our fourth quarter performance. In our lymphedema business line, we grew revenue 16% year-over-year and 24% sequentially in Q4, demonstrating sustained momentum and the strength of our recovery over the past several quarters. The drivers of performance are consistent with what we highlighted previously and reflect continued execution of our go-to-market commercial strategy, which integrates both people and technology. On the people front, as mentioned last quarter, we achieved our year-end goal for sales rep hiring and remain pleased with the caliber of our recently hired reps. This phase of our go-to-market strategy is now behind us, and we believe we have the appropriate rep coverage in place to meet and drive demand across all geographic locations. The rebalance of our sales force infrastructure and accelerated hiring have enabled us to achieve a ratio of 1 account manager to 1 product specialist, a staffing model that will support and optimize productivity based on the diversity of clinical selling and order support activities that are required in the field. With our go-to-market playbook in hand, we will strategically add field resources as needed as we continue to refine territory splits and scale over time. Sales productivity has been further aided by technology, including the introduction of our CRM in February of last year. The CRM capabilities that launched and enhanced over the past 12 months have been invaluable in supporting visibility, accountability and sales effectiveness, and we will continue to strengthen the tool with additional features and functionality enhancements, including more data and analytics, to ensure our field organization is equipped with the right resources and insights to drive referral growth and customer value. We have strong confidence and conviction in the market and our approach to commercial execution. The combination of clear territory design, intentional resource staffing, a robust and integrated CRM and detailed provider channel strategies and tactics position us well for 2026 and the years ahead. Regarding our payer mix, our Medicare channel remained particularly strong in Q4, driven by a couple of factors. In addition to continuing to lap a softer prior year comparison resulting from the documentation challenges that began in Q2 of 2024, we also began to see patients who met the new NCD unique characteristics requirement move directly to our Flexitouch advanced pump after completing conservative therapy without first undergoing a basic pump trial. This is a big win for patients, which ultimately accelerates access to the most appropriate therapy for their condition, and we are pleased to see momentum growing. Turning now to airway clearance and patients we support with chronic inflammatory lung disease. Sales of AffloVest increased 66% year-over-year and 6% sequentially in the fourth quarter to conclude an incredible year for this business line. We are thrilled with this performance, which is a testament to our focused commercial strategy as executed by our skilled airway clearance field team. As broader awareness of bronchiectasis and its available treatment options continues to expand, so does demand for AffloVest. While the claims data are lagging, we believe we have now achieved a market-leading position in the airway clearance category as our commercial momentum accelerates, supported by the strong partnerships and prioritized placement agreements we have secured within the top 10 respiratory DMEs. In 2026, we expect growth in airway clearance to normalize as compared to the elevated level achieved in 2025. From a commercial execution perspective, we will continue to focus on what has worked so well for us to date, strengthening our relationships with each of our top DME partners, penetrating deeper within these accounts, providing high-quality medical education and training for providers and DME staff and launching an enhanced AffloVest therapy to better serve patients. With that backdrop on our Q4 results, I would like now to discuss our acquisition of LymphaTech in more detail. As mentioned, this is an exciting development for Tactile that adds both breadth to our current capabilities and depth to our R&D. Specifically, with LymphaTech, we are expanding our current market-leading portfolio of lymphedema solutions with digital 3D scanning technology for chronic swelling measurement and monitoring, while broadening our R&D with new competencies and programs to extend LymphaTech's current capabilities into next-generation approaches for disease assessment and treatment. Taken wholly, this acquisition strengthens our market leadership in conditions associated with lymphatic dysfunction, and we expect it to meaningfully contribute to our ongoing strategic priorities of improving access to care, expanding treatment options and enhancing the lifetime patient value. LymphaTech's primary technology is a handheld clinically validated solution that uses proprietary algorithms and mobile scanning to deliver highly accurate fluid volume and precise circumference measurements. These elements, along with skin changes, are critical to identifying lymphedema and informing the appropriate therapy options. The LymphaTech platform immediately generates a full clinical-grade 3D model of the body and limbs, replacing traditional manual measurement methods that are time-consuming, highly variable and dependent on clinician techniques. When combined with clinician assessment of the skin, the platform delivers clinicians with a more accurate, repeatable measurement that reduces variability and streamlines clinical workflow. By introducing greater objectivity and efficiency into lymphedema assessment, the platform helps instill confidence in clinical decision-making and enables providers to focus more time on patient care. In addition to real-time measurement, the platform also supports longitudinal surveillance and monitoring, allowing clinicians to track changes over time, including disease progression and treatment response. Beyond clinical benefits, the patient experience is next level. The 3D model measurement output offers a compelling visual of the patient's chest, trunk, head, neck and/or limb, helping them to better understand their condition and keep them engaged in their disease management throughout the care journey. We expect these digital measurement capabilities to enable more accurate disease identification and thereby, accelerate therapy access for the 20 million undiagnosed symptomatic patients in the United States. This acquisition is a milestone in Tactile's evolution from a product-based company to a comprehensive integrated solutions leader for lymphatic dysfunction. By bringing Tactile and LymphaTech together, we become uniquely positioned to support patients and clinicians from early identification and intervention to innovative connected therapy with long-term support and monitoring alongside our Kylee patient engagement application. We expect this acquisition to directly support our longer-term strategy as we seek to capitalize on the growing scientific and clinical understanding of lymphatic dysfunction and lead the next wave of technological innovation. We are very excited about this announcement and for the LymphaTech team who share our combined passion for providing advanced solutions to large underserved patient populations to join Tactile. We will provide additional details regarding the integration on subsequent calls. Turning now to recent updates on each of our three strategic priorities. These priorities are designed to unlock our TAM and enable scalable, profitable growth, and they will continue to be areas of focus for us as we move through 2026. I will begin with an update on our foundational priority to improve access to care, specifically with respect to our head and neck lymphedema, RCT. First, I'm pleased to share that the 2-month results from our RCT comparing Flexitouch Plus to usual care in patients with head and neck lymphedema were published in the Journal of the Sciences and Specialties of the Head and Neck in January. These results, which were initially presented at the ASCO Annual Meeting last June, concluded that Flexitouch Plus is an effective first-line treatment for head and neck cancer survivors with lymphedema compared to receiving therapist-guided treatment without a compression device. Second, following the presentation of long-term data from our RCT at the ACRM Fall Conference in October, I'm also pleased to report that the 6-month manuscript has been submitted and is currently in review. Additional manuscripts will be submitted this year and include a deeper analysis into structural barriers associated with usual care and the role of device technology in more quickly addressing the debilitating symptoms of this population. This is truly a landmark study. Never before has there been a large RCT assessing short- and long-term outcomes of advanced pneumatic compression therapy as an evidence-supported alternative to usual care in treatment-naive head and neck cancer survivors with lymphedema. We are leveraging these data to support our ongoing discussions with commercial payers regarding their current experimental and investigational policy language for head and neck lymphedema device therapy. Clinical data and patient value examples like these strengthen our oncology channel engagement and help to increase awareness of the clinical benefits of Flexitouch Plus for patients in this therapeutic area. While extensive coverage has not yet been fully opened, we are encouraged by the growing momentum and interest, and we'll continue to work with commercial payers to influence their policies and reduce access barriers. Beyond clinical evidence, we are also focused on improving access to care by transforming each step of the order process through the implementation of new technology and more efficient workflows. A key component of this effort is the use of AI-enabled technology to improve speed, accuracy and efficiency for PCD orders. During the fourth quarter, we successfully completed the first phase of our new AI platform, implementing it across our order intake process as well as for certain parts of our medical record review, specifically for orders in our Medicare channel. With the foundation set and early learnings gleaned from the initial rollout, we will continue expanding the use of this technology across the entire order process this year, including patient eligibility and verification of benefits, full medical record review and order qualification and prior authorization. Once fully implemented, we expect this technology to accelerate speed to therapy, reduce revenue impacting errors and improve operating efficiency, each of which should contribute to enhanced operating margins moving forward. I would like now to spend a few moments discussing our product road map for 2026 and broader strategic priority of expanding treatment options. This priority spans both business lines and is centered on identifying ongoing unmet needs and addressing them through patient-centric innovation. We delivered on this in 2025 with the introduction of Nimbl for upper and lower extremity lymphedema and continue to be very pleased with patient and clinician adoption. Nearly a full year into its launch in a crowded market, we have moved into market leadership position in the basic compression pump category, and we expect to continue growing this category and serving more patients with Nimbl. Product innovation will unlock future growth opportunities. And as we look ahead to this year and beyond, there are two specific additional areas of innovation I would like to highlight. First, on the airway clearance side. In early Q4, we submitted a 510(k) to FDA for our next-generation AffloVest product. While the product remains under FDA review, we expect to commercially launch it later this year to ensure it's available for the 2026 to 2027 winter respiratory season. We are very excited about this next-generation device, which will feature further weight reduction, the addition of digital connectivity and improved sizing adjustability to allow for a more customized fit. We are confident these enhancements will support the patient experience while promoting adherence. Our second innovation area is focused on the advanced pump category. Our roadmap includes the phased introduction of incremental features and product enhancements for Flexitouch, including making the device smaller, lighter, more user-friendly and with less external hosing. These updates will support the patient experience, and we will provide additional updates as we progress through our product development cycles this year. Additional enhancements will follow and may include new features that change the way therapy is delivered. With the acquisition of LymphaTech, we now also have access to an expanded capability skill set and a separate product roadmap from their development team. Over the next few months, we will be looking for road map integration points being deliberate and strategic to ensure new therapies and product designs improve the patient experience without compromising therapy effectiveness. Our third strategic priority is aimed at enhancing the lifetime patient value by supporting lymphedema patients across the full care continuum, encompassing a more efficient and personalized engagement before, during and after the order and delivery process. In 2026, we plan to continue focusing on targeted care navigation pilots, leveraging our existing resources to further solidify patient engagement throughout the complex and drawn-out order process and reduce patient leakage. These pilots are designed to proactively reach patients at key moments in the care journey, helping set expectations, reinforce required next steps and support timely progression through the order workflow. Our initial pilots have demonstrated proof of concept, showing that patients value clearer communication and guidance earlier in the process. While we continue to evaluate longer-term technology investments, our near-term focus remains on refining these pilots optimizing communication touch points and expanding their impact in a measured and scalable way. We believe this approach will improve yield, enhance the patient experience and over time, reduce the need for sales rep involvement in the order process. As you can see, we are continuing to execute well across a diverse set of strategic priorities that are designed to unlock our TAM and drive consistent growth over the near, mid and longer term. In each of these areas, we have multiple catalysts ahead, including continued commercialization acceleration and progress across our product and clinical roadmaps, which we expect will support our momentum moving forward. With that, I will now have Elaine review our Q4 financial results in more detail and provide an update on our guidance and outlook for 2026. Elaine Birkemeyer: Thanks, Sheri. Unless noted otherwise, all references to fourth quarter financial results are on a GAAP and year-over-year basis. Total revenue in the fourth quarter increased by $80 million or 21% to $103.6 million. By product line, sales and rentals of lymphedema products, which includes our Flexitouch entree and Nimbl systems, increased $12.4 million or 16% to $89.5 million. And sales of our airway clearance products, which includes our AffloVest system, increased $5.6 million or 66% to $14.1 million. Continuing down the P&L, gross margin was 78.2% of revenue compared to 75.2% in the fourth quarter of 2024. The increase in gross margin was attributable primarily to lower manufacturing costs and stronger collections reflected in our revenue. First quarter operating expenses increased $10.4 million or 20% to $62.2 million. The change in GAAP operating expenses reflected a $4.7 million increase in sales and marketing expenses, a $0.5 million increase in research and development expenses and a $5.2 million increase in reimbursement, general and administrative expenses, including and primarily driven by strategic investments. Operating income increased $6.3 million or 50% to $18.8 million. Interest income decreased $0.3 million or 28% to $0.7 million due to our decreased cash position. Interest expense decreased $0.5 million or 98% to $11,000. Income tax expense increased $5.5 million or 169% year-over-year to $8.8 million. Net income increased $0.9 million or 9% to $10.6 million or $0.46 per diluted share compared to $9.7 million or $0.40 per diluted share. Adjusted EBITDA increased to $22 million compared to $16.2 million. With respect to our balance sheet, we had $83.4 million in cash and cash equivalents and no outstanding borrowings at quarter end. This compares to $94.4 million in cash and $26.3 million of outstanding borrowings as of December 31, 2024. Turning to a review of our 2026 outlook. For the full year 2026, we expect total revenue in the range of $357 million to $365 million, representing growth of approximately 8% to 11% year-over-year. This guidance assumes our lymphedema and airway clearance businesses will grow in a similar range, with airway clearance growing modestly faster. As typical, our guidance range reflects several factors, including expected strength in airway clearance and ongoing commercial momentum in lymphedema driven by our go-to-market strategy. This guidance contemplates a recent Medicare regulatory update related to pneumatic compression devices. Specifically in January, CMS announced a new prior authorization requirement for basic and advanced pneumatic compression device codes under traditional Medicare fee-for-service. With this update, medical device suppliers will be required to obtain prior authorization before furnishing these devices and submitting claims to Medicare beginning April 13. To step back for a minute, Medicare policy in our category is and has been a dynamic and evolving environment. The pneumatic compression device codes impacted by this recent change have been included on the DME master list for many years, meaning that they were eligible to be selected for prior authorization at any time. It is our understanding that as part of CMS' annual review and update process, certain DME categories are periodically moved to the required prior authorization list to provide additional oversight. This update reflects that broader CMS process and is not specific to Tactile or unique pneumatic compression devices. Ultimately, this new requirement will add additional administrative steps to the order process for Medicare fee-for-service patients. As the industry adjust to this requirement, we expect a temporary short-term impact across the broader lymphedema market, which we've incorporated into our guidance for 2026. Importantly, we do not expect this change to alter our ability to deliver growth in line with the overall lymphedema market during this period. As the industry leader and a DME provider with longevity in this market, we believe we are best positioned to navigate this change. We already have extensive experience operating in other prior authorization environments across Medicare Advantage and commercial plans. And the investments we made in 2025 to strengthen our back-office infrastructure, documentation workflows and payer engagement capabilities position us well to navigate this transition efficiently. Once the industry has adjusted, we expect the lymphedema market to return to its normal growth trajectory. As that occurs, we believe our scale, experience and operating discipline position us to perform at least in line with the broader market. More broadly, we believe this change can benefit patients by helping ensure therapies are clinically appropriate and supported by evidence, promoting more consistent and timely access to care with fewer coverage disruptions. As always, we will continue to work closely with clinicians, payers and patients as the industry navigates this change to support seamless access to therapy and optimize patient outcomes. Turning to quarterly shaping, we expect Q1 growth to be higher than the balance of the year, driven by the timing of last year's recovery with growth moderating as we move through 2026. With that backdrop, for modeling purposes for the full year 2026, we expect our GAAP gross margin to be approximately 76%, our GAAP operating expenses to increase 8% to 10% year-over-year as we annualize our sales organization investments and advance our tech-related investments throughout the year, net interest income of approximately $3 million, a tax rate of 28% and a fully diluted weighted average share count of approximately 22 million to 23 million shares. We expect to generate adjusted EBITDA of approximately $49 million to $51 million in 2026. This outlook reflects the annualization of 2025 investments and continued strategic initiatives in 2026, which we believe are important to support long-term growth and operating leverage. Our adjusted EBITDA expectation assumes certain noncash items, including stock compensation expense of approximately $9 million, intangible amortization of approximately $3.6 million and depreciation expense of approximately $3.2 million. With that, I'll turn the call back to Sheri for some closing remarks. Sheri? Sheri Dodd: Thank you, Elaine. Our Q4 and full year 2025 financial performance was strong, and we are very proud of our accomplishments and momentum. We are executing well against our strategic priorities, and our investments in people and various workflow processes are materializing and paying off as expected. The foundation we have built over the past year gives us confidence in our ability to continue delivering consistent performance in line with overall market growth. With multiple catalysts ahead, including continued commercial momentum and progress across our product and clinical roadmap, we believe we are entering 2026 from a position of strength. As we have seen, the lymphedema payer policy environment is adjusting. And as the industry leader, we are well prepared to react and effectively respond to any change that may arise. We have confidence in our business and look forward to sharing updates with you as we move through 2026. I'd like to thank our team here at Tactile for their combined efforts in 2025. Without them, none of what we achieved would have been possible. With that, operator, we'll now open the call for questions. Operator: [Operator Instructions] And our first question will come from Adam Maeder with Piper Sandler. Kyle Edward Winborne: This is Kyle Winborne on for Adam. Congrats on a good quarter. I guess I'd like to start with the lymphedema business. Performance was strong again in Q4 and really started to pick up momentum there in the back half of last year. Can we just drill into what drove this a little more? Did you start to see the NCD interpretation kind of fully turn into a tailwind there in Q4 as you discussed? Just seeing really good productivity and performance as a result of the increased headcount like you discussed in the prepared remarks. Can you just kind of unpack the performance there for us? Sheri Dodd: Yes. Kyle, you basically noted all the things that I was going to say. Really, what we're seeing in Q4 was multiple investments in people and processes and technology, all coming together that really enabled the company to outperform expectations. So for sure, being able to have the CRM, we talked about that, that launched a year ago about this time. By the time we got to Q4, we had really strong adoption. The data was coming through. It really was built into the workflow for our sales organization. The other part of our go-to-market strategy was just increasing the number of reps. And as you saw, we had a nice acceleration of hiring as well as onboarding reps. Many of them came in, in Q2 and Q3. So they started to show more productivity into Q4. And then I would say we did see some modest tailwind from that Medicare patients moving directly to Flexitouch under the new NCD criteria. And that was something that, as you know, we held on kind of going -- leaning into that more until we had more confidence that the policy was settled and had been defined. But we did start to see some of that come through, which was nice to see and that momentum we expect to see going through in 2026. And then, of course, our airway -- you didn't ask, but I'll just throw in our airway clearance business, just did great, again, just a result of strategy and executing those partnerships and the training and education that we did. So those were the things that brought together a really stellar year -- stellar quarter for us and an overall really stellar year. Kyle Edward Winborne: Great. That's super helpful. I guess to follow up then on the lymphedema business as we look into '26, and just kind of understanding the guidance that you gave maybe kind of around that top line growth number for the total business and I guess as we think about some of these new prior auth requirements that you discussed, along with maybe some of these tailwinds that we're just starting to kick in from the NCD; I mean, can you just kind of help us balance the two? I mean did they kind of offset? How did you piece maybe kind of some of those headwinds and tailwinds there around reimbursement for 2026? Sheri Dodd: Sure. So very consistent with our guidance philosophy, our outlook that we put forward really incorporates a very balanced and thoughtful approach based on the information we know at the time. So if I look on the momentum and the tailwinds, we have the NCD. We have a much more seasoned sales organization. They're coming in strong. We basically, at the end of Q4, have the total number of reps we need. We have that ratio of a 1:1 that we talked about. So for every account manager, we also have a product specialist. Nothing has changed in terms of that patient population. We still have this underserved population. We have very strong channel strategy. So all of those things are in place, and we anticipate continuing to drive forward. For sure, the change that the Medicare requirement is asking for in the prior auth is a change than we had seen in 2025. But the fact is that we are going to be prepared for this. We already do prior authorization in our commercial business. We have to stand it up for Medicare. Medicare has never prior authorized this category before, so they'll be learning as well. So we felt it was prudent to not get ahead of our skis on this. We are prepared, we will address this. And as we work through what it takes and what that patient flow looks like, we always have the opportunity of adjusting our guidance in Q3 as we get more experience in this area. But yes, we did a balance of headwinds and tailwinds, but this prior auth is a shorter-term headwind and one that we feel very prepared to address. Operator: Our next question comes from Ryan Zimmerman with BTIG. Iseult McMahon: This is Izzy on for Ryan. I apologize for any background noise. I also want to echo the congrats on the solid quarter as well. So just to start, I was curious if you could talk a little bit more about the LymphaTech acquisition that you guys announced today. Any color that you can provide on the expected commercialization model or high-level thoughts that we can think about for 2026 and our models with that deal coming in? Sheri Dodd: We are really excited about this acquisition to our business. I have been and leaders before and all of you as well has been asking about how can you unlock that TAM that 20 million patients in the U.S. alone that have lymphedema that have yet to be diagnosed. So it fits so nice into our overall strategy in that continuum of care. So very excited about that. What we're also really thrilled about is, one, they already have a commercialized product. And so that commercialization model right now looks like us for measurement and surveillance with compression garment manufacturers use that for digitizing fitting and ordering. And then a few centers use it as just part of their overall workflow. Longer term, we do see this opportunity to integrate LymphaTech into our commercial engine, put it into our reps' hands and look at a very strategic segmentation approach to how would we go sell this in those centers where they have large volume where workflow efficiency is really going to make a difference, plus you have this great patient experience where you don't have someone wrapping a tape measure around your limbs and it being different based on who's doing it for you that this is one where it's a no touch and then the patient gets to actually see what their fluid volume looks like in their limbs. It's very sticky for them to understand the disease that they have. So we're not putting in the bag of our reps right now. It certainly -- it's available in the market. There's also a regulatory and reimbursement strategy that's in place, and we'll be looking at how we can continue to develop that so that there's a payment mechanism in place for use of the tool with clinicians. But we're going to be doing more of the specific work as we get into the integration. And again, just super excited to now have this in the portfolio, really cementing and solidifying our strategy to really lead in this area and have that full care continuum of technologies and solutions for both patients and clinicians. Iseult McMahon: Got it. That's helpful. And then just to go back to the guidance for a second. I was curious what will get you to that 8% versus that 11%, understanding all of the headwinds and tailwinds that you called out for the year and the reimbursement dynamics as well. Sheri Dodd: Sure. I mean I think that, that bottom -- so a couple of things, especially when you look at it from a lymphedema standpoint, we said last year, and we'll say again that we believe that we're going to grow at the pace of the market. We do believe that this prior auth is likely going to pull down some of that market growth. That 10% CAGR is reflective of some years higher and some years lower. And reimbursement has been a big factor in it being higher and it being lower. So I would imagine an 8% would be the prior auth is really challenging, not necessarily on our side, but for the reviewers. It's going to be a manual review. It's not an AI review. They've got to come up to speed. If they're super conservative, don't get trained. I mean those things that could potentially drag it down, that would be what we saw as being kind of pulling down the lower. But there's nothing else that's inherently disrupting the business itself. Again, the patients are there. Our channels are here. We've got the biggest sales force we've ever had. We're operationalizing our back office. We've got CRM tools. So all of those things are kind of countering what might be a little bit of that temporary drag. Operator: And our next question comes from Brandon Vazquez with William Blair. Brandon Vazquez: I wanted to follow up on the last one on the NCD changes. Maybe you can just start, give us a little bit more color. You mentioned you've been doing prior auth on the private side already for a little while. Talk to us a little bit about what does that process look like? You have a lot of CMS and private experience now. So how much could a prior auth process lengthen that process for the CMS patients specifically? And in part because I'm trying to understand what's embedded within the '26 guidance. Does the market contract for a quarter or 2 before it returns to growth? And is that what's embedded in your guidance? Or does this remain a growth market for the next couple of quarters? Sheri Dodd: Yes. I'm going to turn over to Elaine to address some of the specifics. But you originally called out a change in the NCD. And I just want to make sure that the -- nothing is changing with the NCD. So the NCD is still in place, and that really we feel has turned into a headwind where those patients who meet the criteria for an advanced pump can get an advanced pump. This is different in that new policy specifically for Medicare in the fee-for-service on prior auth, not tied at all to NCD. But I'll let Elaine talk about the process that prior auth looks like in our commercial business. Elaine Birkemeyer: Yes. I mean really, the process is you curate a package with that is usually some type of cover document that's specific information that a payer is looking for plus all of the supporting evidence medical records. It could be the demonstration that they can do and so forth. And that is submitted could be via their portal and then we actually would find a response typically by checking the portal. Now that does elongate the process. And so we've seen that with commercial. We've got some payers that are really quick in turning around and some that take longer. As I think you know, this has been a really big attention the public space as far as getting prior auth in a much faster turnaround time. I think the focus is really getting that within a week, and so we're hopeful we start to see that same thing with Medicare. So really, when we think about, to your point, is this a short term kind of slowdown from an industry, I think that's what we're suggesting is there's nothing fundamental changes the industry and we need -- we just need to learn this new process. And it really is a combination of the technical requirements, what exactly is going to constitute all of the parts and pieces of that submission packet and how would we most efficiently get the information to and from Medicare as well as any idiosyncrasies when it comes to what they're looking for. So we're really experienced. And so we've got also the ability with our new technology to be much more nimble at implementing changes. So this is why we're acknowledging it could for a short-term period, kind of slow the growth of the industry, but we feel really well positioned to navigate this. And so we don't see this as a significant long-term headwind for us. Brandon Vazquez: Okay. Great. And maybe shifting topics a little bit, Elaine, I think -- correct me if I'm wrong, but I think this was probably the best EBITDA margin quarter in the company's history. Just talk to us a little about where you're getting the most leverage? And then where can the EBITDA margin go from here? I mean you guys obviously gave a '26 guide, but where do you see the biggest opportunities for additional leverage within the P&L.? Congrats again on a nice quarter. Elaine Birkemeyer: Yes. So yes, thank you for that. That's something that we've been excited about being able to grow profitability. And if you go back to where we started the year, this is much better than we expected. So I think a combination of really good discipline from a cost management perspective as well as starting to see benefit from those investments that we've been making. So we've talked about even some of the AI tools, and they are starting to pay off. As we move into this year, you'll see that our guide suggests an increase to a more modest one, and this is a combination of us annualizing some of the investments such as our sales force. We didn't carry the expense for the full year. We will in this coming year in 2026, as well as continuing to finish out the strategic investments that are underway now. So we're happy that we're going to be able to continue to expand margins, albeit a bit more modestly this year while we're able to continue those investments. Longer term, once we get these investments behind us, we do expect to see gross margin rate grow at a faster pace than we're suggesting for 2026. Operator: [Operator Instructions] We'll go next to Ben Haynor with Lake Street Capital Markets. Benjamin Haynor: First off for me, just for clarity's sake on the prior authorization, it doesn't sound to me like you have the specific requirements that CMS is going to be demanding. And just based upon your work with commercial insurers in the past, it doesn't sound like either that there's anything that is kind of out of the box where clinicians are not used to kind of collecting the data, and it's more of a question of how quickly CMS can turn it around. Is that the right way to think about this here? Elaine Birkemeyer: So I would say with Medicare, it's been -- we've been learning day by day. We are -- we do understand kind of what forms we need to fill in. We're pretty clear because remember, we're getting approved post the claim. So we're pretty -- we have a good understanding of what Medicare is looking for a successful claim, which should translate very well from a prior auth perspective. But there are some technical things of what's the best way to submit it. Are there going to be anything from a prior auth that's a little bit different? So that's kind of the learning there. Unfortunately, every payer is different. So there isn't something that's quite out of the box, but we are excited to be leveraging some of our newer technology that does leverage AI to help facilitate and this process up. So I think that's something that we're excited that will help not only make this more efficient for us, but hopefully make that turnaround time for the patient more quick as well. Benjamin Haynor: Okay. Great. That's helpful. And then just on the bronchiectasis drug that launched here a number of months ago, are you seeing any impact in terms of growing the market there? What's kind of any color that you have there? Sheri Dodd: Sure. I mean the patient population that's in our airway clearance business really mimics the underserved, underdiagnosed population that we see in lymphedema. So the bronchiectasis growth, I would say, or at least the awareness has been driven by, say, pharmaceutical entrants, a lot more awareness, disease awareness, brought in training and education to the pulmonology and respiratory community. And so we've seen a nice uptick from that standpoint. The other good thing here, Ben, is that there is not a -- no guidelines nor clinical decision that a drug should be used ahead of this therapy. They're meant to be used together. The drug therapy reduces inflammation, but it does not actually move the mucus, which is the big challenge for these patients when they get mucus and then they get infections. So it's going to work really nicely together. And so we appreciate the fact that there is more awareness from a disease state, and we also appreciate our position being in our top 10 DMEs and having the preferred placement and seeing the growth. So this continues to be a really attractive market for us and a lot of patients that need to be served. Operator: And there are no further questions. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Wayne Pickup: Okay. Good morning, and thank you for joining. I'm Wayne Pickup, the CEO of The Lottery Corporation. With me today are our CFO, Adam Newman; and Chief Commercial Officer, Callum Mulvihill. We'll run through the investor presentation lodged with the ASX and take any questions you have. I've now been with the business just under 3 months after relocating from Chicago. Let me firstly share with you some of the observations I've had so far on Slide 4. Many of these are the same things that attracted me to join the company in the first place. The Lottery Corporation is a global leader. We have exceptional assets, household brands, millions of Australians engage with our unmatched license portfolio. The balance sheet is strong. That gives us options and it supported -- and it has supported consistent shareholder returns. The culture is also strong. There's great people here, and that's not always a given. This is supported by capable leadership and teams that understand their business and their customers. I've spent time with our technology teams, our commercial teams and our contact center, listening to how we serve and interact with customers. I've spent time with our technology teams, our commercial teams, and our contact center, listening to how we serve and interact with customers. I've spent time in the lottery outlets across the Eastern Seaboard from news agents in Central Melbourne to pubs and clubs in regional Queensland. It's clear we have an engaged workforce and a strong retail network. So I'm starting from a position of strength, but there is upside ahead, and that's what energizes me about the opportunity. Our strategy has served the company well, but we can unlock more value. And going forward, we have 3 focus areas as outlined on Slide 5. The first is accelerating our evolution as a digital entertainment company. This is evolution, not revolution. It's about embedding technology across the enterprise, modernizing platforms, and creating seamless customer experiences. I want to be clear, this is not at the expense of retail. It's about choice and integration. In fact, online store syndicates show how retailers can engage with this digital shift. Many of our retailers, in fact, about 80%, sell shares in their store syndicates through our online store syndicates platform. This is enabling lottery agents to earn revenue around the clock, extending well beyond the traditional shop front. We've just rolled out a major digital signage upgrade across 3,300 lottery outlets that enables more dynamic in-store advertising. It also unlocks the next phase of delivering data-driven, automated, and API-enabled content into stores. This will improve our speed to market, promotional effectiveness, and consistency across our network. Ultimately, we want customers to choose us for entertainment, not just for big jackpots. Technology enables personalized experiences at scale. That's what keeps customers coming back and engaged. The second theme is concentrating on our local, highly regulated markets. The Australian market is attractive. The license structure is unique, generally decades long with staggered maturities. We've got a long history of growth through jackpot and economic cycles, underpinned by population growth and one of the highest spends per capita globally. There's broad acceptance of lotteries. Typically, 1 in 2 Australian adults participate each year, but only half of them have registered and there's upside there. So the focus will be on existing business and adjacent lottery opportunities. The third theme rather is focused execution. The fundamentals we'll maintain are straightforward: continued innovation and active management of our game portfolio. We will make strategic technology investments to maximize the digital opportunity and oversee disciplined capital and cost allocation to deliver strong returns on our shareholders' capital. We intend to detail more about our strategy at an Investor Day in the middle of this year. Now let me turn to the results on Slide 6, which demonstrates the business' underlying strength. Firstly, jackpot activity was well below statistical averages. In fact, it was the leanest jackpot environment we have seen since listing. Despite this, we delivered solid financial outcomes. Strong free cash flow enabled us to maintain the dividend in line with the prior period. More than half our lotteries turnover typically comes from Powerball and Oz Lotto, so a lean jackpot run has impact. That flowed through to participation levels and also impacted digital share growth. Saturday Lotto game changes delivered with high early retention of the recent price increase, albeit in a low jackpot environment. Keno continued its strength in retail, capitalizing on pub and club foot traffic. Our balance sheet gives us strategic flexibility few lottery businesses have globally. We remain mindful of balancing investment with generating returns to shareholders. I'll now hand over to Adam for the group financial overview. Adam Newman: Thanks, Wayne. Hi, everyone. Thanks for taking the time to join us here this morning. Let's move to Slide #8. As Wayne has covered, our first half '26 was a period of lean jackpot activity with Division 1 offers for jackpot games down 14% on the PCP. Despite this, the group delivered a resilient financial performance, reaffirming the strength of our business model. Group revenue was $1.8 billion, demonstrating the value of our diversified portfolio and helping to cushion jackpot variability. OpEx growth remained tightly controlled at 2.9%, consistent with our disciplined approach to managing costs. EBITDA was $367 million, down just 0.7% with Keno's record performance partly offsetting jackpot-related impacts. Interest expense rose 2% due to both lower average cash balances and lower average rates. We remain materially insulated from movements in interest rates given around 85% of our debt is fixed or hedged against foreign exchange movements, and we earn significant income on our cash balances. And while net profit after tax declined 1.4%, the directors determined to pay an $0.08 per share fully franked interim dividend in line with the first half of 2025, and this represents 103% of net profit for the half. If we turn now to Slide #9. Our performance reflects the underlying strength of the portfolio despite the jackpot headwinds that adversely impacted EBITDA by approximately $26 million versus the prior period. Several drivers demonstrate the business resilience. Base games performed strongly with Saturday Lotto and Lucky Lotteries being the standouts. Instant Scratch-Its continued their momentum, supported by new products and pricing, where Keno delivered another record half with strong retail visitation and venue partner initiatives sustaining growth and mirroring the themes that we saw in FY '25. Importantly, digital turnover continued to grow, reinforcing what we highlighted at the full year results that digital penetration is a structural margin driver, which represents significant long-term opportunity for us. In summary, these elements enabled the business to manage short-term jackpot volatility with diversification across our portfolio of games, channels, and customer segments continuing to provide stability. If we can now move to Slide #10. And as we have stressed previously, we manage our business for the long term with the strong fundamentals in mind and our cost and capital discipline is not unduly influenced by short-term jackpot outcomes. OpEx for the half was $146 million, and this was an increase of $4 million or 2.9% and reflected the timing of Powerball product changes and increased employee costs. FY '26 OpEx target is $310 million to $320 million. And consistent with prior periods, our OpEx is expected to skew to the second half, and this is predominantly due to advertising and promotion expenditure, technology, and project-related costs. We'll continue to seek to manage costs tightly, maintaining the aim of keeping annual OpEx growth below normalized revenue growth over time. CapEx for the half was $34 million and is expected to ramp up through the second half with digital and core transformation and retail terminal upgrades continuing. We are targeting FY '26 CapEx between $90 million and $100 million, consistent with the investment profile for the next 3 years that we described at the full year results release. This is a resilient business that generates strong and predictable cash flows with low CapEx and a highly variable cost base. We allocate capital in order to drive long-term shareholder value, and our balance sheet provides us with flexibility to maximize shareholder returns. Net debt-to-EBITDA is at the bottom end of our targeted leverage range at 3x. We have $560 million of available liquidity and a 4.5-year average debt tenor, preserving flexibility for disciplined investment and returns. The Board remains committed to the 3 to 4x leverage target, and we continue to explore opportunities to deploy capital to deliver long-term growth that's in line with our strategy, which includes license enhancements. We'll always exercise discretion and make pragmatic risk-based assessments of any near-term investment requirements and ultimately, we'll seek to return any excess funds to shareholders in the most tax-efficient manner. So in conclusion, with strong cash flows, a robust balance sheet, and continued focus on our costs as well as digital transformation that's driving both margin expansion and improving the customer experience. We remain well placed to deliver long-term value to our shareholders. Thank you, and I'll now hand back to Wayne. Wayne Pickup: Yes. Thanks, Adam. Turning to the business results, starting with lotteries on Slide 12. A strong underlying performance given jackpots were well short of statistical norms, making it the least favorable half for jackpots since our ASX listing in 2022. The net result being a circa $400 million unfavorable impact on turnover versus circa $200 million unfavorable impact in the first half of '25. That said, the changes to our 2 largest games, Powerball and Saturday Lotto are resonating. Saturday Lotto's $6 million core offer is generating good incremental revenue every draw. Early signs on Powerball pricing are positive. If we turn to Slide 13, it shows digital share of turnover grew to 41.2% of lottery's turnover in the half. Big jackpots stimulate participation. You can see the impact their absence had on active customer numbers during the half. If we go to Slide 14, it shows our portfolio diversification at work. Base game growth largely offset the unusually low jackpot games with Saturday Lotto being the standout. Instant Scratch-Its were also particularly successful, a refreshed range and the use of higher price points such as $30 sold through well, especially in key gifting periods such as Christmas, where we had sales up 8.5% over last year. Lucky Lotteries was up over 60%, driven by the Mega jackpot, which reached $21 million at period end and now sits at just over $24 million. If we turn to Slide 16, it shows our success refreshing the game portfolio. The new $6 million Division 1 offer and price increase for Saturday Lotto in May won immediate acceptance. The early price retention of 103% is well above expectations. For context, that surpasses the retention of prior Saturday Lotto price increases, including during COVID when the Division 1 offer went to $5 million. The full effects of the Powerball price change introduced in November are expected to become evident with a return to statistically normalized jackpot levels over time. Set for Life will be our next game refresh, which we want to implement in September 2026, subject to the necessary regulatory approvals. The changes are backed by research. Customers are saying they'd like more upfront prices and promotional draws. So with that in mind, we'll introduce an extra $200,000 upfront for Division 1 winners and a subscription price increase from $0.60 to $0.70 is going to enable more promotional offers. Moving to Slide 17 and 18 on Keno, which continued its strong performance. Turnover was up 7%, growing above historical trend. This performance was valuable given the softness in jackpot games and a reminder of why Keno in the portfolio matters. Promotional initiatives and venues and the clear positioning of Keno as a fun social game as part of the growth story amid strong visitation in pubs and clubs. We have prioritized making sure our in-venue assets, terminal screens, marketing collateral are set up for maximum impact. The online channel returned to growth post the introduction of spend limits in FY '25 with turnover up 3.5% in the half. That's positive as we look to build the online Keno opportunity going forward. Slide 20 sets out our priority areas for the next 12 months. First, the digital experience. We're growing digital, but we can capture growth faster. Digital-first customers expect seamless experiences, instant gratification, and personalization. There's an opportunity to better embed data and AI across the enterprise, so we use technology to understand what each customer enjoys and just simply show them more of it. On short-term initiatives to drive registered customer sign-ups, check and collect will let customers scan their ticket and claim their prize immediately via our app. We're rolling out QR codes in our retail outlets to simplify customer registration and help acquire customers. These are practical steps that remove friction. On product, Set for Life is next for refresh. But as we think about the portfolio, we'll increasingly test opportunities beyond traditional lotteries. The focus is on customer entertainment, not just jackpot anticipation. We're reviewing how we position and market our products. The evidence tells us customers choose by game first. They play Powerball or Saturday Lotto or Oz Lotto, not lottery as a category. There's an opportunity to lean into that insight, making our hero products the stars and building stronger entertainment experiences around them. This is about amplifying what already works. We have strong product brands, and we will make them more central about how we go to market. Keno also fits into this evolution. It's entertainment beyond the jackpot cycle, and we'll continue to invest in it. There's more Keno growth to capture, including online where we are underrepresented. On the operating model, we'll structure for the speed and agility required in a competitive digital market. Finally, we'll prioritize protecting and enhancing our license portfolio. We hold incredibly valuable and unique licenses. These carry rigorous regulatory obligations and in return, generate material lottery duty revenue that funds state services and community programs as well as supporting thousands of small businesses. This is a social compact we take very seriously. But the competitive landscape is evolving. Operators licensed in the Northern Territory offer foreign matched lottery products that sit outside the broader established state-based regulatory frameworks. They contribute no lottery duty to Australian governments other than the NT and operate under lighter regulatory obligations than we do. The federal government continues to review these products. The issue should be more fully addressed. We'll continue to advocate for consistent regulation that upholds the integrity of Australian lotteries and preserves the value of our licenses. Where opportunity exists to extend or enhance our licenses, we'll do so prudently deploying shareholders' capital. Now let me wrap up with Slide 21. The first half shows the core business remains resilient and the fundamentals are sound. The changes to games like Saturday Lotto are delivering as intended. Looking forward, there's upside. We have the assets, market position, and financial strength to unlock more value, be more relevant, and position the business around digital entertainment. That's the business we'll be building, not just a steward of licenses, but a company that earns its market position every day. We intend to detail the strategy further at an Investor Day in the middle of the year. I look forward to taking you through our plans in more depth then. We'll now open up for questions, and Adam and Callum will join me. Operator: [Operator Instructions] Your first question comes from Rohan Sundram from MST Financial. Rohan Sundram: Just one from me. Thanks for the summary, and thanks for the strategic insight. In light of that, Wayne, and with regards to the slides in the pack, where -- which opportunities excite you the most? And where do you perceive the best uses of capital for the group? Wayne Pickup: Thanks for the question. I'm not sure I want to rank opportunities, and we're still sort of actively evaluating. But there's -- look, I think there's a lot of upside on digital that we can deliver in the business and simply make the games more engaging to customers, whether that's through retail or whether that's through app or online. But I think I wouldn't go as far to say it's low-hanging fruit, but it's certainly where a lot of short-term focus will be applied. Operator: Your next question comes from Justin Barratt from CLSA. Justin Barratt: I also wanted to sort of look at the strategic opportunities -- or sorry, priorities for '26. And Wayne, your comment in the presentation around exploring new product opportunities and I guess expanding on that in your prepared remarks, increasingly test opportunities beyond the traditional lotteries. I was just wondering if you could share any more details around those opportunities and what you've potentially seen in other markets that you think could work here in Australia? Wayne Pickup: Sure. I mean, at the moment, we're sort of actively evaluating those. I think there's opportunities in terms of just the way we present the product and the front end and making that more engaging and it's almost like a product in front of a product in some regards. So making the user journey just far more engaging and fun. Then there's certainly room in the portfolio for new product, but that takes time. It takes time to build. It takes time to gain regulatory approvals. So these are all under active consideration. And I'm not able to get into specifics today, but certainly at the Investor Day that we will schedule around middle of the year, I'll be able to sort of get into more details then. Justin Barratt: Great. My follow-up question, just on Saturday Lotto, clearly had very strong retention to that game change last year. But I just wanted to get your expectations on how much that retention has benefited from the weaker Powerball and Oz Lotto jackpot run recently. And I guess whether you still -- or do you think that it will -- that retention will normalize to that sort of 50% to 75% range in time? Wayne Pickup: It's a good question. I'll pass over to Callum, who can provide more historical reference than I can. Callum Mulvihill: Yes. Thanks, Wayne. Thanks, Justin. I think probably a good frame of reference is the last change, which was during a COVID period, which I think we experienced about an 80% retention early on sort of from 8 weeks pre and 8 weeks post. And then we had a real COVID environment that sort of clouded that one. This one is probably surprised on the upside to be holding 103% after 29 weeks is impressive to say the least. It's probably surpassed expectations. And I think we settled -- I think that one back in 2000, we settled at about 50%. So sort of early days, it was 80% and settled at 50%. So this is certainly surprised on the upside. And I think back in that jackpot environment, it was highly varied back in 2000 as well. Operator: Your next question comes from Kai Erman from Jefferies. Kai Erman: You've obviously shown pretty strong pricing momentum across the last 2 Powerball increases, the most recent Saturday increases. And how are you guys thinking about pricing going forward? Do you still think it's a sort of every 2- to 3-year cadence? Or do you think you can sort of get into an annual price rise kind of cadence given the momentum that you've shown to date? Wayne Pickup: Wayne here, I can take that. It's something that the business has done extremely well over time, and it will be -- it will certainly continue to be one of our levers, but not the only lever that we look to pull. So I won't go much further than that just now other than, again, like I don't want this to be my stock answer, but it's under active consideration. It will certainly be one of the levers that we have in the toolkit going forward. And as you probably know, with these lottery products, that price increase correlates through to bigger jackpots, bigger prices. So there's an immediate upside for customers, for our retail partners as well through commissions. So it's certainly something that we'll continue to look at or continue to utilize. And we're also -- the frequency of those is under active consideration. Kai Erman: Understood. And just a follow-up, you mentioned in your sort of earlier remarks around balance sheet optionality given you are sort of at 3x leverage. Would you be able to give any clarity on what some of those options might be? Wayne Pickup: Adam, do you want to take that? Adam Newman: I'll have that, Kai. Kai, I'll just go back to my earlier prepared comments. I think in my speech at the end of the day is we can't get overly specific. The Board remains committed to that 3 to 4x leverage target. And obviously, we're looking at things on a risk-adjusted basis within our strategy of which license enhancements form an important part of that. And to the extent that the Board determines that we've got excess funds, then we'll seek to return them back to shareholders in the most tax-efficient manner. Operator: Your next question comes from David Fabris from Macquarie. David Fabris: Just with my first question, you made some comments around the ability to maybe extend existing licenses. Can we talk through that big license, which expires in '28? I mean if we think about Victoria, they did open up the Keno license to multiple operators back in 2022. Should we be worried about what Victoria might do with this lottery license? Adam Newman: Yes. So David, Adam, I'll take that again. It's a hard question for us to answer. Obviously, we're in discussions with governments on a number of different jurisdictions across the time. But ultimately, you need scale in these lottery businesses at the end of the day. So opening up to multiple participants is not necessarily readily easy to do. And I think you'll just have to see how that process opens up. Obviously, '28 is a couple of years away yet. And we'll just have to see how it plans out at the end of the day. David Fabris: Yes. Got it. Understood. And the next question, look, just appreciate the prepared remarks around operating costs. But can you clarify whether first half '26 benefited from the low jackpot activity on marketing spend? And to kind of dovetail that, if we look at where OpEx has tracked in the first half over the last couple of years and at the midpoint of guidance, it kind of suggests a 46% first half weighting. I know you haven't provided FY '27 guidance, but under the premise of normalized jackpot activity, the fact you're launching new games in the first half or innovation, call it Set for Life in September, which probably requires increased spend. Will that phasing change? Or should we really think about cost for your business agnostic to volumes and it kind of tracks around or below inflation? Adam Newman: Yes, you covered a lot of topics there. So maybe I'll just step back a little bit and say the first half, second half split that we're seeing this year is pretty consistent with what we've seen pretty much every year since we've demerged to start with. So -- and I think we've talked about it in the past that 50% of our costs are people. We do have some ebb and flow in relation to advertising and promotion spend subject to jackpot outcomes. And it would probably be fair to say that the first half maybe benefited from sort of low to mid-single digits from an advertising and promotion spend. I say benefited, but spend that wasn't forthcoming because we didn't have the revenue opportunity. And so if you look forward to the second half, a large proportion of that second half step-up that you're seeing does relate to advertising and promotion spend, of which some of that relates to an expectation that you'll get some potential mean reversion in the second half. Not all because it does -- we've got an Oz Lotto brand refresh going on at the end of the day. So it does depend upon certain timing of different campaigns and programs, but it's not completely dependent upon that. We haven't given guidance to look forward for FY '27. Obviously, we've given it for FY '26. All I can say is we spend a lot of time on our OpEx cost base come through separation at the end of the day. And as I mentioned in the prepared remarks, we're continuing to focus to keep our OpEx at or below normalized revenue growth over time. David Fabris: Yes. Okay. But I guess under the premise of normalized volumes in first half '27, which is how we forecast, you'd expect a pretty significant step-up in OpEx commensurate with jackpot activity and marketing. Adam Newman: I don't want to get and predict into FY '27. I'm not sure that necessarily holds what you just said. Operator: Your next question comes from Sam Bradshaw from Evans & Partners. Sam Bradshaw: Wayne, you mentioned that you believe you're underrepresented in online Keno and there's currently an ongoing review of online Keno and foreign match lotteries. Are you able to give us any color on the status of the review and how it translates to your strategy? Wayne Pickup: No, I can't give you much more color than probably what you already are aware of. It's coming into this market from the U.S., it's -- frankly, it's a bit of an anomaly as it relates to the foreign match lotteries out of the ANZ, I know. Again, coming out of the U.S., the U.S. regulators and lotteries don't particularly like it. The fact that we have these sort of curious services operating through the U.S. and then reselling into international markets. But we -- what I'll say is that we are strongly in favor of fair regulated markets with transparent revenue arrangements with governments, and we'll continue to lobby for those arrangements vigorously. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Just wanted to ask first question about the health of the Powerball game and the underlying demand there. I guess you've called out a negative like-for-like year-on-year for Powerball, but at the same time, 61% retention of the 17% price increase. So I'm wondering, firstly, how you can reconcile that 10% growth that you call out in the retention calc with the like-for-like environment. But also, is it just too hard to judge in a period where you haven't seen major jackpots? Wayne Pickup: Maybe I'll kick off and then hand over to Adam and Callum to sort of put more -- sort of being the new guy on the block, I can only sort of contribute so much. But -- it's always challenging when you sort of bookend a period with a game like Powerball. And I see the same thing with the Powerball product in the U.S. coming in still somewhat of an outside-in view, it is a very healthy product. It has millions of customers. It's a brand that Aussies love. And so if you look at it sort of big picture, it's gone through -- as these things do from time to time, it's gone through a statistically lean time, but that will regress to the mean. But it's certainly one of our hero products and one that we'll continue to invest in, continue to do more with and has a very, very strong loyal customer following. I don't know, Callum or Adam, if you want to add to that? Callum Mulvihill: Yes. Look, if I can build off that, Andre, I mean, it's incredibly -- echo what Wayne said, incredibly strong product. It is our leading product. We've priced that product on its strength. It's now the premium-priced product in the portfolio. Yes, it's had a leaner run, statistically driven. But I think the retention is bang on where we would have expected it to be. It's far too short a period. Retention jumps around quite a bit from the low end to the high end. I think sitting in that 60% range at this point is exactly where we'd like it to see -- like to see it, and it's an incredibly strong product, and it is our leading product in the portfolio. Wayne Pickup: And it performs extremely well on digital as well. Callum Mulvihill: And the portfolio, as you would have seen previously, it feeds off its momentum. And obviously, the momentum that's had in the last half has been lower, but we know the customer recovers. And in the meantime, people have pivoted and we've seen people play in Saturday Lotto and that change be really well accepted. So it's a pretty dynamic environment, but there's no issues with the health -- with Powerball. Andre Fromyhr: Great. My other question is specifically on the digital mix. We've seen it up year-on-year for the half but down a bit on the second half of '25. So how much of that is also relating to the lack of major jackpots? Or is there some seasonality there? And I guess the question is how much of a -- there's several mentions of digital as a strategic priority in the presentation today. But is that something because of the margin benefits that we're going to see more actively pushed up over the next few years? Wayne Pickup: Yes. Wayne here, I can start again and if Callum or Adam want to contribute. We'll -- I mean, I guess, firstly, we'll sort of follow where the consumer goes. And the large jackpots certainly bring in -- yes, they're a strong acquisition tool for us in digital channels. So when you get an event like a $200 million or a powerful jackpot, you're getting -- I mean, it's just common sense, right? You're getting a whole lot of customers that come in that will play once in 1 or 2 years and then drop out again. What we want to do is obviously retain them. So the job isn't just around sort of acquisition. It's around giving them reasons to come back. And as I said at the start, this is why we sort of look there is opportunity in the portfolio. So overall, I look at it, and I think digital has plateaued a bit largely because of -- as a derivative of the Powerball -- particularly the Powerball jackpot environment. But there's opportunity there, a lot of opportunity there to do more with it. I don't know, Callum or Adam, if you want to add anything. Callum Mulvihill: Look, the only thing that I would add to that it is a long-term structural trend that sustains many, many periods, and it has some short-term volatile sort of fluctuations around the macro factors like jackpots. But we're also investing in, as Wayne said, we bring them into the funnel and how do you make them stick and how do you make people register and give them reasons to register with us and convert them through the digital funnel. So there's investment in that space, but it does rely on some of those bigger macro factors like the game offers. Operator: Your next question comes from Matt Ryan from Barrenjoey. Matthew Ryan: I just wanted to ask a question around Slide 27, where you've sort of shown a pretty long-term chart of how resilient the lottery sector is. And I guess just more specifically the past years post 2020, where it looks like the growth rate is a bit elevated relative to history. Just curious on your thoughts on what's driven that? Obviously, the jackpots have been there. And as a result of that, just trying to get, I guess, some color on where to from here? I know you've talked about a $400 million headwind in the half, which is pretty elevated. But I guess we're all just looking for confidence that the reversal of that comes out rather than perhaps, I guess, an unwind of those years, which look to have grown quite a lot more than normal after that 2020 period. Any thoughts would be good. Wayne Pickup: Yes. Well, maybe -- again I'll start and Wayne here. Matt, the look, I'm not going to predict what comes out of the Powerball machine. But these are just simple probabilities. So if we run those, we've got to assume that we're going to revert back to a mean and have jackpots throughout the year of $100 million plus on a relatively regular basis, right? So -- but again, I can't predict what -- unfortunately, sort of what balls get drawn on a Thursday evening or Tuesday evening. What we -- part of the strategy, and we'll sort of get into this more into the Investor Day middle of the year, but we also want to give -- when I look at the portfolio, we want to give people more reason to engage with us beyond that jackpot anticipation. So it's -- I haven't sort of quite looked at the chart the same way as you have, but I understand where you're going. But I'm certainly not concerned that we can't continue to drive sort of more growth, more engagement with what we have and with more innovation and product going forward. Adam Newman: Sorry, Matt, I was just going to add one other thing. It's Adam here that we look at that chart from another lens is that we saw a lot of acceleration into the category as a consequence of COVID because everyone is sitting at home with nothing else to do. One pleasing thing that we've often referred to internally is that we've been able to lock in those benefits. So there was a new high watermark that came out of the COVID period for us in addition to the game changes that we were able to make during that period as well. Callum Mulvihill: Yes. And thanks, Adam. I'll pick up. Probably on Slide 31, Matt, I mean, what we can control in that environment. I mean, clearly, we couldn't control COVID. We really couldn't control the $200 million event in '24. But what are the activities that we're putting in market to continue to capture the market as it evolves. I've always liked this chart because it does show an underlying long-term CAGR. We have been able to accelerate it even if you back out the noise of COVID and statistical one-offs. We've got activity to capture the market and keep growing the market. Keno sits on top there and just continues to grow steadily to add some diversification as well. So for me, this chart shows the resilience of this business. And then what can we control within that market is really Page 31 and beyond. Matthew Ryan: Yes. I guess that's all really helpful. I'm just also curious as a follow-up, whether the volatility in earnings and cash flow poses any negatives for you guys? And I guess the context is that you're clearly showing what is a very defensive long-term chart. The share price appears to me at least to be trading more like a cyclical industrial around shorter-term events. But taking that out of it, are there ways, I guess, to reduce that volatility over time? Or is it something that isn't a real priority for you guys? Adam Newman: Yes. I mean 50% of our turnover comes from jackpot games. So there is going to always be a period of volatility depending upon where those balls come out of the barrel, I don't think we can get away from that. The extent of how maybe you can smooth some of the volatility or grow, we've seen with Saturday Lotto game change, for example, which is the second largest game, we've been able to grow that game from a base game perspective. I don't think from -- we take -- I mean, it was interesting that you raised that chart on [ 27 ] because we do try to take a medium- to long-term view of the business and the decisions that we make. So I don't think -- one of your questions was does the volatility cause us concerns? I don't think it does internally in the way we manage the business and the way we look at run and make decisions. And then I think our balance sheet strength just gives us the overall flexibility to deal with some of this volatility as well. Callum Mulvihill: And so Matt, I'll pick up that as well, less about cash flow volatility, but more about the volatility in the portfolio and a slight correction. My Page 31 is your Page 16, just on the product actions that we've taken over the period. But we do sequence the investment in our portfolio around the core base offers. And Saturday is an incredibly important investment. The fact that, that's stuck after 29 weeks, I mean, I can't overemphasize that provides stability in that core repeat behavior. And to Adam's point, you really can't do much about the noise and the volatility in those jackpot games. When they deliver, it's fantastic. But in short periods, they can go away a little bit. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just in terms of the simplification of the org structure, do you expect this to lead to any material savings in FY '27? Or do you expect any savings to be reinvested into digital or other areas, please? Wayne Pickup: The -- I mean, we're actively looking at the org structure at the moment. It's more around sort of getting clear lines of accountability. And I think we're underinvested in some areas and maybe the counter is true. But it's too early to tell whether we expect any material savings and it's -- but we do anticipate some changes. Adam Newman: Maybe I'll just add, as you heard us talk a bit before about keeping our OpEx growth below our normalized revenue growth over time. And the benefit that you get in this business in terms of a high degree of our costs are variable and the ability to grow your top line is very beneficial in terms of the way we've levered to the bottom line at the end of the day as well. So reinvesting some of those OpEx savings back into growing the top line is something that we actively seek to do as well. Operator: Your next question comes from Liam Robertson from Jarden. Liam Robertson: Just two for me. First one, just on active customers. I appreciate the jackpot weakness, but with that number falling to 8.6 million, is there anything you can tell us about genuine churn versus jackpot-driven lapses? Like anything you can quantify for us there? Wayne Pickup: Would you mind sort of just asking the question again or maybe just slightly rephrasing it? I'm not sure I follow. Liam Robertson: Okay. Sorry, I've just jumped on the call on a conflicting call. So I'm just interested in -- I mean, half-on-half looks like customer numbers in total or active customers have fallen to 8.6 million. I'm just interested if there's anything maybe in the digital cohort that you can tell us about actual underlying genuine churn in active customers as opposed to what has just been driven by that jackpot weakness? Wayne Pickup: It's predominantly driven by jackpot. We've got the loyal sort of registered, particularly the registered customer base. There's a very strong registered customer base that is omnichannel that sort of play both in digital and retail. I mean what you find is when you get these sort of big spikes, these one-off jackpots, people just come in for those -- just those one-time events and then back out. The job to be done is for us to retain them. But there's -- in terms of the data that I see coming into the business, there's no structural issues in terms of the core player base. Liam Robertson: Okay. Perfect. Makes sense. And then I mean, conscious of the comments you just made to the previous question around OpEx, you've given out -- you pointed to looking to automate a bunch of your processes. Conscious that 50% of your OpEx base is currently labor. So I'm just conscious how we should potentially think about composition moving forward, conscious that you might need to invest short term, but long term, if there's sort of anything that might change in the composition of your OpEx base? Wayne Pickup: Adam, if you want to add to that. But I don't see any sort of major deviations from -- we will continue to be prudent in terms of the way we operate the business. We're probably underinvested in some areas around AI at the moment, but -- and we can find savings elsewhere to sort of offset those. But it's -- this is sort of an active analysis at the moment. But what I would say, it's a balancing act. We're definitely not going to see OpEx go up outside of target ranges, that's for sure. Operator: There are no further questions at this time. I'll now hand back to Mr. Pickup for closing remarks. Wayne Pickup: Look, well, just thanks for joining my first earnings call at TLC, and I appreciate you all following the business. This -- just to finish on, this is an incredibly healthy business. We've got millions of loyal customers throughout Australia, brands Australians love. And I'm looking forward to contributing and there's opportunity to do more. So thanks for further engagements, and you can get on to your next call now. Thank you, guys. Bye.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, February 17, 2026. I will now turn the call over to Kyle Sauers, President and Chief Financial Officer. Thank you. You may go ahead. Kyle Sauers: Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter and full year 2025 earnings release. It can be found under the heading Financials, Quarterly Results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should or other similar phrases and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. We will be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share-based compensation, adjustments for certain onetime or nonrecurring items and other adjustments that are either noncash or not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our fourth quarter and full year 2025 earnings release and our investor deck, which is available in the Investors section of the RSI website at rushstreetinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue, we're referring to those items on a non-GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions. And with that, I'll turn the call over to Richard. Richard Schwartz: Thanks, Kyle. Good afternoon, and welcome to our fourth quarter and full year 2025 earnings call. I want to begin by expressing my profound gratitude to the entire RSI team for delivering what can only be described as an extraordinary year. Their dedication, innovation and relentless focus on excellence in delivering exceptional results have been the driving force behind our success. I couldn't be more proud of what we've accomplished together. As I reflect on our performance in 2025, this has been a record year, hitting new highs across virtually every metric. We continue to set new records in revenue, profitability, cash flow and user counts as well as other core KPIs. In 2025, without the benefit of any new markets, we achieved record revenue of $1.13 billion, representing 23% year-over-year growth and exceeding the high end of our raised guidance range. Even more impressive, we grew adjusted EBITDA by 66% year-over-year to a record of $153.7 million, also exceeding the high end of our raised guidance and demonstrating the powerful operating leverage inherent in our business model. In 2025, we also materially grew the bottom line with net income of $74 million compared to $7.2 million in 2024. What makes these results particularly compelling is their consistency and breadth. This strong performance is evident across all geographies and product verticals. Our player engagement remains exceptionally strong as evidenced by record-setting monthly active users in 2025. In North America, our MAUs grew 37% year-over-year in the fourth quarter to over 278,000, including an impressive 51% in online casino markets. Not to be outdone, in Latin America, we grew MAUs 47% to over 493,000, demonstrating impressive growth and resilience amongst temporary tax headwinds. When discussing the strength of our 2025 results, we are frequently asked about the secret that is driving our accelerating growth and profitability. What is the magic bullet that's driving our success? The answer is there isn't one single factor that is responsible for our success. Our exceptional performance is a product of our intense focus on our customers and the cumulative improvements we've made across every aspect of our business. Over the past several years, we've systematically enhanced our capabilities throughout the entire customer journey. We've advanced our customer acquisition strategies, diversifying our marketing channels and optimizing each one to reach the right customers at the right time with the right message. We've reduced friction in our user experience, making it easier for players to discover, engage with and enjoy our platform. We've invested heavily in enhancements to our loyalty programs and retention strategies, creating more personalized experiences that we believe keep players coming back. These improvements span every touch point with our players, from the moment they first discover our brand to their ongoing relationship with us. We've also enhanced our data analytics capabilities, allowing us to make more informed decisions about player preferences and behaviors. We've improved our customer service operations, ensuring that every interaction reinforces our commitment to player satisfaction. And we've continuously innovated our product offerings to create unique differentiated experiences that players won't find elsewhere. Throughout 2025, we also continued to invest in the operational excellence and technological innovation that differentiate our platform. These innovations aren't only about technology. They're about understanding what our players want and delivering experiences that exceed their expectations. Our focus on customer centricity drives everything we do from product development to customer service to marketing strategy. The result of these cross-functional improvements is a virtuous cycle. Stronger customer acquisition brings in higher-quality players. Improved retention keeps players better engaged, and enhanced experiences drive increased player value. When you execute well across all these areas simultaneously, the cumulative impact is significant and yields sustainable growth. Our casino-first strategy continues to be a fundamental differentiator of our business. While we maintain a growing and profitable sports betting business, our focus on leading with online casino has positioned us uniquely in the market. This strategic focus has proven particularly valuable in 2025. Our North American online casino markets continue to drive exceptional growth, as stated earlier, with MAUs increasing 51% in the fourth quarter, representing our second highest quarterly growth rate during the past 4.5 years and impressively achieved on a much larger player base and without the benefit of new market launches. What's even more encouraging is that in each successive quarter of 2025, we saw the continued acceleration of year-over-year growth in monthly active users in our North American online casino markets. Our casino-first approach allows us to focus our resources and expertise where we believe that we can create the greatest value. Online casino players typically demonstrate higher lifetime values, better retention rates and more consistent engagement patterns compared to sports-only customers. By prioritizing these markets and continuously improving our casino experience, we've been able to drive both growth and profitability simultaneously. In fact, in 2026, in support of our casino-first strategy, we plan to increase our investments in developing differentiated casino content and online casino legalization efforts. Another significant accomplishment of 2025 was our successful navigation of the challenging tax environment in Colombia, one of our core Lat Am markets. I'm proud to report that not only did we successfully manage through this period, but we're confident that we gained market share from our competitors, setting ourselves up for continued success. Our approach in Colombia was measured and strategic. Rather than immediately passing the VAT tax cost on to our players, we absorbed much of the tax impact through adjusted bonusing strategies, which inherently reduced revenue. This allowed us to maintain player engagement and loyalty while still attracting a significant number of new customers. The results speak for themselves, but despite a temporary drop in net revenue last year, for the full year, we achieved annual GGR growth of 66% and increased MAUs by 34%. Looking ahead, the temporary VAT tax that was in place during 2025 has now expired. There was a new emergency decree issued in late December 2025, along with associated tax decrees that were issued for 2026. This structure has a more traditional but lesser impact on our business as a tax on revenue rather than tax on deposits, which we offset in 2025 through a higher bonusing. However, this emergency tax decree was suspended less than a month after it was issued in late January 2026 by the Constitutional Court and will be under further review in the months ahead. This is a positive step towards recalibrating to the previous and what we view as the more appropriate tax structure in Colombia. Our experience in Colombia demonstrates our ability to navigate regulatory changes while maintaining our focus on long-term player relationships and market leadership. Now I want to briefly address the topic of prediction markets, which has been highly topical in recent industry discussions. At RSI, we're constantly evaluating the evolving industry landscape. Prediction markets today are primarily benefiting from sports event contracts, which is not an area of high priority for us. We will continue to monitor developments in the event contract space and in the meanwhile, continue to focus on executing our proven casino-first strategy and delivering exceptional experiences in our current markets while capitalizing on significant growth opportunities ahead of us. As we look to 2026 and beyond, we have tremendous confidence in our growth trajectory and strategic positioning. We're particularly excited about our upcoming launch in Alberta, where the regulatory environment is progressing toward a launch time line that could occur in the coming quarters, sooner than we were anticipating during our last earnings call. This represents a significant opportunity for us to leverage our success in other North American online casino markets, particularly given our strong performance in Ontario and our established and growing brand recognition across Canada. Beyond Alberta, we continue to evaluate additional expansion opportunities in both North America and Latin America. The success of our selective disciplined approach to market entry has enabled us to achieve strong returns on our investments while building sustainable competitive positions. We will continue to prioritize markets where we can deploy our full suite of gaming offerings and create meaningful value for both players and shareholders. The 2026 calendar is also filled with marquee international sporting events, such as the current Winter Olympics and the upcoming World Cup. We are well positioned to capitalize on these multinational events across both our sports betting and online casino products. Overall, 2025 was a transformational year for RSI. We demonstrated the power of our business model, the effectiveness of our strategic approach and the dedication and execution abilities of our team. We've built a strong foundation for expected continued growth while maintaining the operational discipline that has driven our success. We're excited about the opportunities ahead and confident in our ability to continue delivering strong results for our shareholders while providing industry-leading experiences for our players. We have a clear path forward, strong financial resources and a team that is executing at the highest level. With that overview, let me turn the call over to Kyle to walk through our detailed financial results and provide guidance for 2026. Kyle Sauers: Thanks, Richard. I'm excited to walk you through what was truly an outstanding fourth quarter and full year 2025 with record-breaking performance. Fourth quarter revenue of $324.9 million, up 28% year-over-year, set another record high and marks our 11th consecutive quarter of sequential revenue growth. Full year 2025 revenue of $1.13 billion grew 23% compared to 2024, exceeding the high end of our raised guidance range. This strong top line performance was driven by exceptional user growth and engagement across our platform. Our gross margins during the fourth quarter were 34.4%, reflecting the continued shift we've made to higher-margin markets. For the full year, our gross margins were 34.6%, in line with the prior year. On the expense side, we continue to drive operating leverage through our disciplined approach. Marketing expenses in the quarter were $45.4 million, an increase of 5% year-over-year and 14% of total revenue. For the full year, marketing expenses were $158.4 million, representing a 2% year-over-year increase and 14% of total revenue. Compared to the full year 2024, marketing spend as a percentage of revenue decreased by 290 basis points. This demonstrates our team's ability to continue to optimize our acquisition channels and improve our player acquisition costs while simultaneously growing our player base and hitting new records for first-time depositors each of the last 3 quarters. G&A for the fourth quarter was $22.3 million or 6.9% of revenue compared to 7.5% in the prior year period. For the full year, G&A was $81 million or 7.1% of revenue compared to 8.1% in 2024. This reflects our continued investment in technology, personnel and infrastructure to support our growth while maintaining operational leverage. Fourth quarter adjusted EBITDA of $44.1 million set a new quarterly record and increased 44% year-over-year. Full year adjusted EBITDA reached $153.7 million, an impressive 66% increase year-over-year, above the high end of our raised estimates and reflects our disciplined approach to growth and operational efficiency. The foundation of our financial success continues to be our exceptional user acquisition and retention performance. In the fourth quarter, North American MAUs grew 37% year-over-year to 278,000 total users. What's particularly impressive is our performance in North American online casino markets, where MAUs grew 51% year-over-year in Q4, which represents our second highest quarterly growth rate during the past 4.5 years and again, achieved on a much larger base of players. In Latin America, we delivered equally strong results with MAU growth of 47% year-over-year in Q4, reaching 493,000 total users. This growth demonstrates the strength of our platform, operations and brand recognition across the region, even as we have navigated the challenging tax environment in Colombia. North American ARPMAU declined 5% year-over-year, which reflects the healthy and expected dilution that comes along with our exceptional growth in user volumes. When you're growing your player base at the rates we've achieved, some ARPMAU compression was not only expected but confirms that we're successfully attracting large volumes of new players to our platform, who initially have lower ARPMAU than established players. The key is that we're acquiring these players efficiently and retaining them effectively, which positions us for strong long-term value creation. In Q4, Latin America ARPMAU was down 21% year-over-year due largely to the extra bonusing in Colombia. However, Q4 player values in Colombia were at their highest point of the last 3 quarters, validating the continued strength in our user experience. ARPMAU should return to meaningful year-over-year growth in Lat Am with the removal of our VAT bonusing strategy as of the end of last year. Breaking down our performance by geography and product. We saw strength across all segments. North America and online casino continue to be our primary growth drivers, benefiting from our strategic focus on these higher-value markets. Our sports betting business also contributed meaningfully to our results, growing consistently throughout the year. In the fourth quarter, online casino revenues grew 30% and grew 28% for the full year. Online sports betting revenue grew 20% in the fourth quarter and grew 7% for the full year. Regionally, revenue in North America grew 29% in the fourth quarter and grew 25% for the full year. Revenue in Latin America grew 17% in the fourth quarter and grew 12% for the full year. Of note, all these growth rates include the burden of the extra Colombia bonusing that stopped at the end of 2025. As Richard previously mentioned, the tax situation in Colombia remains dynamic. Let me provide more detail and discuss the implications for 2026 in our guidance. The temporary 19% VAT tax on deposits that impacted us throughout much of 2025, which was implemented through an emergency decree, expired at the end of the year as we expected. Under a new emergency decree, a new tax was implemented for 2026 with a 19% VAT on revenue. Compared to the tax on deposits that we navigated in 2025, this tax on revenue will have less of a punitive impact on our business from a profitability perspective. However, the Constitutional Court of Colombia suspended the emergency decree and associated decreed taxes at the end of January. The results of this review should be concluded in the next few months, and we're optimistic that it will be resolved in our favor. In any event, we expect the additional tax to be paid for the month of January before the suspension occurred. And given the dynamic nature of this situation, for the purposes of our guidance, we assume that this new 19% tax on revenue will be in place for the full year 2026. This new tax environment, combined with the market share gains we achieved in 2025, positions us well for strong growth in Colombia and across Latin America. Our balance sheet remains strong with $336 million in cash on hand at the end of the year. Net of stock repurchases, we generated $142 million of cash during 2025. Our cash generation capabilities have improved dramatically, and we expect to continue building our cash position throughout 2026. During the fourth quarter, we did not repurchase any shares under our previously announced $50 million share repurchase program, which has approximately $42 million remaining. As we look ahead to 2026, our guidance philosophy reflects both confidence in our business momentum and prudent assumptions about market dynamics. There are some key growth drivers that influence our 2026 outlook. First, we expect continued strong performance in our North American online casino markets, which have shown consistent acceleration throughout 2025. Second, the incrementally improved tax environment in Colombia should allow us to capture more of the strong underlying growth in that market. And although not included in guidance, our anticipated launch in Alberta as well as other potential new markets provide additional upside. For 2026, we expect revenue in the range of $1.375 billion to $1.425 billion, representing growth of 21% to 26% year-over-year. We expect adjusted EBITDA in the range of $210 million to $230 million, representing growth of 37% to 50% year-over-year. When it comes to cadence throughout the year, we would generally expect both revenue and EBITDA to improve as the year progresses, similar to what we've seen in years past. Regarding other line items in our financials and where we'll see leverage, gross margins should improve modestly in 2026 compared to 2025. We continue to improve our cost structure, drive revenue growth faster in higher-margin markets but are absorbing the impact of some higher gaming taxes, including the 19% emergency decreed tax on revenue in Colombia. We have continued to get more efficient with marketing spend, which gives the opportunity to keep increasing investment in this area. So we expect meaningful increases in marketing spend in 2026 but at a rate slower than our expected revenue growth, driving leverage across that line item. Regarding G&A, we continue to see opportunities to improve the product, improve our player experience and explore new opportunities. So we expect G&A to grow more closely in line with our revenue growth. This guidance reflects our confidence in the underlying strength of our business while incorporating prudent assumptions about market maturation and competitive dynamics. We believe this positions us to continue delivering strong shareholder returns while investing appropriately in innovation and long-term growth opportunities. And with that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Dan Politzer with JPMorgan. Daniel Politzer: I wanted to touch on Colombia. You gave a lot of helpful commentary in the remarks about how this could play out in terms of the timing and the year. But is there any way to perhaps put some numbers around maybe what the impact was in 2025 in terms of revenue and EBITDA with the tax on deposits versus maybe what you're forecasting if it is, in fact, in place for the full year in '26? Is it the tax on revenue? Kyle Sauers: Yes, Dan, let me -- I'll try to help with a little bit more color. So you'll recall, in the third quarter, Colombia had more challenging sports sold and that cost us incrementally on the deposit bonusing and then that, in turn, reduces revenue. In Q4, we didn't have that same issue with challenging sports sold. So you saw that play out in our results as well. In total, for 2025, we had about $75 million of incremental bonusing that we did due to the VAT tax on the players, so that's a direct reduction of revenue. It probably cost us in the range of $25 million to $30 million in EBITDA on the year. I think despite the disruption, pretty good news, grew GGR at 66%, grew the user base by 34%, took some meaningful share in the market. And then that headwind, the deposit bonusing goes away in 2026 because we aren't making up for that VAT on the players. So as I shared earlier, this means that within our guidance for 2025, we no longer have -- or for 2026, I should say, we don't have that revenue headwind for the extra bonusing. And just to be clear, we are assuming the burden of the 19% tax on revenue for the full year of 2026. The impact of that probably is -- it's harder to give you a specific answer on that because we aren't guiding to a specific revenue number for Colombia alone. We do, at the very least, expect to have to pay that tax for January, but it is -- it's a 19% tax on revenue. That doesn't mean the exact impact is 19% because we do have a decent number of variable costs that are based on revenue after tax. So it is lower than 19%, but hopefully, that frames it a little bit for you. Daniel Politzer: No, that's helpful. And just in terms of Canada, obviously, you have the Alberta launch at some point. I don't know if there's any additional detail in terms of the expectation of when that might happen? And then also along those lines in terms of framing that expectation, Ontario, could you just remind us maybe ballpark of what your approximate iGaming and sports betting share is there? Richard Schwartz: Sure. Why don't I take the first one, Dan, on Alberta. Yes, the timing is looking like it could -- it will be end of Q2, early Q3, but we're hopeful and it looks like the regulators there are moving at a very determined pace, and it looks like a Q2 opportunity is within the possibility towards the end of that quarter. Kyle Sauers: Yes. And then maybe just other pieces around Alberta and related to Ontario, our casino share in Ontario is kind of mid- to low single digits. Sports is a little bit lower than that. We're very excited about Alberta. I'll tell you, we don't have it in guidance either for revenue or for incremental costs, so there -- when that comes around and we have clarity on the date, there'll be some marketing costs associated with that. We think we're set up really well to be successful there. The other thing I would just point out, and we've mentioned this before, but every North American online casino market that we've launched in, we've been profitable by the fourth quarter of operations. And we don't see a reason that, that should be different with Alberta. So we're very excited to have another iCasino market launching in the near future here. Operator: Our next question comes from the line of Bernie McTernan with Needham. Bernard McTernan: Maybe just a follow-up on that on the first question from Dan. If I just add back $75 million to your revenue for Lat Am in '25, I get to an ARPU that's in the mid-40s, let's say. And so that -- if we look at '22 to -- sorry, '22, '23, '24, ARPU is coming down slightly. And then I think if we add back $75 million and then it spiked up. So was there anything that you were seeing from a cohort level or just like maturity of users that caused such an increase in ARPU, again, if my math's right? Kyle Sauers: Yes. And you're trying to kind of triangulate around the trends of ARPU and the dip down. I think the thing that you probably need to work in there, Bernie, is what we're putting in our deck and obviously, we're reporting in U.S. dollars is there are currency fluctuations over these years. So you'd probably want to normalize for that. I would say -- I mean, we're highly confident that the -- that without this deposit tax bonusing that we're going to have a nice rebound in our ARPMAU in Colombia and therefore, for our total Lat Am. The other piece that, I guess, I would throw in just to think about how you do that analysis in Mexico is becoming more significant part of the business in Latin America. And for the company in total, we're having a lot of great results down there. And the player values are higher in Mexico than they are in Colombia. So that starts to impact what you'd see in those numbers and what you will see for the coming years here. Bernard McTernan: Understood. That's really helpful. And then for Richard, I just want to follow up on one of the comments you made earlier in the investment in content and legalization for -- that's going to go on in 2026. Maybe focusing on the content side and given the context of the G&A guide to be growing more closely to revenue, is that bringing on more engineers? Or how should we think about what's actually going to be coming to market with these investments? Richard Schwartz: Yes. Bernie, yes, so as you might know, I have a passion for the content side of the business, started years ago when I entered the industry for about 10 years working at a slot machine supplier. So I recognize the value of great content and the ability for us to differentiate further by having great libraries of games that are unique and proprietary to ourselves. Having said that, we obviously have included in guidance all the costs of -- and the revenue upside we expect to see for new content that we add throughout the rest of this year. We have been able to sort of build our studio and our technology road map, and we'll start to launch those games in the future during this year and try to grow our position as sort of a casino leader in the industry. I think it comes down to quality or quantity and making sure that when you prepare some content that it's really at a very competitive and high-quality level where players will enjoy engaging with that content, not because you're incentivizing them only to play it but because of the quality of the experience they have playing those games. On the legalization front, we are continuing to plan and put effort into taking advantage of the opportunity that exists in the markets right now where you have states that are having, in some cases, erosion of taxes or in other cases, going to lose some taxes from fewer -- less federal aid for things like Medicaid in the future after election later this year and really trying to mobilize and get additional states to open up in a way that will be very favorable for our company. Operator: Our next question comes from the line of Jordan Bender with Citizens. Jordan Bender: I want to start maybe on the tax increases, and maybe more specifically, in Illinois, I saw your minimum bet went from $1 up to $5. I guess question one is that -- was that more specific to the city tax that went in place? Or is there something in that market that changed that strategy? And then I guess, more broadly, I mean, did that -- is the strategy, the minimum bet, do you think that's something that we can expect if we do see other states whether it's this year or some point down the line, of you looking to implement that to kind of offset any of the future tax increases? Kyle Sauers: Yes. So Jordan, the minimum bet was not necessarily in response to the Chicago tax. So at this point, we're not passing through a transaction fee like some of our competitors are. We've chosen to use a minimum bet strategy. Could we use that in other markets in response to some sort of different tax structure? Absolutely. I think we want to make sure we're using all the levers we have that we think make the most sense both for us financially as a company and so that we're treating players as fairly as we can under a construct. I mean, certainly, when you look at Illinois, the activity levels have not shown that, that tax is probably good for the consumers. So we'll see how that plays out in other markets. Jordan Bender: Great. And then just on my follow-up, the North American entrance comment, was that related to Alberta specifically? Or is that more of a broader -- I don't know if it's changed the tone, but you're looking to markets you're not currently in now to basically launch a sports betting product. Kyle Sauers: So I'm actually not certain which comment you're referring to, but I think we can answer the question either way. It was -- it's more about Alberta or other potential North American online markets that might newly legalize and not so much about revisiting. I mean we definitely continue to monitor and look at all the different markets. But I think we've been pretty clear that most of the sportsbook-only markets that we've passed on, we've done for good reason and focusing on iCasino specifically in North America has been a real winner for us. Operator: Our next question comes from the line of David Katz with Jefferies. David Katz: Appreciate you taking my question. There's -- I know you addressed prediction markets in some of the prepared remarks, but we continue to hear about the prospects of more traditional gaming products being produced with prediction underlying math models. Is that something that you have looked at and explored because that seemingly might be more relevant for the core of your business? Richard Schwartz: David, thanks for asking the question. I think I could have predicted perhaps the predictions questions from you given that, I think, you've hit us with one every quarter so far this year. But it's a great question and obviously, a lot of discussion in this topic. So yes, so first of all, we have been monitoring it very, very closely, as we've repeatedly said. And monitoring means that we don't do things at a surface level of this company. We're very thorough in our ways that we monitor. So we have looked at every angle possible and I think -- or certainly most of them. I think that we are a very nimble organization. If we need to react in some way at some point, we are able to do so. But when it comes to your specific question, I think that it would be more challenging to justify a prediction market when the underlying event is being played for stakes, right? When you're betting on an underlying event, the underlying event -- game is being played for stakes, I think it's harder to justify that as being the type of market that's regulated there. So having said that, I think, obviously, a lot of courts are going back and forth. You'll continue to see that. I saw the Ninth Circuit came out with a ruling earlier this afternoon. And so we're going to continue monitoring the stakeholders' views, including regulators, legislators and anyone else involved here to kind of make sure that we're on top of the opportunities, but I certainly think that there's a lot more to come in this area. David Katz: Okay. And perhaps an easier one, and I hope you haven't touched on this already. Kyle, in your remarks, you mentioned that G&A grows in line with revenue. Did you -- or can you elaborate on what's in there? Are there some tech upgrades? Or why would that grow in line with revenue? Kyle Sauers: Yes. So I think it's notable that it will grow faster than it has the last couple of years. And I think we've been known to be a company that's prudent with our investments. Richard talked about it a little bit, but we do have -- we feel like we've got the real opportunity here to spend more on some differentiated casino content that we put out there, also increasing lobbying efforts in a moment in time here where we think there's a real opportunity to get some iCasino legalization across the finish line in the next couple of years. Obviously, we're always investing in our people, and we have our pay increases in -- just in terms of modeling, we've talked about this before, but our biggest incremental or sequential step-up in G&A is from Q4 to Q1. So we just -- we feel like this is a good time to be investing in those areas, and that's built into our guidance for '26. Operator: Our next question comes from the line of Ryan Sigdahl with Craig-Hallum. Ryan Sigdahl: Richard, Kyle, another really nice strong quarter and guidance. I want to start with the North America MAUs, grew 51% online casino. I mean I'd ask the generic question just how that's possible. I think, Richard, you gave some of that in the prepared remarks. But more specifically, are there specific acquisition channels that you're opening up or that you're leaning into? Or really, where is that acceleration coming from in a very competitive market? Kyle Sauers: Yes. It's really broad-based, Ryan. I think our team just keeps getting better and better. You're right, it's a very -- I don't remember what word you just used, but it's an impressive number. Our cost to acquire players are the -- they're the lowest they've been since before we went public, where we didn't necessarily have the funding to put the right money to work. So our teams are -- they're continuing to evaluate different channels, different creative. It is certainly helpful to have a product that people want to come back to over and over again because that number is not just about first-time depositors, although despite not launching in any new markets, we now have our third quarter in a row of record first-time deposit numbers, so that fills the top of the funnel, but you've got to keep those people coming back and you got to keep people reactivating that maybe have been away for a little while. So it's a combination of all kinds of things. But our teams are doing a fantastic job in bringing in new players, making sure they know what the product is about and then putting the great product in front of them when they show up. Richard Schwartz: I'll just add that... Ryan Sigdahl: Maine -- go ahead, Richard. Richard Schwartz: Sorry, Ryan. Just one quick thing. We have a focus on offering the best user experience, but high quality is great but also differentiated. And again, if you just differentiate something but you don't get the experience right, it doesn't matter if you're different, if players don't really find what you've done differently to be all that compelling. So for us, being better and different has been a goal, and everyone in the organization is working towards achieving those high-level goals. And through that, you then have all sorts of A/B testing and all kinds of technical tools that we're using to ensure that we're sort of delivering the right type of customers, the right type of experience that matches their interests. Kyle Sauers: And just I'll pile on one more, Ryan, just because it would be a shame if I didn't mention it. But I think another piece of the puzzle is customer service and the way we treat customers and making it easy and friendly for them to get through the first time they show up to easily getting a deposit on the platform, easily getting their money off the platform. And when they have any issues, that we're responsive and treat them the right way. So I think we focus a lot on that and do a really good job at it. Now I'll let you ask about Maine. Ryan Sigdahl: All very helpful color. Yes, Maine would be the follow-up question here, just legalizing iGaming. Is that a strategic state for RSI and then your confidence level that you could get a skin agreement with 1 of the 4 tribe licensees there? Richard Schwartz: Ryan, I think this is a -- Maine is an attractive market by virtue that online casino, which is our strength, will be available there. As you know, there's 4 tribal partners there -- tribes there that are -- that currently have the licenses. And so obviously, it's about trying to find the right fit and the right relationship and create the right proper value for the partnerships to work together well. Clearly, we are a great partner in other states, for other tribes and other lotteries, et cetera. We've proven ourselves to be very strong in smaller states, populations and be able to really generate large share in those opportunities. And so I think if someone who operated casino and has a poker platform that, I think, does add a lot of value to acquisition in a small state, we are a very attractive, appealing partner there. We are considering the options there to hopefully have a chance to be in that market someday. Operator: Our next question comes from the line of Mike Hickey with StoneX. Michael Hickey: Richard, Kyle, congrats, guys. Great quarter, great year, great guide. You're sort of a beacon of light here in a tough market. Just 2 questions, both, I think, on the prediction market. So forgive us, Richard. I don't think it's your favorite topic, but obviously, it's important here. I guess, first, it looks like there's some evidence now of some handle share loss to prediction market. So just curious your view, especially in concentrated markets like Delaware, where you're 100% share, if you're seeing anything there. The second piece would be the opportunity, also hearing sort [ guidance ], offering sort of incremental TAM or TAM expansion. So curious if you're also obviously seeing some level of that. And then I'm wondering, Richard, your ability, if you see it over time, still early days, but if you see a migration path from prediction market players to traditional products, where they're looking to sort of get a better value, better parlay, obviously, a better overall experience, if you see an opportunity there and in particular, if you see an opportunity on getting them on to your casino product. Obviously, the cross-sell is very strong. This wouldn't be a pure cross-sell. But given that you're the only casino offering in Delaware and other states, it seems like an opportunity for you guys. Kyle Sauers: All right, Mike, I'll jump in and Richard can follow on if he wants. There's a lot of questions in there. So hopefully, I'll get them all. I think the first is what we're seeing. I think the fact is it's hard to tell. It doesn't appear that it's hurting our OSB business and handle, but it's definitely hard to measure. I think when it comes to Delaware, I mean, if you just look at the last 4 months, and I'll include January, we're up over 50% year-over-year each of those months in revenue. So again, it's -- I think it's hard to measure, but that's -- those are pretty solid results. And when you get to TAM expansion, I think it does this -- all of this activity brings a lot of awareness to consumers. So there's certainly an element there that can draw more people in and more interest. I don't know, Richard, do you want to talk about just the product and kind of how it relates to what's out there for prediction markets today? Richard Schwartz: Yes, sure. I mean so on the technology side, a lot of the technology elements of the CFTC-approved platforms aren't as technically advanced as what we perhaps have in our industry. And so certainly, a lot of the platforms, the player account management systems that exist in our industry could be repurposed and leveraged for prediction markets. In terms of -- if you were to have a prediction market product, I can envision there being an ability to cross-sell between the different verticals and treating prediction markets like you might treat a poker, a third-party platform or even your own in-house poker platform, having the verticals across the different jurisdictions where an operator is operating. So I think there's certainly cross-sell opportunities. It comes down to the types of mechanics and products that you were referring to. Clearly, if you're having a product that has a skill involved, you're going to sort of appeal to maybe a player that has a skill interest in a different type of prediction market. And I think if there's elements of chance involved, which is still being worked through the courts, then certainly, I think that is a different type of cross-sell. So I think there's a lot of opportunity in that ability to sort of learn what works and doesn't work on the cross-sell. But certainly, from a core technology standpoint, there are a lot of similarities between for platforms that are being used today in the CFTC markets and real money gambling platforms. Michael Hickey: Just a quick follow-up. I guess maybe a couple of quarters ago, we asked you if you saw -- and I know you're a product guy. That's one of the reasons why you're so strong and have the market share you do. Looking at the prediction market platforms, are there certain qualities on the platform, whether it's ease of use or maybe the cash out piece being more visible, are there certain qualities that you think might resonate to one of your traditional gaming customers that you could look to do sort of product enhancements in the future? Richard Schwartz: Yes. I mean there's always innovation in all kinds of areas. I think one thing about prediction markets is that operators are self-certifying, which means a little bit of an easier process perhaps to try things out that maybe would be harder to do in a state-level regulatory environment. I think it's still too early to really appreciate all the different elements of what's going to be improved or not, but certainly, you're going to see improvements made in prediction market operators. And I think some are going to come from the approach of trying to replicate a sportsbook interface, and others are going to probably come up with approaches that are going to be novel and differentiated and bring a different element of experience to a user that may be different from what they can get in a more conventional sportsbook. So I think there's still a lot of the leading minds in our industry who historically have kind of moved from one vertical to next, are focused very heavily on prediction markets right now. So I think you'll start to see some of those types of innovations come to market. Operator: Our next question comes from the line of Jed Kelly with Oppenheimer. Jed Kelly: Just going back to the MAU growth, very healthy once again. Are you -- is it strength with that casino first -- that historically casino-first player? Or are you having success more with the first -- sports-first player? Would just love just some background on that. Kyle Sauers: Yes, Jed. So just to be clear, that 51%, I'm sorry, is the growth in North America in markets that have iCasino. If you look at just North America in total, which includes all of our sports-only markets, it grew 37%. So that strength is really coming from the online casino markets. I mean not coincidentally, that's where we're investing most of our marketing dollars and our efforts there from a marketing perspective, and we're seeing the returns. Jed Kelly: Got it. And then just as some of your larger competitors start to market the prediction market products, specifically into football, are you seeing any changes in the promotional environment where you may have an opportunity to take share? Kyle Sauers: I don't think we've seen -- you'll have different operators have different strategies and at different times, right? And some of them will lean in a little bit more. But I wouldn't suggest that there's been any significant change in the promotional intensity across the landscape. Richard Schwartz: I would just add that our strategy is really not to try to gain share through bonusing but by focusing when others are maybe distracted and by delivering innovative experiences that are unique and different for the player with the goal that players, when they find us, they stay with us. And so our focus really is about -- less about using incentives to encourage players to stay with us but more about having them stay with us for the reasons that we talked about earlier, that Kyle also mentioned with our customer service, making sure we reduce friction for the players and let them know that we're fair, honest and treating them well. Operator: Our next question comes from the line of Chad Beynon with Macquarie. Chad Beynon: I wanted to ask about the sports betting hold maybe for the year, for 2025. I know there was some nice improvement just from a parlay mix standpoint. But can you talk about the year-over-year hold growth that you had in the year? And then more importantly, for '26, are there still opportunities to increase that hold? And is that a part of the guidance? Kyle Sauers: Yes. So maybe I'll start with the last piece. Yes, I mean, obviously, we've got a guidance range that has ranges for -- of outcomes for various different things, but it is -- our expectations for hold are built into the guidance, probably not expectations that we're going to improve it dramatically on the sports side, but I think we do have the opportunity to continue to improve it. And to your point, we've continued to improve over the last several years the product. The depth of the markets has gotten so much better. Our percentage of parlays and prop bets has continued to increase. Even in Q3 last quarter, I think we pointed this out on the call, but when it was a bit tougher for sports hold, we had our highest sports hold in the U.S. in our history. And then we did that once again in the fourth quarter. We had a little bit better outcomes in Q4 in the industry, but we've continued to see improvements there. So we think that can continue to happen. There's -- the product will continue to get better, and we think there's continued shift that will happen to more parlay bets. Did I catch all your questions in there? Chad Beynon: Yes, that's perfect. And then just a follow-up. I know you have a slide in there, and you've talked about the poker opportunity and how that differentiates you versus some of the other competitors. Where are we on the poker journey either with -- from a Rush Street perspective or just from a North America consumer awareness perspective? Richard Schwartz: Sure. I think I'll take that one. Poker is sort of -- was expected to be a lot larger market years ago when New Jersey first regulated. But because, historically, it had been a national liquidity and it only opened in a single couple of states where it [ enjoyed ] liquidity, I think it was Nevada and New Jersey initially, you really didn't get the liquidity that you needed to kind of create sustainable table sizes, tournament sizes, variety of tables, different bet sizes. And what's been happening with our efforts is that we've now launched, in the last 12 months, poker in 4 states, tie them all together to share liquidity. There's no operator right now in the U.S. who has more than 4 states, and we're -- we've talked about our plans this year to add a fifth state, which will make us, I think, the first operator to be in 5 states in the United States. And we -- our view of poker has been really clear that it does appeal to a broad gambler, and poker players and enthusiasts like to play other casino games. And certainly, if we can attract a customer who likes to play poker and then win their business over to play casino games, it's a win for us. And the same thing happens if we can acquire a customer and have an active customer who then stays with us playing poker because they no longer have to leave us to go play with a competitor's brand for poker during a tournament time. So at the end of the day, we really feel that poker completes the ecosystem, and it really is a great retention tool for us to have. We do have a TV platform as well, Poker Night in America, nationally broadcast TV on CBS Sports for now many years. So it helps us with brand building, and it brings personality and engagement to the brand and brings it alive for betters. And ultimately, that's what's important for us, is to have a way to grow our brand and attract and retain customers. Operator: There are no further questions at this time. I would now like to pass the call back to Richard Schwartz for closing remarks. Richard Schwartz: Thank you for joining us today. We're excited about the road ahead and look forward to sharing our first quarter results in late April. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Welcome to The Hackett Group Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO; and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin, sir. Robert Ramirez: Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's fourth quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of the Hackett Group; and myself, Rob Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4:08 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data that's discussed on this call that is not contained in the release on the Investor Relations page of our website. Before we begin, I would like to remind you that in the following comments and in the question-and-answer session, we will be making statements about expected future results, which may be forward-looking statements for the purposes of the federal securities laws. These statements relate to our current expectations, estimates and projections and are not a guarantee of future performance. They involve risks, uncertainties and are considered difficult to predict and which may not be accurate. Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors that are contained in our SEC filings. At this point, I would like to turn it over to Ted. Ted Fernandez: Thank you, Rob, and welcome, everyone, to our fourth quarter earnings call. As we normally do, I will open up the call by providing overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow and guidance. We will then review our market and strategy-related comments, after which we will open it up to Q&A. This afternoon, we reported revenues before reimbursements of $74.8 million and adjusted earnings per share of $0.40, which were above and at the high of our quarterly guidance, respectively. While we cannot control the short-term market sentiment or demand volatility, we can control the intrinsic value we create. Over the past 2 years, we have been systematically expanding our suite of GenAI-enabled platforms to lead in the rapidly emerging Agentic enterprise era. By embedding our IP into our new platforms and models, we believe we will be able to generate new revenue with higher margins in entirely new ways that allow us to deliver breakthrough value to clients. Our quarterly results continue to reflect the market and our own disruptive effects given our aggressive AI transition. Our strategy has been to develop highly differentiated GenAI-enabled capability that leverages our unique expertise as well as our proprietary IP. The goal was to be able to accelerate and, more importantly, enhance the value of solutions we deliver to clients. Our AI leadership and relevance is being defined by our distinct capabilities to help clients identify, evaluate, design and deploy high-impact AI solutions utilizing our AI XPLR platform. We are not surprised by the changes required by the AI transition. We were early adopters and anticipated the required changes. We started in January of 2024 when we first introduced AI XPLR version 1, and in September of 2024, when we acquired the globally recognized GenAI engineering capabilities of LeewayHertz to expand our agentic design and build capabilities and also enhance our platform innovation as well as licensing efforts. Our AI XPLR version 5 release is now licensable. AI XPLR is distinct due to its enterprise-wide solution simulation, ideation and detailed process and agentic design capabilities, which are supported by solution-specific ROI. AI XPLR is uniquely ours because it is powered by our proprietary Hackett solution language model and informed by our globally recognized Hackett process benchmarks and best practices process intelligence IP. Although we started with AI XPLR, we have now introduced new platforms, which include XT to support our business transformation engagements, and AIX to support our enterprise application implementation engagements, and Ask Hackett, which we rolled out last summer, to support the delivery of our executive applied intelligence programs. As we recently announced, we now have a complete suite of GenAI-enabled platforms to support nearly all of our services. We believe we have been innovative leaders in our industry. As I mentioned, these platforms significantly accelerate and enhance the value of our services and should allow us to grow our revenues and realize meaningful margin increases as we move from labor-based delivery to labor-led services supported by our powerful GenAI delivery platforms and globally recognized IP. Our job is to make sure our clients understand the importance of their business process context and the critical role it plays in the successful adoption of AI. There is little to no value realization without a detailed understanding of a client's specific business process and reimagining those specific client requirements by assessing the AI-enablement opportunity of each work step. That is the critical foundational element of AI XPLR. We believe that our platform-enabled delivery strategy will provide significant new revenue growth opportunities with higher margins while helping clients capture this unprecedented transformative opportunity. We also believe that channel partners can help us accelerate our efforts by increasing client access, which should also result in revenue growth. We have spent nearly 6 months with a global technology and consulting company demonstrating and testing AI XPLR's powerful capabilities on global, highly complex client solutions that have resulted in our platform being described as game changing. We expect to execute and launch a global go-to-market collaboration agreement that will allow us to jointly serve new and existing clients. We expect to finalize our agreement and launch our first client shortly. We also continue to believe that we can bring significant value to all organizations that utilize Celonis' software and other process mining software. Our ability to ingest their valuable volume and process execution detail into AI XPLR allows us to accelerate and better inform our ideation and solutioning recommendations, which allows customers to accelerate their transformation initiatives. We also plan to launch a go-to-market pilot initiative with ServiceNow this month. We have been pursuing this opportunity for several months and are eager to see the outcome from our joint pursuits. On the balance sheet side, we continue to generate strong cash flow from operations, which has allowed us to maintain our dividend and continue our strong buyback program. With that said, let me ask Rob to provide details on our operating results, cash flow and also comment on outlook. I will make additional comments on strategy and market conditions following Rob's comments. Rob? Robert Ramirez: Thank you, Ted. As I typically do, I'll cover the following topics during this portion of the call. I'll cover an overview of the fourth quarter results for 2025, along with an overview of related key operating statistics, an overview of our cash flow activities during the quarter, and I'll then conclude with a discussion on our financial outlook for the first quarter of 2026. For the purposes of this call, I will comment separately regarding the revenues of our Global S&BT segment, our Oracle Solutions segment, our SAP Solutions segment and the total company. Our Global S&BT segment includes the results of our North America and International GenAI consulting and implementation licensing revenues, benchmarking and business transformation offerings, Executive Applied Intelligence Advisory Programs and our OneStream and eProcurement implementation offerings. Our Oracle Solutions and our SAP Solutions segments include results of our Oracle and SAP offerings, respectively. Please note that we will be referencing both total revenues and revenue before reimbursements in our discussion. Reimbursable expenses are primarily project travel-related expenses passed through to our clients that have no associated impact on our profitability. During our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors. Specifically, all references to adjusted financial measures will exclude reimbursable expenses, noncash stock-based compensation expense, all acquisition-related cash and noncash expenses, amortization of intangible assets and other nonrecurring items, and AI transition charges related to headcount reductions. We have included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today and will post any additional information based on the discussions from this call on the Investor Relations page of our company's website. For the fourth quarter of 2025, our total revenues before reimbursements were $74.8 million, which exceeded the high end of our guidance. The fourth quarter reimbursable expense ratio on revenues before reimbursements was 1.2% as compared to 1.3% in the prior quarter and 2.3% when compared to the same period in the prior year. Total revenues before reimbursements from our Global S&BT segment were $38.6 million for the fourth quarter of 2025, a decrease of 11% when compared to the same period in the prior year. As Ted mentioned, the market is moving to AI-enabled services. AI is becoming an increasing percentage of all of our client engagements as the convergence of traditional and new AI-oriented services is occurring at an accelerated rate. Given our expanded platform delivery capabilities, we can accelerate value realization and realize productivity improvements utilizing our XT and AI XPLR platforms. We expect Q1 revenue to be up sequentially and gross margin to be up on a year-over-year basis and both to continue to increase throughout the year. Total revenues before reimbursements from our Oracle Solutions segment were $14 million for the fourth quarter of 2025, a decrease of 20% when compared to the same period in the prior year. With the recent introduction of our AIX platform, which supports the delivery of our Oracle implementation engagements, we have started to realize delivery productivity improvements. Correspondingly, we expect both revenue and gross margin improvement in Q1 on a sequential basis, and we expect those improvements to continue to increase throughout the year. Total revenues before reimbursements from our SAP Solutions segment were $22.2 million for the fourth quarter of 2025, an increase of 32% when compared to the same period in the prior year. This was primarily driven by strong software-related sales in the quarter, resulting from the increased sales investments we have made and the SAP success driving S/4HANA cloud migrations. The strong software sales were coupled with significant implementation fees, and therefore, we expect demand for our SAP services to be strong throughout the year. Approximately 22% of our total company revenues before reimbursements consist of recurring multiyear and subscription-based revenues, which include our Executive Advisory, Application Managed Services and GenAI license contracts. We are seeing the natural migration of IPaaS requests to transition to the Hackett Intelligence IP capabilities embedded in Ask Hackett, AI XPLR and ZBrain related recurring revenue opportunities. Total company adjusted cost of sales totaled $40 million or 53.4% of revenues before reimbursements in the fourth quarter of 2025 as compared to $40.5 million or 52.3% of revenues before reimbursements in the prior year. Total company consultant headcount was 1,301 at the end of the fourth quarter as compared to total company consultant headcount of 1,317 in the previous quarter and 1,284 at the end of the fourth quarter of 2024. Total company adjusted gross margin on revenues before reimbursements was 46.6% in the fourth quarter of 2025 as compared to 47.7% in the prior year. Adjusted SG&A was $20 million or 26.7% of revenues before reimbursements in the fourth quarter of 2025. This is compared to $18.4 million or 23.7% of revenues before reimbursements in the prior year. The year-over-year increase is primarily due to incremental commissions from increased license sales in the SAP segment. Adjusted EBITDA was $15.9 million or 21.3% of revenues before reimbursements in the fourth quarter of 2025 as compared to $19.5 million or 25.2% of revenues before reimbursements in the prior year. GAAP net income for the fourth quarter of 2025 totaled $5.6 million or diluted earnings per share of $0.21 as compared to GAAP net income of $3.6 million or diluted earnings per share of $0.12 in the fourth quarter of the previous year. Fourth quarter 2025 GAAP net income includes noncash stock compensation expense from our stock price award program of $1.8 million or $0.08 per diluted share and acquisition-related cash and noncash compensation expense of $1.1 million or $0.04 per diluted share. 2024 GAAP net income includes noncash stock compensation expense from our stock price award program of $5.1 million and acquisition-related cash and noncash compensation and related expenses of $2.3 million, which in total impacted our Q4 2024 GAAP results by $0.23. Acquisition-related cash and noncash stock compensation items related to purchase consideration for the LeewayHertz acquisition. This consideration paid to the sellers contain service vesting requirements, and as such, is reflected as compensation expense under GAAP rather than purchase consideration. Adjusted net income and diluted earnings per share for the fourth quarter of 2025 totaled $10.9 million or adjusted diluted net income per common share of $0.40, which is at the high end of our earnings guidance range and compares to prior year adjusted diluted net income per share of $0.47. The company's cash balances were $18.2 million at the end of the fourth quarter of 2025 as compared to $13.9 million at the end of the previous quarter. Net cash provided from operating activities in the quarter was $19.1 million, primarily driven by net income adjusted for noncash activity and increases in accounts payable and accrued expenses, partially offset by an increase in accounts receivable. Our DSO or days sales outstanding was 71 days at the end of the fourth quarter as well as in the previous quarter and 66 days in the prior year. As Ted mentioned, we were pleased that during the fourth quarter of 2025, we were able to utilize our strong balance sheet and cash flow to return capital to our shareholders. By leveraging our credit facility, we completed our stock tender offer, which resulted in the repurchase of 2 million shares of the company's stock at a price of $20.29 per share, including transaction-related fees. In total, including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares, the company acquired 2.1 million of the company's stock at an average of $20.30 per share for a total cost of approximately $42 million. Our remaining stock repurchase authorization at the end of the quarter was $11.4 million. At its most recent meeting subsequent to quarter end, the company's Board of Directors authorized a $13.6 million increase in the company's share repurchase authorization, bringing it to a total of $25 million. Additionally, the Board declared the first quarter dividend of $0.12 per share for its shareholders of record on March 20, 2026, to be paid on April 3, 2026. During the quarter, the company borrowed a net of $32 million from its credit facility to fund the tender offer. The balance of the company's outstanding debt at the end of the fourth quarter was $76 million. Before I move to guidance for the first quarter of 2026, I would like to remind everyone of the seasonality of our business relative to costs as we move sequentially from Q4 to Q1. Specifically, consistent with first quarter guidance provided in previous years, our first quarter guidance for 2026 will reflect the sequential increase in U.S. payroll-related taxes and the sequential buildup of our vacation accruals. The company estimates total revenues before reimbursements for the first quarter of 2026 to be in the range of $70.5 million to $72 million. We expect both Global S&BT and Oracle Solutions segments to be down when compared to the prior year, but sequentially up from Q4. We expect SAP Solutions segment revenue before reimbursements to continue to be up on a year-over-year basis. As a result of the continuing pivot of our business to generative AI, the company will incur AI transition charges in the first quarter of approximately $1 million to $1.5 million. These charges primarily relate to severance costs due to headcount reductions and the leverage of our AI delivery platforms. The company may continue to incur additional charges during 2026. These charges will be excluded from adjusted results. We estimate adjusted diluted net income per common share in the first quarter of 2026 to be in the range of $0.34 to $0.36, which assumes a GAAP effective tax rate on adjusted earnings of 26.3% as compared to GAAP effective tax rate of 20.1% in the first quarter of the prior year, an unfavorable increase in taxes of approximately $0.04 per diluted share. We expect the adjusted gross margin as a percentage of revenues before reimbursements to be approximately 44% to 45%. We expect adjusted SG&A and interest expense for the first quarter to be approximately $20 million. We expect first quarter adjusted EBITDA as a percentage of revenues before reimbursements to be in the range of approximately 19.5% to 20.5%. Lastly, we expect cash balances, excluding the impact of share buyback activity, to be tempered due to the payment of 2025 performance-related bonuses and the payment of employee income tax withholding triggered by the net vesting of restricted shares. At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months. Ted Fernandez: Thank you, Rob. As we look forward, let me share our thoughts on the near- and long-term demand environment and the growth opportunity it offers our organization. Although demand for digital transformation remains solid in traditional areas, it continues to be impacted by thoughtful decision-making as organizations assess competing priorities partly due to economic concerns and also partly due to the consideration and also confusion of emerging GenAI technologies and what they offer. We have not been surprised by the powerful potential to the compute and inference power of the large language models to drive transformative change, but rather the confusion created by the frequent introductions of new technology, primarily build capabilities, is where we believe the confusion lies. What requires greater understanding is what is necessary to realize high returns from the deployment of the available emerging capabilities. To assess and design high ROI solutions requires client-specific process knowledge in order to reimagine and enhance the new workflows to determine Agentic workflows, which should be designed and deployed, which can provide targeted returns. That is where our process knowledge, expertise, benchmarks, and the powerful capability of our Hackett solution language model, which powers all our platforms are distinct. The rapidly emerging build capabilities which are being introduced by the client providers like Anthropic and OpenAI are only accelerating and reducing the cost to build agents and Agentic workflows. However, they do not eliminate the need to fully understand the exact client-specific business process requirements, the client's existing automation footprint and the need to assess existing and potential data sources necessary to fully optimize the value of AI in the design, build and deployment of solution. This is without even considering what it takes to fully then execute a high-impact, high productivity solution, which impacts both the number of people that support that activity as well as the new cognitive capabilities that are going to be utilized and how. We believe we are entering the greatest automation expansion area of our lifetime, which will dramatically increase the enterprise automation footprint of every organization. The opportunity of all technology players to provide the underlying application and infrastructure solutions is obviously massive, and therefore, their marketing is understandable. But no one should underestimate the incumbent enterprise application providers' ability to thrive in this hyper-growth automation environment. Based on our estimates, the automation expansion opportunity is somewhere between 3x to 5x the existing automation footprint which exists today. Imagine all of the change that was to happen if you really were transitioning an organization from what is primarily static and rule-based automation to fully cognitive automation, which allows for the deployment of digital labor. Again, do not underestimate the opportunity for software and services companies to be able to grow in this environment given the significant amount of automation, which will and can be deployed and the help they will need to affect those changes. One of the critical questions that AI XPLR answers is what automation is required by a proposed AI solution which already exists in the client's enterprise application footprint. Clients have no desire to duplicate any automation they have worked so hard to deploy. So is the transition as disruptive as software and services companies and as the current stock market volatility of that sector suggests. The answer is yes, yes. But again, at the same time, what has not been equally or properly reported is the total addressable market increase for enterprise automation that will be delivered when and as existing automation footprints extend into the cognitive and Agentic workflows and therefore, who will provide it. Increasing automation opportunity should more than offset any disruption that software and services provider experience if they expand their current application footprint and related services capability to capture the significant growth. All organizations will need to understand the potential productivity and intelligence force multiplier that will emerge when existing static rule-based automation starts to transition to cognitive automation. We expect IT budgets to increase with increasing attention and allocations to the rapidly emerging GenAI solutions and the related opportunities and threats that it brings. Eliminating confusion, as I say, will be key to accelerating the adoption. The unlimited potential of GenAI will define an entirely new level of AI world-class performance standards, driving all software and services providers to extend the value of their existing offerings with the introduction of Agentic AI capability. We believe this will result in unprecedented innovations, which all organizations will have to consider. This shift is consistent with our aggressive pivot to GenAI-enabled transformation, which we believe creates a unique value creation opportunity for our organizations. We believe that the platforms that we have deployed and the unique capabilities of AI XPLR have already significantly expanded our opportunity to help clients address areas and opportunities that we were not previously pursuing. Another critical investment that we have made is to also build our own GenAI-assisted knowledge-based solution, which I previously shared is called Ask Hackett AI. Ask Hackett leverages our proprietary Hackett benchmarking, executive advisory business transformation intelligence, which allows us to define and enable digital world-class performance for clients. Our IP will also be increasingly leveraged across all of our market-facing service delivery platforms. We are continually ingesting and indexing all IP in order to make sure that it is available to support our clients as well as our associates. On the talent side, competition for experienced executives with high technology agility continues. Overall turnover continued at acceptable levels during the quarter, and we expect that trend to continue. Lastly, even though we believe that we have the client base and offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP, platforms and transformation expertise, and can add scope, scale or capability, which can accelerate our growth. As always, let me close by congratulating our associates on our innovation and performance and by thanking them for their tireless efforts and always urgent to stay highly focused on our clients and our people no matter what challenges we may encounter. Those conclude my comments. Let me turn it over to our operator, and let us move on to the Q&A section of our call. Operator? Operator: [Operator Instructions] Our first caller is George Sutton with Craig-Hallum. George Sutton: Ted, you threw out a couple of big nuggets there, so I wanted to bite. First, on the 6-month demonstration and testing work that you've been doing with what sounds like an international potential reseller and partner. Can you just talk a little bit more about what the ultimate outcome you're looking for from that specific relationship would be? Ted Fernandez: Yes. Look, it goes without saying that I would have loved to have been able to announce the agreement on the call, but we expect to do so shortly. But with that said, look, the capabilities of AI XPLR are really distinct. I know it sounds repetitive, but I want you to know where we believe we are just -- we have extreme capability, which continues to be very distinct. Our ability to first to simulate an entire industry's AI opportunities across 26 industries and our ability to do so with AI XPLR are distinct. Our ability to capture a client's automation footprint inside of the client, so that we understand any automation considerations the client wants to consider or make, we believe, are distinct. Our ability to evaluate the return on investment on any AI solution, which a client asks us to review, we believe it may not be distinct, but in that performance intelligence side, gosh, our IP is as strong or stronger than anyone. And as you know, George, that acquisition from LeewayHertz allowed us to expand the solution design module of AI XPLR to just incredible capabilities. We call this our ability to develop an 80% solution with specific client input that we require. But our ability to do that, to develop a detailed functional design and soon to extend that same capability within ZBrain to a technical design, we think are also going to be highly distinct. It is those capabilities that will allow a partner to provide us the required information we normally request or they provide us when they're trying to pursue a specific area of their business or evaluate the performance of specific area of the business, our ability to use our AI XPLR capability to provide our partners and their clients with significant productivity ideas supported by detailed agentic workflows with a Hackett prepared return on investment is very valuable. And I believe that those organizations that are considering strategic alliances with us is because of the credibility of the brand and then the unique capability of AI XPLR. So I would describe that relationship and leveraging that for existing or actually prospecting new clients would be where we intend to initially start. George Sutton: Just to be clear on this relationship, if you do get this signed, that would be something you would announce intra-quarter, hypothetically? Ted Fernandez: Yes. If we get it signed, they would like to announce it as -- I don't know as much as we do, but they obviously would like to announce that relationship as well. George Sutton: Okay. And then separately, you actually mentioned ServiceNow and going forward with that partnership. Can you just give us a sense of how you'd be going to market with them? And any more details on that plan? Ted Fernandez: We were trying to do something with them for months and they were looking for specific go-to-market areas to use, again, this unique capability we have and to see what the impact is in introducing their existing platform capabilities. So it's a pilot to target. We've recommended and we've discussed a specific industry that, again, the hope is to be able to launch that before the end of the month. George Sutton: Got you. And just one final question. You mentioned transition costs from GenAI, meaning your headcount can actually now be reduced in certain areas due to GenAI. So that's interesting because, obviously, the other parts we're talking about our go-to-market strategies with AI. This would be your costs are actually starting to come down because of GenAI. Can you just give us a better sense there? Ted Fernandez: Yes. If you will recall, we launched 2 new platforms at the end of the year, which include XT for our transformation professionals, this is where we do operational modeling and transformation road maps for clients, as well as AIX, originally known as AIXelerator, which we use to help deliver our technology implementation solutions. We've rolled out that on the transformation side. I believe that there's now 10 clients where we are leveraging this new capability to deliver the targeted outcome for the client. And we think we're seeing productivity improvements that could result in some numbers that will be in excess of 25%. Let me just leave it there. And as you and I have mentioned, we don't quote rates anymore. We quote outcomes, and we put a value on that outcome, and the client can determine whether that outcome can be delivered by anyone else as powerfully and as efficiently as we can. And if they can't, then we will realize margin expansion as we believe we've already started to experience in Q1. The AIXelerator platform launched initially through our OneStream group, and it's now rolling out into Oracle. And that platform, the best story for that platform is that we were asked to jump in late in the game to a very significant OneStream opportunity in an industry, I'll just say, we have limited capabilities in. The power of our platform to demonstrate how we are able to execute, configure, build, test that OneStream opportunity was powerful enough for us to come in late in the game and win this over a list of who's who. We expect similar results. So we've now got it in front of 2 or 3 other opportunities. So we're just seeing some success, but we clearly know that we have built the initial capability looks at how to really eliminate what I'll call production or data gathering or execution costs that would have been generally done by some of our junior consultants, not that we have many of them, because that's not the way our enterprise model works. But there is no doubt that our ability to take that and deliver a much powerful outcome on a similar opportunity that we would have had without the new AIX capability is distinct, and it's significant. And if we're able to demonstrate that enhanced capability with a tremendous -- with a high level of confidence, leveraging the IP and the Hackett brand that people come to rely on and trust, we're going to capture a meaningful amount of those gains. The client will get a higher and better result and accelerated speed, and we will be able to provide that with, I'll call it, people obviously leading the implementations, but being, gosh, powerfully supported by these new platforms. Since we just rolled out the platforms and we started and launched all these new engagements, we saw that there was both an opportunity that we were going to have additional people that we may not need under this new service delivery environment. So we decided that we should make sure that the marketplace knew that we were realizing those productivity gains and how they were impacting our operating results. Operator: Our next caller is Jeff Martin with ROTH Capital Partners. Jeff Martin: Ted, I wanted to dive in. You mentioned at the start of the call that your products are all licensable now. Just curious how things are progressing on the licensing front. Ted Fernandez: Like we said, we announced that, I believe it was the first week of January. So we expect to start licensing the product here as we progress throughout the year. The product has been utilized in the version 4 capabilities to assist the delivery of a consulting engagement. But after a consulting engagement, once the client is exposed to the platform, now if they would like to continue to either ideate, discover opportunities on their own, because the module now resulted in 2 modules, an ideation explorer module and a solutioning module, the client has the option to license either one or both depending on how they want to avail themselves to that capability. So we expect to expose clients to version 5 as we are on any and all of the engagements that we're launching. And then we expect clients to decide how they would like to avail themselves to those platforms. So they'll make that determination. Jeff Martin: Got it. And then you mentioned that you're not quoting on rate anymore, you're quoting on outcome. I was curious if you could elaborate on that, so we can understand that from a financial model point of view. Ted Fernandez: Well, we evaluate each job and respond to the client requirements. And we quote the completion of the pass that the client has either in an RFP or whatever the detailed request is, and we quote that fee. If the client wants to have a rate discussion, which some may, then we talk about the licensing aspect of the platform during the engagement. If the client wants to -- most of the clients want to focus on specific deliverables and the outcome from those deliverables, then we quote a fee. So we know we're in a transition period, but we are not making our platform available to clients for free. Let's make sure that's clear. We believe that it results in an accelerated deployment, which the client values, and value realization, and greater value to any of these engagements that we have, whether we are doing AI discovery and solutioning with XPLR, business transformation with XT or an Oracle or OneStream implementation for now using AIX. Jeff Martin: Great. And then I was curious on this large international channel partner, would that be a relationship where you could leverage some of their implementation? Or would you need to continue to staff up additional implementation resources as you go along? Ted Fernandez: Entirely up to them. They obviously have been exposed and understand the capability of our engineering capabilities. So it will be determined on an engagement basis. Operator: Our next caller is Vincent Colicchio with Barrington Research. Vincent Colicchio: Ted, can you give us an update on the pieces within the S&BT business, how they're trending? Ted Fernandez: Specifically, which ones are you thinking about, Vince? Is there something specific you have in mind or... Vincent Colicchio: No, nothing specific, just to get a sense for how things are trending. You talked about AI, the AI piece. Ted Fernandez: Clearly, the number of clients that have an AI element is going to be increasing meaningfully throughout the year. The other big pieces that are in there, the advisory business actually did pretty well given the current environment. So the integration of our GenAI -- the introduction of our GenAI program and now the fact that we're also providing our members with access to ideation capabilities of AI XPLR, so that they can get, I mean, exposed to actual actionable AI opportunity identification through their program, we believe, is also helping. So that performed -- I'm going to say, in the environment and seeing what others have presented, we performed pretty well. And OneStream, well, I mean, that group is up sequentially. S&BT, as Rob said, is expected to be up sequentially from Q4 to Q1. Same with Oracle. Same with SAP. Well, maybe not sequentially to SAP because of the bar, but year-on-year, SAP is in a very strong position. So again, look, in '25, we saw the, if you want to call it, demand disruption and the confusion I referred to at the beginning. We believe that new capabilities, better understanding of adoption. And if the technology providers actually describe their capabilities a little bit more precisely, I think it will help all of us as well. But I don't know if that's the background that you wanted or you had some more specific, Vince? Vincent Colicchio: That's helpful. And then with SAP and Oracle improving and expected to improve throughout the year, I assume we'll still see a mix shift towards AI for the next 12 months. Is that accurate? Ted Fernandez: Yes, absolutely. I mean the SAP performance, as we mentioned, has been coming on for a few quarters, because SAP has done a terrific job with convincing clients to migrate to S/4HANA. So that's reflective in our business. And the Oracle sequential decline is important for us. So we continue to be very hopeful that with that increase and with the AIXelerator capability rolling out inside of that practice, that it gives our Oracle group an opportunity to start growing in 2026 -- resume growth in 2026. Operator: And at this time, I show no further questions. I would now turn the call back over to Mr. Fernandez. Ted Fernandez: I'd like to thank everyone for participating on our fourth quarter earnings call. Look forward to updating everyone again when we report the first quarter. Thank you, everyone. Operator: Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.
Operator: Good day, and welcome to the Toll Brothers First Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please also note, today's event is being recorded. I would now like to turn the conference over to Douglas Yearley, CEO. Please go ahead, sir. Douglas Yearley: Thank you, Rocco. Good morning. Welcome, and thank you for joining us. With me today are Gregg Ziegler, Chief Financial Officer; Rob Parahus, President and Chief Operating Officer; Wendy Marlett, Chief Marketing Officer; and Karl Mistry, who will be taking over as the third CEO in our company's history on March 30, when I will transition to the Executive Chairman role. Karl is an outstanding leader who has been with Toll Brothers for over 20 years. He has run homebuilding operations in many of our key markets and currently heads all of our Eastern operations. He knows this company inside and out, and I'm very confident he is the right person to lead us through the next phase of growth. During today's call, I will provide a brief overview of our results in the quarter, discuss the market at the macro level and touch on our strategic initiatives. Karl will focus on our operational results and provide a deeper dive on conditions across our markets and product lines. And as usual, Gregg will provide a detailed review of our financial results in the quarter and discuss guidance for the balance of the year. Before we start, however, I need to provide the usual cautionary notice that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, interest rates, the availability of labor and materials, inflation and many other factors beyond our control that could significantly affect future results. Please read our statement on forward-looking information in our earnings release of last night and on our website to better understand the risks associated with our forward-looking statements. I am pleased with our first quarter results as we met or exceeded guidance across nearly all metrics. We delivered 1,899 homes in the quarter and generated $1.85 billion of homebuilding revenue, approximately $24 million above the midpoint of our guidance. Both our adjusted gross margin and SG&A margin were also better than guidance by 25 and 30 points, respectively. We earned $2.19 per diluted share, a 25% increase compared to the $1.75 we earned in last year's first quarter and $0.05 above our implied guidance. We are off to a good start in fiscal 2026. In the quarter, we signed 2,303 net contracts for $2.4 billion, flat in units, but up 3% in dollars compared to last year's first quarter as the average sales price increased to $1,033,000. Since mid-January, we have seen an increase in overall traffic and sales consistent with the start of the spring selling season. While it is early, we are cautiously encouraged by the increase in activity over the past month. Our strategy of balancing price and pace worked well in the first quarter. Our overall incentive remained flat compared to the fourth quarter at 8% of sales price. This is the third consecutive quarter that incentives remained flat on a percentage basis. We are benefiting from a healthy mix of build-to-order and spec homes in our inventory, balancing the higher margin in our build-to-order business with the lower margin but faster turns in our spec business. Impressively, our average adjusted gross margin in our build-to-order business remained above 30% in the first quarter. Overall, as we head into the heart of the spring selling season, we are very comfortable with the level of specs in our inventory and their stage of construction. Consistent with the strategy I discussed during our last call, we increased our spec production in our first quarter in order to have the right amount available for delivery in the summer when many buyers are looking to move into their new homes ahead of the start of the school year. We expect to increase community count in the second quarter from 445 communities at the end of the first quarter to 455 at the end of the second. For the full year, we are targeting another 8% to 10% increase over the 9% we grew last year. We also have enough land under control to continue growing community count at this pace over the next several years. At first quarter end, we owned or controlled approximately 75,000 lots, 55% of which were optioned. Our land is well located in desirable locations which allows us to be highly selective and disciplined as we evaluate new land opportunities. We also continue to structure land acquisition and development opportunities to be more capital efficient, including through option arrangements, land banks, joint ventures and similar structures that allow us to defer payments and lot takedowns. I'd also point out that we continue to benefit from our more affluent customer base, which is less sensitive to the affordability pressures that continue to impact the entry-level buyer. Over 70% of our business is luxury move-up and luxury move-down, which serves a wealthy cohort that has benefited from growth in their home equity and stock market appreciation. The remaining 25% to 30% serves the more affluent first-time buyer who is less impacted by affordability pressures. Many of them are older millennials buying their first home later in life when they have higher incomes and are more financially secure. The average delivered price of our first-time buyer was approximately $670,000 in our first quarter. Lastly, I will note that our balance sheet remains very healthy. We have ample liquidity, low net debt and a strong investment-grade credit rating. We recently extended the maturities of our revolving credit facility and most of our term loan facility to February 2031. We also continue to expect significant cash flow generation from operations this year. All of this enables us to continue investing in the growth of our business while also returning capital to our stockholders. With that, I will turn it over to Karl. Karl Mistry: Thank you, Doug. I'm excited for this opportunity and grateful for the trust that you and the Board have placed in me. I very much appreciate our investors and the analyst community, and I look forward to building on the great relationships that you and Bob before you have developed over the years. We started the year off with a solid first quarter. We beat the midpoint of our homebuilding revenue guidance, exceeded margin expectations and increased our earnings per share by 25% over last year's first quarter. From a demand perspective, we saw the typical seasonal pattern unfold in the first quarter. Based on signed contracts on both an absolute and per community basis, November was the slowest month followed by December with a market uptick in January. As Doug mentioned, we saw an increase in demand beginning in mid-January that is consistent with the start of the spring selling season. With our broadly diversified portfolio and affluent buyer profile, we are well positioned to capitalize on any further improvement in homebuyer demand. Geographically, the Boston to South Carolina corridor has continued to perform well, as has Boise, Las Vegas and Reno in our mountain region and all of California. Most of Florida seems to have found its footing, although Tampa remains challenged, along with Atlanta, San Antonio and the Pacific Northwest. Among our buyer segments, our luxury move-up business also continued to perform well. In the first quarter, luxury move-up accounted for 59% of homebuilding revenues. Luxury first time was 25% and luxury move-down was 16%. Our luxury move-up business has the highest margin among our buyer segments, so we are very pleased that it is the largest part of our business. Turning now from buyer segments to our build-to-order and spec home strategy. I will note that we generate about 1/2 of our homebuilding revenues from specs and the other half from build-to-order. We believe we have achieved the right balance in our overall business with this healthy 50-50 mix of high-margin build-to-order homes with buyers who want to customize their dream home with specific layouts, designs and finishes alongside lower margin, but faster turning spec homes that appeal to buyers who want to move into their homes on a quicker schedule. I will also point out that we sell our specs at various stages of construction. Although the mix can change from quarter-to-quarter, on average, approximately 1/3 of our specs sell before framing is completed. And the risk profile and margin for these homes is not all that different from our build-to-order homes. Our goal is to sell our specs as early in the construction cycle as possible. The earlier we sell our specs, the greater the opportunity for our customers to visit our design studio and personalize their homes with finishes that match their tastes. This ability to customize remains an important competitive advantage for Toll Brothers, and it benefits our margins as design studio upgrades tend to be highly accretive. In the first quarter, design studio upgrades, structural options and lot premiums averaged $212,000 or 25% of our average base sales price. Doug mentioned the benefits of serving a more affluent customer base, consistent with the past several quarters, approximately 24% of our buyers paid all cash in the first quarter. And the loan-to-value for buyers who took a mortgage was approximately 70%, also consistent with recent quarters. Our contract cancellation rate in the first quarter remained low at 2.8% of beginning backlog. This industry low cancellation rate speaks to the financial strength of our buyers as well as the sizable deposits they make and how emotionally invested they become as they personalize their homes at our design studios. We benefited from improved production efficiencies in our construction cycle times in the first quarter. For our build-to-order homes, the cycle time was approximately 9.5 months and was about 1 month shorter for spec homes. Additionally, our build costs in the first quarter were flat compared to the fourth quarter of 2025. With that, I will turn it over to Gregg. Gregg Ziegler: Thanks, Karl. In the first quarter, we delivered 1,899 homes at an average price of $977,000 and generated home sales revenues of $1.85 billion. While we exceeded the midpoint of our revenue guidance, the average delivered price was below our guidance due primarily to mix as we delivered more lower-priced finished spec homes in the quarter than projected. As Doug mentioned, we signed 2,303 net agreements for $2.4 billion in the quarter, flat in units, but up 3% in dollars compared to the first quarter of fiscal 2025. The average price of contracts signed in the quarter was approximately $1,033,000, which was up 3% compared to the first quarter of fiscal 2025 and up 6% sequentially. The increase was primarily due to mix as we sold well in the North and Pacific regions, particularly in our luxury move-up business. Our first quarter adjusted gross margin was 26.5%, 25 basis points better than our guidance of 26.25%. Q1 gross margin exceeded our guidance due primarily to operating efficiency. We are maintaining our full year adjusted gross margin guidance of 26.0% and project a second quarter margin of 25.5%. In the second half of the year and especially in the fourth quarter, we expect our adjusted gross margin to rise as our deliveries mix should include a greater contribution from our higher-margin North and Pacific regions. Write-offs in our home sales gross margin totaled $11.7 million in the quarter, approximately $5 million of these related to predevelopment costs and option write-offs with the remainder associated with a handful of operating communities in different markets around the country. SG&A as a percentage of revenue was 13.9% in the first quarter compared to our guidance of 14.2%, the 30 basis point beat relative to our guidance was due primarily to leverage from higher-than-anticipated homebuilding revenues. Note that our SG&A margin in the first quarter is higher as it generally is our lowest revenue quarter, and it includes accelerated employee stock-based compensation expense that only hit in the first quarter. Joint venture, land sales and other income was $72 million in the first quarter compared to $2.5 million in the first quarter of fiscal 2025 and our guidance of $70 million. During the quarter, we substantially completed our previously announced sale of about half of our Apartment Living portfolio for net cash proceeds of approximately $330 million. The $72 million of joint venture, land sales and other income includes the net gain associated with this sale. As we noted on our last call, we intend to fully exit the multifamily development business over the next several years. Our tax rate in the first quarter was 22.9%, 30 basis points better than guidance. We ended the first quarter with approximately $3.4 billion of liquidity, including $1.2 billion of cash and $2.2 billion of availability under our revolving bank credit facility. Our net debt-to-capital ratio was 14.2% at first quarter end compared to 21.1% 1 year ago. Turning to our guidance. I will remind you that our projections are subject to all the caveats regarding forward-looking statements included in our earnings release. We are projecting fiscal 2026 second quarter deliveries of approximately 2,400 to 2,500 homes with an average delivered price between $975,000 and $985,000. For full fiscal year 2026, we are maintaining our projected deliveries of between 10,300 and 10,700 homes with an average price between $970,000 and $990,000. As I noted earlier, we expect adjusted gross margin to be 25.5% for the second quarter, and we continue to project 26.0% for the full year. We expect interest and cost of sales to be approximately 1.1% in the second quarter and for the full year. We project second quarter SG&A as a percentage of home sales revenues to be approximately 10.7%. For the full year, we continue to expect it to be 10.25%. Other income, income from unconsolidated entities and land sales gross profit in the second quarter is expected to breakeven. We continue to expect $130 million for the full year, of which we have already realized $72 million. Included in our second half projection is the sale of several stabilized apartment projects. We project the second quarter tax rate to be approximately 26% and for the full year rate to be approximately 25.5%. Based on land we currently own or control, we expect to grow community count by 8% to 10% by the end of fiscal 2026 and are targeting 480 to 490 communities. We expect to be selling from 455 communities at the end of the second quarter. Our weighted average share count is expected to be approximately 96 million for the second quarter and 95 million for the full year. This assumes we repurchase a targeted $650 million of common stock for the full year, with most of that occurring later in the year, aligned with our anticipated higher cash flows. Now, let me turn it back to Doug. Douglas Yearley: Thank you, Gregg. We remain positive on the long-term future of the U.S. housing market. Owning a home continues to be a key aspiration for tens of millions of American families. The market is supported by strong demographic tailwinds driven by the millennial generation reaching its peak home buying years and Gen Z following right behind. The baby boomers who have built up enormous wealth over their lifetimes are passing it down in the greatest generational wealth transfer in history. They are also in the market buying homes as they enter the next stage of their lives. Our country has also enjoyed years of stock market success. In addition, the vast majority of the 88 million American households that own a home have participated in significant home price appreciation over the past decade. These are powerful drivers of long-term demand. On the supply side, the market continues to be underserved. Depending on the estimate, the market would need anywhere between an additional 3 million and 7 million new homes to reach a equilibrium based on population growth. So basic economic forces, strong underlying demand and low supply create a solid foundation for the housing market. We believe that over time, affordability pressures will recede and buyers who have been priced out will come back to the market, creating a much healthier housing ecosystem. In the meantime, we are pleased to be serving a more affluent customer in our luxury business. We will continue to navigate this market with the goal of driving strong returns for our stockholders. I would like to thank our Toll Brothers' employees. Their hard work, talent, dedication and commitment to our customers is the reason we've once again been named the #1 Homebuilder on Fortune's list of the World's Most Admired Companies. Rocco, let's open it up to questions. Operator: [Operator Instructions] Today's first question comes from John Lovallo at UBS. John Lovallo: The first one is you've exceeded your gross margin outlook in each of the past 13 quarters by 65 basis points on average. So sort of with that as a backdrop, what's driving the 100 basis point sequential decline from 26.5% in 1Q to 25.5% in 2Q? Douglas Yearley: John, it's mix. Gregg touched on it. We will have less Pacific in the second quarter, which is for us, a very high margin region. That reverses itself as the year progresses, particularly in the fourth quarter when we will have a lot more coming out of both the North and the Pacific, which are our #1 and #2 margin areas. John Lovallo: Got you. Okay. And then curious on your thoughts of the Sumitomo acquisition of Tri Pointe. I mean, obviously, there's an effort to diversify away from an aging demographic in Japan. But the Japanese in general tend to be pretty big proponents of off-site construction. I mean, do you think that they have a bigger goal in mind here to bring more technology sort of like Toyota did in the 1980s in the automotive industry? Douglas Yearley: I don't know the answer to that. I'm not close enough to it. Doug Bauer could probably help you out on that one. I'm sure there have been conversations around how they intend to invest in his great company. They've obviously been aggressive in terms of getting into the U.S. housing market through the acquisition of a number of mid-cap-sized builders. That's between, of course, not -- it's Daiwa also, we put in that conversation with their MDC deal. So I don't know. The Japanese have always been innovative. We have had a very hard time as an industry, making that innovation, that technology lead to more efficient homebuilding operations. You've heard me say many times that in my 35.5 years here at Toll Brothers, it's -- the way we build houses has changed very little from when Bob Toll sent me out in the field with -- when he told me that go buy a pair of Timberland boots and get in a trailer. And so I am -- we are all anxiously awaiting more innovation and technology to the industry. Maybe the Japanese can help in that regard. I don't know. But it's been a tough nut to crack for all of us. Operator: And our next question today comes from Stephen Kim at Evercore ISI. Unknown Analyst: This is Randa on for Stephen. First question, I kind of wanted to dig into your spec strategy. Today, you reiterated that you're comfortable with the spec ratio around 50% and that you would like to close your specs early in the construction process. Say that demand is insufficient to maybe support kind of both parts of your spec strategy, which would you prioritize? Would you either slow your spec starts but continue to sell them earlier under the construction process, or maybe sell later, but maintain that 50% spec ratio? Karl Mistry: Randa, it's Karl. We are happy now with the 50-50 mix. You'll see that change quarter-to-quarter, may go up and may come down. To your question about a softening, we are very comfortable and as we outlined, execute well at a high margin on the build-to-order business. So we would pull back if there's more softening. We're not going to blindly build specs into a softening market. And we are working to sell them at an earlier stage. The trick for us is getting our customers into the design studio to make their selections. It's a unique process. We execute well there. So yes, we would lean into build-to-order if the market softened. Unknown Analyst: Got it. That makes sense. And then curious what kind of long-term net debt to cap are you targeting? And how do you think about cash? How much cash you want to hold going forward? Gregg Ziegler: Randa, it's Gregg. Yes, long-term net debt to total cap, we think somewhere in the mid-teens makes a lot of sense for us. And then in terms of what our cash holdings need to be, you'll see they generally accelerate as you move into the second half of the year. But we probably have a minimum holding of a few hundred million just to meet normal operating expenses, including land purchases. But that's kind of the general cash flow cadence that we see throughout the year. Operator: And our next question today comes from Sam Reid at Wells Fargo. Richard Reid: Karl, welcome to the call. I wanted to unpack the January to-date comments. And would you just characterize the traffic and sales that you're seeing as better, as potentially good relative to normal seasonality? Or is it just tracking in line with normal seasonality? Maybe just trying to parse through that difference there. And then we've heard some comments from peers that weather has been a little bit of a headwind year-to-date. It doesn't sound like that's been the case for you, but any comments on impacts from weather? Douglas Yearley: Sam, it's Doug. I'll take this one. There's 3 data points, right? We've got web traffic. We've got physical traffic visiting our communities, and we've got deposits because agreements lag 1 to 3 weeks behind deposits. When you look at the last month, the agreement number is not as relevant. And for all 3 of those, web traffic, physical traffic and most importantly, deposits, we are up modestly over last year, same period of time. It's modest. It's too early to be high-fiving around here, but it causes us to have what we call -- the industry likes to call cautious optimism, and that's where it is. But we're in mid-February. We'll have to see how it plays out, but we are -- we knew it would increase as mid-January hit, consistent with the beginning of what we call the spring selling season. And it did, of course, increase, but it is only up modestly over a year ago. But at the moment, we'll take it. Richard Reid: Sounds like a plan. Douglas Yearley: Weather, I'm sorry. Your question about weather my apologies. North Carolina, Raleigh and Charlotte got slammed. Nashville has been on the news. Kids didn't go to school for a week. Vanderbilt lost half of their beautiful trees. My friends tell me from kids being there. And Atlanta got hit. So that corridor, the Mid-Atlantic from North Carolina down to Georgia definitely had an impact, slowed us down for a week to 10 days. But outside of that, Philly, New York, Boston, Washington recovered pretty quickly. So I think it's just the Carolinas to Atlanta corridor that we felt it. Richard Reid: All helpful color there, Doug. And then maybe switching gears on the P&L to gross margins. You talked a little bit about gross margins improving sequentially in Q3 and Q4. It sounds like Q4 is going to be particularly strong just given the timing of some of those luxury closings. But would just love maybe a little bit more nuance around the cadence of margin in the third and fourth quarters. Karl Mistry: Sam, it's Karl. Yes, we expect that the back half to be better. It's mix again. It's actually similar to the answer around the second quarter. So in the back half of the year, you'll see more revenue out of the Pacific and the North as well as more of that move-up luxury that I referenced in my remarks. And that's what's contributing to the improvement, and we see more of that even in Q4. Gregg Ziegler: That's right. Yes. Karl, I can just add on to it for you, Sam. Yes, Q3 is probably slightly improved over Q2, and then we expect the benefit to accelerate a bit in Q4. Operator: And our next question today comes from Mike Dahl at RBC Capital Markets. Christopher Kalata: This is Chris on for Mike. Just a follow-up on that 3Q, 4Q gross margin step-up. Outside of mix, I mean, could you just talk about how you guys are thinking about the pricing incentives, costs and some of the other financial impacting gross margin outside of mix? Karl Mistry: Yes. So incentives, as you go throughout the year, we've maintained them at current levels. So there's no assumption that the market has a dramatic improvement or anything like that. So it should be -- we tried to underwrite for today's conditions throughout our projection, and that's where we left it. Douglas Yearley: And for building costs. Building costs are flat. Karl Mistry: And building costs are flat. Douglas Yearley: We're beginning to see a little bit of downward pressure, downward move, downward improvement on building costs, but it's small. Lumber right now is a little bit of a headwind, but there's other costs that are coming down. But in terms of our projections, we're just going into it assuming they'll stay flat. Christopher Kalata: Understood. Appreciate that. And then just maybe if you guys can just touch on what you're seeing in the land market today, the outlook there as you progress through the year and how aggressive you guys plan on being investing in land this year? Karl Mistry: Yes. Mike, it's Karl again. I think we're still seeing that low- to mid-single-digit inflation on land. Operator: And our next question today comes from Michael Rehaut at JPMorgan. Michael Rehaut: Congrats, Doug and Karl, on your upcoming moves. First, I just wanted to dig in a little bit to the -- also on the comments around kind of year-to-date trends. And I think you mentioned just earlier that you're up modestly versus a year ago. I just wasn't sure if that was in terms of sales pace in particular or any other metrics? And more broadly, as you talked about incentives being consistent for, I think, 3 months in a row, that's not necessarily what we've heard from other builders. I think maybe perhaps they're more spec or first-time builder oriented -- but buyer oriented. But there has been a lot of movement around incentives over the last 3 months, I think, on a broader market basis. So just would love to understand, number one, again, the up modestly versus a year ago, what exact metrics are those, if it's sales pace? And number two, how your own incentive strategy is different from the market? Douglas Yearley: Sure. I'll take this one. All 3 metrics I mentioned, web traffic, foot traffic to our communities and deposits, all 3 of those -- each of those are up modestly over a year ago. With respect to incentives, we're comfortable with the guide around 8%. That's where we've been, as I mentioned, for the last 3 quarters. While -- we did focus in Q1 on leaning into our completed specs a little bit more because we did [indiscernible] down, and we have had success in doing that, where we are now very comfortable moving forward with our mix of the stage of construction of our specs. Some of those completed specs required a little bit more incentive to move them, but that was offset by a modestly lower incentive in our build-to-order business, which was very encouraging. And when you put it all together, it came out to the same 8%. And even though we did lean into selling a bit more of the finished inventory to get down to what we think is the right percentages, we were still able to beat margin. So that was -- I'm very proud of that in today's environment. And we don't -- we think we have fully budgeted and have conservatism in our internal projections around the spec business, which is where the incentive can be a bit higher. And so we're very comfortable with that 8% number. We think it will stick right in that range, and we're very comfortable with full year guide around margin. Operator: And our next question today comes from Alan Ratner at Zelman & Associates. Alan Ratner: Nice quarter. And yes, congrats again to both Doug and Karl. I guess, first, I'll add on to the incentive trend. Personally, I think it's encouraging. I guess, I think you said 3 quarters in a row that incentives have been stable at 8% and it doesn't sound like you're expecting much movement from here in the near term. But I'm curious, as we head into the spring, which typically does have a little more pricing power than the winter. What would you need to see to try to take a stab at dialing back some of those incentives? Is it thinking about absorptions on a year-over-year basis? Is it thinking about what mortgage rates do? I'm just curious at what point you might get more aggressive in trying to dial some of those incentives back? Douglas Yearley: Yes. I think -- Alan, it's a great question. If the market improves, we're going to first lean into pace. Right now, we're running at a 24 pace per year per community to a month. We have the operation capacity in the field and the infrastructure, the organization out there to build into the low 30s per community per year. So the first thing you're going to see is for us to increase pace. But as that happens, price will probably also go up because it's just the nature of more and more people get in your sales office and there's more activity and the deposit starts popping up on the site plan and the sales center and urgency, it's an amazing thing what happens with urgency. And so that will not just drive pace, but it will also drive price, but we will first lean into pace. Alan Ratner: Got it. That makes a lot of sense. And you mentioned having the infrastructure to build 30 homes a year per community. As you think about labor and cost in general, obviously, I think that was the big positive surprise in '25 in terms of the cost relief that builders were able to see in spite of the tariffs. I'm curious how you see the labor environment today? We have seen a little bit of an uptick in lumber prices to start the year. What's the flex in the supply chain right now where if we do see a strong spring, do we -- is there any risk that labor can become tight again, costs can begin creeping higher? Just curious what your thoughts there are. Douglas Yearley: Alan, we are not seeing the impact from tariffs. We -- on the good news, we're seeing plenty of availability of labor, more and more people showing up to the job site that want to work. I think our scale is going to continue to help us with suppliers and so I think it's too early to tell. If there's a really robust spring, which we'd be happy to see, it's hard to see if there's going to be pressure ahead. We'll continue to leverage our scale and the rationalization that we have done with our products over the last several years to minimize those impacts. Operator: [Operator Instructions] Our next question comes from Jay McCanless with Citizens. Jay McCanless: Just wanted to focus on the cost side a little bit. It sounds like labor and construction costs are moving in Toll's favor. Are you seeing any opportunities to maybe lean in on land purchases, especially since Toll seems to be doing better than a lot of other builders out there? Douglas Yearley: Jay, I think we're seeing -- because of who we are and what we build, I think the opportunity for us to structure land deals with seller financing over time more efficiently has always been a part of the playbook. I think we are -- to your question, we are seeing a little bit more of those opportunities of late, which is encouraging on the land side. But broadly speaking, we just have less competition. There are fewer and fewer builders that have capital and the desire to build luxury homes north of $1 million, and that plays right into what we do well. So we'll continue to watch it, and we are seeing a little bit of an opportunity for some well-structured land deals. Jay McCanless: That's good news. Could you talk about the opportunity to raise prices? It sounds like Pacific and North are doing well, but maybe what percentage of your communities this quarter were you able to raise prices? And how is that outlook going forward? Douglas Yearley: 30% to 40% of our communities saw a price increase in Q1. And you're right, the North is the strongest. Boston down to -- really Boston down to South Carolina, that full corridor. It's no longer Boston to Washington, D.C. It extends with Raleigh, Charlotte, our 4 South Carolina markets and Atlanta. Atlanta has been a bit softer lately, but certainly through South Carolina, we have done the best. We had a community in -- down in the Delray Boca Raton area that took 10 sales at $1.5 million in the quarter with a mid-30s gross margin. We have a community in Central New Jersey at the Beach took 12 sales in the quarter at $1 million to $1.2 million, north of 30% gross margin. Southern Cal, at the Great Park, everyone knows the Great Park right next to Irvine Ranch, took 23 sales in the quarter at a community that sold between $1.5 million and $3 million. So there is still action out there, and there's still pricing power. It's relatively limited. But I think what -- I think I fully described it. I think 30% to 40% is about the right range of where we saw some price increases. And by the way, that's -- I have been corrected. Those numbers I just gave you for sales was not in the quarter. It's in the last 8 weeks. So it's in the last 2 months. Operator: And our next question today comes from Paul Przybylski with Wolfe Research. Paul Przybylski: Congratulations, Doug and Karl. I guess to start off, you mentioned your January traffic and deposits were up slightly. Can you add any color on how that breaks out among your consumer groups, especially with how the age targeted is starting off the snowbird season? Karl Mistry: Yes. It was pretty consistent activity between our 3 consumer segments, move up, move down in first time. I don't -- and it was pretty consistent between spec and build-to-order. So there's nothing in those buyer segments that stood out as either outsized sales or undersized. So consistent across the business. Paul Przybylski: Okay. It's good to hear. And then you mentioned that the Pacific Northwest was one of your weaker markets. Can you give us any color on how the ethnic homebuyer demand trends have performed since we've had a little bit of settling since the H1B controversy? Karl Mistry: Yes, Paul, we still hear -- even separate from the Pacific Northwest, I'll just say broadly, we do still hear about it a little bit. The uncertainty around Visa status has created a little bit of a pause from customers across the country. It's been modest, and I don't think it has been concentrated in the Pacific Northwest, but we still hear it on the sales floor. Operator: And our next question today comes from Armando A Barrón with Housing Research Center. Alex Barrón: You probably know me Alex. Anyways, I wanted to ask, so we saw Pulte sold their truss manufacturing plant, but you guys have a very expensive, I mean, not just trusses, but lots of stuff you guys do with those manufacturing plants on the East Coast. I'm just wondering what would it take for you guys to expand those more to, let's say, Texas or Phoenix or some markets where you guys have a bigger scale? Is it a matter of scale? Is it a matter of distance to communities? Like what would it take for you guys to start those types of operations in other markets that are not the East Coast? Karl Mistry: Alex, it's Karl again. We we like the business, and we like its current footprint. It probably serves 20% to 30% of the revenue for the company nationwide, as you know, predominantly sort of Carolinas North. The limitation with expansion of those facilities is transportation costs are really significant. So it's had a sort of a fixed footprint for a very long time. We like the business. That vertical integration in this corridor has really helped us. But at least in the near term, we don't see a need or desire for expansion. Operator: And our next question today comes from Ryan Gilbert of BTIG. Ryan Gilbert: Congratulations to Doug and Karl. I wanted to go back to the North segment, really strong sales, and I understand that demand is strong in this area. I'm just wondering the extent to which there have been any changes in product mix that could be contributing to the improvement in orders and then also how the community pipeline looks and your ability to replace community closeouts given the strength of orders? Karl Mistry: Yes, Ryan, it's a good question. There has been a planned shift and repositioning of product and our land acquisition strategy throughout the Northeast, particularly here in Pennsylvania, New Jersey, New York State, we're seeing a lot of opportunities for infill development, repositioning of old unoccupied or poorly occupied office buildings. These tend to be in very, very good locations, great school districts. And so it's helped us maintain better velocity and absorptions in these markets. I think the other thing you have going on is that there's just less inventory. This corner of the country during the pandemic, it was not one of these markets that ran away. And so inventory has remained a bit muted. And so we -- yes, we are seeing a repositioning of our strategy here, much more attached product. And that's really the same on both coasts, both here in the Northeast and parts of California. Douglas Yearley: And we are also -- to your question about opportunities, we are -- I think, guys, we would all agree, we're seeing outsized land opportunities now in the North and the Mid-Atlantic, which is very exciting for us. Karl Mistry: Yes, the pipeline in the North region is very strong. Ryan Gilbert: Okay. Great. And then second question on the land bank. You've talked about having the lots controlled to continue growing community count in the years to come, but I think kind of flat to down lots controlled versus growing community count seem a bit at odds. So I'm hoping you can add some detail to what gives you the confidence that you can continue growing your community count given relatively flattish controlled lot count and then where you think your optimal years of land supply sits? Gregg Ziegler: Ryan, it's Gregg. We're still very comfortable because we have 75 -- approximately 75,000 lots that we own or control. So the mix is still very favorable with 55% of those being optioned. It's -- when you net out our backlog, I think we have 2.7 years of owned land, so an attractive statistic as well. So we think we have the right land bank to support our continued community count growth, somewhere in that 7% to 10% each year as we look forward. Operator: And our next question today comes from Susan Maklari with Goldman Sachs. Susan Maklari: And I want to add my congrats to Karl and to Doug. My first question is on the design studios. You mentioned that you've still seen some really healthy activity there, especially as you're selling some of those specs a bit earlier. Have there been any notable trends in the spend there? Anything that has changed? And anything that we should be aware of as we're thinking about the outlook for future deliveries and margins? Karl Mistry: Yes, Susan, it's remarkable. Over my 20-plus years at Toll Brothers in good markets and bad, the design studio upgrades as sort of a percentage of the home have been really consistent. And so what has improved is I think if you spend time in our studios, we have continued to professionalize them. We'll continue to do that and make the buying experience better and better. The margin has improved over time. But to your question on spend, it has been very consistent. Susan Maklari: Okay. That's helpful. And then you mentioned some of those headcount reductions that you recently implemented. As you're thinking about balancing costs relative to current conditions, but still being able to flex once things do normalize and improve, can you talk a bit about how you're thinking about those 2 worlds? And what is your ability to eventually ramp the business as conditions improve? Karl Mistry: Yes. Susan, we are constantly making sure that the business is structured to be efficient. And we've done that quarter after quarter. If we have a great spring, again, we're hopeful we do, and we see that absorption at 24-year climb. We see that on the front end of the business first. We see it in the sales offices. And we can begin to staff up, particularly with our field personnel, our construction teams and our sales teams. But our back office, our G&A, those folks are intact. They're here. And as Doug alluded to, we believe have capacity to produce a lot more revenue with the existing team. Operator: And that concludes today's question-and-answer session. I'd like to turn the conference back over to Doug Yearley for any closing remarks. Douglas Yearley: Rocco, as always, you've been terrific. Thanks, everyone, for all your great questions, your interest and support of our great company. This is an exciting time here at Toll Brothers. And we appreciate all of you very much. And I hope you have a wonderful remaining winter and the spring comes early this year for all of us. Thank you. Take care. Operator: Thank you, sir. And we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Hello, everybody, and welcome to the Perion Network Q4 and Full Year 2025 Earnings Call. Today's conference is being recorded, and an archive of the webcast will be posted on the company's website. The press release detailing the financial results is available on the company's website at www.perion.com. Before we begin, I'd like to read the following safe harbor statement. Today's discussion includes forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the headings Risk Factors and elsewhere in the company's annual report on Form 20-F that may cause actual results, performance or achievements to be materially different and any future results, performance or achievements anticipated or implied by these forward-looking statements. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. As in prior quarters, the results reported today will be analyzed both on a GAAP and a non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. Hosting the call today are Tal Jacobson, Perion's Chief Executive Officer; and Elad Tzubery, Perion's Chief Financial Officer. I would now like to turn the call over to Tal Jacobson. Please go ahead. Tal Jacobson: Good morning, and thank you for joining us on the Perion's earnings call for the fourth quarter and full year of 2025. 2025 was a defining year for Perion. For a company that has been around since 1999, we consider 2025 as year 1 for the new Perion, a year in which we changed everything except our name. We redefined our mission, our strategy, our technology, our organizational structure and even our executive team, all in 1 year. Today, we will summarize the results of the pivotal path we took 12 months ago. We will present the Q4 results that gives us the confidence in our Perion One strategy. We will also cover our 2026 guidance and our 3-year organic plan based on the momentum we're seeing. In 2025, we started building Perion One as a centralized platform for marketers. We integrated our technologies, expanded strategic partnerships and introduced new innovations to drive growth. We are now introducing the next phase of Perion One, deepening our technology and becoming an AI-native execution infrastructure that delivers measurable results across channels, platforms and verticals. Outmax, our AI execution agent, is already getting into more and more channels, delivering meaningful results for our customers. Perion One is becoming the infrastructure that allows our clients to harness the power of AI agents to execute all their media activities. Let's start with the fourth quarter performance. I'm happy to share that we delivered strong results in Q4. Our main growth engines, CTV, Digital Out-of-Home and Retail Media, all delivered double-digit year-over-year growth, significantly outpacing the market. We accelerated our contribution ex-TAC faster than the revenue growth. We delivered strong adjusted EBITDA growth and generated meaningful operating cash flow, demonstrating that we continue to operate with discipline. This combination of growth and profitability reflects the strength of the infrastructure we are building and our ability to execute in a highly dynamic market. The global advertising ecosystem is both massive and complex. Marketers navigate in a fragmented universe of screens, platforms, formats and buying environments while being held to higher standards of performance and accountability. Budgets, signals and optimization are often siloed by channels. That fragmentation is where efficiency and performance break down. This is the core challenge we've been focused on solving. We've built Perion One to unify the fragmented ecosystem. Its AI-powered execution infrastructures enable marketers to harness AI agents to perform highly complex marketing activities. Perion One helps advertisers make confident decisions faster and continuously optimize every campaign in real time. It also helps publishers to maximize inventory value through smarter demand allocation and yield optimization. By aligning execution across both sides of the ecosystem, demand and supply, Perion One improves efficiency, performance and outcomes end-to-end. At the center of Perion One is Outmax, our AI native execution agent that drives results for our customers. Outmax' goal is to be the one AI agent for every channel, whether it's YouTube, Facebook, Instagram, NBC, Disney+ or digital out-of-home. Outmax acts as the intelligent execution agent that ensures every dollar spent is working at its maximum potential. It removes the guesswork and replaces it with algorithm certainty, allocating spend, managing pacing and optimizing outcomes in real time. Outmax is already showing great results for our customers. Let's take a look. [Presentation] Tal Jacobson: Here is a strong example of how Outmax agents performance drives trust and scale. The Outmax AI algorithmic model started with this specific advertiser on a $50,000 YouTube budget test in 2023. The performance justified the budget expansion as we grew the spend to $4.5 million in 2024 and to $20 million in 2025. When technology drives performance, scale comes organically. Another example comes from our digital out-of-home technology, where we're seeing the same pattern. In late 2025, we announced the launch of digital out-of-home player that became the marketing operating system for digital out-of-home publishers. As you can see in this graph, an out-of-home publisher that integrated this solution in September '25 scaled with us from a spend of EUR 200 a month to over EUR 0.5 million a month in just 90 days. This is not an isolated win. It demonstrates the repeatability of our execution model across environments and formats. It's the Perion One infrastructure that scales performance and creates stickiness among our customers. This next example shows how execution and optimization come together in our Outmax for CTV. With Webroot, we applied Outmax CTV, AI-driven optimization, to continuously improve performance. Outmax drove a significant reduction in cost per action and an uplift in site visitation that led to week-over-week efficiency improvements. It is also important to note that Webroot had a full transparency into performance, allowing them to see what was working and scale with confidence. All these examples prove that the outcome is consistent across different brands, channels and formats. This Outmax outcome delta graph represents how we think about our AI agent models, models that have only one purpose, to create consistent incremental uplift for our customers. It is a difference between having an army of media traders executing with hands-on keyboards versus our Outmax AI agent optimizing in real time. Following a short learning period, Outmax agent continuously applies dynamic bid and execution adjustments across dimensions, reallocating spend based on live performance signals. This execution capability directly translates into how customers consistently increase ROI at scale with us and why this execution model is trusted by some of the world's largest brands. Perion's technology serves 52 of the Fortune 100 companies in the U.S. across industries, including retail, pharmaceuticals, airlines, technology, media, financial services and insurance. This wide variety reflects trust in our execution model regardless of the vertical. One of the most exciting things about the new Perion is the level of strategic partnerships we are attracting. We are partnering with the most advanced companies in our industry to accelerate our growth. This quarter, we launched 3 new partnerships with Amazon, Walmart and Mastercard. Through our new Amazon partnership, we are combining Amazon's unique audience data and measurement capabilities with our AI-driven creative technology and premium inventory. This partnership strengthened Perion's long-term programmatic revenue potential with commerce brands. I'm also happy to share that Perion's AI-powered dynamic creative optimization is now integrated with Walmart Connect's first-party audience and sales insights. This help advertisers better personalize campaigns, explore opportunities for incremental sales lift and improve ROI. And with Mastercard, we're integrating aggregated purchase insight across the U.S. and Europe, particularly strengthening our digital out-of-home and CTV execution. Together, this partnership extends the power of our infrastructure. Collectively, those achievements reflect a structural shift in our business. 2025 marked Perion's transition from reset to execution and scale. We established Perion One as our AI native execution infrastructure. We unified our brands, our technology and our data into a single operating system, powering the execution of planning, activation, optimization and measurement. Our growth engines reaccelerated. CTV, Digital Out-of-Home and Retail Media showed clear momentum and drove advertising solutions back to growth. We strengthened execution across the organization, simplifying the operating model, refreshing leadership and increasing focus and speed. At the same time, we deepened our AI capabilities, introducing advanced execution algorithm agents and expanding performance solution across channels. Importantly, we returned to year-over-year growth in the second half of the year, demonstrating operating leverage and improved cash flow strength. Taken together, 2025 repositioned Perion for a scalable, durable growth. This foundation is what supports our forward targets. By 2028, we expect Perion One to represent the vast majority of our business with legacy activities remaining stable and no longer defining growth. Today, we present how we think about the future of Perion with our 2028 targets that include 3 main KPIs: Two for accelerated organic growth and the third for EBITDA margin expansion. Specifically, we are targeting Perion One pro forma spend CAGR of at least 25%, contribution ex-TAC CAGR of at least 20% and adjusted EBITDA margins reaching 28% of contribution ex-TAC. These targets are supported by clear structural growth drivers that include continued expansion in our performance-driven AI agents across CTV, Digital Out-of-Home, YouTube, Meta, web and Retail Media. This resonates with a market-wide shift towards performance advertising that is directly aligned with the Perion One offering. Internal AI-driven automation improves operating leverage, while disciplined cost management and targeted investment in go-to-market and innovation ensure we scale efficiently. This is scalable growth built on execution. With that, I'll now turn it over to Elad Tzubery, our CFO, who will walk you through the financial results of the fourth quarter, full year 2025, 2026 guidance and our targets for 2028. Elad Tzubery: Thank you, Tal, and thank you all for joining us on the call today. Our fourth quarter results mark a definitive turning point for Perion. Over the last 18 months, we focused on unifying our advertising solutions under the Perion One strategy. We are now seeing substantial financial impact. This quarter demonstrates the power of our execution. It reflects on our top 3 financial metrics. We delivered 19% year-over-year growth in contribution ex-TAC resulting from our go-to-market strategy. We achieved a 53% surge in adjusted EBITDA resulting from the efficiency measures we built earlier this year, and we generated over 400% year-over-year increase in operating cash flow, which enabled us to end the year at almost 90% adjusted free cash flow to adjusted EBITDA ratio. The Perion One platform continues to fuel our 3 growth engines: CTV, Retail Media and Digital Out-of-Home. Even more importantly than the outstanding performance of these engines, they are also consistently outgrowing the market. We expect this momentum to continue serving as the primary catalyst for our future expansion. We are entering 2026 with a highly efficient operating model, strong cash-generating abilities and a clear long-term financial road map to continue our top line growth. Our strong financial results, the successful implementation of the Perion One strategy and our AI-based execution infrastructure are the foundation on which our 2028 target plan is built on. We are backing this confidence in Perion's organic growth trajectory with action. We recently expanded our share repurchase program to a total of $200 million, of which we already executed $118 million. Moving on to our key financial metrics for the fourth quarter. Revenue for the quarter grew 6% year-over-year to $137.1 million. More importantly, our contribution ex-TAC grew 19% year-over-year to $65.2 million, significantly outpacing our growth in revenue. Adjusted EBITDA reached $24.3 million, an increase of 53% compared to last year. This implies an adjusted EBITDA to contribution ex-TAC margin of 37%, showcasing the operating leverage we have unlocked. The strength of our underlying business model and our consistent ability to generate cash proved itself effective once again. During this quarter, we generated $21.8 million in operating cash flow. We ended the year with $313 million in net cash even after repurchasing shares at almost $24 million in the fourth quarter alone. Looking at the full year of 2025, revenue was $439.9 million and contribution ex-TAC for the year was $203.4 million. Adjusted EBITDA reached $45.2 million, reflecting a 22% ex-TAC margin. On an annual basis, we generated $41.9 million cash from operations, representing a 504% year-over-year increase. Furthermore, our conversion rate of adjusted free cash flow to adjusted EBITDA was an exceptional 89%. This proves that even during a transition year, Perion's business model is resilient, profitable and highly cash generative. While our AI execution infrastructure is channel-agnostic, our strategic focus on the fastest-growing channels in digital advertising is bearing fruit. Our growth engines are both growing and outpacing the market. CTV revenue grew 59% in the fourth quarter and 42% for the full year, reaching $62.1 million. As the shift from traditional linear TV to connected TV advertising is accelerating, advertisers are increasing their CTV spend, looking for performance and measurement. This is exactly what Perion is offering. Digital Out-of-Home revenue grew 28% in the quarter and 36% for the full year to $94.9 million. This was driven by our expanded global footprint and our complete end-to-end digital out-of-home full stack solution. Retail Media also continues to be a star performer. Revenue increased 42% in Q4 and 36% for the full year and more than doubled the market growth. As we integrate more deeply with industry-leading retail partners like Walmart and Albertsons, we are seeing higher stickiness and recurring spend from top-tier brands. We expect to continue to capture market share in this rapidly expanding vertical. Looking at our revenue mix for Q4 and the full year, we see the continued shift towards advertising solutions that stands at the core of Perion One. Advertising solutions revenue increased by 7% year-over-year in Q4. This demonstrates the growing portion of CTV and Digital Out-of-Home, which accounting collectively for 44% of revenue in the fourth quarter and 36% in the full year 2025, accelerating from 34% and 23%, respectively, last year. Web declined 17% year-over-year in the fourth quarter and 13% for the full year. It is important to note that on a pro forma basis, when utilizing the lower-margin activities that were discontinued in late 2024, web revenue declined 12% in the quarter and only 1% for the full year. Search revenue increased 3% year-over-year in Q4, and we expect it to remain stable going forward. Contribution ex-TAC in the fourth quarter grew by 19% year-over-year to $65.2 million, representing a margin of 48% compared to 42% last year. For the full year 2025, contribution ex-TAC margin was 46% compared to 43% last year. As we move forward with our strategic plan and add more customers to the Perion One platform, we expect a shift in product mix that will grow our contribution ex-TAC at a faster pace compared to the total revenue. This measure better represents our top line performance than revenue alone. Adjusted EBITDA for the fourth quarter surged 53% year-over-year to $24.3 million, representing 37% of contribution ex-TAC and 18% of total revenue. This compares with 29% and 12%, respectively, last year. The fourth quarter is the second consecutive quarter that delivered year-over-year margin expansion. This reflects our improved operational leverage and is a result of the disciplined cost management structure we implemented earlier this year. We have successfully decoupled our expense base from our revenue growth, allowing a higher share of each incremental dollar to flow to the bottom line. As we increase our investment in innovation and go-to-market initiatives, we will also continue to optimize our cost structure. Those efforts, along with scaling our Perion One platform, will allow us to further expand our margin gradually over the next years. GAAP net income in the fourth quarter was $8 million or $0.19 per diluted share, a 61% increase compared to the fourth quarter last year. On a non-GAAP basis, net income for the fourth quarter was $21.4 million or $0.49 per diluted share. This reflects a 30% increase compared to the fourth quarter last year. For the full year, GAAP net loss amounted to $7.9 million or a loss of $0.19 per diluted share. On a non-GAAP basis, net income for the year was $51.3 million, delivering a non-GAAP diluted earnings per share of $1.13. In the fourth quarter of 2025, cash generated from operating activities significantly increased to $21.8 million, and our adjusted free cash flow grew to $20.7 million. On an annual basis, cash generated from operating activities significantly increased to $41.9 million and adjusted free cash flow grew 142% to $40.2 million. This reflects an 89% free cash flow conversion ratio, among the highest in our industry. Turning to our balance sheet. As of December 31, 2025, our balance sheet remains very strong and includes $313 million in cash, cash equivalents, short-term bank deposits and marketable securities. Our strong cash position gives us the financial flexibility to support our balanced capital allocation framework. First, it supports organic investments in our AI infrastructure and an aggressive go-to-market strategy. Next, it allows us to fund our share repurchase program. And lastly, it provides us the flexibility to pursue M&A opportunities that align with our Perion One strategy. Looking ahead, we expect to continue to generate positive free cash flow and maintain a strong conversion ratio. We remain committed to returning value to our shareholders. In the fourth quarter alone, we repurchased 2.5 million shares for a total amount of $23.9 million. Since the initiation of the program, we have returned over $118 million by repurchasing 12.9 million shares. Reflecting our confidence in our 2028 target plan, our long-term value proposition and our cash generation ability, the Board has recently authorized an expansion of our share repurchase program from $125 million to a total of $200 million. At our current valuation, this program represents in full a 56% return on our market cap. 2025 served as a year in which we focused on consolidating our Perion One platform. We introduced new advanced solutions, implemented Outmax, our Agentic AI execution agent and build the foundations for growth with efficient scale. We expect 2026 to be the year we begin to scale. For the full year 2026, we expect contribution ex-TAC of $215 million to $235 million and adjusted EBITDA of $50 million to $54 million. Looking ahead for the next 3 years, our strong results, the successful enrollment of the Perion One strategy and the AI-based execution infrastructure we have been building provide us with the substantial foundations for the 2028 target plan we present to you today. As we become the AI execution infrastructure of digital advertising, spend becomes a leading indicator of our platform's adoption and scale. It represents the total media spend running through our platform. On a pro forma basis, Perion One spend grew at a CAGR of 34% in the 2022 to 2025 time frame. Due to our investments in go-to-market, our innovative solutions that allow us to attract new customers and Outmax's ability to improve ROI and retain customers, we remain confident that the growth trajectory will continue moving forward. we project that Perion One spend will continue to grow at a pace of at least 25% CAGR through 2028. The other legacy parts of Perion, primarily our search activities, are expected to slightly decrease going forward and remain relatively stable. Diving deeper into Perion One, on a pro forma basis, Perion One contribution ex-TAC grew at a CAGR of 19% across the 2022 to 2025 time frame. Moving forward, the surge in spend is expected to translate into growing contribution ex-TAC. This provides us with confidence to target a contribution ex-TAC CAGR for Perion One of over 20% through 2028. Our confidence in this target is supported by 3 key catalysts. First, the ongoing strength of our growth engines; CTV, Digital Out-of-Home and Retail Media continue to provide significant organic tailwinds. Second, the broader market shift to performance advertising aligns perfectly with Perion One's offering. Outmax, our AI agent, demonstrates higher ROI for advertisers, establishing our solutions as value-driven products. Third, our value proposition attracts new customers and drives expansion within existing ones, reflected in our land and expand business model. It is important to emphasize that this growth will be purely organic, driven by the Perion One flywheel. Starting 2026, we expect Perion One to comprise 85% to 90% of the consolidated contribution ex-TAC. Moving forward, search is becoming a smaller portion of the contribution ex-TAC mix, completing our transition to a Perion One pure-play growth story. The rapid growth of Perion One spend and contribution ex-TAC will be accompanied by a balanced approach in profitability. We are targeting an adjusted EBITDA to contribution ex-TAC margin of 28% by 2028. Achieving this margin expansion relies on 2 complementary levers. First, efficiency. We will continue to drive internal efficiency and utilize AI-based automation to optimize our cost structure. Second, we will invest to scale. We plan to strategically deploy capital into go-to-market and innovation. While this requires upfront investments, it is essential to expedite growth and ensure we capture the full potential of our platform in the long term. As a result, Perion's consolidated profitability margins are expected to expand into 2028. We have always prided ourselves on being a highly profitable and cash-generative business, and our 2028 target plan is designed to amplify that. Even as we continue to invest in our AI infrastructure, we expect to maintain a high adjusted free cash flow conversion ratio. To summarize, the Perion One model is a combination of top line growth, increased efficiency and strong and sustainable cash flow generation. Perion enters 2026 stronger and more focused than ever. We have the technology, the balance sheet and the strategy to deliver significant value to our shareholders. With that, I will turn the call back to the operator for questions. Operator: [Operator Instructions] our first question comes from Andrew Marok at Raymond James. Andrew Marok: Two, if I could. Can we please start on the 2026 guide? A little bit of a wide range there, about 10 percentage points worth of growth. So I guess, can you walk us through what the low end versus the high end assumptions are there? And what you're maybe thinking for political impact in the second half of the year? Elad Tzubery: Yes. The guidance for 2026 represents the current view of the business. We expect to see a gradual decline in search and our other legacy activities, in parallel, a sharper increase in the Perion contribution ex-TAC. Given the market dynamics that we see -- I'm sorry, given the market dynamics we see today, we see shift towards performance. And within that, we actually believe that Outmax would be able to deliver -- would be able to capture more scale into our [indiscernible]. And right now with how we're seeing 2026 in terms of the budget spend, we see that advertisers are planning for shorter cycles and the visibility remain 6 months. And since right now at the beginning of the year, we start to stay disciplined in how we're seeing it and taking into account that second half of the year will -- the seasonality of AdTech is thinking much more... Andrew Marok: Got it. And then maybe a follow-up on that. I haven't run through all of the numbers, but it seems that there's like an acceleration implied going from '26 in the context of your 2028 guide, accelerating off of '26 into '27 and '28. Is that just an impact of like the mix shift away from search and toward the Perion One platform? Or are there things like incremental product launches and things like that, that are contemplated over the course of your medium-term guide? Elad Tzubery: We are not actually taking into account the new proposition, but we will add to the market. You take on the point, the growth of the Perion One platform together with the search declining will actually bring -- and expedite the growth towards [indiscernible]. Operator: Our next question comes from Eric Martinuzzi at Lake Street. Eric Martinuzzi: Yes. I saw that one of your announcements in the past quarter was the integration with the Amazon DSP. Just wondering if you did see wallet share gains with your advertising, both brand and agency advertisers? And then what does that mean for kind of the ramp in 2026? And I have a follow-up. Tal Jacobson: Yes, absolutely. So the Amazon DSP, that request actually came from our customers for a long time to use our DCO, our dynamic content optimization, with our inventory through the Amazon DSP. So we've been working with Amazon for quite a while on that integration, and we're extremely happy about it. We think that's going to open up a huge opportunity for us. As we just launched this. Obviously, there are things that are going through this, but it's just getting started. Eric Martinuzzi: Okay. And then as far as each of the DSPs also has AI tools to optimize spend across -- through their relationships with advertisers. What are you hearing from advertisers as far as the prioritization of using Perion One to manage campaigns as opposed to leaving in place spend at traditional legacy DSP. Tal Jacobson: That's a great question. I think that's really where we're focusing on. We're not trying to replace other DSPs. I think -- I would carefully predict that all DSPs are going to have their own AI tools if some of them don't already have them. But that's not the case for us. So what we're trying to do is to be a layer above all of those DSPs and optimize cross channel and understand where things operate the best. And that's based in the goal. So if the goal is to drive more people to websites, the goal is to drive more people to physical stores, the goal is to install an app, that is the goal. And then our AI agent can actually run across all DSPs and figure out, on that specific goal, where would that make the most sense and get the best outcome. So even though currently, most of AI tools that we're seeing out there are mostly UI-based and not the execution layer, I'm sure people are going to add more execution parts, but our execution infrastructure is built in a way where other AI agent can interact with our AI agent. And based on that, get the best yield for the advertiser. So it's kind of a different play. We're not optimizing for inventory, which every DSP optimized for its own inventory. We're optimizing for the outcome of the advertiser across all inventories, which is really the big thing we're trying to solve for that industry. Operator: Our next question comes from Jason Kreyer at Craig-Hallum Capital Group. Jason Kreyer: So I just want to start out talking about Outmax. If you can talk about maybe what the adoption has been over the last couple of quarters? And then are there any barriers to marketers adopting Outmax? Tal Jacobson: Yes, absolutely. Thanks for the question. We're seeing strong adoption, and we've shown only one example where we have many examples how the land and expand actually works with Outmax. Outmax is really all about performance. So even though we're extremely excited about the level of technology we have here, our advertisers are actually excited about the level of performance it drives. And we're seeing anything between 40% to almost 80% uplift with some of our advertisers. And it usually starts from budgets for tests and then pretty quickly, it goes into getting more and more budgets, but it's all performance driven. So we're seeing great success with that. Jason Kreyer: And broader question just on Perion One. Over the course of the last year, as you've rolled this out and you've worked with new customers to onboard, are you seeing anything unique in terms of selling cycles? Or are you seeing selling cycles compress at all over time now that that's been in the market longer? Tal Jacobson: Yes. So we are seeing people talking less about specific features and more about the outcome of the feature. So people -- in the past, they were tending to look at specific features or specific channels. Now they mainly care about the performance and the outcome. So that's why it kind of makes sense that we combine everything into one AI agent where just tell us what you're trying to achieve and let the agent figure it out. So that made our sales cycle shorter. It's easier to get testing budgets and then through showing actual results, increasing that -- the amount we're getting from the clients. Operator: Our next question comes from Steve Hromin at Oppenheimer. Steven Hromin: This is Steve Hromin on for Jason. So just one question from us. So with the very strong 28% guide for '28 EBITDA margin versus, I guess, this year is around 23%. So just if you could double-click on sort of what underpins your confidence in achieving that between cost of revenue efficiencies or OpEx or anything of that nature, AI initiatives? Elad Tzubery: Sure. Thank you. So I would start by saying that we're already seeing the progress that we did this year with our efficiency. Q4 results proving we jumped from 29% last year in Q4 to 37% this quarter. We took a lot of efficiency measures already this year, and we will continue to invest in them, specifically around the G&A and the cost of revenues using automation and AI tools that we implemented and build on our day-to-day operation. Together with that, we are seeing an increase for next year to 23% since we are about to invest as well in go-to-market and R&D. So as we progress along the year, we'll see more of our ex-TAC growth as a result of our performance, then we're definitely going to see the impact of what's coming as well to the EBITDA contribution ex-TAC ratio. So it's a combination of those 2. Operator: [Operator Instructions] our next question comes from Laura Martin at Needham. Laura Martin: Sure. So my first question is on the web. I think you said it was down 17%. So I'm really -- can you hear me okay? There you go. Tal Jacobson: We just lost you for a minute. Repeat that, please? Laura Martin: Sure. So the question is on web. I think you said the web piece of the business is down 17%. And so I'm interested in -- is that because -- I'm interested in the fundamentals behind that. Is that CPMs are under pressure or traffic is down because we have AI answers not sending visitors to websites? Or is that -- like tell me what's going on in the fundamentals of web? That's my first question. Elad Tzubery: Laura, with respect to web, the decline is driven from 2 different reasons. First of all, it's proactively. If you remember, we shut down low tech and low-margin legacy activities at the beginning of '25. So that's part of the decline. On a pro forma basis, if we are neutralizing that, Q4 decline was 12%. And on an overall -- on a yearly basis, it was quite flat. I think that the second reason is that actually human behavior is shifting towards otherworld gardens. What's important to remember that Perion One is channel agnostic. Outmax is optimizing for the ROI of the advertisers without necessarily specification of a certain channel. It's programmatic to hit certain KPIs defined by the customer. And whatever channel presents the best ROI, this is where we're going to see the spend. So it's really a channel agnostic play. Laura Martin: Okay. And then my other question was customers. So to your point about the fact you're not really a DSP, you're sitting on the layer above that because you want to optimize for brand advertising for the advertiser. It feels like there's going to be a big shift in your customer -- like what kind of customer you're calling on. So can you talk about that, please? Tal Jacobson: Sure. I'm not sure we're going to have a shift in the type of customers. We're still dealing with the majority of our clients come through agencies, but some of them are brand direct. But I think the way we interact with customers is definitely going to change. Up until a year ago, we interacted with them based on specific products or channels. We are now looking at a more holistic approach that let's look at the entire budget, let's figure out what are we trying to achieve, let's see if we can get you guys on better performance. Not necessarily switching between DSPs, but necessarily optimizing algorithmic approach into driving more performance. So the algorithm might choose different creative, it might choose different audiences, might choose different devices, but that's the focus. So we're actually the same type of customers, different level of conversation, which is more holistic and a broader approach. Operator: Our next question comes from Jeff Martin at ROTH. Jeff Martin: I was just curious if you could touch on, at least in your core growth areas, the market share gains that you've achieved over 2025. What has been the biggest contributors to the outpaced growth relative to the industry? And could you touch on the sustainability of that outpaced growth? Elad Tzubery: Sure. I think we see it in the -- our growth in Q4 definitely came from the growth engines that we see. CTV led with almost 60% year-over-year growth. Digital Out-of-Home with 28%. The Retail Media vertical once again increased 42% in Q4. So overall, all of our growth engines were really outpaced the market by double or triple than the industry. And I think this is part of the power of the value proposition that we are providing to customers around -- specifically around those channels. As we said, this is the foot in the door, always to gain more spend and budgets, and we see this in Q4 results. Operator: This now concludes the question-and-answer session. I will hand the call back to Tal Jacobson for closing remarks. Thank you. Tal Jacobson: Thank you for joining us at our Q4 and full year 2025 earnings call, and thank you for being part of our journey. We'll see you next time. Elad Tzubery: Thank you.
Martin Fewings: Okay. Good morning, good afternoon. Thank you for joining us here today, either here physically or online. Welcome to our 2025 financial results. Presenting today from Glencore are Gary Nagle, CEO; and Steven Kalmin, CFO. Gary, I'll hand over to you to begin. Gary Nagle: Thanks, Martin. Good morning, those in the room, morning, morning and good afternoon, good evening, wherever you are dialing in from around the world. Thank you for joining us for our 2025 year-end results. We're going to follow a similar format to how we follow each year. Martin's got a good formula on the presentation, and I think it works very well. So we'll kick off as we normally do with our financial scorecard and where we ended the year. A very good year, particularly how we started the first half of the year. We stood here this time last year, and we said the first half of the year would be a weak year or a weak half year. It was a weak half year. We finished off very strongly. Those who are here for the CMD will remember the presentation that we gave and some of the updates that we gave then. But we finished the year off very nicely, a $13.5 billion adjusted EBITDA for the year, made up across the business. On the industrial side, close to $10 billion adjusted EBITDA, very pleasing result. The main thrust of that came from the metal side of the business. In particular, copper had a very good year. Zinc had a good year. You've seen in the second half of the year, prices were much higher, our production was much higher. I'd like to say that we did that on purpose, that we slow played the first half and got ready for the contango in the second half of the year. I won't take credit for that, though. That wasn't us, but it did work in our favor, so sometimes better lucky than good. So a particularly strong year in metals, particularly copper, zinc, byproduct from gold kicking through in the second half of the year from our zinc operations. So a very pleasing results in metals. On the flip side, the Energy side and Steelmaking coal, a bit weaker. We saw prices were lower, particularly the first half of the year. It has been a tougher environment we've seen for steelmaking coal. Fortunately, we produced a higher quality -- higher quality both steelmaking coal and energy coal, and we're still able to be very cash generative through that business. The second, probably the last quarter of the year, things looking a bit better and even into this year. We've seen this year, things in both steelmaking coal and -- or prices in both steelmaking coal and energy coal looking stronger. Energy coal driven largely by Indonesian cuts on exports, which has lifted prices above $120 a tonne out of Newcastle. We're very pleased with what we're seeing out of Indonesia. And in fact, as Glencore, we're always want to try to stay ahead, and we may even consider our own cuts despite the higher prices, we may even consider our own cuts to continue this momentum in the market. We're very happy to see Indonesia doing what they're doing. On the steelmaking coal side, price is also higher. We've seen spot prices up to $250, the forwards in the $220s, all look very good. It's largely driven by some weather impacts in Queensland as well as stronger steel demand and steel production out of India. So that brings -- that resulted in a very good result for our -- on the industrial side, as I said, close to $10 billion of adjusted EBITDA. On the marketing side, also a strong year. You'll remember our old range of $2.2 billion to $3.2 billion, and we're always at the middle of that range of $2.7 billion. Steve explained how we adjusted the range last year. We're now back in the middle of the new range, so higher than the middle of the old range. And remember, the new range or the new earnings excludes any Viterra trading profits that we had back in the day. So if you look like-for-like, it's materially higher than what we were achieving previously. So $2.9 billion adjusted marketing EBIT for the year, again, that was driven largely on the metal side. Copper had a number of opportunities. There were trade dislocations. There were regional arbitrage opportunities. We had a very tight concentrate market. It's all playing in, and that was not only in copper, but in zinc, all playing into a very strong trading set for our metals business during 2025. On the Energy and Steelmaking coal side, a weaker trading set available. It wasn't that -- it wasn't -- we know the prices were lower, but the trading set available to us was not there for us. So it was a year of more risk off. Pleasingly, we did see those opportunities coming back in the second half of the year and in particular, from about September, October, things came back. And second half of 2025 over the first half was annualizing closer to where we were for 2024. So -- and we started this year off nicely as well. So on the energy side, we're seeing things coming back nicely during the year. Our operational scorecard, this is a new slide on our key commodities and where we've landed up. Very solid performance. 2 years in a row, we've now achieved our guidance across our key commodities. We -- Steve and I did our roadshow in August last year, our midterm last year, interim results last year. And needless to say, I think 99 out of 100 people would have said there's no ways we would be able to put up a slide like this. So this slide is not a slide to say I told you. So, it's more a slide to call out to our operational team. Xavier is here in the room. Earl Melamed is here in the room. He runs our coal business. It's a shout out to Jon Evans. It's a shout out to Suresh. It's a shout out to Japie. It's a shout out to Colin, and our entire operational team. They assured us, they assured Steve and I, they would meet our production guidance, and they did. So it's a shout out to them. I certainly hope other than Earl and Xavier, none of them are watching this, and they're out in the field doing what they should be doing. But I think this is important for us, where we're reestablishing ourselves as reliable operators, ensuring we deliver what we say we're going to deliver. Moving on to our portfolio scorecard, and we're going to talk about copper first. We'll get on to some of the other parts of the business in a second. We were here in December in this room on these very comfortable chairs. We made you sit for 3 hours. We won't make you sit for 3 hours today, don't worry. But we just thought we'll give you a quick update on where we are and some of the projects that we outlined during the copper -- it was mainly a copper presentation. We obviously covered a lot of the rest of the business, but copper was the theme, the main theme of that presentation. And we've had some nice advancements in many of those projects. You'll remember our graph that we put up where we'll see growth back to our base 1 million tonnes a year of copper production. We'll then grow to circa 1.6 million with the potential to go well over 2 million tonnes, depends on which lever we pull, and we have a number of levers we can pull, and that's the joy of our business. We're not relying on one or two different operations, multiple levers to pull, and we can be able to -- we are able to increase production far in excess of where we are now and even above the 1.6 million tonnes, if that's what we want to do by 2035. So working from left to right through the various projects. Antapaccay, as you know, is our great operation in Peru. We've always spoken about the extension and expansion in Coroccohuayco. The entire region is a very highly mineralized region. We were able to complete the acquisition of Quechua, which is just adjacent to Coroccohuayco and Antapaccay. And that gives us two benefits. The one benefit of that is it's very highly mineralized, and that could be an extension of Antapaccay in the same way as Coroccohuayco is an extension of Antapaccay. So we may choose to go into Quechua before we go into Coroccohuayco. That gives us huge optionality just within that area. It also gives us optionality that if we do build Coroccohuayco first, we have access through the Quechua deposit back to the Antapaccay -- pit in the Antapaccay concentrator. So we no longer become ransomed around any land or issues around Coroccohuayco. It's a huge unlock for us, very pleasing result, very big step forward in the Antapaccay region. In the DRC, we signed a non-binding MOU with the U.S. government-backed Orion, CMC. I was in D.C. 2 weeks ago to sign that. We had the Deputy Secretary of State there. We had the head of the DFC. We had a number of officials there. It's a very exciting opportunity. What does this do for us? Firstly, it's a big confidence boost for the DRC. The DRC, we've always said is a good country to operate in. It's a good country to invest in. Does it have its challenges? Yes, every country has its challenges. But this shows that this is a country that's open for business that companies are ready to invest in the DRC. It also shows how important the U.S. is or how important critical minerals are and the DRC is to the U.S. that they are backing a company like Orion to invest in the DRC. So that's great. And lastly, it's a nod in our direction about the value and quality of the mines that we have there. We've got a circa $9 billion value on the two operations we have there, KCC and MUMI, which is something very -- we've always said because of the quality of the deposit and the great way those -- the mines develop, there's a long life, high value proposition for Glencore in it and this has proved through that time. So very exciting opportunity for us, still early days. It's a non-binding MOU, but work has already started on that. The other thing -- the other exciting news out of the DRC is at KCC, we've been talking about land for -- Steve, 6, 7 years now? Maybe longer. Yes? Steven Kalmin: 5-plus years. Gary Nagle: 5-plus years. We've been talking about the land. We've been promising it for 5-plus years. We've now finally delivered. Thank you to our partners, Gecamines, great partners. They were able to unlock the land packages that we need. And what does that do for us? That allows us to be able to expand the mine, as we've always said and how we explained when we sat here in December. This takes the mine back up to around 300,000 tonnes of copper per year. It takes the life of the mine well into the 2040s. So very exciting opportunity. That land gives us the chance or the infrastructure, in fact, for dumping, for tailings, for power lines, all the sort of infrastructure that will support the existing pit, be able to push the pit back and make that operation or run that operation as effectively and efficiently as we can. Moving to Argentina. We have two RIGI approvals in place -- underway at the moment. One is for MARA, one is for Pachon. Both are going very well, very constructive and good dialogue with the Argentinian government, sharing a lot of information. We expect the MARA RIGI to come through before the Pachon RIGI. It's just the way they're sequencing it in terms of resource and able to manage the number of RIGI applications they have. Very exciting. We expect to have -- I mean, with some luck, we'll get the MARA in the first quarter, but we're being a bit conservative here and saying we'll definitely have it in the -- we expect it in the first half and Pachon will come soon after that. We've also started our work on Alumbrera, which, as you know, is an enabler for the construction of MARA led and the development of MARA, and we expect first production in 2028 in Alumbrera. NewRange is the joint venture we have with Teck or soon to be AngloTeck in Minnesota. Unbelievable deposit. The resource base through work that we've done and the extra drilling with Teck, we've increased that resource base by approximately 1 billion tonnes. This now is a bigger resource base than resolution. It's a bigger resource base in Pebble. It's -- in fact, not only that, this is a deposit that is lower capital intensity than both and quicker to market than both. So very exciting. Like the others, it also has some permitting challenges. But fortunately, we're moving through those quite well. We've met with the Governor of Minnesota, very supportive of the project. We've got a good team operating there, and we expect to unlock. I think we've got 20 or 21 of the 23 permits we need for the first phase. So moving along nicely, and that will be a nice project once we get that fully approved. Some of the rest of the business, we've done some monetization. We've done some portfolio optimization, some portfolio simplification. Century Aluminum for the Americans, Century Aluminum for those this side of the pond. We've sold a part stake of our shareholding in Century. It's a great company. Jesse runs a great company. We're very pro the company. We want to maintain a meaningful stake in the company. But we felt that owning in the 40s, 45%, 46%, whatever it was, didn't really make sense for us in terms of being able to use that cash and recycle it into other very high IRR opportunities. So we've taken some money off the table with Century, but we do remain committed to the company at a reasonable shareholding level, but we'll be able to take that money back in, reinvest that at 20-plus IRRs, great for shareholders, great for returns, and you've seen the returns that we've announced today. Portfolio optimization simplification, a number of initiatives underway. Japie in South Africa is doing a lot of work on the power tariffs with the South African government. The South African government is very supportive, great government to work with, looking to find a solution. We've announced that Lion has reopened under a temporary tariff relief, and we're looking to open two other ferrochrome smelters in South Africa, if we get this tariff relief from the government by the end of February. We're more than hopeful, we're confident that we'll get that. As I say, the government has been very supportive of that. And that would put our ferrochrome smelting business right up there being internationally competitive with the rest of the world. Pasar smelter, we've -- you'll remember when we put that on care and maintenance, that obviously comes with a cost with it. We were able to sell that to a local Filipino business. We've moved that off the books. It means it takes less management time. And clearly, we don't carry any of the ongoing care and maintenance costs. And even something that perhaps you wouldn't have known about, but we have a big port or we had a big port on the Cienega Coast in just near Santa Marta in Colombia. We built that port to service our Prodeco mines back in about 2010, 2011. Given that our business now has moved entirely to the La Guajira and we don't have operating mines in Cesar anymore. This was a port that wasn't really -- was being underutilized, didn't -- costs were -- the normal cost of keeping these ports operating even for very small volume didn't make sense for us. So we've sold that, again, funds back into Glencore and reinvested into the business. So that's left us in a very strong position. Balance sheet, very strong. We've declared a dividend today of $2 billion back to shareholders, very cash-generative business, very strong and very happy with the first half -- for the 2025 results. And with that, Steve will take you through the financial side. Steven Kalmin: Good morning all here, and it's great to be back presenting I would say, very clean and positive results and very good momentum in the business. What we've done on this particular chart, and we'll cover almost all these numbers later on in the presentation, is to just separate out H1 and H2, just to show the significant momentum and positivity and performance that's now going through the business and continuing on into 2026 when we show some of the spot illustrative cash flow generation and EBITDA in the business. We just ran out of a little bit of runway to catch up on 2024, another month or 2 months, and that minus 6% would have been zeroed out, would have gone positive at the rate of EBITDA generation in the second half. So you've seen a 50% increase half-on-half across the whole business. Industrial was plus 65% and even marketing, which expect that to obviously be a more constant business throughout, had a strong second half performance as well. So very good across the business. We'll look at the variances and the like. Net funding, having been here 6 months ago at $14.5 billion, explained the bridges to where we were. So the pathway towards, sort of, back to $10 billion. Here we are back at that particular level where we started the year, notwithstanding having paid CapEx distributions during the year and continue to invest within the business as well. RMIs, you would expect in this pricing environment has gone up. Copper would have been the biggest contributor there. Start of the year was at $8,600 on copper, finished the year about $12,400 or so. So that's a 44% increase. We do carry units across copper and aluminum and nickel and zinc, but that was the biggest impact across the $3 billion increase that we had across the RMI and then strong metrics generally, as I said, we'll cover off all these levers. But even second half annualized over $16 billion, and you'll see it spot illustrative numbers later on at $18 billion plus or so. So strong momentum across all parts of the business going into '26. If we look at the industrial side, Gary has given largely the reasons it's well chronicled within the financials itself. It was a strong performance, particularly on the metal side as we picked up $6 billion to $7 billion. That was the zinc business, second on the podium. Both in its own right in terms of business, zinc prices and the likes, but gold definitely has a significant kick up, particularly at Kazzinc. But the year-on-year increase on zinc business of that $1 billion was $800 million just from zinc, of which $500 million was Kazzinc. And the copper business having had a slow start for the year, both in the production and general contribution sense did pick up year-over-year in financial performance, notwithstanding the inability to sell much cobalt during the year, which does delay the generation of earnings, cash flow and contribution from that business. But it has been supportive for cobalt price itself, which will help even delivering units under the quota system, and we do produce some non-DRC cobalt as well out of Canada and Australia specifically. So that's clearly helping there as well. The coal business, Gary had spoke about those. We'll see on there -- in the waterfall bridge on the next slide, you'll see where the different elements of the business come through. But the momentum clearly in the business is, you can see a $9.9 billion industrial EBITDA across the business. What we'll see later on, spot illustrative is at $14.6 billion, and that's all elements of the business picking up momentum in terms of production, cash flow and the like. So our metals business at $7 billion is now spot illustrative at $11 billion. So we've got $4 billion plus there. And the energy business lagging in terms of that recovery, we do need prices to move a bit higher to have that sort of back kicking as it's done in the past clearly. And it is -- it's performing well, but it's an earning sleeper at the moment within the business, and we do see potential from that given some positive constructs in both those markets that Gary had spoken to. So $3.7 billion last year on the energy at the business, spot illustrative is now at $4.2 billion. So it is picking up and second half performance was a little bit better. I think the waterfall bridge, if we go to the next slide, of course, there as well. So how do we go from $10.6 billion up to $9.9 million. The negative graphs, particularly on the pricing belies the underlying components of significantly weaker on the coal year-on-year variance, which was actually negative $2.4 billion. Metals was a positive year-on-year variance of $1.9 billion. And we're closing sort of even at the half year when we're here, that was a negative $1 billion year-on-year. It's closed the year at negative $0.5 billion. So if you plot the two periods, you've had positive momentum build back into price variance. Of the metals, $1.9 billion, the copper business contributed $1 billion of that. Copper prices -- average prices were up 9% year-on-year. Zinc was $0.8 billion. And even the little custom met assets, which were, not saying they're doing well, but there was a slight performance in the business through particularly zinc TC/RCs were a little bit better. And we do recover quite a bit of free metal out of our custom smelting business, and that free metal tends to be in the precious space. So whether it's some PGM, gold, silver, we do pick up. There's probably a couple of hundred million that got picked up year-on-year. On the volume variance of $0.9 billion, that was effectively all on copper being down 11%. We'll see later on, Collahuasi the main contributor. We dropped 68,000 tonnes year-on-year at Collahuasi from 178,000 tonnes this year to 246,000 tonnes. I think Collahuasi's story during the next year or 2 years is being well chronicled. We're going through a low phase this year, pick up a little bit now in 2026, and then you see a snapback in 2027. That is a high-margin business when it's clearly kicking in. So when you're not getting those tonnes, it does lead to quite a volume variance as well. The other impact was the lack of cobalt sales, which for us flows through as a volume variance, supportive for the market longer term, we support the initiatives of the DRC government in rebalancing and restoring value within that particular commodity given the sort of market share, we'll start seeing the benefits of delivering into the quotas this year significantly up on 2026. The cost variance at negative, actually pretty pleasing, frankly. That's not easy to deliver an outcome there. There is inflation, just general inflation. There is some even input cost inflation that would exceed normal inflation levels. We see it in some of our Australia, the Murrin operation. You saw high prices across sulfur, ammonia. You've seen labor, energy, maintenance in place like Kazakhstan is a little bit up above normal inflationary levels, reagents, asset costs within DRC. It was also fairly sort of tight markets. And of a $40 billion cost base that we have across our industrial business, just 1% on that is going to move you up -- is going to move you up $400 million. We've been able to neutralize that to 0 across our cost variance, and that's that $1 billion cost reduction program and initiatives across 300 sites that we also announced, that is effectively done, delivered more than half of that was banked in 2025. We'll have all of that fully delivered by the end of 2026. That was able to keep the variance at, sort of, breakeven. Would have been even positive, we've got a few quirks in the cost line, those ferroalloys businesses that Gary said that were in care and maintenance pending the tariff relief. They've been in a standing situation. They've been in care and maintenance. We've had to continue to pay workers and the like. So there has been a cost of carry there, compensated somewhat by the high oil prices across the business for some of the expenses get taken there. And we did impair some of our custom smelting businesses last year, the Horne and CCR in particular. So even if you've got CapEx, we have to expense CapEx now, which goes through this OpEx line as well. So that was about $100 million in each bucket. So actually quite pleased with a 0 variance. You've seen EVR. That will disappear as we move forward. This is just reflecting the fact that there was a full year of EVR compared to half year in the previous year. Quite a busy slide, this one, but I think quite useful across all the business to give our cost, volume and profit by key department. I'll spend a bit of time on copper because we have changed a little bit of the presentation format to provide a little bit more granularity around two particular elements. If you look at the -- let's start at 2024, and you'll see what I mean by 2025. We show the unit cash cost. This is after byproduct. If you look at '24, we're at $1.74. This is at the operating asset level itself. So this is the consolidation of all the businesses as they come through, the Collahuasi, the Antapaccay, the Antamina, the African business and the likes. So you've got $174 and then we've had a few areas on top of that, that the overall Glencore business has then had to absorb. There's been the opportunity cost historically of having done streams across the business. It's been topical in the last week or so, Antamina and Antapaccay. It hasn't been a big opportunity cost up until this point. It's starting to bite a little bit more with gold and silver prices the way they are. And we also had divisional overhead in the copper business that was above the asset level. All of that still went through copper, but sort of geographically, it might be worth if we just go to Page 26 quickly. I'll come back. So, we've given the sort of buildup back of the industrial copper. This was showing how our $3.9 billion of $4.1 billion. Historically, we might have been more like $4.3 billion and then we would have had $300 million down in that development projects and other. Because streaming as well as divisional overhead was in development projects and other. And in fact, even when we were here giving our spot illustratives in previous times, we did capture that, which just wasn't captured in the net cost post streams and divisional overhead. So we always had a number about $300 million. We've effectively pushed that extra $200 million now up into the unit cost. And now the only thing that's -- we'll look later on with the spot illustrative, the only thing we've got now in development project other is development projects. The other has all been pushed up into the -- we've used it to sort of reflect the -- both the cost in absolute terms and to look at the unitization of those costs as well. So we'll get back. It will make more sense then as we work through the various numbers, but we thought that was a more transparent and granularity way of looking at the various costs just because it was becoming a number that was more meaningful, particularly on the streaming side of the business as well. So on the copper side, so in 2024, it was really small. We had $0.10 on divisional. That is some of the savings of those organizational and the cost savings that we delivered across the business. On the copper, you've seen we've gone down from $0.10 to $0.05. The team when they did take over, they've effectively moved a lot of what was central overhead across regions, they pushed it down into the regions. And some of that $1 billion was delivered within the copper business and would reflect the $0.10 going down to $0.05. You can see streaming historically very little in 2024 was $0.04 across the business as well. So that was about $75 million or so that would have been in that development projects and other line. As we go into 2025, $1.83 is the cost at the underlying operations. Now to get up to $1.99, there's been $0.11 on streaming. Gold and silver prices have obviously picked up. We have cut overhead on the divisional side, so that's only $0.05. So across those two elements, that's about $300 million, which is now captured in there. Previously, it would have been down in the -- it doesn't change where we get to at the end of the line in terms of $3.9 billion, but we think this is a sensible way to present and to give that granularity around the business as well. And it will make more sense as we look forward, because we show cost '26 and then we look forward into 2028, '29, where our copper business is transforming, both in scale and in cost competitiveness around the business. And whereas the other businesses, zinc, steelmaking coal, energy coal is more steady state over the next 5 years or so. So I think the rest is largely self-explanatory and how that's delivered the outcomes. The progression of $3.9 billion EBITDA in copper will roll into where the spot illustrative, but it's now a $6.7 billion business, slightly higher volume and obviously, better prices. Prices has clearly helped some of these. The zinc was a $2.3 billion outcome in 2023. It's now $2.5 billion spot illustrative. Steelmaking coal, $1.9 billion. It's now also $2.5 billion. Pricing is helping on that based on spot. And energy coal, $1.5 billion, it's still about $1.5 billion. But you can see prices and variances, and I think it's well described. If we look then marketing quickly, we will come back to a number of those slides. Gary has mentioned pretty much where we're at in marketing, down a little bit, but it belies the fact that year-on-year, it's actually quite similar across the aggregate of metals and steelmaking and energy. One is plus 4%, one sort of minus 4%. The base period did have $165 million of Viterra earnings. We stopped reporting that during 2025 because of the sale, which completed in July. So year-on-year like-for-like is actually much closer, but a strong pleasing result, good momentum in the second half, better performance on the energy and steelmaking side as well and a generally good performance. We've got used to those numbers in the 3s. It's still a very solid, very strong, very cash-generating business as well as it converts into cash at the Glencore level as well. If we look at net debt, we stayed still, good result stand still $8.7 billion of our funds from operation, that's EBITDA less interest and tax. Maybe you haven't had a chance to look through the financials, but I'm sure you will at some point. There was a big tax bill that was due, which we think will be -- we've been funding the U.K. government now for a bit of time. There was a $1 billion payment to HMRC for many, many years and legacy payments, you have to pay everything in advance. That's the way it works until ultimately, there's resolutions running through a U.K. Swiss bilateral resolution process around where it is. We expect to get a significant amount of that back. They've taken the most conservative, aggressive position around how they want to send the bill and they have assessment rights that says you've got to pay and you've had to pay. And this was the year of reckoning around accumulation of quite profitable years in the oil business, which is where this particularly translate. So there was $1 billion of tax that does come through that FFO line. It's sitting as an income tax receivable. We expect a significant portion of that given the merits and our conviction in potential outcome there. So that's parked for now. We're lending -- we're sort of funding services in NHS here for a while. So we just, sort of, your thanks is well noted. On the net CapEx, $6.9 billion. We'll look at the slide on CapEx. Investment profile was actually generating. That was primarily the cash portion of the Viterra into Bunge transaction in July, $940 million was the cash. Working capital had a strong reversal from H1. We're sitting here with an outflow of $1.1 billion. It came back $1.6 billion. I'd say there is a bit of a sugar hit in that. I think some of that will unwind in 2026. So the Q4 price pickup accelerating, particularly into the end of the year, did create more of a receivables payables mismatch in favor of releasing some working capital. In a more normal environment, I would expect that some of that will go back into the balance sheet during 2026, but we'll take it for now. Distributions and buybacks, cash was $1.2 billion, share buybacks, $2 billion, dividends to minorities, mainly at Kazzinc, was $0.3 billion in potential there. So how does that translate into distributions and shareholder payments? We've done our normal calculation, $1 billion for marketing, 25% of industrial. That's come to $1.2 billion for the year. And what we introduced as well, and that if you just roll that forward, that says $10.2 billion. Pay out the distribution of $1.2 billion prima facie, you're not quite at your $10 billion. So, that's where we've got deleveraging required, $1.4 billion. This is all on a pro forma 1st of January since that gets you towards your $10 billion, which is our long-term optimum target. But we did create the surplus capital warehousing, which I think is a neat concept around our Bunge stake, where we've said this is subject to lockup and the like that gets released in July. This is something that is non-core for the business. We like the business. We think there's clear value. We're working with the team. We're sitting on the Board. We're supportive. They're performing well within their industry as well. But ultimately, this is going to get monetized in some way, shape or form for Glencore shareholders in whatever structure and form that makes the most sense to us. So that will be something that's going to be part of our thought process over the next year as we take that forward. But there's no reason why we can't already ship some of that out the door in terms of the pre -- sort of preempting and distributing something in anticipation of that eventual monetization. So $4 billion was the stake as of Friday, up already $1.4 billion since the close. So that's performing very well. Conservatively, we said let's reserve $1.4 billion towards the top graph and getting back to $10 billion. But in reality, we've continued to generate cash. So that $1.4 billion is not needed. But just graphically, you say it makes sense, let's just park it upstairs. But the base business continues to generate and then we're going to bring down our debt levels. So all of the Bunge stock is ultimately up for distribution to shareholders in due course. But for the purpose of just now and prudently, we have topped it up another $0.07, another $0.8 billion to get to our $2 billion and $0.17 at this particular point in time. Even with that more conservative, there's still that $1.8 billion, which we wanted to say that still represents 45% of the remaining. So even if the Bunge stock for some reason was to decline in value, there is conservative prudent capital management around how we're setting ourselves up in this -- and we did that, and there was form in how we looked already post close to already do the $1 billion buyback that we did last year was to introduce that concept as well. On the CapEx side, $6.9 billion was the net cash for the particular year. First full year of EVR, EVR is quite capital intensive, particularly during the next year or 2 years, water treatment, some reinvestment in fleet. I think if you look at the detailed sheet, EVR itself is a little over $1.5 billion. It does over the next 3 years, average out to more like $1.3 billion and then longer term tapers down more towards the $1 billion. But year-on-year, it's quite interesting even on the $7.5 billion is what's been capitalized onto the balance sheet, while there's a difference between cash and -- but that's -- there's some leases in there. There was the big lease that we've called out over at Kazzinc, $249 million that was already there at the first half. We've signed, and this is not a multi-20th. This is sort of a 3- or 4-year lease on a hydro facility that we've been operating Bukhtarma in Kazzinc for decades, frankly. And previously, it was an OpEx and now we start had to capitalize that onto the balance sheet. But taking out EVR as well as Kazzinc, the rest of the business like-for-like was actually 10% lower CapEx at $668 million. We've shown a bit of a wagon wheel around where some of that CapEx is. There's a slide later on, which shows it by commodity, by category, where some of the bigger spend that's in deferred strip costs, deferred mining, which is really just capitalized OpEx in some sense. So this is through our big open pit operations. That was the biggest spend, 25% towards the left, that was $1.9 billion. A big part in water treatment, you can see in the sort of one of the blue bars at the bottom. That was $0.9 billion. It's primarily at EVR. They're going through really this year and peaks last year this year and then starts tapering off. There was two very large projects, which Earl is nodding in the background. He's confirming that we should peak out and EVR is going to normalize as we move forward. In terms of CapEx guidance, '26 to '28, no change from CMD, exactly sort of as you were, 6.5 average the next 3 years. And that's including a lot of copper, including the Alumbrera restart, very capital efficient. There's only $200 million to $300 million there in the Alumbrera restart over the next 2 or 3 years. We've also got the zinc business. We've got $450 million of the $600 million for the 80,000 the gold extension expansion, which is both in an open pit as well as an underground sense. So there you've got you sort of -- that business in the absence of that would have been tapering off quite steeply in the next 3 or 4 years. You've got sort of quite meaningful life in the gold deposit, which is kicking in very well at Kazzinc. You can see EVR, $1.3 billion average over '26 to '28, what we expect. That is down from where we were this year. Copper growth projects, we discussed this at the CMD. There's a real bookend of where this could come as we FID and look to bring some of those projects and what the timing sort of makes sense. So there's a hypothetical you get on with Gary's, sort of, chart that he put up there in December when we go up over $2 billion, that's staggering everything at the earliest possible opportunity. You would have had $4.2 billion spend in the next 3 years, but you get to your $1.5 billion pretty quickly of -- $1.5 million of copper. With no FID, probably cumulatively spending $500 million just to buy the land and progress and do the studies and everything else. In reality, it's going to be somewhere in between, and we'll shed light on all that as we work through the business. But absolutely no change on that since the CMD. Also no change in guidance, '26 as you were across all the businesses. This is the chart Xavier, I think, presented at CMD. There's detailed slides 38 to 41, which does shape all the different operations across largely steady across zinc. Nickel steps up with OD being commissioned later on in this year, you've got your 70 towards 80 as you were across both coal businesses over this particular period. And copper, you've already got, although we're flattish on overall copper, the copper business itself actually goes up from $7.52 to the midpoint of $7.85 because we drop copper out of our zinc business, which was the MICO copper operation that did stop production at Mount Isa in the middle of last year. So we do pick up units this year on the copper. And then you've got quite a big increase in '27, that's particularly Collahuasi as that snaps back. And Africa business, even more reinforced by the land package that we've now got was in the sort of 250,000, that's across both operations into the 300 -- about 300,000 next 2 years and then up to 360,000 by 2028. But just if you go back to all the CMD slides, it's all in there. There's no change to anything over there. So in terms of the long layup earlier on around the copper -- copper has got its own slide now on costs, which I think makes sense as we want to roll it forward because it is a business that is in quite a bit of transition growth, and delivery across the business and the cobalt sort of shorter-term impacts that we are having as well. The '26, you can see the $1.85 is now our unit cash cost for determining EBITDA, and that's with nothing below it other than maybe $100 million, just those development projects because we've pushed the streaming impact that $0.24. The reason we've separated it, it's not $0.24, it's not $0.11, it's not $0.04. If it was still $0.04 or $0.11, we might have kept that still down in the other area, but it was just more in granularity and financial buildup. We thought it made sense and transparency just to bring it all in there. So $1.56 is actually coming out of the assets themselves. That's where we would have been but for the streams. The streams have put $0.24 back in there. The overhead is nothing, divisional overhead. So $1.85, still a good cost structure across the business, generating $6.7 billion of EBITDA, which we'll see later on. Direction of travel, which we thought is important by '28, '29, that $1.85 is down at $1.18 and $1.08. Why is it there? Now you've got higher production. Look at those numbers on the bottom right. You can see the step-up in copper production, including from the copper department itself. It tapers off more from nickel, zinc, but copper is sort of growing from the high 700s and then you're at 1 million tonnes 2028, '29. Collahuasi, Africa, those are some of the main contributors, a bit of Alumbrera, some other tonnes, may obviously come through in there. You get the denominator impact. You're starting to get cobalt in our assumptions more normalizing that once you're out of the quota period in '26, '27, we do feel like the market that we haven't assumed that it's just back to kind of cavalier days and as much cobalt comes up. We think it's still going to be tightly controlled to make sure that there's almost sort of a price that works within a band. These are some of the assumptions that we use, which we gave those, I think, in the CMD as well. And then even at current macros and 1 million tonnes in 2028, your copper business is now a $10 billion plus EBITDA business. If you just run same macros, same through that cost structure in '28, '29, it's the most transformative clearly of all the businesses as we look. And this is not in the never, never. This feels like it's tomorrow, frankly, by the time we start 2028. So that's pretty good. Even on the streaming side, yes, it dilutes because of a higher denominator. We've also got Antapaccay stream, by 2028, we've delivered certain volumes that we actually step back up in terms of the percentage of spot gold prices that we get. I think we had 20%. There's a step up to 30%, even 10% of all that starts making a reasonable difference at that point. So I thought useful slide on the copper, it will all figure -- someone's thinking later on. The other -- the zinc, steelmaking coal and energy coal, all fits onto the one slide. Zinc continues to be a massive cash generator with these sort of byproduct prices and volumes that we have a negative $0.48. It's even lower than the CMD number that we put up here given the ongoing projection of macros, we were $0.26. We're now negative $0.48. So there's going to be a tick-up of earnings coming out of the zinc business. And from the two sides of the coal businesses, we've got some cost increase because of currency tailwinds. So to give you some perspective, we've rolled forward Aussie dollar, we were at 0.65 early December, we've used 0.705. The South African rand was at 17.04. It's 15.74. It's weakened a bit. Some of these probably have given back some of their sort of impact. Canadian was at 1.40, it's now 1.35. So like-for-like at the CMD in steelmaking, we were at $118.6, -- we're at $122.9 now. So you're up about $4 a tonne across both steelmaking and energy. That's all currency tailwinds. Not all of that has then found its way into prices. You'd expect some of that to also as cost curves move and respond to some of these prices as well. So Earl and the team, Earl is here, they'll work on making sure that they can continue to manage as efficiently and effectively as they can and deliver some good outcomes. If we then just finish up, we do our spot illustrative slide in the usual format. I think it's useful 3, 4 times a year. We've given production, no change there. We've given updated costs of the copper business now at $6.8 billion or $6.7 billion after. That previously would have been exactly, as I said, we could have cut that as a $6.7 billion less $0.3 billion. But I think this is just a better way of presenting those numbers as well. You get down to the same number, $6.7 billion. That's increased quite a bit since CMD days with copper price I think it was $10,850 up to closer to $13,000 at the moment. To put copper in the overall industrial, we're now getting to 50%. And I saw there was someone that put a slide up the other day. When you start being a 50% copper contributor in your EBITDA, you should start seeing ratings multiple and expansion and interest from our business. We're at 46% and growing back to that previous chart. You sort of roll that forward. We're going to be a copper company at some particular point in time in terms of meaningful progression portfolio shift as we go down. So copper business, zinc has progressed from $2 billion to $2.5 billion. Given progression, again of pricing and metrics, we used gold of $4,200. It's now $4,900. Zinc was $3,000, it's now $3,300. So macro progression. Steelmaking coal is as you aware, $2.5 billion. We picked up sort of $4 in net realization of price and cost of $4 has taken that away. Energy coal is down because of costs having eaten more into it than the price at the moment. But we're still at a reasonable Newcastle, a business that generates quite a bit of money given -- it's in cash harvesting mode. CapEx is quite efficient in that business as well. The other has picked up a little bit. Nickel, of course, prices have picked up a bit. So it was $0.4 billion to $0.6 billion. But it's just part of the other bucket and overall $18.1 billion to $7 billion of free cash flow. So a very healthy start and good momentum across all parts of the business. With that, I'll hand back to Gary to wrap it up. Gary Nagle: Thanks, Steve. Very comprehensive. We'll wrap it up just a couple more slides. This seem to work here. Okay. Our 2026 priorities, it's not only our 2026 priority, but our priority every year and every day is safety. It's what we do. We need to keep our people safe. Zero harm is what our business is about. Unfortunately, during 2025, we had two fatalities. It's two to many, and we continue to work hard through our Safe Work program, through rolling out new initiatives, to reduce harm in our business. Not to belittle the gravity of having two fatalities. But just to put into a bit of perspective, it is the lowest number of fatalities we've ever had in this business on a fatality frequency rate and on an absolute rate. It's lower than the ICMM average. We continue to trend down from previous years. And I do believe this business will be multiyear fatality-free in the near future. Operational excellence, it's been maybe a topic du jour for the market on us, particularly given last year's first half performance where we believe that we would. And we believed in ourselves that we would meet our full year production guidance across our key commodities. As you know, we did. That's our second year in a row we've done that, and we've started this year off nicely as well on the production side. We've delivered the discipline, the operational rigor that's gone into it from Xavier and his team, and that focus continues. Organic growth, a big part of our business, given our pipeline that we have of projects, continue to derisk and successfully progress all these organic projects along the value curve. We've spoken about the copper ones earlier. We also have other projects around our business like BSOC in Queensland, a great zinc business, which is moving into the feasibility stage. So a number of organic growth projects that we have in our business and gives us those levers to pull at the right time when we want to expand. Balance sheet, Steve spoken a little bit about that. We certainly don't run a lazy balance sheet, but at the same time, we run a balance sheet that is strong through the cycle, being able to generate cash, cash for our shareholders through dividends as well as being able to fund our business going forward. You'll remember the slide that Steve put up in December around our ability to fund our growth projects, organic growth projects, and that's consistent with a very strong balance sheet through the cycle. And obviously, very important is the value creation for shareholders because that's what we're here for. We want to create value for shareholders. We want to deliver predictable base shareholder returns. You'll have seen our capital distribution framework. We keep to that. We top up where we can around our $10 billion net debt target or around the surplus capital warehouse that Steve's introduced over the last couple of years. That allows continual returns to our shareholders, been very exciting. We've returned over $27 billion of returns to shareholders since 2021. And lastly, our investment case. We presented this in December, so we'll just go through it again quickly, just to remind everybody where we are. An exceptional portfolio of copper assets. It positions us amongst the one of the largest. Steve talked about another presentation he had seen. I saw the same presentation. A couple of slides look awfully a lot like some of the slides we put up in December. So terrific. It was well received. It's great. We're very happy with that. And we'll continue to see the growth of our projects up to that circa 1.6 million tonnes of copper and potentially higher, depends how we decide to use all the levers that we have in our business to become one of the world's largest copper producers. At the same time, although copper, a huge part of our business, we still play a strategic role in the energy in needs of today and tomorrow, a high-quality steam coal business. It is the world's leading seaborne steam coal business, no question. Our EVR business, which many of you here in the room were visited through the course of -- was it last year? I think it was last year. Yes, last year, terrific business run by Mike Carrucan, really high-quality business, multi-decade business, low-cost operations, high-quality coal, looking very good. Water treatment plant CapEx coming to an end. I'm going to ask Earl to give a detailed presentation on water treatment plants later, but very good business. And given the quality of that material, something that's going to be needed for many, many decades to come. At the same time, right here in this building, we continue to grow our energy trading business, LNG, carbon power. That marketing business is a strong contributor to the energy earnings in the business. Our marketing franchise around the world, one of the best across multi-commodities, multi-geographies. For 50 years, we've been doing this. It allows us to arbitrage. It allows us to take opportunities in the market that others don't see because of the fact that we have such a big network. We're across the production side, the third-party side, sales, blending, freight, you name it. It's unique. We're the only major mining company that has this kind of franchise or has this kind of business unit. Year in, year out, it delivers something very exciting for our business. It's underpinned by a number of key strategic marketing assets that help us generate those high IRRs in the business. The operating structure, it's optimized, it's simplified. Xavier spoke a lot about it when he was here in December, standing at this lectern. Jon Evans spoke about it. And you see how that is actually delivering. Costs down, production up, safety getting better. So it's all putting -- sending us or putting us in the right direction around having -- making sure that we are a reliable operator, delivering on our guidance. And then lastly, what does it all lead to? As I said on the previous slide, it's about constant focus on value creation for shareholders. We're here to make money for our shareholders. That's our job. We want to do it reliably. We want to do it safely, and that's what we're doing. Over $27 billion of announced shareholder returns since 2021. Steve spoken again through the -- how we get to those numbers. There's additional cash generation coming out of the business at spot cash -- at spot free cash flow, the numbers Steve spoke about a couple of slides back, that places us very strongly to be able to continue delivering cash to shareholders while still servicing the organic growth options in our business. And with that, we'll go to Q&A. Ian Rossouw: Ian Rossouw from Barclays. A couple of questions. Firstly, just I guess, Steve, you briefly sort of touched on it, but obviously, we've seen a big dislocation in copper -- what markets are willing to pay for copper companies versus diversified miners and particularly those with bulk businesses such as coal and iron ore? You've asked your shareholders 1.5 years ago whether they should -- you should spin out the coal business. They said, no. Do you think it's time now to ask them that same question again? Gary Nagle: Ian, it's a two-way discussion. It's not only us asking them, it's them asking us or ultimately shareholders own the company. Of course, we own the strategy that we present. We've had zero incoming around an interest to spin off coal. They see the value of the coal business. I just spoke about the quality of both the steelmaking coal and the steam coal business. The fact that the world now is recognizing the importance of having cheap baseload power as we transition over decades. The world recognized the importance of steelmaking coal, and it's not going away for many, many decades to come. There was a sort of a euphoria back in the early '20s around, well, we can get rid of coal, we don't need coal. And shareholders value the fact that we have these terrific businesses. They're hugely cash generative. They are a bedrock for these $27 billion of returns. And we haven't had any incoming or any questions, in fact, for -- since that decision was made in July '24, I think, August '24. Since that, I can't remember in any engagement with any shareholder an inquiry around spinning of coal. As we've always said, if the shareholders want us to spin off coal or want us to reinvestigate it again, that's up to the shareholders, but we've had zero incoming. Ian Rossouw: Okay. And then just a follow-up on the DRC. Firstly, just on this MOU with Orion. Do you mind giving us -- could you give us a bit more details on that? Just what the cash flow impacts could be once that is approved? And then secondly, just on this land access. Obviously, this is 7 years from the previous deal. What makes this different? Some of the terms, I think you -- just how some of the terms changed versus the 2019 deal as well? Gary Nagle: I'll let Steve take the first one. I'll do the second one. It's predominantly the same terms. It was -- it's changed structure. This was meant to be an acquisition of land. We paid some money upfront, and then the remainder of the money was going to be paid once we acquired the land. It turned out that Gecamines, despite their best efforts, were unable to sell us the land under some various regulations and issues in the DRC. So what we've done is we converted to a long-term lease agreement, where the same financial impact instead of paying for the land, we're going to lease the land. It's the exact same financial impact as we would have had if we bought the land. It's the exact same access rights that we have. It's for the life of the mine. So it doesn't expire in any course of the mine. So like-for-like, it's virtually exactly the same. We just won't own the land, we'll lease the land, totally unencumbered, full for our use, no issue with that. So it's effectively the same deal. Steven Kalmin: So in terms of the -- it's still early days, Ian. I mean, I would generally position it as if there's the EV of number, it's been put out at $9 billion. Obviously, it will be what it is. And ultimately, it also -- there'll be an allocation ultimately between KCC, Mutanda. There's different ownerships clearly, in those businesses. I think our effective realization, monetization, value unlock or creation will be our sort of whatever share of our attributable share of those businesses. So whether, yes, there's debt and equity and the likes. I think it's too early to know exactly how that's all going to shape up because it is early in the MOU and DD is going to commence in the structuring, and we need to get the accounting right. I mean, there could be changes in how we account for these assets as well. And again, depends on the sort of governance and operating, we'd certainly continue to operate. This system, Orion, is not an operating company, but 40% is not 0. It's a meaningful stake in these businesses and what sort of partnership and what rights and how that will work. So none of that sort of really left the starters gate in any meaningful sense. So we'll sort of come back and that will sort of shape out both in a cash sense, accounting sense, deleveraging sense, commitment sense. There's a whole -- a lot of wood to chop as someone said the other day on a different transaction. Martin Fewings: Jason? Jason Fairclough: Jason Fairclough, Bank of America. Guys, for a couple of weeks there, a few of us got excited about a $300 billion EV company in the sector. And then it hasn't happened. So I don't know if you're willing to share anything. It sounds like it was value at the end of the day. But I guess the fact that this hasn't happened, how does it change your plan A? Gary Nagle: Look, yes, it was value. Ultimately, that's what it came down to. It has to work for both sides. It didn't work for both sides. So that's fine. I mean, it was a good interaction. Simon is a very decent guy to work with, good team at Rio Tinto. So -- but we couldn't reach agreement on value, and that's fine. We look after our shareholders, they look after their shareholders. In many cases, shareholders are the same. But different views, who knows what the future brings. From our perspective, we could -- this is not a deal that we had to do. A deal that we'd like to do, and we would like to -- we would have liked to do at the time because we did believe we could create a $300 billion mining company, relevant, unbelievable assets, unbelievable projects, unbelievable management teams, that's what we wanted to create. But without that, Glencore is an unbelievable company. You've seen what we presented today, you saw what we presented in December. We have what we believe is the best pipeline of copper growth projects in the world. Our existing portfolio going up back to 1 million tonnes by 2027, 2028, a terrific copper business. As Steve says, copper is becoming a much bigger contributor on an EBITDA basis in this business than anything else. Backed up by a terrific coal business. We've spoken at length about the coal business, the best-in-class and biggest and best steam coal -- seaborne steam coal business in the world, what I believe is the best steelmaking coal business in the world, given it doesn't suffer from the royalties that Queensland does and some of the weather conditions that they do -- that they suffer in Queensland. What I believe is the best steelmaking coal business in the world. And marketing franchise that's second to none. And then we have all the subsidiary businesses, which are real contributors, alloy, zinc, nickel, real contributors. So for many, many decades ahead, the business case for Glencore as a cash generative, returns to shareholder business is incredibly strong, and the re-rate potential continues right there as we develop our copper business. So this is why this is not a deal that we had to do. It was a deal that would be nice to do on the right terms for our shareholders on the right terms to everybody. We couldn't reach agreement. So we continue running our business. And if another opportunity comes to us where we can create a big mega major miner on the right conditions for our shareholders, we would look at that. Jason Fairclough: How do you address investor concerns on your credibility in terms of executing on these projects? Gary Nagle: The copper projects? I mean, if you go through the copper projects and there's always risk around execution, I agree with you. And every mining company has messed up projects. It doesn't matter who you are. You can name them all. We're included, Rio Tinto, BHP, Anglo, Teck, you name them. We've all messed up projects. So that's what -- that's unfortunately the reality of life. When you look at our projects, and we went through and we had talked about this before. Fortunately, most of our projects are brownfields. They're expansions of existing operations, whether it be Coroccohuayco, which is just a new pit or in Quechua in the case of the land that we just bought, either Coroccohuayco or Quechua. It's a new pit connected to a concentrated plant a few kilometers away. That is earth digging. It's not new concentrators, it's not new projects. MARA, same thing, a little further away from Alumbrera, but you know Alumbrera very well. We're restarting Alumbrera. That plant that we -- Steve and I have spent time there. It's in superb condition. We'll start Alumbrera. It's connecting another new pit to Alumbrera, a bit further away, a little bit of civil works, but that's something that is much lower risk than the traditional greenfield project. Mutanda sulfides, same thing. The business is operating. It's a brownfield expansion of that business. Collahuasi fourth line, well, there's three lines next to it. It's the fourth line expansion of that. So the bulk of our business, the bulk of our growth projects is brownfield, low capital intensity. Of course, we need to make sure that we're skilled, resourced, properly set up to execute on these projects. The one that isn't is the greenfield, which is Pachon, it's an unbelievable resource, and it has to be built. And there are a number of ways we can do it. We can partner up with another mining company just on the other side of the border, a terrific mining company. We would love to do that. That derisks it materially. We will bring in a partner for their project. And who their partner is, when we choose our partner, how much, that's to be determined. But we would like a partner that has execution skills. And in fact, not only has execution skills, but we'll back up the execution skills where they'll take a disproportionate share of the risk in execution. And we see companies doing that now. We're dealing with companies in Indonesia, for example, right now, who are prepared to underwrite brand new projects, TAM, capital, quality of the assets. Now we can bring in a partner like that to say, they'll take a disproportionate share of the execution risk in return for certain returns or certain amount of equity or whatever it may be. That's a very nice outcome for us. It massively derisked the project for us instead of saying, "Oh, today, I've got a great project building team, and I'm not going to be like every other single project that's been built in this mining industry before." We're not going to do that. That's not going to make sense because for us, we've seen what happened. My predecessor hated greenfields, I like them a little bit better, not much better, just a little bit better, but I'm certainly not going to fall into the same trap that every other mining company, including ourselves, has done before, and we will derisk it materially to make sure it gets done properly. Martin Fewings: Chris? Christopher LaFemina: It's Chris LaFemina from Jefferies. Maybe a question, Steve, for you. On the working capital variability, you obviously are very sensitive to changes in commodity prices and in a rising price environment. It's impressive that you had a working capital cash inflow in the second half of the year. But first question is how much of that unwinds, you said some of that would unwind over the course of 2026. And then secondly, as the business grows, should we expect working capital to continue to build? And is there anything that you can do to manage that, like account receivable factoring -- or what do you do to stabilize the cash flow impact from working capital in a growing business that's very leveraged to changes in commodity prices, which are highly volatile? Steven Kalmin: And the -- I mean, working capital is volatile and fine. And many of those sort of initiatives that you said we do, whether it's sort of receivable discounting. And we have payables rough sort of days turnover about 40 days and receivables is about 20 days, so you have a mismatch there. But then that's also a float that's funding longer-term prepays in some other parts of our business where we do target to have a marketing balance sheet that's basically receivables, less payables or non-RMI is basically balanced, and then you have the RMI. The big impact of working capital in both the growing business higher prices is going to be in RMI, because the other two can largely offset each other within the business itself. So you've seen it happen now from '25 to '28. That was all prices that pushed us up. So then it's not a net debt factor in terms of how we look at the RMI. This is all the hedge, the nickel in warehouses, the copper in warehouses, the oil that's sort of moving from A to B. That's very fungible in a very sort of short period of time. So that, I mean, that's a good problem, if you can even call it that. So that's just a funding. It's not equity capital intensive. It's working capital-intensive. It doesn't have a net debt impact. We have over $10 billion of liquidity. Our entire balance sheet is largely -- it's pretty much all unencumbered. We would have no problem funding another $5 billion, $10 billion. I mean, just to pick any number, if it was about RMI and working capital, I mean, maybe at some point, you would start saying those sort of sizes are starting to get sort of a little bit big. I mean, fine for us. But just as a sort of third party do you say, well, okay, your RMI is now $35 billion. Is there a level at which the sort of size of the gross and netting is just a little bit too high? Maybe. But I mean, at that point, our $18 billion of EBITDA is probably $25 billion of EBITDA and your $7 billion is $12 billion, and your share price is 25% higher because you're generating so much cash. So this is a sort of a side show, probably in terms of working capital in the business. And I suspect in that environment, our marketing earnings are also going to be higher and you're proportionately getting the sort of returns on that. So it's really about watching RMI, funding RMI, I'm pretty confident around receivables, payables that can be managed. You do have volatility within particular periods. That's why I said there was arguably towards the end of the year, I'm not claiming that as permanent. It was a bit of a sugar hit in terms of sort of release. And I think all things being equal, one should assume that, that's going to probably be returned back to the balance sheet in '26. It doesn't have to be, but I think that's probably a prudent projection for '26 is that there's going to be a little bit of working capital going back out. Martin Fewings: Matt. Matthew Greene: It's Matt Greene at Goldman Sachs. Steve, perhaps one for you. Monetizing infrastructure has become a bit of a theme. I think this report is, and you would have seen in some of those presentations of your peers, we're now seeing absolute numbers and targets being placed on this and some interesting structures out there. Steve, I asked you at your CMD and your interims, I can't recall which one it was, you said you had private capital banging down the door. On your infrastructure, I think you referred to Collahuasi water treatments. So perhaps hoping third time lucky, can you give us some indication of what you're looking at? Is this -- and I appreciate your peers are looking at non-core asset sales as well. I'd like to isolate this into infrastructure. Are we talking a couple of billion dollars, are we talking $10 billion? Any sort of color you could think about? Steven Kalmin: I mean, these discussions are clearly more fertile and you're seeing outcomes that sort of translate into concept into actual announcements. And we have had some discussions and some indications. And this is across infrastructure. I mean, of course, I mean, streaming aside, let's park that, there was obviously a big announcement in the last -- in the last 3 days. And some of -- whether it's Collahuasi, whether it's even at EVR, some of the water treatments, some of those sort of facilities. For us -- and I think I said it back in December, we would entertain. We just need to -- they've got to sharpen their pencils. That might have been an expression that I used back then, and I still maintain that. So we would be a willing partner on the other side on terms that sort of made back to saying, well, widened some bigger M&A discussions has got to be on sort of the economic terms that make sense. So we would be a willing partner on some of these processes for the embedded returns that we're giving up in terms of them being able to sort of annuitize those if it was on better rates for us. So it purely comes down to when there's a price and a structure that makes sense for us, we'll do it. Matthew Greene: So would you look at infrastructure within the group, would you say the water treatment is the price? Steven Kalmin: No. There's a variety of things. It could be all infrastructure. It can be -- the water treatment is a thing. I'm just sort of throwing it out there because there's been a lot of money that's been spent. That's a good jurisdiction. It's Canada, some of the team there have looked at it. You can pick their brains on it, maybe during the coffee break or whatever the case may be, they have looked at some of these things with various other things, Collahuasi. And again, maybe once it's up and like the desal pump gets up and running, I mean, your pricing also, depending on that risk sharing and these things, and once something is actually up and operating, you tend to get better pricing than during a construction and a risk-sharing phase as well. So maybe it lends itself down the track. But I wouldn't say these are -- I mean, these are certainly multibillion opportunities. I wouldn't say $10 billion, but single multibillion-dollar opportunities. Matthew Greene: That's great. And Gary, your opening remarks, you suggested you may put back coal volumes. Could you please expand on what options you're exploring? Gary Nagle: Matt, we've always been willing to be supply disciplined in a market that we see is oversupplied. Certainly, you saw what we did in Cerrejon last year, very successful cutback. And we believe, in fact, after that cut back, the market did react. Was it all us? You'll never know. But we certainly were a catalyst for that reaction or that market or the market reaction. Now, where we will look at now, we see what's happening in Indonesia. We don't know yet how these cutbacks or export restrictions will work, which qualities will impact. Given that big business we have in Australia, that will be probably your natural one to look at throttling. If we decided to throttle the business, Australia would be something, and it's always on the table for us. Because if we see a particular quality or a particular market is oversupplied, given our size, given our scale, we can pull some of that back if we see the opportunity. Matthew Greene: It's more on energy coal versus steel making? Gary Nagle: Yes. Martin Fewings: Myles. Myles Allsop: Myles Allsop, UBS. Just a couple of questions. Maybe for Steve. First of all, this time last year, when we were looking at your illustrative spot free cash flow of $5 billion, it turns out at $1.5 billion. And obviously, coal prices were the big step down, but then copper offset but didn't come through because of cobalt and stuff. When you look at the $7 billion illustrative free cash flow today, where do you see the biggest risks? So whether we actually see that flow into shareholder returns this time next year or whether there's going to be -- kind of is it commodity prices? Is it on the cost side? Where are the risks on that? Steven Kalmin: I would say, commodity prices, Myles. Back to those sort of variance analysis, it's -- I mean, cost fine. I mean production, of course, you need to sort of get there. Marketing is in the middle of the range there as well. We've been -- generally being there or thereabouts or even increased sort of over the time. This is in a notional interest and tax also. I mean it's actual interest, but tax is a little bit notable. Last year, we were hit with that tax. So the $1 billion U.K would have not been something I would have necessarily positioned for and put in the number at the beginning of the year last year. So that would have impacted the thinking at the beginning of the year. There's nothing like that, that -- I mean, if anything, some of that could come back. I mean we have a big sort of tax receivables now across a couple of jurisdictions, U.K. being the biggest one, some of that in the next year or 2 years, it's kind of come back. It's not a multiyear sort of proposition. But that's kind of below EBITDA. CapEx, it's an average of 3 years. I mean, you can sort of have swings and roundabouts a little bit if we've said the sort of $6.5 billion, this year $6.7 billion, and the next year is $6.3 billion. So that takes $200 million out in the short term. But confident around the average. But ultimately, pricing is going to dictate sort of 90% of the variation there. Myles Allsop: And maybe just on Kazzinc has been in the headlines as potential sort of simplification, disposal, cash return? What's the latest with Kazzinc? And is the value of the gold getting recognized by potential purchases? Gary Nagle: Kazzinc is a very good business. It's a core asset for us. But we've said before that if there's a transaction -- I mean, we have been approached previously on Kazzinc and recently, in fact, on Kazzinc as well. And if there is a transaction that -- and a value, along with sharing in gold earnings, of course, who knows where the gold price will be. I mean it's -- it goes to Steve's point in commodity prices. If there's a sharing of that gold price earnings and it makes sense for us and the value was very good for us, we would think of divesting. But that goes for any other asset in our portfolio. It has to be something that really makes up -- makes us set up and look at it. It's not an asset that we're out there selling or that we want to sell. But if there's a good value proposition around that, gold price sharing and any other marketing benefits that come with it, we would always consider it. Martin Fewings: Liam. Liam Fitzpatrick: First one on Bunge. I know you can't say when or how you're going to get rid of it. But do you think this time next year, you'll still own those shares? And linked to that, do you hope to return the buyback at some point this year? Gary Nagle: I would say, it's hard to say, Liam. I mean, it will come down to what opportunities they are. We want to maximize value on for those -- for that stake. The lockup is until July 2. I don't think anyone should expect us out in the market selling these shares on July 3. We will work very closely with Bunge and Greg Heckman. He's running a great business. You see how their share price has reacted because of this transaction that we've done with them. The synergies are playing through. Steve pointed out, I think those shares are probably mark-to-market in our book today value to $4 billion. So we would do something that made sense at the right time for both Glencore and for Bunge, whether that's this time next year, if it's in our books or not. Don't know. We're in no rush to sell it. We're in no rush to exit the stake. What we have said is over the short, medium, long term, it doesn't make sense for Glencore, a mining commodities marketing company, to own 16.5% of Bunge. That doesn't make sense. It's a terrific company, terrific valuation. We want to be able to return that to shareholders in a disciplined and correct manner, and we will choose the way we do it in the timing to maximize that value. Liam Fitzpatrick: And then just a follow-up on Collahuasi QB. It's a very -- potentially very capital-efficient project. Any progress, changes in thinking on that? Gary Nagle: Potentially, we do have our own route that we can go. We've discussed that we've now approved the feasibility study for the fourth line. We've yet to receive a proposal from Anglo. So until that, we continue down the road of the fourth line. Steven Kalmin: Or from AngloTeck. I don't know the other piece yet. Martin Fewings: Alan? Alan Spence: Alan Spence from BNP Paribas. A couple of questions on the dividend. Interested to hear on the top-up portion of it, why you elected to make it a special dividend rather than a buyback? And then as we think about that surplus account, should we consider Century Aluminum being in there to be wound down in due course? Gary Nagle: I'll take the second one first. Century, I mean, Century is a very good company, and we want to retain a meaningful stake in Century. We are not looking to sell out to Century. So whether we stay at where we are or we move around a little bit, that's to be seen. But certainly, we wanted to retain a meaningful stake in Century. As I said, great business, Jesse runs a good business there. They're building a new smelter in the U.S. Midwest premium is very high, generating cash, good business. So I don't think you could expect us to sell out -- you wouldn't expect -- we were not looking to sell out our entire shareholding in Century. With regards to the top-up and buybacks versus cash, we've done a lot of buybacks, and we get a lot of feedback from our shareholders, and we've taken on the feedback from our shareholders. And we've tried to, over time, get to a position where we're trying to please most of the shareholders most of the time. You can't please all the shareholders all the time. We all know that. And we're trying to get, as Steve rightly puts it a Goldilocks solution. We've done quite a significant amount of buybacks over the previous years. Shareholders, some shareholders have sort of said, well, hold on, don't forget us. We want a bit of cash. So we've tried to pivot and get to a bit of a cash position now. But buybacks remain firmly on the table for us. We're just trying to get to that Goldilocks solution to please as many shareholders as we can. Martin Fewings: Dominic? Dominic O'Kane: Could I just ask you about the conversations you're having with Orion and the U.S. International Finance Corp.? Does that open up other opportunities for you within the group? Are you having conversations there about -- that they're coming in at different partners at different assets? So how -- does that open up a broader future relationship with the Glencore Group? Gary Nagle: Yes, it does. I mean I was in D.C. to sign this MOU 2 weeks ago. At the same time, we had discussions about Project Vault, which we're part of. We had discussions about a number of other opportunities with the U.S. government and with various other counterparts. Certainly, the U.S. is very active in doing -- in getting involved in critical minerals around the world. Where there's an opportunity that makes sense for us, a number of them are coming to us. I had a couple of calls from someone yesterday on a new opportunity. If it goes somewhere, great, if it does and doesn't. But there's certainly the flow of opportunities, the flow of ideas, whether it be Bolivia, whether it be Peru, whether it be Venezuela, whether it be DRC, whether it be Kazakhstan, we're seeing a big flow of opportunities, and we'll pick and choose the ones that make the most sense. Martin Fewings: Ben? Benjamin Davis: Question -- well done on the land access, finally getting it. Just wondering how much of the deal with the Orion, how much with the U.S. was a factor in helping that getting it across the line finally? Gary Nagle: Zero. Benjamin Davis: Zero. Okay. And then also land access, you mentioned you've got options at Coroccohuayco, MARA. Have you -- is land access issues totally sorted or what are the mechanisms there? Gary Nagle: Yes. The gating items from MARA is not land. The gating item is environmental approvals and various other approvals around and getting our trade or studies have betted down around how we're going to access the tunnel. Are we using trucks, are we using conveyors, all those sorts of things. Those have progressed quite a lot in the recent months. We'll be bedding that down, I think, in probably the next 6 or 7 weeks, then we can progress to feasibility. That allows us then to have a definitive application around those environmental permits and other permitting that we need to be able to start that construction. Steven Kalmin: And get the one community over the line. There's one community. Benjamin Davis: On Century, they are a JV partner in one of the big greenfield projects in the U.S. and the size of the project is vastly disproportionate to their market cap. So in terms of funding, and is that a consideration in your -- consideration of the stake sale in Century? Or is that completely an independent decision? Steven Kalmin: Independent decision. Benjamin Davis: For Century? And just... Steven Kalmin: I mean, I'm not across the details, but I don't think that they're going to be committing huge amounts of their own equity to this project, from what I understand, but... Benjamin Davis: And then just a clarification on the streamings around Antapaccay. Does it include the Coroccohuayco and Quechua sort of lease areas or it doesn't? Steven Kalmin: It does not on Quechua. It does on Coroccohuayco. But by the time that, that's in play, we would have then stepped up. So I said one of the slides I sort of spoke to the fact that we would have delivered a certain number of ounces already at that point, and we will at least step up in terms of our participation in the spot market. But yes on Coroccohuayco, no on Quechua. Benjamin Davis: And then just lastly on streaming in general. Obviously, with the benefit of hindsight, the deal was not great at -- but then does this kind of put you off streaming altogether? Or is there like a time where you say, "I just want higher participation, and I'm willing to stream a small proportion as long as I get a meaningful upside from the gold or silver streams in assets like a zinc in the future." Steven Kalmin: There's so many things in hindsight, one can say good decision, bad decision. I mean we've done some fantastic things and some things you say that in hindsight. Obviously, at the time, it was fine. I mean, I'm not sure people would have quite projected gold and silver necessarily to come where they are. That's not our core business. It was having sold a -- effectively a gold or a silver mine, what's Glencore doing in gold and silver back in 2015, '16 when there was kind of the rest of the business and what looked like a pretty sort of good price in terms of sort of discounting at the time in hindsight, whatever. But you can point to parallel sliding doors where we had that money and then what have we done with that money, and how you invested and the whole Bunge sort of transaction and Viterra and that did its thing and then you bought MARA, you bought out minorities in MARA, and you were doing all sorts of things with the money on the site. So okay, you got to run two different parallels. So I think we've got enough streaming on the books at the moment. I think back to Matt's point, I'd probably rather do the infrastructure plays for now. So that's probably where we've sort of prioritized the more kind of sort of non-traditional financing revenues. Martin Fewings: Alon? Alon Olsha: Alon Olsha, Bloomberg Intelligence. Just firstly, on the DRC, it sounds like the government there is looking to enforce rights around local ownership. If you could just talk a little bit about that and what this deal with Orion, if that mitigates any risk around that? That's the first question. Gary Nagle: Yes, Alon, we don't believe that -- we don't believe that impacts us. That's for new mines and new concessions issued post the new mining code from 2018, 2019, I think it is. Ours is existing operations from before, so it doesn't impact us. Alon Olsha: Okay. And then another kind of more strategic question. You've spoken about the need for scale in mining, kind of to become more relevant, a big index representation and all the benefits that brings. But it also brings kind of a lot more complexity as well. Not every deal is going to bring the kind of operational synergies investors are looking for. So kind of how do you think about the trade-off there in terms of scale and relevance, which was historically not really a motivation to do big deals, but has become now, versus the kind of complexity and downsides of bringing two businesses together that may not have the level of operational synergies to kind of justify some of the premiums? Gary Nagle: Yes. I think if I just look at our experience recently, operational synergies are important, but they're not the only source of synergies. We spoke about our marketing business, for example, the best-in-class marketing business. That provides meaningful synergies across businesses. Whoever we did -- if we ever did a transaction with somebody or we did a transaction, that's meaningful value creation. And that's not necessarily at the expense of a customer. That is just the way we run our marketing business, which just optimize logistics, optimize lending, arbitrage opportunities, just taking advantage of dislocations. That's not going to a customer and saying, okay, now we have more volume, we want to charge you higher price. It's not that. It's certainly not that. And given what we do in marketing, so many mining companies, they trumpet that their operational excellence. Today, we trumpet it a bit of ours. They trumpet the operational excellence. But what I do see. And from my experience sitting in joint ventures with other mining companies, you can sit through mine numbing presentations for hours, learning about how wall can be adjusted by 1/4 of a degree and it's going to save you $0.04 of BCM. But nobody pays that kind of attention in the rest of the industry to marketing. That's what we do, where we can save sense on freight, sense on logistics, sense on port use, sense on storage, blending opportunities, having qualities in the right areas of the world. We bring that to any other mining company. They do not have that in their businesses. Yes, they sell their product. And in some cases, they said it reasonably well, not always that well. So that's a huge part of synergies. There's another part of synergy. And I mean if you look at AngloTeck, a big part of their synergies is just the fact that you've got two head offices and two this and two that and two HR managers and all those sorts of things, operational head office or overheads, procurement, all these sorts of things. So there's no -- if I look at our recent experience, operational synergies are not the big ticket item. It's in fact, everything else where you can do things better, you can buy trucks better. You can sell your product better. You can have better -- less head offices, all those sorts of things or less offices, less people, less things and do things properly. So I think that it's not about -- you have to have two mines next to each other that we can integrate, and that's why we should do a big M&A transaction. No, there's huge amounts of synergies that come stand-alone even with very little operational synergies. So to me, I still think it makes sense, comes with a rerate, synergies plus a rerate and a rerate on those synergies, I think there's still opportunity. Martin Fewings: Patrick. Patrick Mann: Patrick Mann, Investec. Just one clarification on the Orion investment. I'm assuming that goes to Glencore, it's not primary proceeds being injected into the Africa copper business. So I just wanted to double check. And then the second question is across the industry, we're seeing companies approving or putting on the fast track path copper projects. At what point or is there a risk we get to the point where the industry sort of runs out of capacity to build these projects or at least we start to see capital inflation because there's just not enough EPCM, there's not enough concentrator components and parts and the engineering skills required. Is that a risk that you're seeing on the horizon? Or is it too early to say? Gary Nagle: Certainly, for us, we don't see that risk at the moment, too early. As I said, take MARA. MARA doesn't need to concentrator components. It needs someone to drill a hole through a hill. That's what we need. That's fine, that we can do. Same for Coroccohuayco, doesn't need -- yes, it's an upgrade of the plant, but it's not -- we're not building a brand new plant. You could say the fourth line does need a new concentrator. We're only starting that feasibility now, but we've seen no headwinds around procurement of being able to bring in the skills or the plants and equipment. Patrick Mann: I was thinking more around Argentina, you've sort of got this copper rush with 3D and everybody piling in at the same time. Gary Nagle: Yes, of course. I mean, BHP will build the Vicuna district and First Quantum will build their operation Taca Taca, and we'll build ours. We're approaching it, as I said differently. We're looking at derisking it materially. And those issues that you raised, if they become issues at the time, of course, a part of that decision process for us around who we choose as a partner and how we execute on the project. Martin Fewings: Okay. With that, we'll finish the Q&A and pass back to Gary for closing remarks. Gary Nagle: I don't really have too many closing remarks. I just want to say, thank you very much. I appreciate the questions. We're always available. Martin and the team is available for follow-up questions. Otherwise, thank you very much for your time.